Q2 2024 DarioHealth Corp Earnings Call

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Operator: Good morning, ladies and gentlemen, and welcome to the DarioHealth second quarter 2024 results conference call. At this time, all lines are in a listen-only mode.

Good morning, ladies and gentlemen, and welcome to the Dar you'll help second quarter 'twenty 'twenty four results conference call at this time.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 8, 2024. I would now like to turn the conference over to Kat Parrella, Investor Relations Manager at DarioHealth. Please go ahead.

Speaker Change: All lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.

Any time during this call you require immediate assistance. Please press star zero for the operator. This call is being recorded on Thursday August eight 2024.

I would now like to turn the conference over to God Perrella Investor Relations manager at <unk>. Please go ahead.

God Perrella: Thank you.

God Perrella: Thank you operator, and good morning, everyone. Thank you for joining us today for a discussion of Cardinal health second quarter 2024 financial results.

God Perrella: Leading the call today will be Erez Raphael CEO with Cardinal health.

Speaker Change: He joined by Steven Nelson Chief Commercial Officer.

Kat Parrella: An audio recording and webcast replay for today's call will also be available online, as detailed in the press release invitation for this call. For the benefit of those who may be listening to the replay or archived webcast, this call is being held on Thursday, August 8, 2024. This morning, we issued a press release announcing our financial results for the second quarter of 2024. A copy of the release can be found on the Investor Relations page of DarioHealth's website.

Speaker Change: An audio recording and webcast replay for today's call will also be available online as detailed in the press release invite for this call.

Speaker Change: So the benefit of those who maybe listening to the replay or archived webcast. This call is being held on Thursday August eight 2024.

Speaker Change: This morning, we issued a press release announcing our financial results for the second quarter of 2024.

Speaker Change: A copy of the release can be found on the Investor Relations page of our you'll helps website.

Kat Parrella: Actual events or results may differ materially from those projected as a result of changing market trends, reduced demand, or the competitive nature of DarioHealth's 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 to differ materially from those projected. In addition, certain non-GAAP financial measures may be discussed during this call.

Speaker Change: 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.

Speaker Change: Such forward looking statements and their implications may involve known and unknown risks uncertainties and other factors that may cause actual results or performance to differ materially from those projected.

Speaker Change: The 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 second quarter 2024, our quarterly report on Form 10-K.

Speaker Change: Additional information concerning factors that could cause results to differ materially from our forward looking statements are described in greater detail in the company's press release issued this morning and in the company's other filings with the SEC.

Speaker Change: In addition, certain non-GAAP financial measures may be discussed during this call.

Speaker Change: These non-GAAP measures are used by management to make strategic decisions forecast future results and evaluate the company's current department management believes the presentation of these non-GAAP financial measures is useful for investors' understanding and assessment of the Companys ongoing core operations and prospects for the future.

Speaker Change: Reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in this morning's press release.

Speaker Change: With that I'd like to introduce Erez Raphael Chief Executive officer at target.

Erez Raphael: Thank you, Cass, and thanks to all of you for joining our call this morning. This channel remains our primary revenue driver, contributing approximately 75% of our total revenue with an annual run rate of $21.6 million. This high-margin business with SAAS-like characteristics is gaining traction and demonstrated 82% non-gap gross margins in this quarter. This financial discipline will be evident in our results over the next three quarters in a more intensive way.

Erez Raphael: Thank you Pat and thanks to all of you for joining our call. This morning.

Erez Raphael: Q2, 2020 full marked another step forward in our journey of People's ability.

Speaker Change: <unk> be the beat in the egg.

Speaker Change: Engine driving what we call revenue from health plans and employers.

Speaker Change: Most cases continues to grow.

Erez Raphael: The sequential growth between Q1 to Q2.

Erez Raphael: This equals 28% organic growth before factoring in the positive impact of the treating physician.

Speaker Change: This challenge remain fall blending it have any viable contributing approximately 75% total revenue with an annual normal April 'twenty, one from $60 million.

Speaker Change: This high margin business, we felt like the.

Speaker Change: Gaming section demonstrated 80% non-GAAP gross margin in this quarter.

Erez Raphael: Secondly, the aggressive cost reduction initiatives implemented post merger.

