Q1 2021 DarioHealth Corp Earnings Call
Okay.
[music].
Greetings and welcome to the Danville, and Health Corp, first quarter, 2020 one financial results call. At this time, all participants are in a listen only mode of <unk>.
Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being reported.
I'll now turn the conference over to your host Glenn <unk> of Investor Relations you may begin.
Thank you for your Molly and good morning, everyone. Thank you for joining us today for a discussion of Dario helps first quarter of 2021 financial results, leading the call today will be arrays Raphael Chief Executive Officer will be joined by Zvi, Ben David Chief Financial Officer, and Rick Anderson, President and General manager of North America. After the prepared.
Third remarks, we will open the call for Q&A and audio recording and webcast replay for today's conference call will also be available online as detailed in the press release and wait for this call for the benefit of those who may be listening to the replay or archived webcast. This call is being held and recorded on May 18th 2021. This morning, we issued a press release announcing our financial results for the first.
For 2021, a copy of which can be found on the Investor Relations page of the company's website actual events or results may differ materially from those projected as a result of changing market trends reduced demand and the competitive nature of Dario helps industry such forward looking statements and their implications involve known and unknown risks uncertainties and other factors that may cause <unk>.
The results for performance to differ materially from those projected the forward looking statements discussed on this call are subject to other risks and uncertainty and <unk>.
Certainties, including dose just discussed and the risk factors section and elsewhere and the company's 2020 annual report on form 10-K, as well as the first quarter 2021, and 10-Q filed this morning additional information concerning factors that could cause results to differ materially from our forward looking statements are described in greater detail and the company's press release today and in the company.
Filings with the SEC. In addition, certain non-GAAP financial measures may be discussed during this call. These non-GAAP measures are used by management to make strategic decisions forecast future results and evaluate the company's current performance management believes the presentation of these non-GAAP financial measures is useful for investors' understanding and assessment of the company's ongoing core.
<unk> and prospects for the future of reconciliation of these non-GAAP measures for the most comparable GAAP measures is included in today's press release and with that I'd like to introduce Erez Raphael Chief Executive Officer of Dario Health arrays.
Thank you Glenn and the.
Good morning, everyone and thanks for joining our call. This morning, joining me today on the Sun, the President and general manager of for North America, and sleep and David and the CFO of the company.
And so we're very excited this morning guys.
So we pulled out of Q1 results and also.
To give you some updates about all the news that we just.
For the earlier this morning about the acquisition of the way forward.
And I wanted to be very the assistant and therefore.
And therefore, I want to eat today and the main pillars that we keep mentioning every quarter of for the last the I would say you and the harmful to us with regards to how we are planning our strategy, how you see the future of business.
And then how we are reporting all of progress. So the main three pillars of the expansion into one of the conditions, which is something that we keep the building.
The second pillar of these the.
Expansion into SaaS high gross margins and revenue.
And that's the second one the third one and obviously the most important one is the transformation and into the beta B. The C. As you. All know this company started the Electra consumer we are big believers in the consume utilization of health care and this is why we start.
The BDC, we created one of the best products and we all transforming the business seem to be the big.
And the we believe that the combination of these three pillars together the <unk>.
Something that the each of them will have a very important impact on our financial profile.
But the combination of the three of them together is going to create the exponential growth all company.
And that's how we are looking into the business. We also.
Consider all of the digital Therapeutics platform is the second generation of the.
The digitalization of health. So we have heard the laws in the market the boat the telemedicine and evolution from our perspective. The telemedicine is about scaling up the capabilities of health care professionals of when we're looking on digital therapeutics platform like value of health. We are very very focused on how.
Now, we can empower patients and how we can scale of the treatment even more by getting patients involved with the own health and I think that this is the future of digital for the beauty of the digital the health and health and in general.
And this is the what the market would have seen the next few years in terms of the consumer mutation of health.
So keep repeating we think that.
B. The BDC is the most important files that are we going to report on per day in terms of all guys.
But at the same time, we need to make sure that the product.
The will improve its value proposition and when we are looking on the involvement of the market. We are looking through the three and for use for ward, how we can win health plans and employers and this is why it's important to improve all of the positioning in terms of the product and then.
And at the same time and when we have more product lines.
Uh huh.
It's it's improving our financial profile and a way that we can number one win more clients number two we can the upsell and more product for clients that we all day and.
Winning and.
In other words, and we also improved and the total population that are eligible for our product.
And number three because and more than the 50% of the cases patients so the suffering from.
More than one condition eventually we can sell for one user more than a one and and <unk>.
Chronic condition and we can provide a solution that is much more personalized and other words hypothetical.
So the combination of more clients for all the and portfolio of products and.
<unk> eligible members and higher up whether it's revenue per user all of these three of those all of them are going to improve our financial profile and ensure that we are the move just scaling the business. We are also doing that in the.
And a very healthy way and I are mountain dew and very healthy growth.
And at the same time, we are introducing the moat in terms of all the ability to deal with the future market as well. So that's the way that we're looking on the business and we always looking into these three pillars.
So we use debt I wanted to touch the high level.
And the results so far of financials that we announced yesterday after the closing so we ended the quarter with $3 6 million the autos and.
And the revenue, which is 73% growth over Q4, 2020 if.
If we are counting.
And also the revenue of up right from the beginning of the quota of hands also generally the overhaul of the revenue and also known as for former is for $7 million for the quarter.
Usually because of the majority of the revenue today is still coming from B to C and specifically in the for products like upright January is very strong.
So January generated more revenue than what we have seen from upright in February and March.
But in general both businesses downhill legacy business and a price.
Both of them will going between Q4 from Q1 and.
So we feel that we also manage most of the acquisition of the of upright, but the owner.
On the business and bring the business back to growth. So we think that it's a good day and indication that we're going to continue.
Continue growing the business team for the second quarter of as well and obviously to the rest of the year.
In terms of growth small and James we ended the the quota with 31% the gross margins for the first quarter.
If we are excluding the acquisition related amortization again from the acquisition of upright.
We are we would the almost double the growth margins to 44, 7% from 24, 2% debt. We had in Q4, so I think that the this.
