Q3 2021 DarioHealth Corp Earnings Call
Yes.
Greetings and welcome to Daniel help Corps third quarter 2021 results conference call. At this time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
Anyone should require operator assistance during todays conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn this conference over to your host Mr. Glenn Gourmand Investor Relations. Thank you Sir you may begin.
Thank you Laura and good morning, everybody and thank you for joining us today for a discussion of Dario Health third quarter 2021 financial results, leading the call today will be arrays Raphael CEO, Gary will help she'll be joined by Zvi, Ben David CFO, and Rick Anderson, President and General manager of North America at Dario House. After prepared remarks, we'll open the call for Q&A.
The audio recording and webcast replay for today's call will also be available online as detailed in the press release invite 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 November 16th 2021 last night, we issued a press release announcing our financial results for the third quarter 2021, a copy of.
The release can be found on the Investor Relations page of Dario helps website actual events or results may differ materially from those projected as a result of changing market trends reduced demand or the competitive nature of Dario helps industry such forward looking statements and their implications may involve known and unknown risks uncertainties and other factors that may cause actual results or performance.
For materially from those projected forward looking.
Statements discussed on this call are subject to other risks and uncertainties, including those discussed in the risk factors section and elsewhere in the company's 2020 annual report on Form 10-K, as well as the third quarter 2021, 10-Q filed last evening additional information concerning factors that could cause results to differ materially from the company from our forward looking statements are describe.
In greater detail in the company's press release issued last night and in the company's 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.
Useful for investors understanding and assessment of the company's ongoing core operations and prospects for the future a reconciliation of non-GAAP measures to the most comparable GAAP measures is included in today's press release regarding quarterly and year to date results and with that I'd like to introduce arrays Raphael Chief Executive officer of Dario help arrest.
Thank you Glenn.
Good morning, everyone and thanks for joining our call. This morning oil this quarter was one of the most exciting quarters for us as we have seen all the strategic pieces that we put together in the last two years coming together in a very impressive.
Impressive way and so in the last couple of years, we are talking about two a few a few main pillars number. One is there is the fact that the companies moving into platform that is multi condition. We always thought that the market is going to consolidate and we're going to see the digital therapeutics.
Our industry.
Getting a coming together into one platform and the second pillar is about the fact that we are moving the company from direct to consumer into the bee the BTC and in other words selling into the small employer market in the provider market and in the last Oh.
Months, we have seen that.
These two pieces came together in a very nice way on the.
Multi condition platform.
Both building organically ultimate abolish pieces in there and there are few use diabetes hypertension and weight loss. We also made two acquisitions earlier this year.
Upright then way forward will Emiscan also for behavioral.
Angel and further than that we showed the very strong execution capabilities made the fact that we managed to integrate the upright solution into the valuable platform and we launched a few weeks ago the value of move which is damn escapes solution.
Wed alio and we're going to also integrate the beer that health cloud in Q4. So in terms of are performing the acquisitions getting the technology integrated into the platform and we did a we moved very fast and we created one integrated platform.
Which is one of the most comprehensive platform today in the platform.
In the industry and we see a lot of very positive feedback from our clients and even more impressive is what we have shown in the last four five months in terms of getting account signed we keep talking about the three main China's providers employers and health plans and today, we have accounts that have been signed on all that we are.
China's.
Actually we had in Q1 around five accounts today with 47. So in the last four five months, we have seen 85% of the accounts that we have ever signed in the last few months and we we think that this momentum is going to continue into the end, albeit in us into next year I'm sorry.
It's not about the number of accounts, it's about also about.
The quality of the accounts one of their accounts as you probably know is a big National Health plan that they signed with the company I think that there's some something that gives us a lot of credibility and this is something that should have a significant impact on our financial profile.
Further than that we also showed the few of the accounts that we have signed and I'll also for multi condition and I think that this is another very important indication that the company strategy.
Is that is the right strategy because today, we are not just selling into their multiple China's we are also selling multiple product lines and we are selling the full suite, which is something that we thought there from the first place that clients are going to be very interested in so overall, we see that we are getting a full validation.
For both the China's and the offering of the company and I think that the fact that Oh disappoints had happened in the last four to five months.
The outstanding and the best only about all that execute our ability to execute on the on the strategy.
In terms of the pipeline.
We reported that the pipeline is continues to be to be stronger and it's above 1 billion dollar oh be asleep, we deducted from the pipeline the accounts that we sign them. So practically all those that have been signed and are going into implementation and on our most powerful the billion dollar a week.
It means that we had a significant growth in the pipeline as well and another very important data point is the fact that 80% of what we have in the pipeline is as full and multi condition platform. So again he chose that we built and the right platform and the right Oh, feeling a add to that.
I meant under which we're operating today and overall, we see more excitement overall, we see more interest.
And overall, we see that will open I think in the demanding environment that we have seen since then the pace of this company overall, we see the momentum continue into the end of the year and into 2022 and we think that we're going to have more accounts before the end of the year a few words about <unk>.