Erez Raphael: Confidence in our ability to achieve substantial 40% reduction in non-GAAP operating expenses from Q1 2020 for Q1 2020.

Speaker Change: On a pro forma basis, we have already seen a reduction in opex from Q1 to Q2 this year with a book to make at.

Erez Raphael: This financial discipline will be evident in a while.

Erez Raphael: Over the next three quarters and a more intensive way.

Erez Raphael: Our gross margin continued its upward trajectory toward 80% target.

Erez Raphael: Early next year.

Erez Raphael: B to B to C has already reached 82% non-GAAP gross margin. In addition, we anticipate allowed deduction well below 70% and non-GAAP operating losses between Q1 of 2024 and Q1 'twenty.

Speaker Change: He spoke with aligns perfectly with our roadmap to complete the ability by the end of 2025.

Erez Raphael: In the last few quarters, we made some strategic decisions in a very challenging market environment.

Erez Raphael: We believe that TEST decisions have positioned us as one of the strongest players in the digital health space with a stronger financial purpose. We have built one of the most comprehensive platforms in the market, covering six different conditions from diabetes to hypertension, diabetes, musculoskeletal, well-being, and general health. Billions of data points collected through years of direct-to-consumer engagement have created a substantial competitive advantage. Our combined product offering following the Twill acquisition is driving cross-selling success already, with 10 of Dario's clients already adopting the Twill package.

Erez Raphael: We believe that this decision positions.

Speaker Change: It was one of the strongest brands in the digital health state with a stronger financial profile.

Speaker Change: We have built one of the most comprehensive platforms in the market other than the six different conditions and diabetes.

Speaker Change: Diabetes muscle skeletal will be that'd be able and he'll be in some data points collected who used to direct to consumer engagement has created substantial competitive advantage.

Speaker Change: Data simply kept boats, that's produced the best solution, but they said.

Speaker Change: Maybe then we'll take good health outcomes and reduce costs.

Speaker Change: Okay.

Speaker Change: Beyond the financials as well.

Speaker Change: Compelling evidence of our growth trajectory.

Speaker Change: <unk> got a thoughtful and calling between acquisition and driving cross selling successes already with some.

Speaker Change: Clients are already adopting the credit bubble.

Erez Raphael: Our GLP-1 product has seen rapid adoption with nine clients already on board. While GLP-1 is a proven weight loss medication, its potential is maximized when coupled with behavioral support. To address this, we have undergone a strategic organizational process, including tightening our structure and appointing a seasoned chief commercial officer. We believe this dual approach will accelerate revenue generation and better leverage our strong market position.

Speaker Change: How do you see one product came off with adoption with non clients onboard well Q1 was proven weightless medication, it's potentially maximized when coupled with building codes are used to.

Speaker Change: I think that it will be able to help with the ability we have created a comprehensive solution support Jack do you want adoption among employers and vote.

Speaker Change: I'll also provide streamlined approach to delivering Jim do you want to hop in and grabbing optimizations.

Speaker Change: On the pharma side, we see that.

Erez Raphael: Pharmaceutical industries undergoing significant transformation.

Speaker Change: One of the leading companies seeking direct to consumer and business solutions.

Speaker Change: We see a substantial opportunity globally integrated offering to meet this growing demand.

Speaker Change: While Pos partnerships, we value and tweak clients like Novartis.

Speaker Change: And Sanofi generated mainly Muslim baseball than you'd hope.

Speaker Change: On redefining our integrated offering to elaborate on this market opportunity for patient engagement and transition our pharma business to a more stable and more recurring revenue base.

Speaker Change: But some of it is shifting.

Speaker Change: We made the strategic decision to issue a $1 $1 million of bite squad fishing input in our topline this quarter alone.

Speaker Change: Position over.

Speaker Change: Our long term goal.

Speaker Change: Could you basically come to a normal living and you put them on the phone much Ireland towards the end of this year.

Speaker Change: For the total angles.

Speaker Change: And we both.

Speaker Change: The client base, including so it won't be five other companies.

Speaker Change: Revenue growth was not fully materialized close expectation.

Erez Raphael: But at least we have undergone this put physical organizational consolidation, including that's something else, that's true and appointed Susan Chief Commercial officer.