And this one and speaks to the second pillar that I mentioning and.
And the improvement of gross margin so I see.
And a very good the improvement on debt allow Mattel and as mentioned in previous calls.
We're seeing the disbarment, though will keep improving the more we are expanding the penetration into the beat of B market.
So a few words about the beat of BTC transformation and I'm going to give some highlights but the the week will elaborate the even more and that's one.
And this is obviously the most important feeling and we all are very focused on that one and.
So first of all of just as a reminder, we started the overall transformation.
When the rig joined like at the beginning of 2020. We consider this transformation is a multi year transformation. We started with a team of like a full five and commercial team and in the states and today, we all day.
Around 35 from which we have like Oh thing sales people client success marketing and so on so we really changed the whole foundation of the company from a product fulfilling standpoint, and also from the head count standpoint, and we started to show the first few wins in Q4.
And in 'twenty and in the Q1 the <unk>.
And in 'twenty, one we started implementation and one of the themes. So the thesis that we had is that are we we told the market. We have one of the best products and the market and in terms of the user experience in terms of user engagement user of enrollment.
And also the ability to improve clinical outcomes and save money to the two are employers and plans and I think that after a few months and into the implementation I'm very satisfied with the results and the thing that these the thesis proved to be true because the in a somewhat of like.
And the weeks into the implementation.
We all of the exceeded 40% enrolment rate. So I think that the in terms of fab and winning accounts and winning all of the size of although the competition. We showed that we know how to do that in terms of implementing accounts. We showed that we are of showing so far of very good indication that we are hitting all of the kpis.
So the product the book to be a very effective and b to C seems to be.
Very effective also on the beat of being including the enrolment and the ability to engage with users.
And and follow the acquisition of upright.
And are in discussions those discussions that we have with clients I think that's also the thesis that the clients want to see a multi chronic condition platform. The one I spoke with one vendor they want and know that their users are getting one voice for multi conditions and they want and also by solution.
And from an integrated the company I think that that the the thesis of our multi condition that will accelerate our wins and will get us.
The more service and also a more revenue. This see this also proved to be true because the more than 30% of all the potential clients are interested also on the M escape solution and potentially also and there'll be other lot of health solution that we just announced acquisition of this morning.
With that I want to provide few words about the acquisition that we just announced.
So the idea to expand into behavioral health of these Aldo for a while and those that are listening carefully to our earning calls known that this is the management and strategy are in terms of expansion. We think the behavioral health is the basis in order to threep and chronic condition and.
And and we cannot see how we can keep improving our performance.
In terms of the helping more and more people and improve more outcomes without having a very good solution on debt and that is integrated to the rest of the platform and more importantly are.
And we hear it from current so clients want and get the solution as well the beta beat the deep transformation would be successful anyway, even if we wouldn't acquire the way forward, but we the way for what we believe and that it's going to playing sort of position, it's going to improve almost moving forward and the next few years.
And this is why we made the decision to two.
And to acquire the wave for award and the Rick will elaborate shortly while you wait for the is there is one of the.
The best solutions and the market and why we made the specific choice.
And I think that the knowledge that our company have and on the metabolic side and.
And also on the behavioral health side with the background, the leak and Oman, and dwell I and others from the team of bringing puts us in a position that are we going and we will know how to integrate these solutions together into the best the best the best of suite and so to say so and we are not.
Turning ourself as the holding company and we.
We are positioning ourselves for the as a portfolio can all of <unk> software company and this is and why it's so important to know how to connect the solutions together into one integrated the harmonize the experience for all users.
So is that the one I handover the call to recap to provide additional information about the beat of BDC transformation and potential wins as well as the acquisition of way forward Rick.
Thanks Suraj.
One of the keys to our strategy to moving to the <unk> accounts is generating enrollment and revenue from those accounts.
That's a key factor not just winning them, but actually being able to enroll people engage them and continue to generate revenue and as Ray said, we launched several accounts in the first quarter. We've been very pleased with where that enrollment is running we're running north of 40% enrollment in under.
10 weeks, which exceeded our internal goals and as Ive stated several times, we use 35% enrollment in our pipeline and and our internal models.
So since we are substantially above 40% that really shows what we're able to do and it bodes well for converting from contracts to revenue.
It also happens to be from what we know best in class in terms of the enrollment of our competitors and we continue to be excited about that the other operational piece I wanted to touch base on was the partnership that we announced with many Orbis and this is really a virtual care offering and we're offering it.
You know directly to patients in partnership with maybe Orbis and we believe as do many people in the industry that virtual care is going to be a significant part of the future is.
The significant part of the health care future and in this case, many orbis is providing the telehealth care to members and we're providing the remote patient monitoring and coaching to the orbis and support of those patients. We started in our existing population and we've now and we started expanding out beyond that and we.
Believes that this is the significant opportunity to generate revenue and the early pieces that we're seeing are just reinforcing our views about that and you know one of the other things. We think is exciting is the this is based on <unk>.
Largely on the remote patient monitoring codes that you've heard us talk about several times for Medicare members because of what we're seeing and the marketplace is is that more and more commercial payors are actually starting to reimburse for the same code. So we have and expanding our market opportunity as well there. So we're very excited about.
Of that.
From a business development perspective, our pipeline is now north of $700 million, we continue to make progress and all three channels and I'll start with health plans you know as we've stated we expect we continue to expect that we will have health plan agreements this quarter that will generate meaningful revenue in the second half of the.
2021.
That is we are on track for delivering that and based on where the contracts are with our customers and we're excited about that obviously.
We also have the several other opportunities for health plans and the late stage and we expect to see additional contracts and the later part of the year. It was just won't generate as much revenue in 2021 or revenue and 2022, but we still anticipate that we will have contracts in this quarter.
And we also continue to progress some of the earlier offered earlier stage opportunities through the pipeline and help them do remain a significant part of our pipeline for.
For us, though also employers are of very exciting data point I think over the last quarter as I've stated in the past.
The majority of call it 70% of employers may be a bit more on that January one to December 31st cycle, which means we're in the sales cycle.