Industry. So we see that the industry is becoming man from moving from a book fulfills what the telemedicine companies are selling into consumer first and it's very important to understand the difference between telemedicine to digital therapeutics, we are creating a consumer first platform and the industries.
Moving into digitalization and into value based and this is all the pieces that are digital therapeutics platform, Oh, they are providing including valeo and well selling at a in a model that we like to call. It a digital cell therapeutics as a service. So overall, we see that.
We are starting to be a leading the category.
Hum.
You don't want to move to a few of the financial results of the quarters. Overall, we were growing by 176%. This is a very robust.
Growth and in terms of the pro forma gross margins, we reported 45%.
Gross margins are.
In comparison to 26, 9% that we had a year ago. Overall, we still think that we are in the trajectory to generate a gross margins.
Over 70%, we think that the more we're going to move into the Bee debuted the more revenues are going to come from the b to b there higher there's going to be good the Gulf Mountains, and we think that we're going to operate a kind of a SaaS model our company.
Oh, we see how all that these are.
Strategic initiatives the multi condition.
I said the movement into the Payless market. These are creating these two victoza, creating a compounding impact on our ability to generate revenue and we think that this is something that will have a significant impact on our numbers in 2022 and and we're going to see in 2022 the significant ramp up.
They're in our run rate.
On the financial profile side I, just wanted to remind you.
How these two victoza walking together, so when a single account.
And that are that we are signing a company that have a single condition in most of the digital health companies and managing either diabetes or hypertension O M. SK, usually were 8% to 15% of the population.
They have a single app as single condition.
When we are moving from single condition to multi condition. We have a few kpis that theyre improving lastly, one is the number of Felicia when members are eligible to one or more product. So on the multi condition, where we see the numbers going from like a 15% to 40%.
And the output average revenue per user is something that is much higher it's going from $60 to 19 Donuts. These two parameters together under the same assumptions Oh for enrolment rates.
It is something that is generating between five to seven X more bullets, but every account under which we are implementing again. This is something that is not reflected yet.
In the revenues that we're generating today, but definitely it will be reflected in the revenues that we're generating next year overall on the implementation side, we are doing a good job here as well.
Well that on the accounts that we're already implementing we are above 40% enrollment rate and the retention rate.
Is in the trajectory of 80% retention year over year with.
With that I want to hand over the call to weeks will give you a deeper insight into their accounts and into the implementation Rick.
Thanks Ross.
To start with a few highlights on the operational side.
And some of these are ones that arises just spoke about but we continue to see enrollment for our standard accounts being greater than 40%, which is above the 35% that we use it both the pipeline calculation and our internal models current trends suggest that we remain on track to receive.
Excuse me achieve 80% annual retention consistent with our historical trends and we have grown the users on the platform to approximately 210000 people.
In implementation for most of the recently announced agreements with the majority for our first quarter 2022 launch in a few for fourth quarter 2021 launch we believe that this positions us well for significant revenue growth starting in the first quarter of 2022 from the <unk> pipeline.
On the sales side the pipeline continues to grow now more than $1 billion. Despite winning multiple deals in the last quarter. So this is a net pipeline we have seen significant progress in all three channels in the third quarter expanding from five contracts at the beginning of the year to 47% as of now including plans.
Employers providers and channel partners with 80% of those coming in the last six months.
And we have about a dozen contracts that we have not yet announced that we anticipate closing before the end of the year and launching in 2022. These are either signed and not yet announced or in negotiation or contract at this point as to the individual channels starting with the health plans. We were very pleased to announce our first health plan.
This quarter with one of the top five National Health plan, we anticipate.
Late that the health plan will contribute millions of dollars in revenue beginning in the first quarter of 2022, and we are already in discussions with a plan on expanding our relationship and as I talked about before especially in health plans landing and expanding is a large part of the business and.
And we have an additional plan in the final stages of contracting and another few that are very late stages of this process. So we anticipate to continue to see more health plans as we go through 2021 and into 2022.
It's been approximately 18 months since we began selling to health plans.
The channel that has an 18 to 24 month sales cycle generally speaking so we remain pleased with the progress that we're making on the employer side employers represent the largest growth in contracts in the third quarter. As we continue into 2021 sales cycle. Many of the wins that we've announced and those that we will announce in the coming weeks.
Our through a competitive RFP process with some of our largest competitors.
Let's start first contract for the entire product suite, and we anticipate more full suite product announcements before the end of the year.
These wins will not only add substantial revenue in 2022, but the number and quality of accounts and the consultants that we've dealt with.
Should significantly increase our reference customers and opportunity that we can leverage to even greater number of wins in larger accounts. During the 2022 sales selling season for employers, which will start in the first quarter.
2022, we've also entered into agreements with several channel partners, including Virgin pulse, which increase our visibility in distribution and should further accelerate our revenue growth in 2022, and I would like to call out that we continue to have good success with our behavioral health only product an off cycle sales are steady trend we see.
