DarioHealth Reports Third Quarter 2022 Financial and Operating Results

14 Nov 2022
www.prnewswire.com
Financial Statement
Third quarter 2022 revenues of $6.6 million increased 17.3% from $5.6 million in the third quarter of 2021 driven by growth in Business-to-Business (B2B) revenues. Nine-month year to date revenue totaled $20.8 million, a 44% increase over the first nine months of 2021.
B2B revenues grew to 63.5% of total revenue for the quarter, up from 46% in the previous quarter
30% reduction in net loss for the third quarter of 2022, compared to the third quarter of 2021 and 13.3% reduction from to the previous quarter
85 signed B2B contracts to date with $61 million in total contract value
High market demand for a comprehensive, multi-condition platform as evidenced by multi condition opportunities representing 50% of current pipeline and which represent higher revenue per customer opportunities
Company to host conference call and webcast 8:30 am ET tomorrow
NEW YORK, Nov. 14, 2022 /PRNewswire/ -- DarioHealth Corp. (Nasdaq: DRIO) ("Dario" or the "Company"), a leader in the global digital therapeutics (DTx) market, today reported financial results for the third quarter 2022 and provided a corporate and B2B (formerly described as B2B2C) update.
"In the third quarter, Dario continued to execute its strategic plan of offering what the market now demands most: a single integrated digital therapeutics platform for the management of multiple chronic conditions," stated Erez Raphael, Chief Executive Officer of Dario. "Employers and health plans increasingly recognize the value of an integrated multi-condition single platform for chronic condition management, because it more effectively engages users leading to better health while lowering the burden of contracting and managing multiple single point solution vendors. We have now signed 85 B2B contracts with total value exceeding $61 million annually once fully implemented, with 50% of those contracts signed in 2022 for more than one condition, and we maintain our objective to hit our 100 contract target by year end. Our B2B business now contributes more than 63% of our revenues, and we see a large, growing pipeline heading into 2023."
"Our transition to B2B continues to improve the financial profile of our company. In addition to driving robust topline growth, we are generating gross margins of approximately 70% in our B2B business. Also, we continue to operate more efficiently, reducing operating expenses from our legacy Direct-to-Consumer (D2C) business and lowering customer acquisition costs. Of note, operating expenses were reduced 29.8% resulting in a 30.3% lower net loss compared to the third quarter of 2021. This is excellent progress toward our strategic goal of shifting the company into a high-growth, high-margin B2B business model in a relatively short period of time. We are excited by the improvement in our financial profile and look forward to continuing this momentum," Mr. Raphael concluded.
"We are excited about the national health plan agreement that we signed last quarter, which will embed our behavioral health technology in their digital platform, which has already generated revenue in the third quarter, and we expect revenue from this health plan will grow throughout 2023, subject to the health plan successfully implementing its roll out plan of their platform to their customers.  This was among the most significant contracts that we signed in 2022, which we expect will give us access to up to ten million members," said Rick Anderson, President of Dario. "We are in discussions with several additional health plans – both directly and through our partners – and anticipate additional health plan customers in the quarters ahead."
"We continue to experience accelerating contracting momentum from our direct sales efforts and through our partnerships with Solera, Virgin Pulse, Vitality and Alliant all contributing now to our overall customer counts and yielding significant additional opportunities with health plans and employers," continued Mr. Anderson. "In addition, we continue to see a significant opportunity in our co-promotion relationship with Sanofi with multiple potential health plan customers moving into later stages of the pipeline despite the relatively short time of collaboration.  Additionally, more than 50% of our current pipeline is for multiple conditions, which allows us to achieve higher average revenue per customer as we can engage people across a wide range of chronic health conditions. We believe that our integrated suite of solutions increasingly differentiates us from our competitors and is resonating in the marketplace. I anticipate a strong finish to the year and strong momentum going into 2023."
Q3 2022 and Recent Highlights
Total B2B contracts signed increased to 85; Company reiterates goal of 100 signed B2B contracts by year-end
Existing partnerships are gaining traction and are beginning to accelerate recurring revenue streams from employers and health plans
Strong pipeline growth continues to demonstrate the strength of Dario's multi-condition suite, with more than 50% of pipeline opportunities for multi-condition contracts
Selected by a national health plan to incorporate Dario's behavioral health solution into its mental health and well-being platform for up to ten million members with first revenue recognized in Q3 and increasing revenue anticipated in 2023
Selected by a national employer for Dario's full suite of integrated chronic condition management solutions, including diabetes, high blood pressure, and needs related to weight, musculoskeletal pain and behavioral health
Continued to improve financial profile of the Company, driven by emphasis shift toward B2B accounts.
Presented new research at the American Psychological Association Annual Convention demonstrating the positive impact of a digital health solution with 72% of users in the study reducing their symptoms of depression during 12 weeks of participation and 44% of users experiencing clinically significant reductions in their levels of depression during the same timeframe.