For 2020, two launching and contracts as we speak and most of the increase and the pipeline and in the last quarter.
Related to those employers. So we anticipated we would see that we're seeing that we're very excited about that I think that speaks to the work that we've been doing but also the name recognition.
And that we're seeing the fact that benefit consultants are seen the opportunity with the Oreo and we're getting the opportunities to pitch and as I've said in the in the past when we get opportunities are at bats, we tend to do very well. So we're very focused on increasing those so we're excited about that and then on the RPM side, we have several contracts.
And that are pending final signature we believed that RPM will generate meaningful revenue in 2021, obviously already generating revenue, we expect that to continue to increase and one of the interesting things as debt, we are seen and increasing interest from health systems.
Strategically we went after customers that can move faster earlier most of that was going to be based on grants that they were getting and then also of course, the RPM codes that I mentioned a minute ago and we're continuing to see the larger systems, who tend to move a bit slower have and increasing interest and that the other.
Thing that we've seen over the last quarter is an increasing interest from what I'll call partners and that means everything from device companies. They were looking for potential partnerships with us to distribution partnerships and also includes partnerships with other digital health company and so we're continuing to see and interesting went to Oreo is doing well.
We believe that relates not just to the success, we're having with customers, but are expanding the portfolio product portfolio and at this point really are product has expanded two of selling an integrated offering and that's beyond the original metabolic syndrome.
Syndrome at this point, we are offering day.
Diabetes pre diabetes hypertension, obesity, and obviously M. S K with the upright acquisition, which is taking two forms one of the upright go posture monitor where we're seeing interest and the marketplace with that on the B b to b side as well as the BDC side and then also the newer offerings and that's.
Going to incorporate more send.
Sensors and movement related items.
We continue to get interest in both the employer and the health plan channel for the M. S. K offerings. So we think that that's exciting and since we just added that a couple of months ago, and we have been partnering and over the last few months.
With way for where to include behavioral health in our offerings and so we truly are selling.
And the integrated offering we're also though offering each of those is in the individual point solution and that is consistent with our strategy of having an integrated front end and back end.
And in the Middle we are integrating best in class point solutions in a way that allows people to have a holistic experience and we can manage the multiple chronic conditions that folks have within the platform, but we can also sell those as individual point solutions and we will integrate because word open by design and architecture.
We will integrate with other players in the ecosystem and that has also been well received and the marketplace and <unk>.
Lastly, we continue to grow the team.
We've been adding of course from the sales side, but we also added to the new Vice president of client success of.
Who is coming to us from Hello Heart.
We continue to be able to attract talent from our competitors and other digital health companies that are in the marketplace and I think that speaks volumes to the fact that they can see Dario has unique value proposition and offering. These are people that have a front row seat to what's going on and digital health and with the customers and they're seeing the differentiation.
<unk> debt.
Oreo offers.
And then just a few words on the way forward acquisition as Erez mentioned, our strategy has always been to be and integrated multi condition platform.
Post acquiring wait for word we believe that we are one of the most robust.
That forms covering the most conditions in the industry.
And as we look at why do we Wanna add behavioral health and we've talked about this and the past.
And we look to add conditions, where behaviors play and outsized role and the outcomes for that condition and behavioral health.
Obviously as the has significant behavioral drivers that are part of it.
Who has significant comorbidity with chronic conditions.
And depending on whose numbers you look at and.
30% to 70% of all of chronic conditions have of coexisting and behavioral health condition and behavioral health underlies all of these conditions and this is and opportunity for us to help provide and integrated way that support for our members. It's a large addressable market and as <unk> mentioned are.
Customers are looking to add behavioral health solution, specifically digital behavioral health solutions, that's been true throughout the pandemic, but continues to be true.
And it's consistently and the top five priorities that they have to reduce cost and improve outcomes.
It also increases the number of customer opportunities that we can participate in and so number of Rfps and.
And the breadth of those rfps and or selling directly to you.
The health plans and there also is an opportunity with providers, especially providers that are at risk, but also providers that are looking to address behavioral health as part of their other remote patient monitoring solutions and it increases the number of people per customer that we can help.
We estimate that we can now serve approximately half of a given population if we're using our entire integrated suite of product solutions and we believe that this will also and this has been validated and the market with the interest and we're getting we will increase the average revenue per member that we can achieve so it increases the.
Overall opportunity in terms of customers and increases the number of members and the average revenue per member that we conserve so why wait for word we believe wait for it has a unique offering.
Most of the other digital health providers and you know all of the Big names certainly they've gotten a lot of attention over the last year are primarily offering of Tel Aviv, Israel Health service, Yes. They may go and talk about things that they have in advance of that but the main focus of their offering is really of Tel Aviv Gabriel health a way forward.
And actually focus is somewhere else, they're focusing on the whole that exist in most behavioral health offerings.
And does not address those members that need to see of providers. So if you will the the.
Hold that exist between nothing or EAP and of provider network is really where way forward is focusing and they're doing that through and AI based screening mechanism, which helps identify where members should go and the process what are the appropriate resources and level of care that they could get and then provide digital and cognitive.
Behavioral therapy of CBT, and both self help and and in combination with coaches and then where appropriate Ken referred to the customer's existing face to face where telehealth provider network.
And if somebody wants them to bring the network to the table than they can do that but this really is focused on something that's different and that provides.
And the opportunity to really partner with the other people that are and the system and not in fact compete with the provider networks that exist or have an incentive to send people to the highest level of care. So you can address people more people than you do now and.
And address those people at a lower unit cost throughout the system. So it's a very efficient way to approach that enables different kinds of partnerships, including with the and the.
The digital health companies that I mentioned or the digital behavioral health companies that I mentioned earlier.
The their architecture fits well with our existing products and philosophy of being open and willing to integrate with other parts of the ecosystem as well, which we felt was important and they are bringing with them of approximately 20 employer customers.
And we will add about 20000 members to our existing platform, but they also provide the digital technology for civil EAP platforms, which is actually runs into the several hundred thousand.
The folks that are out there as well.