Into 2022.
On the RPM or provider side, we have also recently announced additional provider contracts.
We have several additional contracts that are pending final agreement that we expect in the fourth quarter or early next year. In addition, we are also seeing the size of the deals that we're getting done increasing which is a very favorable trend for us.
And we continue to see strong demand in the market for the multi condition solutions such as ours, 80% of the pipeline is now multi condition or a whole suite offering and the feedback that we're getting from the market is it's not only the integration of the front end and the back end for the customer making it easy for them, but there are also responding to the fact that we.
We are one of the few in the industry that has a fully integrated solution. Many of our competitors. Even if they have multiple conditions are doing it in separate modules, where we've taken a different approach and really combine the user experiences. So one coach one experience and and that's responding are resonating very well in the marketplace.
Metabolic suite is the backbone of the integrated solution that Ontario move which is M. S. K solution and the behavioral health solution are helping us build additional momentum in creating additional opportunities for us to pursue.
And there is significant economic impact from moving to multi condition deals. We expect that revenue from our full suite deal will be five to six times that of a single condition for the same size customer.
As we look into 2022, we are confident that we will see strong growth we've seen our efforts translate into contracts that will generate revenue primarily starting in 2022.
We continued to grow the pipeline, we have strong operational trends with our first employer customers that demonstrate our ability to translate contracts to revenue, we see strong growth of members on the platform.
<unk> grown our leadership team with the addition of Jared as Chief Commercial Officer, which we announced yesterday and are very excited about we continue to see wins in competitive RFP processes against the most established competitors in the space, which personally I find one of the most exciting things that we're seeing.
With multiple channels and multiple partners, we have multiple growth engines, we are not dependent on any individual channel to achieve our growth objectives through the end of 2021 and into 2022 with that I'd like to turn it over to Zee.
Yeah.
Thank you right.
Revenues for the.
Three months ended September 32021 were $5 6 million a 7% sequential increase from the three months ended June 30, 2021 and 176% increase from the $2 million.
For the three months ended September 2012.
Gross profit for the three months ended September 32021 eight.
$846000, an increase of $277000 or <unk>.
One 5% compared to gross profit of $549000 for the.
The three months ended September eight 2020.
Gross profit margin was 14, 7% for the three months ended September 30 of 2021 as compared with 1% to six 9% for the three months ended September 32020.
Former gross profit, excluding $1 7 million of amortization of expenses related to the acquisition.
And the way forward was $2 5 million or 45% with revenues for the three months ended September 32021.
Operating loss for the three months ended September 30, 21 was $22 5 million, an increase of 15 $9 million or 141% compared to the $6 $6 million operating loss for the three months ended September 32020. This increase was mainly due to the <unk>.
Kris and our operating expenses and stock based compensation.
Net loss was $22 4 million for the three months ended September 32021, an increase of $15 9 million or one of the 43% compared to the $6 $55 million net loss for the three months ended September of 2020.
Non-GAAP adjusted net loss for the three months ended September 32021 was $11 9 million.
An increase of $7 2 million or 151% compared to $4 $7 million non-GAAP adjusted net loss for the three months ended September 32020. This increase was mainly due to increasing our operating activities.
Cash and cash equivalents totaled $51 3 million as of September 32021.
Turn now the call back to Ed.
Thank you Tiffany.
So.
I want to wrap it up with the three main points remain takeaways that are that it's important.
All of Us will understand.
Number one.
Wanted to talk about the health care industry that is changing dramatically now we.
We used to think about the health care industry is it booked though first.
Now, we see that it's becoming more consumer first digital first and more value based.
And therefore, we think that the digital therapeutics as.
As opposed to telehealth telemedicine digital therapeutics is going to lead this transformation.
And we believe that value is very well positioned to be the king of this category and the category is having a huge potential and.
Well, just just now scratching the surface in terms of the potential of this industry, we see it all over the place where the client environment is changing as well, it's not about whether we need to adopt solution. It's about what is the solution that we're going to adopt.
We see that clients want to be part of the ecosystem.
And it's not any more about that just early adopters that are buying something for me innovate those.
It's about really getting inbound requests from clients that want to adopt these kinds of solutions. So the industries that are and it's happening at point number two.
Related to this strategy and our ability to execute on the strategy assuming that we will very clear and those that are following the company in the last few years, we will very very consistent with the pillows multi condition moving from PTC to be to be providing the best solution to Paris, I think that we are executing.
Well in all the pieces in the last four months of the attending the best story about that.
Overall, we think that the momentum into the end of the year is going to is going to continue and we're going to sign additional six to 12 contracts, including health plan and we also think that we're going to build the momentum into <unk> 'twenty 'twenty. Two what are we going to see a significant Thai revenue in <unk> 2022.
So this was a point number two number three related to the previous two points and number one because the industry is transforming and growing our digital therapeutics in the digital in general.
We see that are more and more way giants that are coming from the healthcare industry I would called them and non digital Giants think about pharma companies as I think about the big medical devices companies.