Speaker Change: All this took tactical missiles organization focused on two key areas first keep focusing on acquiring new clients.

Speaker Change: Maximizing the growth will probably be this thing a little bit.

Speaker Change: Stay an opportunity to do much better.

Speaker Change: Believe this dual approach will accelerate because every new generation and better liberally.

Speaker Change: Kong market position.

Steven Nelson: I'm pleased to introduce Steven Nelson, our new Chief Commercial officer, Stephen will provide more details on our commercial packaging steps, we're taking to drive top line growth.

Steven Nelson: I'll turn the call now to Steven.

Stephen Nelson: Thank you, Erez. Good morning, everyone. I'm Stephen Nelson. As many of you are aware, I started in June 2024 as Chief Commercial Officer at DarioHealth. Early in my career, I honed my B2C skills through experiences in packaged goods and retail. First, refining our strategy and operational process. Our roots in B2C companies, as well as the comprehensive multi-chronic condition product offering, have built a solid and unique value proposition that most of our competitors lack, especially in this market environment where we see a consolidation of vendors.

Stephen Nelson: Thank you rich good morning, everyone I'm Stephen Nelson as many of you are aware I started in June 2024, as Chief commercial officer at Dario.

Speaker Change: I've had the privilege of spending over 20 years in the payer industry with Elevon and Highmark Blue Cross Blue Shield and most recently led a direct employer company for five years Nathan D go out.

Speaker Change: Early in my career I hone my BTC skills through experiences in packaged goods and retail.

Speaker Change: Today I'm excited to share some context around my four key focus areas since my arrival and discuss some details on our Q2 2024 financial results.

Speaker Change: First refining our strategy and operational processes.

Speaker Change: Our roots in BDC companies as well as a comprehensive multi chronic condition product offering have built a solid and unique value proposition that most of our competitors lack.

Especially in this market environment, where we see a consolidation of vendors.

Stephen Nelson: Dario has an impressive client base that is very unique in the market, and it is my belief that with a refined strategy and a well-designed commercial operation, we can accelerate revenue growth. With these insights, I have collaborated closely with our commercial team, as well as others in key cross-functional roles throughout the company, to implement a focused, Scalable Operating Model within the Commercial Department.

Speaker Change: <unk> has an impressive client base that is very unique in the market and it is my belief that with a refined strategy and well designed commercial operation, we can accelerate revenue growth.

Stephen Nelson: We have recently completed a detailed product market fit strategy, providing us with focused insights to drive more credible revenue across all segments.

Speaker Change: These insights have collaborated closely with our commercial team as well as others in key cross functional roles throughout the company to implement a focused scalable operating model within the commercial department.

Stephen Nelson: This model is meticulously designed to enhance operational efficiencies streamline processes and two of resins point strengthened both our pipeline for new clients, but even more important insurer, we accelerate revenues from existing clients by understanding and anticipating our customers needs and their Mo.

Stephen Nelson: Good of operation, we can focus on what we do best enroll and engage with more members for every account that we serve.

Stephen Nelson: Second, we have and will continue to accelerate B2B2C growth, and we are determined to unlock its full value. My goal is to accelerate growth in this channel by having specific focus and accountable resources allocated to existing clients, as well as deepening existing strategic partnerships with the right strategy, leading to higher utilization of existing contracts in terms of member enrollment, as well as expansion of our customer contracts with both an expanded offering as well as access to a larger population. This will help us solidify a robust, reoccurring revenue base that is crucial for long-term sustainability.

Stephen Nelson: Second we have and will continue to accelerate D to b to C growth.

Speaker Change: Our b to B to C channel as a powerhouse of potential.

Stephen Nelson: We are determined to unlock its full value.

Stephen Nelson: While we have established a solid foundation, we recognize that there is much more to achieve.

Stephen Nelson: Especially on how to extract revenues from our client base on a faster and larger scale.

Stephen Nelson: My goal is to accelerate growth in this channel by having specific focus and accountable resources allocated to existing clients as well as deepening existing strategic partnerships with the right strategy, leading to higher utilization of existing contracts in terms of member enrollment as well as expansion of our customer contracts with.

Stephen Nelson: Both expanded offering as well as access to a larger population.

Stephen Nelson: This will help us solidify a robust reoccurring revenue base that is crucial for long term sustainability.