And we have a significant cultural and and vision alignment with them, which was important and we'd look at everything at dairy and through a culture lens as well. So they were really a good fit for us and you know part of the way that we've understood that as I've mentioned is that we've been partnering now with way forward for several months and it was just clear that we had a good ally.
And that between the teams and the way that we were looking at things as we went and mutually pitch customers. It was a good fit from that perspective, as well and the entire way for team, including the two founders will be joining the diary of a team.
And we're excited to have them on board as part of diarrhea.
In terms of deal structure and it was in the press release, but the acquisition was $25 million upfront and of $5 million earn out based on the 2022 revenue.
The vast majority of that was paid in equity using a 60 day be Wap and it was really important to wait for to do of primarily equity deal in order to be able to continue to share in the vision of building an integrated offering and the upside that we anticipate that we will create.
And together.
Of course, it also minimizes the impact on our cash balance and we don't anticipate very significant continued investment there's a nice synergies between the two companies in terms of the.
And the ability to use the Oreo sales and marketing organization and some of the organizational pieces of wait for word. So we don't believe that that will have a significant increase and burn and will contribute to revenue in 2021, but a much larger contribution in 2022.
And all of the stock of debt is was part of the transaction is subject to a lockup of six to 18 months much similar to what we did with the upright.
Transaction, so with that I will hand, it over to Zee.
Thank you Ray.
Revenue for the first quarter ended March 31st 2021 wells $3 6 million, 73% sequential increase from the fourth quarter ended December so the first 2020 and 116% increase on the one $7 million and the first quarter ended March 30.
First when people are empty.
Revenues generated during the first quarter ended March 31st plenty of 21 were derived mainly from the social value of the house products and services and from the consolidated revenues of upright commencing February 2nd 2021.
Gross profit and the first quarter of 2021 was $1.081 million and increase of 302000 and also.
The eight 8%.
The gross profit of $779000 and the first quarter.
And 'twenty growth.
The gross profit margin was 31% in the first quarter of 2021 as compared to $46 seven and the first quarter of 2020.
Pro forma gross profit excluding $526000 of amortization of.
The expenses related to the acquisition of operate technologies was $1 $6 million for former gross profit margin, excluding the amortization expenses related to the acquisition of a price war.
44, 7% and the first quarter of 2021.
Sequential increase from 24, 2% and Pufahl Twenty-twenty book.
Total operating expenses and the first quarter of 2021 way of $15 $4 million on per.
The $10 9 million bottles, and the first quarter of 2020 and increase of four and $5 million all 41, 6% the.
The increase resulted from the increase in our research and development activities.
And the marketing expenses and from the consolidation of operating technologies, partially offset by a reduction and stock based compensation.
Operating loss and the first quarter of 2021 was $14 $3 million and increase of $4 $4 million of 41, 7%.
The $10 1 million ton of operating loss from the first quarter of 2020.
This increase was mainly due to the increase in our operating expenses.
Net loss was $15 million was $15 million in the first quarter 2021 and an increase of $5 $1 million of 51, 2% and belt pools of $91 9 million below the net loss and the first quarter of 'twenty 'twenty.
Cash equivalents totaled $81 1 million at March 31st one eight points of one <unk>.
I'll turn the call letters.
Thank you Terry.
And thanks, Rick for the overview, so a few closing remarks.
First that I wanted to eat debt the beat of BDC transformation.
And so of winning employers.
<unk> plans.
And providers, who is our first priority.
And as we stated we believe we will we will have a win of health plan this quarter.
And I know very important data point that the thing that investors should understand is that in terms of implementing.
Employers.
We we are showing that we know how to do that we managed to take.
The beauty of seek of probabilities and transform them into the beat of B, So from a product standpoint.
From a from a team standpoint, we have all of the tools in order to be successful and they said funds formation.
And the thing that the fact that we also managed to conclude the work.
Positions and full months this is another indication and.
On all of the aggressiveness in terms of and in a positive manner and how we want to and.
And the market in terms of billing of the digital therapeutics platform and I want to emphasize digital therapeutics as pom and.
Net for chronic condition management.
Hans consumer centric scalable.
And we are integrating with telemedicine platforms.
In order to provide one integrated experience, but we believe that the future of the market and scalability will be achieved only by involving until you. The users with the home health and that's why we keep improving our strategic position and I'm very glad that the after.
And we raised more than 100 million dollar of in the last 12 months I would say.
We are utilizing the capital and a very smart way the two acquisitions that we do the minimal in terms of spending cash and also of the acquisition of wave for award is not going to add.
And I'll burn rate.
And that is meaningful and so we're practically.
We are utilizing the capital and a very small Gwen we feel that we are of a longer runway.
And so as at the stated we ended the quarter with the 81 more than $81 million of Theyre.
And cash.
And we already see.
And you know inside Q2 debt, we will be able to continue the growth from Q1 to Q2.
And I'm talking about growth that is organic.
With that I would like to open the sag colorful way of for Q&A.
And at this time and will be conducting a question and answer session. If you'd like to ask the question. Please press star one on your telephone keypad. The confirmation tone will indicate your line is and the question queue.
The press Star and two as you would like to remove your question from the queue for.
Participants using speaker equipment and may be necessary to pick up of your handset before pressing the star keys.
One moment, please while we pull for questions.
Our first question is from Alex Nowak with Craig Hallum Capital Group Police force.
See with your questions.
Greg Good morning, everyone. Thanks for the for the call here, we've continued to see the pipeline and get built up here you know 700 million now of 600, my and last quarter, but and it also looks like the conversion of the deals has been quiet. The last few months, maybe a little bit slower than you would've thought I think last quarter.
And the expectation was 20 to 30 different deals could be signed over the course of 2021, you're not you.
You mentioned and the health plans you mentioned a couple of employers that are in the works and a couple of providers, but can you provide an update of all of the deals that you expect the sign over into <unk> and.
And as the customers during 2021, and just the status of cross providers employers and payers. Thanks.
Sure Alex Thanks, Thanks for that question, yes, the you know the.
The <unk>.
Pipeline has continued to grow and and part of that was just where we are in the in the transition.