Understand that this is where the market is transferred is transforming and don't want to be part of this category.
We started to get the local for inbound requests we are talking about it in the last few quarters and we're seeing that it might get to a maturity whether the company will have a will have the opportunity to have strategic relationships with one of the big guys, which is something that will help us push it up.
The platform faster into the market.
So these are the main key takeaways are.
Overall.
We are there.
Creating a very good momentum into 2022, I'll pause here and I will hand over to the operator for Q&A now.
At this time well be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is another question queue. You May press star two.
<unk> from the queue for participants using speaker equipment, and making necessary for you to pick up.
Starkey one moment, while we poll for questions.
Our first question comes from the line of Alex Nowak with Craig Hallum. You May proceed with your question.
Great. Good morning. This is kinda Mccarthy yonker, Alex can you provide more detail on the health plan when the initial contract size when that could start converting into sales and what additional investments if any.
To make to get the platform ready for them.
So in terms of.
Launching it we anticipate that it will be launched by the first quarter of 2022.
The ongoing activities to implemented are just about done.
So there's a small chance it will happen.
This year, but we're really looking at it starting next year.
What we've said is that the contracts is in the millions of dollars there'll be more detailed forthcoming as we go and we are in a discussion with them right now to expand this beyond what they're already doing this is with them there.
So clients, so they're selling our solution through as their own effectively.
The lift to do this.
As indicated by the time frame I guess is not very significant we expect that we will have a bit more of a significant lift to launch phase two when we get there, but it's it's nothing that's going to be significant in terms of dollar expenditure or time. So we're very bullish on.
This continuing to expand and into other opportunities in other areas in the health plan.
Got it that makes sense and just from a broader perspective, what the deals you've won and are expecting to win before the end of this year.
Can you just expand on how revenue is expected to ramp throughout 2022 and more specifically do you still believe you can double sales next year as the street indicates.
Yeah. So thanks for the question.
<unk> with Citi.
Things that we're going to see more accounts getting signed.
We think that they also health plan is something that we have a few more in the pipeline that are in a conflict between state. So we are very confident that we're going to get it as well.
We are very confident in our ability to grow the revenue we're intensively.
I don't think that the company is in a stage, where we can say precisely if we're going to see the run rate jumping in Q1 or Q2 of next year, but we're very confident that we have enough accounts in the in the pipeline plus an acceleration in the number of the accounts that we're going to.
Sign on also next year that is going to grow the cells in a very intensive way.
We cannot be the size app.
On the on whether that's going to happen, we're going to see day I Hope you stick in Q4 of this year Q1 of next year. This is too early to say.
But we are talking about a significant account, but you can just give you. An example D. The the health plan that we're talking about is something that and.
And going few stages.
Double digit in terms of millions of dollars to the company if.
If it is going to happen in a in 2022 the two digits. It's wants to know if it's going to wait for the beginning of 2023, it's a different story. So the ability to predict these is a bit challenging at this point, but at the same time, because we are selling into multiple channels and multiple conditions we have.
Multiple growth engines. So the bottom line to your question. Yes, we are confident that we can grow the revenue.
<unk> is not something that we have at the moment.
Okay. That's helpful and just if I could squeeze one last one in here can.
Can you walk through the elevated spending as this current opex spend a good run rate or do you expect it to increase and if you could just speak to the capital plans are.
Now how the cash burn is going to trend over 2022 that would be great.
Yeah. So.
I think that now we are seeing the seeing some peak in all that.
In the burn rate because we.
We spend a lot of money in order to satisfy.
Two the launch of many accounts.
Plus we also put together a few pieces of the multi condition. We're investing also in 12 and in order to take all the pieces together in only nine months, we are connecting three companies together into one platform. So this is something that created the Moe expenses.
When the accounts that we have signed on including in the Big Health plan.
Not yet generating revenue most of them and it's going to take another couple of months before we see that so we see a peak in our in the in the overall burn we expected that it's gonna it's gonna relaxed into next year.
Once the significant revenue is going to get in on top of the run rate that we have today.
And overall, we feel comfortable with the with the cash balance that we have.
We know what is ahead of us in terms of the pipeline.
What are the next account said that we might sign on we know about the strategic discussions that we're having so where we feel comfortable a with the cash balance that we have and we've seen that we have is we still have a very long ago I'm right and we still have the ability to make there.
<unk> decisions.
In terms of how in the future we want to fund the company in between the strategic opportunities that we have two the along the run rate that we have.
Great. Thanks for the questions.
Thank you so much.
Our next question comes from the line of Charles <unk> with Cowen You May proceed with your question.
Yeah, Hey, thanks, guys and congrats on.
All the new business and the momentum that you're seeing.
Maybe if I could just ask a little bit about sort of the makeup of these all of these new wins 47 contracts I think you said the majority are employers and if we pull the that the national health plan client out of that for a second can you give us a little bit more maybe directional kind of guidance in terms of.