Stephen Nelson: Yeah.

Stephen Nelson: We are leveraging our existing relationships and assets to drive more value from our B2B2C channel. This includes actively pursuing cross-selling and up-selling opportunities with our current partnerships, targeting both employers and large health plan channels. In the second quarter, our B2BTC channel was the primary driver of growth, with a 315% year-over-year increase and a 60% sequential rise from Q1.

Stephen Nelson: We are leveraging our existing relationships and assets to drive more value from our b to B to C channel.

Stephen Nelson: This includes actively pursuing cross selling and up selling opportunities with our current partnerships targeting both employers and large health plan channels.

Stephen Nelson: Our G. L. P. One product for example is gaining significant traction already implemented by nine clients with several more in the pipeline. This product represents a rapidly growing segment that we are prioritizing in our client contracts.

Stephen Nelson: In the second quarter, our beat the DTC channel was the primary driver of growth with a 315% year over year increase and a 60% sequential rise from Q1 looking forward, we see a sizable opportunity amongst specific client segments and I am confident in our ability to expand these relationships.

Stephen Nelson: Looking forward, we see a sizable opportunity among specific client segments, and I am confident in our ability to expand these relationships. For instance, health plans like Aetna are making timely progress. We are initiating collaborative strategies for them to use our newly combined behavioral health platform to compete in a differentiated way with the market. Our large employers, including Amazon, Microsoft, Google, and others, have been very supportive of our current products and are open to exploring how our assets can further solve health problems.

Stephen Nelson: For instance, health plans like Aetna are making timely progress.

Stephen Nelson: And with our focused approach to products that theyre poised for much higher growth given the potential size of business.

Stephen Nelson: We are initiating collaborative strategies for them to use our newly combined behavioral health platform to compete in a differentiated way with the market.

Stephen Nelson: Our large employers, including Amazon, Microsoft and Google and others have been very supportive and our current products and are open to exploring how our assets can further solve health problems.

Stephen Nelson: We must lead health plans through effective activation, engagement, and reducing their costs to deliver health care with our SAS-based digital health technologies and expert experience journey. Worth noting, our cross-selling efforts are gaining momentum with at least 10 initial clients targeted for the Twill platform or vice versa.

Stephen Nelson: We must lead health plans through effective activation engagement and reducing their cost to deliver health care with our SaaS based digital health technologies and expert experience journals.

Stephen Nelson: Worth, noting our cross selling efforts are gaining momentum with at least 10 initial clients targeted for 12 platform or vice versa.

Stephen Nelson: Third, enhanced pharmaceutical collaboration. The pharmaceutical market is undergoing a significant transformation, with companies increasingly seeking ways to engage consumers directly. Our integrated DarioTWL top-of-funnel and navigation capabilities offer exactly what pharma companies need, as demonstrated by successful projects with clients like Sanofi, Novartis, Merck, and others. To capitalize on this opportunity, we are driving an innovative change in our business model, moving away from milestone-driven revenues to a more sustainable, recurring revenue model. Our commercial pharma channel is a critical pillar of our growth strategy, but we believe this redesign is integral to maximizing its potential. This shift will lead to a temporary slowdown of revenues for this channel this year as we transition to a more stable and predictable revenue stream.

Stephen Nelson: Third enhanced pharma collaborations.

Stephen Nelson: The pharma market is undergoing a significant transformation with companies increasingly seeking ways to engage consumers directly.

Stephen Nelson: This shift presents a huge opportunity for Dario health one that is currently underutilized.

Stephen Nelson: Our integrated Daurio 12 top of funnel and navigation capabilities offer exactly what pharma companies need as demonstrated by successful projects with clients like Sanofi Novartis, Merck and others.

Stephen Nelson: To capitalize on this opportunity we are driving an innovative change in our business model moving away from milestone driven revenues to a more sustainable reoccurring revenue model.

Stephen Nelson: Our commercial pharma channel is a critical pillar of our growth strategy, but we believe this redesign is integral to maximizing its potential this shift will lead to a temporary slowdown in revenues for this channel. This year as we transition to a more stable and predictable revenue stream and.