Really starting in mid 2020.
For the most part for most of the markets that we're pursuing.
From a very low number and then continuing to expand that as we go forward, we're not expecting that the pipeline will continue to grow at the rate that it's been growing.
In the future as the deals you know most of the sales.
Sales cycles for health plans and you've heard me say several times are 18 months to two.
Two years, we're very pleased that we have some debt looked like they will come out of the pipeline in essentially a year under a year, which is pretty quick and I think that that speaks to the value proposition and the opportunity. That's there but there also are ones that will continue to move on you know what we would think would be of normal cycle.
As I mentioned employers most of the employers that we're working with it are in the pipeline, although not all of them are 2022 launches, which means those contracts, which you're referencing will be.
And coming to play and the fourth quarter, we have a couple of including some things that are fairly large that we would anticipate would come.
Probably in the third quarter based on where we are in terms of of the contracts.
With some revenue in 2021, but the majority of it really launching into 2020 two and then on the RPM side, that's where we anticipate certainly a larger volume of contracts over a period of time and at the moment we have.
A fairly healthy number that are sitting out waiting for signature so.
You know it may be the nature of the Beast that sometimes we get a bunching in clumps as it relates to that we still anticipate.
The same number of contracts that we were anticipating last quarter and nothing has changed from that perspective, if anything we probably seen.
And increase in the potential for contracts, especially through partners.
Around that and of all of those comments or are pre acquisition.
Acquisition of wait for word, which we anticipate will also contribute now to that as well, but but excluding that I would say, we're in the same or a little bit better place.
And then we were last quarter in terms of having those come out.
Certainly understand the some of the.
Frustration as it relates to seen those on a regular basis I think we'll see more of.
RPM contracts on a regular basis health plans, we really like I said, we really arent going to see a ton of those until we get later in the year because those are 2022 revenue launches with the few exceptions and health plans.
Tend to be a little bit.
Further in between but we are we believe we're well positioned for this quarter and then going forward for the rest of the year. We also anticipate some additional.
Okay.
Great. That's really helpful. Okay on the behavioral health of the waste from acquisition you know Rick you, you've obviously of experience.
I have experienced the payroll of health companies before you mentioned the reason why there's true your attention to the way forward, but you also said you don't need to make any and major investments to it. So I guess just expand on that because I'm sure you want to shape way forward into a little bit of the vision that you've had from your prior experience and then ultimately what do you need.
Due to modify the way for a platform sort of fit the Daurio network is it going to be something similar to what youre doing with upright I guess I didn't necessarily get the message and then just last question of the bunch here.
Among the 20000 customers. The way forward has what is the revenue from that and do you expect to expand the diabetes solutions and to the 'twenty employer plans that way for them that way for a house.
Sure. So let me, let me try and make sure I get all of those if I Miss something let me know.
And I, probably wasn't as clear as I could have been in terms of we don't expect it to add a significant and burn.
To what we're already spending so we're not expecting as you know a very large additional incremental burn associated with that part of that is because they are generating revenue and part of that is and it's because they already have a robust.
Software development team their software development team is indicate is located in India and has really been doing some great work and we anticipate that they will continue to.
Do that great work and continue to refine the offering of way forward, but they have built the platform.
They are operating that platform. So you know a lot of that heavy lift has already been done as it relates to that the primary pieces in terms of bringing way forward in with Oreo is really the integration as I talked about we want to make this available and this by this I mean, the different offerings available to members not necessarily.
All in the same.
And application, we don't think of it that is the best of member experience of we anticipate we will continue to maintain different applications, but have integration as it relates to things like members being able to see where they are across the different conditions that they have those.
And have you know ease of use back and forth between them consistent look and feel so you feel like you're in it and an integrated experience and of course, the whole thing is supported and the underlined by our AI journey engine, which enables us to do a more personalized and the hyper personalized approach to those members. So we will be.
And the data feeds and then the recommendation engines et cetera that come from that AI engine and the way forward piece and we anticipate that that will happen over the next couple of months, but wasteful word is a little different and up right to the extent that there they are.
And are already operating most of their customers are.
Self insured employers, whether that's direct contracts of or through resellers that they have so their offering is already a beat of the offering and like I mentioned, we have been partnering with them on Rfps already.
The earlier well throughout the you know the first part of this year as we've entered especially on the employer side.
So there's not a lot that needs to be done for us to start that process over the next few months, we'll be integrating them into sort of that debt overall.
The look and feel from that perspective, and I feel like and missed one of your question.
Just on the revenue contribution that you would expect once the deal closes.
And we don't expect it to be.
Terribly material to our existing revenue that we have.
In the current year. The you asked the question in terms of the billing and the 20000 members approximately that theyre, bringing like I said that doesn't include their technology solution.
You know, they're a little different in terms of the way that their billing and that they are billing per user or excuse me per member per month, so they're actually of fixed charge every month.
Related to those folks because of the way that their platform works. It has the ability to screen people and then provide the digital CPT and the CVP plus coaching so.
No most of the rest of our solutions are being build on and engage member basis.
They have existing customers that are on the P. M P M basis.
And they have ones that are in process of being implemented as well. So we'll continue to see so there's contracted revenue there that will continue to come into play over the rest of 2021 and really building into 2020 two as they continue to expand.
Okay understood and then just any update of how the upright acquisition that that transformation is happening moving into more of a beat of <unk> platform.
Okay.
In terms of from and offering perspective, we have already integrated as I mentioned, we have a simple opportunities actually for M. S cases of stand alone and we also have simple where it's integrated.
And we're working with a couple of different health plan customers and we've been including it from that perspective, and we've also seen initiatives by the way in the upright go from B.
The <unk> perspective, as well so there are and that is no obviously and existing product that has that is in process and we expect that we will have.
All of the pieces that we need from a b to b side in the late summer and arrest do you want to add anything to the.
The <unk> integration for MSCI.
Yeah. So that's something that as we stated in the last earning call.
We're going to get.
And this MSA offering the packaging for the BW of market for Q3 of <unk>.
Still the plan.
The debt, we have so and we own.