What sort of the average size of these deals look like.
What is sort of the implemented implementation lengths and does revenue like how will revenue get recognized.
So if we're looking at 40% enrollment is that within like the first month or should we be thinking about that over the course of maybe three to five months.
Kind of color around that would be helpful.
So let me start at the end and I'll go forward and just help me out if I, if I drop one in the middle and happy to come back to it. So in terms of the revenue ramp or the enrollment ramp we've seen pretty much so far reaching.
The enrollment rate that you're talking about within two months.
So I would say for the most part it should be somewhere between eight and 12 weeks that we would reach that level of enrollment and then obviously, we have ongoing efforts to sort of keep it at that rate or maybe move it up a little bit in a couple of cases that we've seen.
From there.
In terms of sort of average deal size it really varies a lot.
Between those.
And we're looking forward to kind of giving averages as we go forward, but these are everything from $100000 $250000 to.
The full suite product.
Probably about $1 million or just under a million dollars a year run rate.
So they're kind of all over the place and so it's a little challenging to give you an average over the whole 40.
<unk> 47, or 46, if we take out the health plan contract.
Okay. Okay.
So I mean, it sounds like if we thought of it that way, we're still averaging somewhere low mid six figures is that if we were to ballpark. It has that kind of what would be in the in the room yeah.
Yes, if we're talking about.
Metabolic or multi condition, we're probably talking in the.
In that range.
And as we go to the full suite for sort of your average sized customer now I'm not talking about jumbos here, but your average sized customer you're probably approaching $1 billion.
Okay.
Then when we think about.
You noted that the majority of these contracts are going to start January of next year.
Can you give us a little bit more like what percent of the of these new contracts that will start here in the fourth quarter, because you know where.
I'm looking at consensus for next quarter and you know it ticks up in is at least Directionally.
<unk> is where consensus is.
Do you think a fair approximation approximation for obviously you have the the upright integration.
You have some new starts coming in the fourth quarter, you know any sense directionally that.
Where where the where the market is.
Pretty close.
So I will let me just answer the question because I missed it from App, where I apologize on the.
As it relates to the launch of the contracts.
<unk>.
Other than one.
The contracts for the metabolic and multi condition.
We will launch in the first quarter.
Of 2022.
Some of the behavioral health only contracts are launching kind of a cross.
The platform those are on the smaller end of the size range. So just some of those are like 30 day implementations the others for the most part we're gonna be 60 day implementations unless we got started earlier in late January.
January launch.
Consistent with the benefits cycle that or is do you want to talk about yes.
Just wanted to add down on you know on top of that we were talking about this health wins for a while and I'm. You know some of them has been delayed are the big National one is is something that.
We also expected in the.
It's changing the you changed a whole lot of trajectory of the revenues for the company at the same time I think that some revenue that we wanted to appear in 2021 will not be there from the health plan is gonna go only into the first quarter of next year. So so.
So probably this one will have mobile app.
Significant growth in the beauty of Bee revenue because of all the accounts that we are going to launch in Q on Q1 of next year I mean, there's no organization is on fire because.
We have a significant amount of wins that all of them a lot of them are going to be launched in Q1 at the same time Q4, where we also expect a nice growth from Q3 to Q4 because of a few other implementations that we have because we still have a use.
On the platform from the BTC because usually in Q4, there is a seasonality of the BTC. So I still see a ramp up from Q3 to Q4, and then and then the most significant impact of all the accounts that we signed in a kind of a host hockey stick in the in Q1 and Q2 next year.
If I can kind of like a pain.
And how would this chart should look like.
That's really helpful and last one for me here.
Or as you talked about competitive rfps and and.
And winning against.
Your your largest larger competitors here.
For those accounts, though did they already have.
Something in.
In place and they were looking for replacement or are these sort of or is mostly clients that didn't have a solution in place and we're looking for the first time. Thanks.
Okay.
Yeah no. Thanks for that question I think it's important as we look forward and let me expand on that a little bit in terms of you know I would say probably.
70% to 80% of the accounts that we're looking at have at least some portion of what they are some of the conditions that they are looking at that are new to them. In some cases, they would have already have a diabetes solution or some other solution and now theyre going to multi condition, we're seeing that the rest of our what I would call.
I'll sort of replacement.
And you know a lot of contracts that we're going to be coming up over the next year as well for folks that have signed on a couple of years ago, and we think that we'll probably see the number of folks that are looking for replacement, but replacement and expansion at the same time in terms of multi condition.
<unk> as we go through the.
The rest of 2021, and then really as a trend in 2022, we're seeing strong demand for multiple conditions from a smaller number of vendors and as I mentioned in my comments the integrated solution is really resonating.
Also in the marketplace.
Great. Thanks, a lot guys.
Yes. Thank you.
Okay.
Our next question comes from the line of David Grossman with Stifel. You May proceed with your question.
Good morning, Thank you.
Yeah. So as you mentioned in your prepared remarks about.
