• Revenue Growth: 60% sequential growth from Q1 to Q2 2024; 28% organic growth before Twill acquisition impact.
• B2B2C Revenue Contribution: Approximately 75% of total revenue with an annual run rate of $21.6 million.
• Non-GAAP Gross Margin: 82% for the B2B2C business in Q2 2024.
• Non-GAAP Operating Expenses Reduction: 10% reduction from Q1 to Q2 2024; targeting a 40% reduction from Q1 2024 to Q1 2025.
• Non-GAAP Operating Loss Reduction: Anticipated over 70% reduction between Q1 2024 and Q1 2025.
• Price Concession Impact: $1.1 million price concession affecting Q2 2024 top line.
• B2B2C Year-over-Year Growth: 315% increase in Q2 2024.

• Warning! GuruFocus has detected 5 Warning Signs with DRIO.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• DarioHealth Corp (NASDAQ:DRIO) reported a 60% sequential growth in its core B2B2C business from Q1 to Q2 2024, with 28% organic growth before the Twill acquisition impact.
• The company achieved 82% non-GAAP gross margins in its B2B2C business, indicating strong profitability potential.
• DarioHealth Corp (NASDAQ:DRIO) anticipates a 70% reduction in non-GAAP operating losses between Q1 2024 and Q1 2025, aligning with its roadmap to profitability by the end of 2025.
• The integration of Twill's behavioral health expertise with Dario's platform is driving cross-selling success, with many existing clients adopting the Twill platform.
• The company's GLP-1 product has seen rapid adoption, with nine clients already on board, enhancing its comprehensive solution for employers and health plans.

Negative Points

• DarioHealth Corp (NASDAQ:DRIO) issued a $1.1 million price concession impacting its top line for the quarter, which may affect short-term revenue.
• The company's revenue growth has not fully materialized to expectations, prompting a strategic organizational transformation.
• There is a temporary slowdown in the pharma channel revenues as the company transitions to a more stable recurring revenue model.
• The Twill acquisition has not yet resulted in significant revenue growth, as the B2B2C segment experienced mid-single-digit growth in Q2 2024.
• The company underwent significant headcount reductions and cost-cutting measures, which may impact operations and employee morale.

Q & A Highlights

Q: How are cross-selling efforts progressing since the Twill acquisition, and what are the expectations for B2B2C growth in 2024? A: Erez Raphael, CEO, explained that cross-selling is underway with many Dario clients adopting the Twill platform. The organic growth for B2B2C was approximately 30% from Q1 to Q2, with an integrated growth of 60%. The expectation for B2B2C growth for the entire year is above 50%. The company is also transitioning its pharma business to a recurring revenue model to leverage market opportunities.

Q: Can you provide more details on the $1.1 million price concession to a strategic partner and its impact on future payments? A: Erez Raphael, CEO, clarified that the price concession is a one-time adjustment related to past revenue recognition and will not recur. It was part of a strategic shift to transform the business model to a more recurring revenue stream, balancing short-term adjustments with long-term growth prospects.

Q: What operational changes have been made post-Twill acquisition to drive growth and profitability? A: Erez Raphael, CEO, mentioned significant operational changes, including reducing headcount and non-headcount expenses, resulting in a 10% reduction in operating expenses from Q1 to Q2. The company anticipates further reductions in the coming quarters, aiming for a 40% reduction over three to four quarters, positioning for cash flow positivity by the end of next year.

Q: How is the integration of Twill's behavioral health expertise enhancing DarioHealth's product offering? A: Steven Nelson, Chief Commercial Officer, highlighted that the integration of Twill's behavioral health expertise with Dario's cardiometabolic foundation creates a comprehensive platform. This integration optimizes care delivery, improves member outcomes, and enhances return on investment for employers and health plans.

Q: What are the strategic priorities for DarioHealth moving forward? A: Erez Raphael, CEO, outlined three key strategic areas: optimizing operations to increase revenue from existing clients, capitalizing on the pharma industry's shift to direct-to-consumer models, and maintaining strict cost management to achieve profitability by the end of 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.