Of the commit the clients.
Got it delivered for Q3 our.
And the existing product as Eric stated the go to.
Is distributed now for some of the B B to B accounts.
Alright, that's great and then just last question just to confirm what was the revenue of just the daria organic and excluding upright in the quarter.
Okay.
That's something in the range is so for them.
$2 3 million of $2 4 million and I'm not sure of the exact number but that's the ranges I mean, we had the growth from Q4.
And yes, some of the upright.
Yeah.
Yes.
Makes sense, okay and understood on the up rate we can.
All right excellent. Thank you I appreciate the update okay. Thank.
Thank you Alex.
And our next question is from Charles <unk> with Cowen. Please proceed with your question.
Yeah, Hey, guys. Thanks for taking the question maybe.
Maybe first just to follow up on up right. So.
And you talked about the.
And I think in the release and you talked earlier the chunk of the.
First quarter revenue is typically captured and the first quarter. So is that just a function of seasonality and.
So when we think about revenue from upright for the rest of the year should we be using sort of February and March monthly kind of run rate as well.
Has the run rate through you know, let's say of the middle of the year and then more of upright and revenue comes in the fourth quarter and first quarters of the year.
Yes, thanks for the the question so yes since the the majority of the revenues that we had of generating per day is still be the same and that's also the case for off price and the visa seasonality.
So usually January and is very strong and this is why generally is the is higher than February and March off price and then the toward the end of the year in November and December going to be.
Again the high.
Comparing to the months and before so between I would say February.
And the and.
And we will build this out of the months and as you said you should consider the long the late and the potential growth of the sunlight from.
February March and onwards, that's the way to think about it.
Okay. That's helpful. So when you guys talk about I think at one point and a release or I think you've made mentioned once that if that was about 90000 active users for up right.
Does that does that represent the sort of steady state and membership of this February the September period, because of because my guess is right and if you're paying a monthly P. M. P M.
And maybe correct me if I'm wrong the.
The fourth quarter first quarter of fact is that really a lot of people trying it out because of the holidays or you know the they wanna.
No.
Better or whatever reason, but 10 day they kept the people cancel Friday, maybe they choose not to continue and and.
And what you're really seeing and February in September of the the consistent active users.
Yes, so first of all of it I just wanted to and just want to emphasize that we we've put a new deck on our website. This morning, and we provided the link on the press release and also on the 8-K, so way and information about number of users and so on and is disclosed the bulk of the presentation. So it's all of them.
And it's just.
And just as a comment with regards to your question are we have and.
And then the majority of users that are coming from the metabolic are moving into a membership program and that.
The transformation that we had and the last couple of fuse and.
In terms of the off price use of those that are coming from.
And from the B to C all of buying and.
The the device is the one time and then trying it and then the L are getting net of the platform and keep trying it.
So bill and more on the program that is.
That is one time and the auditors of ER.
Joining as part of the beauty of B or getting on programs that are net.
And that's helpful.
And the membership all of them.
So that's the way to think about it.
I see so it's a little bit less about the subscriptions outside of that but it's also the device charge as part of the upright debt our people purchasing more of in the you know.
The Morris gifts or at the start of the year.
Yes people are buying more and line toward the end of the year and the start of the year and this is why we see the seasonality and it's less about the the membership program because that's the that's the nature of the B to C says that we're doing and when I'm talking about the formation of the off price business into <unk>.
The M SK I'm talking about and turning it into a membership and the the yearly program, whether you're going to see something that is more.
And kind of less seasonal and more stable. So the more we move the business and the overall revenues into the beat of B youre going to see the stability improving.
Obviously this is something of that you also already see and the value of metabolic visit and this is because we started doing this transformation the unit and the house ago, and Thats something that youre going to see towards the end of the and also for the MSP business.
Okay, but just on the on the beta see part of the upright just to be clear.
And we should be modeling.
More of the February March run rate.
Through September and then ramp up in the fourth quarter and and.
And in fourth quarter for.
And not only just yet, but as we think of next year as well right.
Yes, that's exactly right.
Okay.
And I just wanted to ask one more question around our way forward.
You know you can talk about it sits in the middle part between.
And they're not getting care, but we're getting and getting all the way until like a real full blown tell of behavioral health kind of visit what part of the market. Because you know if you think about and I'm looking at your slide deck right now and you show this venn diagram of.
You know all of the addressable market.
You know of 9 billion is this just the segment of the behavior of health that you think that way for it represents or is this.
Or is this you're just saying just kind of of 1% penetration of that some of it because I'm trying to understand like what part of the behavioral health market fits into.
We're way for it is trying to.
Yes does that represent.
And where we think that their plane right at the moment, but if you think about behavioral health as a pyramid for the moment where.
You're looking at the number of people.
And that would be and a level of acuity, let's just call. It for the moment is probably not exactly the right term, but you know at the very top of the pyramid youre going to have a small number of people with seriously persistently mentally ill and they have very high costs associated with them on the behavioral health side and also.
By the way on the physical health side.
The next group of people down is a little bit bigger number of people, but those are people that are usually incurring significant amount of cost maybe on the medical side instead of the behavioral side, but they have significant behavioral health issues and then there's you know and depending on how you want to look at it two to three categories below that debt.
Debt have decreasing severity of behavioral health condition and also decreasing costs. So if you really look at.
And on an overall base and it's the base of that pyramid is the largest group of people that have behavioral health conditions that would benefit from care and the if care is not provided a significant portion of those will continue to progress into higher levels of <unk>.
QED and cost associated with that the challenge with the bottom end of that pyramid is that they don't cost a lot of money, they're not spending money on behavioral health they don't really need of.
Traditional provider and is it the.
The way that we would think about it necessarily and a lot of cases and some do.
But a lot of them really could benefit from other interventions and so the the trick has always been how do you provide services to that low end of the the.
And that pyramid, there and a very cost effective way and what.
I think is unique and interesting about what wait for it is doing is that they're really focused on using sophisticated screening to understand crews and what category and what kinds of.
Treatment or care would be appropriate and then helping direct them to those pieces and in some cases, providing that carry themselves and in some cases.