New partners, including pharma and Med Tech from large pharma and Med Tech companies first of all did I hear that right and if I did.
Perhaps you could elaborate a little bit more on the type of relationships.
What those may look like down the road.
Yeah.
So number one yes, you heard that correctly, what I said.
And I was talking generally about the health care market that is becoming more digital and when I'm, saying digital I'm thinking about digital therapeutics and digital health I'm not talking about telemedicine.
Practically.
Those that are selling into.
Into the clinic.
Mission market, whether it's a it's medication and pharma companies all medical devices companies or the combination of the two.
Looking to get into this space said.
The space is evolving over time more and more money is getting into VC and takeaways in Italy created and it's all of them. They want to be part of the offer of this future and don't want to get digital access to their patients.
In both cases, if the pharma companies all medical devices companies, because they think that the future is about.
Managing the daily routine of the user and this is something that creates for them a lot of opportunities to provide a better personalized treatment to patients and I know this kind of a thought no thinking strategically I've used Ford and don't want to be part of the cartel go in this year.
Where we started to get a lot of inbound calls and we are in touch with few of them and we are trying to figure out what's the best way to partner.
There are multiple ways to partner for example, it might be licensing the platform for a specific territory one of the things that I want to remind.
All our investors is the value as opposed to all the other platforms in the market value is a digital therapeutics platform that is multi region multi language cleared by multiple regulation bodies and can go global.
So it might be licensing gain on other territories it might be licensing in the U S territory and help us push the solution into the market. Obviously, if a big players are want to be part of the Katanga way, they're also thinking in terms of.
How are they can dedicate most strategically and they have in mind in the very you know in the future also.
Equity is thinking and stuff like that it's still early to talk about the equity path, but in terms of strategic partnership. This is something that is definitely in discussions.
Got it thanks for explaining that.
On the other.
Thing I wanted to ask.
You referenced I think mentioned before that the National Health plan has different potential phases to it can you can you give us any more specifics on what are the milestones required.
Dario versus those that are the milestones that are internal to that client.
Getting factors to move from phase one to two to three or whatever kind of the progression could be.
Sure so the.
The first two phases are really kind of tied together.
The health plan wanted to go faster than their internal capabilities would really sort of allowed them to push and so they split the first piece into.
<unk>.
Essentially two groups with the first one.
So that they can meet some of the commitments that they wanted to have coming into the beginning of this year.
Second phase basically immediately started thereafter, so theres not milestones that are needed there'll be as I mentioned in.
During the call there's going to be some additional sort of integration and branding work that we're gonna do none of which is terribly significant.
And Ulster then doing a little bit more of the back and kind of work that health plans like to do in terms of understanding the structure of the technology and things of that nature that it'll happen, but there's not like a specific milestone so as we complete those pieces which are.
Already underway, then we would anticipate that the second phase would start.
The third phase is the one that I.
I also mentioned, where we're already in discussions on the.
The potential to expand this relationship into.
A different segment of that same health plan.
Which is as big or bigger opportunity than the first two phases.
That we're talking about and then.
I believe that land and expand.
<unk> tends to be the way that health plans work. So I think that there are opportunities.
On those those three but those are the ones, where there is substance discussions going on.
<unk> stuff right.
And is it still kind of at least your expectation that you would go from phase one to phase two sometime.
By the end of the second quarter of next year is that.
Timing, yes.
I mean that.
Would be our current level of expectation.
Got it and and I know I think this question came up before but just wanted to.
See if there's any incremental context, you can provide for us in terms of.
Based on the backlog that you have for <unk> had a great six months of new contract wins and customer wins and just curious as can you give us any sense of.
What the run rate revenue looks like when those clients are fully implemented.
Yeah, It's a tough question, David because if you think about.
The health plans as I said, it's a it's on a full implementation.
That will lead to tens of millions of dollars.
This is called the health plan and for the rest of the accounts as we stated are in their account. So somewhere between you know all of them are in the ranges of like six digit.
So you know you can make the calculation.
One of the things that we don't know.
You can understand is how quickly we can get all of them to be on a full run rate, but on a full run rate.
The numbers that we see as a consensus by the analyst.
Is is something that we can achieve them.
That's even an understatement when the full run rate now we need to see how quickly we can implement them and how quickly. We can go between the few phases and the health plan is like a on a few phases as tens of millions of dollars, but we need to get them to go to phase III and we need to go first through the phase one and two that's the.
And the most circulate the assumption that I can give you.
I got it and just one other thing on that then just excluding the large health plan as you know.
As most of the.
Lack of visibility related to you know.
Just kind of client activity or do you feel like you've got adequate capacity to onboard all of this new business with.
With the uncertainty of breeding more client driven or are there other factors that come into play.
Yes says.
This is a very important point the company was operating as a b to C for a while actually today, we are managing more we are managing approximately.
208000 fuses in the platform we already implemented.
Collinson, both why those sides.
And on the employer side.
So we know how to in all users we know how to retain users I think that our debt.