Erez Raphael: An adjustment that is essential for creating long-term value and ensuring that we remain aligned with the pharma industry trends and positioned as a premier partner for companies considering or already executing direct-to-consumer models. The recent integration of Dario's Twill platform significantly enhances our offering, making it more attractive to pharma clients. We are engaged in promising discussions with key clients like Merck and Sanofi, who are interested in how our SaaS-based consumer engagement capabilities can bolster their efforts.

Stephen Nelson: An adjustment that is essential for creating long term value and ensuring that we remain aligned with the pharma industry trends and positioned as a premier partner for companies, considering or already executing direct to consumer models.

Erez Raphael: The recent integration of Dario <unk> platform significantly enhances our offering making it more attractive to pharma clients. We are engaged in promising discussions with key clients like Merck and Sanofi, who are interested in how our SaaS based consumer engagement capabilities can bolster their efforts.

Erez Raphael: This technology, which has historically supported our pharma channels, can now go further with our newly formed consumer hub model. The future of our pharma collaborations is bright, and we are excited about the potential for growth in this area. Fourth, our comprehensive integrated product offering. We believe the combination of TWIL's behavioral health expertise and Dario's Cardiometabolic Foundation creates a powerful platform that delivers exceptional value to employers and health plans. By integrating AI-driven navigation tools, we enable clients to optimize care delivery, improve member outcomes, and achieve a significant return on investment.

Erez Raphael: This technology, which has historically supported our pharma channels and.

Erez Raphael: I'll go further with our newly formed consumer hub model.

Erez Raphael: Our decision to grant a one time price concession of $1 1 million to a strategic partner underscores our commitment to balancing short term adjustments with long term growth prospects.

Erez Raphael: This price concession accelerates the timeline of this shift to a higher quality revenue supporting our highest objective of reaching profitability by the end of 2025.

Erez Raphael: The future of our pharma collaborations as bright and we're excited about the potential for growth in this area.

Erez Raphael: Fourth our comprehensive integrated product offerings, we believe the combination of <unk> behavioral health expertise and Darius cardio metabolic foundation creates a powerful platform that delivers exceptional value to employers and health plans.

Erez Raphael: By integrating AI, driven navigation tools, we enable clients to optimize care delivery improved member outcomes and achieved significant return on investment.

Erez Raphael: Our platform's ability to match members with the right programs at the right time sets us apart.

Erez Raphael: Behavioral health is a foundational component of managing any chronic condition.

Erez Raphael: The metabolic disorders, our platform seamlessly integrates behavioral health interventions with other therapeutic areas, providing a comprehensive and holistic approach to care.

Erez Raphael: Finally, leverage our AI capabilities. Our proprietary data sets, especially within the B2C segment, provide us with a unique advantage, enabling both internal and external monetization in this rapidly evolving market. The future of AI and healthcare is incredibly promising, and we are at the forefront of this exciting transformation. Our AI capabilities will enable us to offer unparalleled value to our clients and drive our growth in new and innovative ways. Thank you for your trust and support as we embark on this exciting journey together. Erez, back to you. Thank you, Stephen.

Erez Raphael: Finally leverage our AI capabilities, we believe AI will be a meaningful change for Dario health as we proceed with our focused product and technology roadmap.

Erez Raphael: Integrating and updating aspects of AI that have already been deployed in the past and accelerating generative AI and micro services in a targeted way within product <unk> technology can further revolutionize our industry, leading content activation engagement and personalization capabilities.

Erez Raphael: Our proprietary datasets, especially within the BDC segment provide us with a unique advantage, enabling both internal and external monetization in this rapidly evolving market the future of AI in health care is incredibly promising and we are at the forefront of this exciting transformation our AI.

Erez Raphael: <unk> will enable us to offer unparalleled value to our clients and drive our growth in new and innovative ways.

Erez Raphael: In conclusion, Dario health is on a transformative journey and I am incredibly optimistic about our future.

Erez Raphael: The strategy, we have developed underscores our commitment to sustainable growth and innovation, we are well positioned to continue our momentum with greater strides and deliver exceptional value to our stakeholders.

Erez Raphael: Thank you for your trust and support as we embark on this exciting journey together.

Erez Raphael: Back to you.

Speaker Change: Thank you Steven.