Sending folks to care outside of themselves as part of the referrals and and don't get me wrong that referral is part of the value the ability to do that referral is part of the value as well.
But this is really kind of addressing that lower and piece of the market on a cost effective basis, and because they are not providing and making their money. So you know several of the players that are out there are essentially charging for telehealth.
Visits for Tullow behavioral health visits at significant cost oftentimes actually in excess of what it would cost for an in person visit so if that's where you're making your money your incentivize the actually to send people to that level of care, which is not necessarily appropriate or needed for those members. So with the better member experience.
It's more convenient and gives them what they need.
And also allows you to address these very large portion of the market and.
And doing that the only way you can do that is through a digital.
Our approach to doing that and that's also why the.
The structure for the business model perspective is the is it true P. M. P. M vs are engaged member.
So I mean, we think that the opportunity is.
Even potentially larger than that Charles that's there, but we're starting with something that debt is smaller, but we think appropriate.
Okay lot of Alaska is it can you give of restaurants and of what the P. M. P. M S for for wait for it.
It really depends on what the underlying services are but it's going to run somewhere between.
250 and for.
Okay, great. Thanks, guys.
Thanks Charles.
And our next question is from David Grossman with Stifel. Please proceed with your question.
Good morning, Thank you.
I'm wondering if I know you gave us some good statistics on some of the pro forma numbers for the first quarter and I was just wondering if you. If you look at the kind of clients that are currently under contract and ramping can you give us a sense for what the run rate revenue as you know.
Under the definition, just if you assume the Paul.
All of the you know the visibility that you have.
And that's in the process of ramping and what that run rate would look like.
Yes.
And so.
The run rate of the revenue at the moment in between them and we need to count in AR.
Both of the beat of C of the metabolic the BDC of upright and the beat of beat it started and.
I would say that the.
And the run rate is above at the moment is above the $4 7 million pro forma debt we presented.
So Q1, okay. Because we are in the middle of Q2, so it's above the debt numbers.
And I cannot provide the escalate the split though and how it's divided between dataset to be the b, but I would say that it's more like in the range of sofa, 15% the.
B to B, and the 85% weighted b to C. That's high level and the.
And no we don't have an accurate.
Number for that one, but that's on either of them.
Right and and I guess similarly on the Opex for the balance you know kind of the year was.
Was the first quarter you know.
Uh huh.
And of the EBITDA loss is that a high watermark do you think for the year or is there.
Do you want to think about how that how that trends for the balance of the year.
Yeah. So I think that some of the expenses that we had in Q1, where the higher because of the acquisition. So we had no expense expenses of legal and the when the cash and from a cash flow perspective, we had to cover.
You know of debt and other things. So we're I think that the in terms of losses and burn you shouldn't think that the Q1 is going to me that on the rate for the rest of the year of I think that we're going to see a gradual and.
Decline and the losses and in the bone.
And like I would say like as we move forward something in the range of 15% the decline.
As we move forward so that's the on high level.
Q1 was a was a very special.
The special quota was this acquisition of upright.
And the impact of way for them with regards to cash as we stated is going to be very minor because again the.
And for wafer award, we are not making any b to C investment because every single of them is on the beta beside and in terms of the commercial teams and.
The way forward is relatively small.
And and we're going to ramp up of the sense of a way for award with the team that we already have on board from value and this is something of that is reflected into all of the opex already.
And in terms of and the operational team of fair way forward, including the AI and the software development team and the cost of it.
The lower than the average that we have and the company.
Because it's in the the majority of the team is in India.
So with regards to debt.
I think that from a.
Cash flow perspective, and the P&L perspective, the impact of the way forward for the Opex is going to be very low and in fact, it also gives us an opportunity when we are the extending all the teams do rely on the development center in the India and moving forward to improve our financial.
We'll file also in terms of cost when we want and goal with the additional employees. We have also the India site. So that's and operational opportunity also for the rest of our business that we are very happy about.
Got it and just to be clear when you said that it will have a nominal impact on your share of losses does that mean that they're losing less.
As a percentage of revenue or that they just have nominal absolute losses currently.
They have and absolute close of that of a relatively low if we are considering the revenues that is getting in and out of notices the expenses and the losses, so very low and.
And you know that the.
The idea of doing M&A is and this is something of that I.
And I did before and my previous company, usually are usually what we're seeing and you know one is that the and.
And the two P&L of getting together and.
And we're not going to see cost reduction here, but at the same time, where for the not losing a lot of money. So it's a relatively very very very small comparing to our overall expenses and usually in the second year, we started to see and improvement and cost effective activities and that will improve and the overall P&L.
And so we're going to send that to your previous point, we think that's moving forward toward the second half of the year, we're going to see improvement and the P&L and obviously into 2020 to go in and being a much better position in terms of losses.
Got it. Thanks, Thanks, very much for that and then and then just on the the revenue model I think a question came up a moment ago about the P. M. P M.
And we're forward so.
When you go in to sell a bundle of our each of these products can be sold separately or you can have a base price for the platform like you were talking about when you closed the upright of I just wanted to get a sense of how to think of.
The new clients coming on and and how to think of our base revenue per clients and how that may scale by adding you know the.
The different products.
Yes, so I would think about that.
And as I made mention in the in the comments. Our primary objective is really to sell and the integrated solution, we're getting a lot of interest and traction from that.
From having that integrated solution, we can for it does make it the principal net of those homes that are out there and the marketplace.
And we have been market testing different kinds of pricing models and looking at that we will be offering it on both and engage member per engaged member per month, so really kind of translating.
And two from.
The well.
Okay.
And of France, Standalone as well as on an integrated basis. So you know.
The reality and the marketplaces the different players want to address.
The different things and different ways, and we do pride ourselves on our flexibility in terms of both the offering and the ability to integrate with others and then also how we deliver on that value to our partners. So.
The the way that I would probably.
Think about it just yet.
And because it's probably easier is to think about it on a.
Per engage member per month basis from the model perspective, and it's just a matter of adding additional dollars to that to cover that on an integrated basis.