We do have the ability we do have the capacity.
And we do have the more important and we do have all the.
This is in place in terms of the head count and the management.
Rick and his team and also the rest of the team. The R&D team, we feel it will very very prepared to go into a wider implementation. So I don't think that this is a this is a risk from our perspective, yes. We took a few conditions together and we are integrating them together.
As we speak we just launched the first one the second one will be launched in the next.
A few weeks.
I'm talking about the behavioral health in all of it together, we will have to be launched in generally first.
This is a piece that there's an integrated.
<unk> offering.
We are going to launch at the beginning of next year overall I think that we are ready from capacity perspective from experience perspective, and from a head count perspective.
The only unknown is how quickly we can realize the potential of the revenue for the 47 accounts. This is something that.
It's still early to say, if it's going to take us like two months or five months. That's the that's the big unknown that we have at the moment and this is why it's really hard for us to guide the market specifically, how each quarter is going to look like.
Alright, I got it thanks, very much and good luck.
Thank you.
Our next question comes from line of Nathan Weinstein with Aegis capital You May proceed with your question.
Good morning, Erez, Rick and thanks, so much for taking my questions and congrats on the progress so far.
Nice quarter.
I guess, starting with the pipeline for the 20% that is not described as multi condition generally is there a reason why the client would want a more limited set of conditions or a point solution and then how do you think about that in terms of future upsell potential.
I think that's a good question there are customers that are just looking for a specific solution because that's what fits with their strategy. So as they go through and say hey, here's the pieces that are most.
Relevant to our current offerings. So maybe they'll have some pieces in place or theyre looking at the spend that they have in.
In their claims data and saying Hey, our real issue is in this area.
For example, diabetes, we do have some opportunities that are in the pipeline, where just by the nature of the business that they're running and where they are geographically located they're going to have an outsized challenge with diabetes from a cost perspective, and so they may decide that this is where we want to focus.
First I do think that that creates an opportunity for integrated solutions.
And whether that would be another one or two conditions to that.
Because if you have diabetes is a significant issue in your plan you likely have.
Some behavioral health, what's underlying that and then of course, you also are going to have weight management and M. S. K challenges within that as well. So those are supplemental things, we definitely will work towards expanding that with customers that we land and we really look at it as sell the customer what they want to buy in.
Then make sure that they are Super happy because then they will look at more expanded solution and we can create the economic and member experience argument for them.
But many I mean, two thirds of the pipeline is looking at more than one solution. So I think that that speaks to the fact that there's.
Theres more recognition of the broader base, but there's definitely always going to be customers that want to look at one condition.
Okay great.
Thank you for the color there and then just one follow up for me on the mental health side, what's the feedback so far what's the covered lives understanding of how they access the solution.
And then also if you could just opine on what the mental health practitioner awareness and appreciation for digital.
Digital therapeutics as a usable tour.
Sure. So we're seeing roughly about 20% of our population is screening.
And then as you may recall, our solution is really what I would call it fills the hole between.
Almost everybody has which is between nothing we're EAP solutions in the provider network and it focuses on screening people and presenting them with options generally into three buckets, one being digital self help with CVT modules.
That can be that category of folks can include very low levels of behavioral health app to moderate levels of behavioral health and then you have the middle category, which is really coaches plus those digital therapeutic tools and modules that they can utilize it and then the third bucket is.
Is referring people to a provider network and we don't provide ourselves the <unk>.
<unk> network solution, which makes us a little bit unique in terms of the.
The industry, but we can connect into anybody's network, whether that be brick and mortar or telehealth or however, they want to deliver that and we can bring partners to the table and we do in some cases, where they they want that they want us to provide that capability, but we're really looking at it from that perspective. So.
Most providers at least as it relates to our solution are going to see it as an inbound referral essentially and because of the fact that just it's the nature of the mental health industry, There's often wait times going into these other networks and so this allows us to coach on the back of that we're seeing about.
Roughly 10% of the people that are going through the screening process are being referred out to a provider. So it's an attractive opportunity for our customer because they can get more services to more people at a lower average price point that is based on what the member actually needs and there is also an experienced point here because.
Who has a low level.
Relatively on a clinical scale scale on it may not feel that way to an individual but they have a relatively low acuity anxiety problem. For example may be best served by just coaching and not go to a provider and as a matter of fact, if you refer them to a provider which would normally be with their option is they're not going to go. So we will get nothing so it is.
It's a much better solution from that perspective.
I think to the more generalized.
Industry question that you asked I think there is a greater and greater awareness, especially.
Especially coming out of the pandemic with a lot of the.
Telehealth based solutions for behavioral health, I think theres, a greater and greater understanding in the mental health community around digital tools and how those digital tools can get used but I think that they have the same challenge that you see on the medical side a lot of the pieces that are out there are a lot of the well known pieces, even better out there.
Are not very clinical in nature and there are some tools that are clinical in nature and there are some tools that are more navigation based.
That those are the ones that.