Erez Raphael: We have identified the three key strategic areas that will help us accelerate growth and drive business to profitability, pending the adoption of GLP-1. Lastly, we remain committed to redress cost management by aggressively controlling operating expenses. We expect to deliver tangible results in the coming quarters. As mentioned, we see our operating loss reducing by at least 70% by Q1 of 2025, on our way to profitability by the end of 2020.

Erez Raphael: We have identified the three key strategic areas that will help us accelerate the growth in that business to profitability.

Speaker Change: So we will optimize our operations ceased revenue generation from existing employer and health plan.

Speaker Change: Spending their adoption of <unk> is also play with the tool.

Speaker Change: Second we will capitalize on the pharmaceutical industry shifts towards direct to consumer about those bilaterally.

Erez Raphael: Unique twin valued solution.

Speaker Change: Focus is positioning Goldman.

Speaker Change: So I'm on my phone base to a recurring revenue stream in this specific cyclical.

Erez Raphael: Lastly, we remain committed to vigilant cost management by aggressively controlling operating expenses, we expect to deliver tangible results in the car.

Speaker Change: Many quarters.

Erez Raphael: I mentioned, we see our operating loss, reducing by at least 70% by Q1 2025.

Erez Raphael: The way to our profitability by the end of 2025.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by number one on your touchtone phone. You will hear a prompt that your hand has been raised.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by number one on your Touchtone phone.

Speaker Change: Do you have a problem. That's your hand has been raised.

Speaker Change: Should you wish to decline from the polling process. Please press star followed by number two if you're using a speaker phone. Please lift the handset before pressing any keys.

Speaker Change: One moment. Please for your first question.

Speaker Change: Your first question comes from the line of Charles <unk> from Cowen. Your line is now open. Please ask your question.

Lucas Romanski: Hey, this is Lucas on behalf of Charles. Thanks for taking the questions. I was wondering if I could ask about how your cross-selling efforts are, you know, progressing since the TWIL acquisition, as well as, obviously, some restructuring and your guys' commercial operations. Now, let's just get an early read on how it's translating into bookings. It appears that, you know, maybe X-12 B2B2C growth was up mid-single digits in 2Q. Can you remind us what the target for B2B2C growth is for 2024 and kind of what your expectations are now for the second half?

Speaker Change: Hey, this is Lucas on for Charles Thanks for taking the questions.

Speaker Change: I was wondering if I could ask about how you're cross selling efforts are.

Lucas Romanski: Progressing since the <unk> acquisition as well as obviously, some restructuring and you guys as commercial operations.

Lucas Romanski: And how that's trended just early reads on how its translate into bookings that appears that.

Speaker Change: Maybe ex Twirl Peter D to C growth was up mid single digits in Q2.

Lucas Romanski: Can you remind us what the target for <unk> growth is for 2024 and kind of what your expectations are now.

Speaker Change: For the second half.

Erez Raphael: Yeah, absolutely. So, so far, I'll just answer your specific question about... The other area where we see a cross-sector opportunity is the pharmaceutical industry. On the pharmaceutical side, both Dario and Twill had a business model that was very milestone-driven, which created a lot of issues with revenue recognition. Some of it we saw this quarter when we had to provide a concession. We made some changes.

Speaker Change: Yeah, absolutely so so.

Speaker Change: So far.

Erez Raphael: I'll answer your specific question about it.

Erez Raphael: And now the costs are.

Erez Raphael: Two as I had mentioned on the call, we already have and that will climb.

Erez Raphael: If we cross sell and we sold them the Twilio platform.

Speaker Change: Yeah. This is a relatively small mines and then we have the specific.

Speaker Change: Are there specific opportunities for larger clients.

Erez Raphael: Looking either.

Speaker Change: Can I, just I'm looking into valuable data.

Erez Raphael: Looking into 'twenty.

Speaker Change: As we mentioned on the call the sequential growth Bill Gamic bulk debate a b to C. Between Q1 to Q2, just the organic was approximately 30% between Q1 to Q2, and then integrated basis clearly it was 60%.

Erez Raphael: That's the numbers that we have at the moment, we anticipated that the overall growth.

Erez Raphael: Revenues for <unk>.

Erez Raphael: Why are you gonna be loud your year over year, that's gonna be allowed you had been and then 30% it should be and then I just.