Third Quarter 2022 Results Summary
Revenues for the third quarter ended September 30, 2022 were $6.6 million, a 17.3% increase from $5.6 million for the third quarter ended September 30, 2021, and an increase of 6.8% from $6.2 million for the for the second quarter of 2022. The increase resulted from higher revenues from the Company's B2B segments, including health plans, employers and providers.
Gross profit for the third quarter of 2022 was $1.8 million, an increase of $1 million, compared to gross profit of $0.8 million for the third quarter of 2021, and an increase of 58% from $1.1 million for the for the second quarter of 2022. Gross profit as a percentage of revenues increased to 27.3% in the third quarter of 2022, from 14.7% in the third quarter of 2021, and 18.4% in the second quarter of 2022.
Pro-forma gross profit, excluding $1.1 million of non-cash amortization of expenses related to the acquisition of technology, was $2.9 million, or 44% of revenues, for the three months ended September 30, 2022, compared to a pro-forma gross profit of $2.5 million, or 45% of revenues for the three months ended September 30, 2021. Non-GAAP gross margins for the B2B business channel exceeded 70% in the third quarter. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
Total operating expenses for the third quarter of 2022 were $16.4 million compared with $23.3 million for the third quarter of 2021 and $18.5 million for the second quarter of 2022, a decrease of $7 million, or 29.8%, compared to the third quarter of 2021, and a decrease of $2.1 million, or 11.5%, compared to the second quarter of 2022. The decrease compared to the second quarter of 2022 resulted from a decrease in our DTC marketing expenses. Total operating expenses excluding stock-based compensation, acquisition expenses and depreciation for the third quarter of 2022 were $11.4 million compared to $14.5 million for the third quarter of 2021, and $13.4 million for the second quarter of 2022.
Operating loss for the third quarter of 2022 was $14.6 million, a decrease of $7.9 million, or 35.2%, compared to $22.5 million for the third quarter of 2021, and a decrease of $2.8 million, or 16%, compared to $17.4 million for the second quarter of 2022. The decrease compared to the third quarter of 2021 and the second quarter of 2022 was mainly due to the decrease in operating expenses.
Net loss was $15.6 million in the third quarter of 2022, a decrease of $6.8 million, or 30.3%, compared to a net loss of $22.4 million in the third quarter of 2021, and a decrease of $2.4 million, or 13.3%, compared to the second quarter of 2022. Net loss excluding stock-based compensation, acquisition expenses and depreciation for the third quarter of 2022 was $9.5 million compared to $11.9 million for the third quarter of 2021 and $11.8 million in the second quarter of 2022.
Non-GAAP billings for the three months ended September 30, 2022, were $6.6 million, a 19% increase from $5.5 million for the three months ended September 30, 2021. The increase is a result of higher sales generated in the three months ended September 30, 2022, compared to the three months ended September 30, 2021. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
Financial Results for the Nine Months Ended September 30, 2022:
Revenues for the nine months ended September 30, 2022 were $20.8 million, a 44% increase from $14.5 million for the nine months ended September 30, 2021.
Gross profit for the nine months ended September 30, 2022 was $6.9 million, an increase of 103%, or $3.5 million, compared to gross profit of $3.4 million for the nine months ended September 30, 2021.
Pro-forma gross profit, excluding $3.1 million of amortization of expenses related to acquisitions, was $10.1 million for the nine months ended September 30, 2022, compared to a proforma gross profit of $6.7 million for the nine months ended September 30, 2021.
Total operating expenses for the nine months ended September 30, 2022 were $54.7 million, a decrease of $3.5 million, or 6%, compared with $58.2 million for the nine months ended September 30, 2021. The decrease resulted from a decrease in our sales and marketing and general and administrative expenses. Total operating expenses excluding stock-based compensation, acquisition expenses and depreciation for the nine months ended September 30, 2022 were $39.7 million compared to $38.6 million for the nine months ended September 30, 2021.
Operating loss for the nine months ended September 30, 2022 decreased by $7 million to $47.8 million, compared to an operating loss of $54.8 million for the nine months ended September 30, 2021. This decrease is mainly due to the increase in the gross profit and the decrease in operating expenses.
Net loss was $49.6 million for the nine months ended September 30, 2022 compared to a net loss of $55.2 million for the nine months ended September 30, 2021. The decrease was driven by higher gross profit and lower operating expenses.
Non-GAAP billings for the nine months ended September 30, 2022 were $20.6 million, a 44% increase from $14.3 million for the nine months ended September 30, 2021.
Non-GAAP adjusted net loss for the nine months ended September 30, 2022 was $29.5 million, a 7% decrease from a $31.7 million non-GAAP adjusted net loss for the nine months ended September 30, 2021.
A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."