The professionals are really looking to utilize but it's still a highly highly fragmented industry from that perspective.
Without a lot of consolidation and.
Use of for example, electronic medical records, but thats changing.
Great. Thank you so much for the thorough answer it's really helpful. Appreciate it.
Sure.
Thank you.
Our next question comes from the line of Ben <unk> with Alliance Global Partners. You May proceed with your question.
Because hey, gentlemen, thanks for taking the questions.
I'm, just looking to kind of understand the mechanics of the backlog a little bit better I know on a net basis, yes, I think $100 million you went from $900 to $1 billion.
During the quarter now is the right way to think about that 100 million increase lets say you were to land all of that.
Tomorrow.
What's the right way to think about that be okay. There was a $100 million opportunity now we're going to hum.
We just need to enroll these patients so we're not going to get them all so multiply the hundred bi.
35% or 40% or whatever you expect for the enrollment rate.
So youre talking about the pipeline that we have that we're selling into which is we're trying to give people visibility to the demand for the product and where we're competing so those are not won deals. So we would expect over the next year to be more like 10% of the pipe.
Wind, we'd come out in terms of contracts.
That we would expect I mean, what we use internally is.
It depends on whether its a single condition or a multi condition in terms of what the prevalence rate is that would be eligible. So if youre talking about diabetes youre talking about 8% to 12%.
The population would be eligible if youre talking about full suite, you are probably closer to 40% so.
The deal is we would look at that as being the eligible and then we'd multiply that by that 35% that we use as our standard enrollment rate.
And then we put a couple of other factors in there, but basically that's how we're building up the.
Both the pipeline and then that's how we look at the revenue coming out of it.
But he always made this calculation.
Yeah, just to clarify you don't need to take down that million dollars multiplied because the 35% the enrollment and eligibility members.
For full condition for full suites, 40%, though only diabetes, 8% everything is already factored into the pipeline. So it's a few potential revenue.
Alright, so sorry.
Alright.
Okay. So in actuality.
Let's just say that everyone had something wrong with them.
The opportunities that you had we wouldn't multiply that by.
Six or something like that just because.
And they all enrolled just because of your 40%.
For full suite of the addressable patients you'd multiply it by two and a half so that would be like $2 5 billion of everyone have something wrong with them is that correct.
No. So I wasn't very clear so the way that we build a pipeline number so the $1 billion is basically the size of the population multiplied by the prevalence rate within that population for the conditions that we're talking about with that customer. So so that would be say its 20 <unk>.
A cent of the population we'd have a condition it would be what the total opportunity for that customer is timed to 20% then we multiply it by the.
By the overall enrollment rate of 35% and then by whatever the pricing is to get the the amount that's actually in the pipeline. The pipeline represents what we would anticipate the customer actually can provide and then.
<unk>.
From that we would expect that we will get some amount of that going forward and typically what we're looking at is 10%. So you don't need to.
You just need to say okay. This is the portion thats going to come out of the <unk>.
Pipeline, you don't need a multiplied by a bunch of other things like our win rate.
So okay.
This year, we've got 100 million potential so to speak.
Yes.
Okay got it.
Thanks for the clarification. That's that's helpful and then when Youre signing these b to b contracts and you're announcing now.
Are you are you guys asking the firms whether you can use their name in the press release.
They're saying no or is it something where just for competitive reasons and youre not youre not given the name of the customer.
Generally speaking customers will not allow us to use their name because they don't want to be seen as.
<unk>.
We're really pushing for their lawyers don't want them to be seeing as advocating for a particular solution in some cases they will.
Allow us to for a variety of reasons in some cases, they'll probably allow us to in the future.
So, but that's why we don't we almost always ask or put it in the contract and they take it out.
But that's a pretty standard practice the way that that happens.
Okay fair enough.
Lastly for me.
Just looking at the kind of category of sales rankings.
For the blood glucose monitor on Amazon It seems to me like Youre seeing.
Tracking a pretty significant number of users in that channel or maybe even 10 15000.
Over the course of the quarter does that does that sound like that's in the ballpark.
Yeah actually I mean, the BTC is still operating.
No way to tell you what is the portion between Amazon to other marketplaces, but.
But we do generate.
Still generate revenue from the BTC side, and Amazon is a very important China and we're getting a lot of.
Consumer interest on all the one application in medical devices food is China.
Okay, sorry, one more.
Is there.
Is there a chance you could give us a sense of what youre kind of spending on on.
Digital marketing on a monthly or quarterly basis.
Yes, so it's in that range or so for a few hundred thousands of dollars.
For the quarter.
Okay got it thanks for taking the questions gentlemen.
Thank you.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn this call back over to Mr. Erez Raphael for closing remarks.
Thanks, everyone for joining us this morning, and looking forward seeing you as we keep building this business.
And the digital therapeutics space looking forward seeing you in the next quarter. Thanks, everyone.
Thank you for joining US today. This concludes today's conference you may disconnect your lines at this time.
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