Erez Raphael: Yeah.

Erez Raphael: <unk> percent that's the expectations.

Erez Raphael: The other area, where we see a cross selling opportunities the farmer.

Speaker Change: Boneless side, both valuable and twin head.

Erez Raphael: Our business model that was really a nice familia, which created a lot of issues.

Erez Raphael: The revenue recognition.

Speaker Change: Some of it we sold now in the quarter when we had to provide the concession and we get some changes. So we are trying to streamline this revenue stream in a way that it's gonna be a recurring revenue also we can do that because they leave.

Erez Raphael: We are trying to streamline this revenue stream in a way that it's going to be a recurring revenue also. We can do that because there is a specific opportunity in the market now when pharma is transforming to be much more direct to consumers. We have the platform to help them go directly to patients.

Erez Raphael: Specific opportunity in the market now when pharma with transforming to be.

Speaker Change: <unk> direct to consumer and we have the platform to help them.

Erez Raphael: Go directly to patients.

Erez Raphael: This capability is a result of the combination of the Twill platform, Twill Care, which is the top of the line capabilities with what DarioHealth, and this is why we see an opportunity also to do a transformation there. On the Twill side, the B2B2C side, the employers and health plans, were not going between Q4 to Q1 to Q2. This is due to the financial situation that Twill experienced before we acquired them, and we anticipate that this is something that will be changed in the next two quarters, and Twill is going to go back to growth once we are stabilizing the situation there. So that's on the revenue side. On the OPEC side and the operations side, as we mentioned in the script, we had. Thank you very much for joining us for this session of the Open House.

Speaker Change: This capability is really regardless of the combination of the twin Black Hawk. The tweak here, which is a top of funnel capabilities that we've looked out you'll have and this is why we see an opportunity also to be a transformation deal.

Erez Raphael: Twin side, the B to B to C that employers and health plans.

Erez Raphael: Between.

Erez Raphael: Q4 to Q1 to Q2 and this is due to.

Erez Raphael: The financial situation that we experienced before we acquired them and we anticipate that this is something that will be changed in the next two quarters.

Erez Raphael: I was going to go back to growth once we are stabilizing the situation. There. So that's on the revenue side.

Unknown Executive: Good morning, ladies and gentlemen, and welcome to the DarioHealth Second Quarter 2020-24 results conference call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.

Erez Raphael: On the Opex side and the operations side.

Erez Raphael: As we mentioned on the script.

Erez Raphael: Two.

Erez Raphael: Yeah.

Unknown Executive: If at any time during this call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 8, 2024.

Speaker Change: And wanted at the beginning of May the other one at the beginning of flow goes well.

Erez Raphael: We have two large weeks, one at the beginning of May and the other one at the beginning of August, where overall, we reduced the headcount, and we reduced expenses that are also related to non-headcount. In this quarter, we have seen a 10% reduction in the OPEX performer between Q1 and Q2, and we see in Q3, Q4, and Q1 a significant reduction in the OPEX, so overall, the companies are merging much faster than what we anticipated on day one when we made the acquisition. We were thinking about 30% growth over eight quarters. It's going to be something that is more like 40, even more than 40% over three to four quarters.

Erez Raphael: Well overall, we reduced the head count and reduce expenses that are also related to the non head count in this quarter, we obtained 10% reduction in the Opex.

Kat Parrella: I would now like to turn the conference over to Kat Parrella, Investor Relations Manager at Dario. Please go ahead. Thank you, thank you operator and good morning everyone. Thank you for joining us today for a discussion of DarioHealth Second Quarter 2020-24 financial results.

Erez Raphael: Foremost between Q1 to Q2, and we're going to see.

Erez Raphael: In Q3 full and won the significant reduction in the Opex overall.

Erez Raphael: Companies are managing much faster than what we anticipated in day, one when we made the acquisition we were thinking about 30% of the.

Kat Parrella: Leading the call today will be Erez Raphael, CEO of DarioHealth. We'll be joined by Steven Nelson, Chief Commercial Officer. In audio recording and webcast replay for today's call, we'll also be available online as detailed in the press release invite for this call.

Erez Raphael: Eight quarters, it's going to be something that is more like 40, even it's even more than 40% over a three to four quarters.