Got it and just just one other question was I was just wondering.
And if you look at how you're selling today and what it may look like you know kind of 12 months from now.
Do you have any change to the the channels that you're using and and the ones that you're using today and maybe give us a sense for how those are performing and and what I mean is channels outside of the internal direct sales efforts and just trying to get a sense for how your partners are performing now and and what you are.
Expecting day out over the next several months if any.
Yeah, I mean, we're seeing additional interest from if I understand your question correctly.
Seen additional interest from distribution partnerships, and we kind of look at those and too.
Broad buckets, one being making it easier for customers to adopt.
What we're doing so you know they have some ability to either past data or facilitate payment or they already have contracts in place and we can fit or tuck in underneath that as part of their offering.
We think we will see some expanded.
Relationships there over the next couple of quarters.
And then we look at it its folks that are truly really kind of reselling, what we're doing and there's fewer of those opportunities, but we have gotten definitely gotten some traction with some of the ones that we have.
Not.
Really pursuing those.
And a significant way right now from that perspective, we're more interested in the first part of the partnership the first category of partnerships and the direct sales pieces that we're doing but that will continue to evolve and you know, we're always reassessing, whereas the market going how is it doing.
The deals who can we partner with you know I think that there's more and more emphasis and the marketplace right now in terms of.
And I think there was of Wall Street Journal articles. It was there was timely and appropriate is there is a certain amount of point solutions and fatigue in certain parts of the market, but the other thing the interesting thing that's going on is because digital health has been and the market now for a while but its primarily been in the larger employer part of the market.
Is there now and the interest that says okay. How do we get this into smaller customers that just arent economically feasible for somebody like of Daurio to pursue.
100 205 hundred.
And.
The <unk> type of contract and there are some interesting partnerships that are happening in that area as people are looking to how they could leverage their existing.
Base of customers at that level and in pursuit of that so I think we will see some activity there as well.
Alright, great. Thank you that's it for me.
Thanks, David.
And our next question is from Steven Halper with Cantor Fitzgerald. Please proceed with your question.
Hey, guys. Good morning. This is Joe Downing on for Steve and just a quick question from me. So given the experience of the management team and on track do you guys expect integration of the way forward business to be go more smoothly than past acquisitions and could this potentially lead the future behavior of little partnerships with some other companies.
So.
It absolutely could lead to other partnerships as I said, I mean, I think way forward is well positioned to be a partner and the ecosystem, which fits with our philosophy vs.
Compete.
With a lot of the offerings that are out there on directly and how they can definitely the.
And partners we of partners that we can bring to the table.
To provide those offerings and we anticipate we will have more partnerships to do that in the future.
We do have behavioral health expertise in.
The organization, but I think we're also.
That is part of the reason for doing the way forward acquisition is that we're bringing their expertise.
And their platform to the table.
But we certainly understand how behavioral health fits in the overall.
Offering that we're doing and and how those pieces are integrated and we also have several advisors that are assisting us with that as well that are coming from other places but.
And then have that behavioral health experience and.
And you know our clinical coaching leads.
And also.
Coming from a variety of different companies that are out there, including cigna et cetera that are very familiar with.
How the behavioral health pieces work in relation to overall chronic condition. So, yes, we and and overall basis, Yes, we believe we're well positioned.
To integrate way forward into the overall offering and operations of the company.
Given the the breadth of the experience that exists within Daurio today, and we're really pleased to bring the offering and the expertise that way for it brings to the table as well. We also think that by the way way forward will enhance our behavioral science and.
Approaches as well, so that's and an additional.
Benefit that they're bringing to Dario.
Great. Thanks, guys.
And our next question is from Nathan Weinstein with and you just capital. Please proceed with your question.
Good morning, Aric and for me Congrats on the way forward acquisition and thanks for taking my questions.
Just one quick one.
There's been a lot of discussion about how the pandemic outside of the deleterious effect on mental health and so.
Luckily, we're seeing an influx of innovation and the space. So I'm just wondering when we think about the next few years for this acquisition and for Daria of health, how you see the opportunity.
Evolving and the market, especially as the country goes through reopening.
And we think that.
Oh, sorry go ahead.
And then go ahead of it.
[laughter], okay. So so.
You know the well.
We are part of the seamlessly for the last eight nine years I think Rick is the almost 14 years.
And my perspective health care of is is the managing and unofficial way and ideal starting all of these businesses. These two.
And digitalize the space and.
And we think of that the consumer is the way to digitalize it.
And we have seen the pandemic accelerating our vision.
The which is good and we are happy about it and the we only think that the eventually.
All of the change of sell here to stay and we're going to see the continuous of the fund's formation.
And so from our perspective the strategy is to provide the consumer centric you'll get the users and the one journey.
I think as the one of the one of the statement that they had and descending coil is that we own most of the holding company. We are the technology company. We are going to eventually integrate the solutions that users would have one journey.
In the thoughtful way, it's not that we're gonna have why not necessarily.
And we're gonna have.
The very high book.
Is the experience and as I said, we think that each of the next generation of <unk>.
And of the.
And the digitalization of the space, we have seen and the last day 15, 20 years, a lot of telemedicine solution. We have seen that the companies are trying to scale up treatment by getting our software solution for healthcare professionals, we are going once the forward without without the digital therapeutics platform we have.
Scaling up the capabilities for the users and we are supporting them with healthcare professionals and none of the other way around and I think that that's the future if we want to create.
<unk> ability and if and when it today at the high a high margin business.
The debt will be able to scale up of treatment and that's what we are focusing on and today with this acquisition you have seen the seed of fallout.
All of our plans, saying the next day, two and three years. So we really think strategic and we really think few use and advance.
Thank you very much appreciate the insight.
Cool.
And we have reached the end of the question and answer session and I'll now turn the call back over to management for any closing remarks.
So thanks, everyone for joining our call this morning.
And just wanted to eat the way that we had the new presentation loaded to the website with additional information that can be complementary to the press releases that we put this morning and.
And also to the Sone and coal.
And the <unk>. Thanks for your continuous support and have the good day Bye bye.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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Yeah.
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