Conference Call Details: Tuesday, November 15, 8:30am ET
Dial-in Number: 1-844-826-3035
International Dial-in: 1-412-317-5195
Conference ID:  DarioHealth Third Quarter 2022 Results Call
Webcast link: https://viavid.webcasts.com/starthere.jsp?ei=1582524&tp_key=be742de176.
Participants are asked to dial-in approximately 10 minutes prior to the start of the event. A replay of the call will be available approximately two hours after completion through December 15, 2022. To listen to the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and use replay passcode 10173311.
DarioHealth Corp. (Nasdaq: DRIO) is a leading global digital therapeutics company revolutionizing how people with chronic conditions manage their health. DarioHealth offers one of the most comprehensive digital therapeutics solutions on the market - covering multiple chronic conditions including diabetes, hypertension, weight management, musculoskeletal and behavioral health within one integrated technology platform.
Dario's next-generation, AI-powered, digital therapeutic platform supports more than just an individual's disease. Dario provides adaptive, personalized experiences that drive behavior change through evidence-based interventions, intuitive, clinically proven digital tools, high-quality software, and coaching to help individuals improve health and sustain meaningful outcomes.
Dario's unique user-centric approach to product design and engagement creates an unparalleled experience that is highly rated by users and delivers sustainable results.
The company's cross-functional team operates at the intersection of life sciences, behavioral science, and software technology and utilizes a performance-based approach to improve its users' health.
On the path to better health, Dario makes the right thing to do the easy thing to do. To learn more about DarioHealth and its digital health solutions or for more information, visit http://dariohealth.com, the content of which is not incorporated by reference in this press release.
Cautionary Note Regarding Forward-Looking Statements
This news release and the statements of representatives and partners of the Company related thereto contain or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as "plan," "project," "potential," "seek," "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" are intended to identify forward-looking statements. For example, the Company is using forward-looking statements in this press release when it discusses that it sees a large, growing pipeline heading into 2023, that its transition to B2B accounts continues to improve its financial profile and that it anticipates continuing the momentum, that it expects the national health plan agreement to contribute to revenue throughout 2023 and the number of members it is expected to provide, that it anticipates additional health plan customers in the quarters ahead, that it continues to experience accelerating contracting from its direct sales efforts and through its partnerships with Solera, Virgin Pulse, Vitality and Alliant and its co-promotion relationship with Sanofi, that it anticipates a strong finish to the year and strong momentum going into 2023 and that it maintains its target of signing100 contracts by year end. Readers are cautioned that certain important factors may affect the Company's actual results and could cause such results to differ materially from any forward-looking statements that may be made in this news release. Factors that may affect the Company's results include, but are not limited to, regulatory approvals, product demand, market acceptance, impact of competitive products and prices, product development, commercialization or technological difficulties, the success or failure of negotiations and trade, legal, social and economic risks, and the risks associated with the adequacy of existing cash resources. Additional factors that could cause or contribute to differences between the Company's actual results and forward-looking statements include, but are not limited to, those risks discussed in the Company's filings with the U.S. Securities and Exchange Commission. Readers are cautioned that actual results (including, without limitation, the timing for and results of the Company's commercial and regulatory plans for Dario™ as described herein) may differ significantly from those set forth in the forward-looking statements. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Non-GAAP Financial Measures
We have provided in this release financial information that has not been prepared in accordance with Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial results with peer companies, many of which present similar non-GAAP financial measures to investors.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures provided in the financial statement tables below.
Billings (non-GAAP). We define billings as revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period and adjustment to the deferred revenue balance due to adoption of the new revenue recognition standard less any deferred revenue balances acquired from business combination(s) during the period. We consider billings to be a useful metric for management and investors because billings drive future revenue, which is an important indicator of the health and viability of our business. There are a number of limitations related to the use of billings instead of GAAP revenue. First, billings include amounts that have not yet been recognized as revenue and are impacted by the term of security and support agreements. Second, we may calculate billings in a manner that is different from peer companies that report similar financial measures. Management accounts for these limitations by providing specific information regarding GAAP revenue and evaluating billings together with GAAP revenue.
Operating expenses (non-GAAP). Our presentation of non-GAAP operating expenses excludes stock-based compensation expenses. Due to varying available valuation methodologies, subjective assumptions, and the variety of equity instruments that can impact a company's non-cash operating expenses, we believe that providing non-GAAP financial measures that exclude non-cash expense provides us with an important tool for financial and operational decision making and for evaluating our own core business operating results over different periods of time.
Net loss (non-GAAP). Our presentation of adjusted net loss excludes the effect of certain items that are non-GAAP financial measures. Adjusted net loss represents net loss determined under GAAP without regard to stock-based compensation expenses, deferred inventory, depreciation of fixed assets, earn-out remeasurement and acquisition related expenses and amortization. We believe these measures provide useful information to management and investors for analysis of our operating results.
DarioHealth Corporate Contact
Mary Mooney
[email protected]
+1-312-593-4280
Media Contact:
Scott Stachowiak
[email protected]
+1-646-942-5630
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