DarioHealth Corp. Q2 FY2025 earnings call

• Revenue was below expectations but progress on growth indicators like channel partnerships, recurring revenues, gross margins, and client quality was noted.
• Signed 21 new clients year-to-date, with 80% being multi-condition programs. Committed annual recurring revenues (CARR) totaled ~$5 million, with a pipeline of $53 million.
• GAAP gross margin increased to 55% from 44% year-over-year. B2B2C business had non-GAAP gross margins over 80%.
• Operating expenses reduced by 36%, narrowing the operating loss by 43% year-over-year.
• Commercial updates: Strong momentum with health plans, including 2 national health plans with multi-million dollar opportunities; employer segment saw traction with GLP-1 support program; pharma business transitioning to recurring revenues; entered sleep health market via partnership with GreenKey.
• AI integration for operating efficiency, member engagement, and cost reductions in OpEx.

Total revenues for the second quarter of 2025 were $5.4 million, down from $6.3 million in Q2 2024 and $6.8 million in Q1 2025. GAAP gross margin was 55%, while non-GAAP gross margin for the core B2B2C business was around 80% since Q1 2024. Operating expenses were $12.2 million, a 36% decrease from $18.9 million in Q2 2024, narrowing the operating loss by 43% year-over-year.

• Adjusted cash flow breakeven to be reached by the end of 2026 to beginning of 2027.
• Committed annual recurring revenues (CARR) stand at ~$5 million with an additional $5 million in late-stage contracting.
• Pipeline is $53 million. OpEx goal to be in the range of a bit more than $8 million per quarter by end of next year.

• Actual results may differ materially from forward-looking statements due to changing market trends, reduced demand, or competitive nature of the industry.
• Risks include those discussed in the Risk Factors section of the Form 10-Q and other SEC filings.

Q: Just looking at the sequential revenue decline in 2Q, was there any churn that contributed this quarter?

A: As mentioned, there hasn't been churn in ARR. The revenue decline was due to a one-time revenue from a large health plan not repeating and new clients ramping more slowly than expected.

Q: Could you give more color on health plan discontinuing services?

A: The health plan decided to discontinue a Medicaid maternity program and in-source it, not related to Dario's services.

Q: Talk about the partnership network and positive impacts of restructuring?

A: Restructuring focused on 5 core conditions, adding virtual care network with Rula and expanding into sleep health via partnership with GreenKey to create new revenue opportunities.

Q: Cash flow outlook and OpEx reduction from AI?

A: Goal is to have OpEx in the range of a bit more than $8 million per quarter by end of next year, with AI agents used to streamline operations in member management, enrollment, retention, and G&A areas.

Q: Talk about claims-based billing infrastructure?

A: Adding claims-based billing allows rendering of services as claims, opening a new revenue path by getting closer to the majority of the industry's billing through claims, using clinical oversight to enable this.