Erez Raphael: So that from a merge standpoint, from an operational standpoint, we see a lot of synergies between the companies that are more synergies than what we anticipated in the first place. And this is the good news because we think that we can retain revenue, grow revenue, and, in parallel, take the optics down. And this is why we are positive about our ability to reach cash flow positive by the end of the year.

Speaker Change: So that's from a mix standpoint.

Unknown Executive: For the benefit of those who may be listening to the replay or archived webcast, this call is being held on Thursday, August 8, 2024.

Erez Raphael: From an operation, we see a lot of synergies between the companies that though.

Unknown Executive: This morning, we issued a press release announcing our financial results for the second quarter of 2024. A copy of the release can be found on the Investor Relations page of DarioHealth's website. Actual events or results may differ materially from those projected as a result of changing market trends, reduced demand for the competitive nature of the company. Investor Relations Manager of DarioHealth's 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 to differ materially from those projected.

Speaker Change: Most synergies than what we anticipated from the first place and this is a good news because we think that we can really claim revenue rolling venue and in parallel taking the opex down and this is why we are positive about our ability to reach cash flow positive by the end of next year.

Speaker Change: Got you. Thank you for all the color I guess I wanted to dig in on the price concessions that you provide to your preferred partner.

Speaker Change: In your 10-K it says.

Erez Raphael: Maybe related to speed I guess.

Unknown Executive: The 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 second quarter 2020-24 quarterly report on form 10K. Additional information concerning factors that could cause results to differ materially from our forward looking statements are described in greater detail in the company's press release issued this morning and in the company's other filings with the SEC.

Erez Raphael: In terms of.

Speaker Change: One I guess what brought about this.

Erez Raphael: Price concession, if I can ask, and then does it have any impact on the expected $6 to $8 million in expected payments that we were expecting from this partner? I understand that you're talking about this converting maybe to a more recurring revenue stream. Can you kind of give us more details on, you know, what kind of came about this price concession?

Speaker Change: Price concessions, if I can ask and then.

Erez Raphael: Does it have any impact on the expected $6 million to $8 million in expected payments that we're expecting from this partner I understand that you're talking about this converting maybe to more recurring revenue stream can you kind of give us more details on.

Unknown Executive: In addition, certain non-gap financial measures may be discussed during this call. These non-gap measures are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management will be of the presentation of these non-gap financial measures is useful for investors understanding an assessment of the company's ongoing core operations and prospects for the future. A reconciliation of these non-gap measures to the most comfortable gap measures is included in this morning's press release.

Speaker Change: What kind of came about at this price concession.

Erez Raphael: Yes, I'll start from the end. We're not going to see this kind of concession or something like that in the future. So this is one time that appears in this quarter. It's related to recognition that we had in previous quarters. So it's a one time thing; it's not going to happen again.

Speaker Change: Yes, so sculptural and we're not going to see this kind of concession or something like that in the future. So this is one thing that appears in this quarter. It's related to recognition that we had the previous quarter. So its a one time, it's something so I'm going to repeat again.

Erez Raphael: That's number one. Number two, for one business model to another business model, one of the things that we are trying to do is to transform from Dario only or Twill only to something that is more combined.

Speaker Change: Number one.

Erez Raphael: Number two.

Erez Raphael: Okay.

Erez Raphael: One point I mentioned the name of the client.

Erez Raphael: With that, I'd like to introduce Iris Raphael, Chief Executive Officer at DarioHealth. Thank you, Kass, and thanks to all of you for joining our call this morning. Q2 2020-24 marked another step forward in our journey to profitability. Our core B2B2C business, the engine driving our account revenue from health plants and employers has demonstrated as continuous growth with 60% potential growth between Q1 to Q2. This will present 28% organic growth before factoring in the positive impact of the tweed acquisition.

Speaker Change: But we we had a.

Speaker Change: A discussion with them about.

Erez Raphael: Formation.

Speaker Change: For one business model to another business has long been one of the things that the corn area, but we will try to do is to transform full man.

Erez Raphael: O'neill twill only to something that is more combined that's number one and number two we are trying to move into.

Erez Raphael: Number two, we are trying to move into recognition that is more recurring or revenue that is more recurring. As part of the conversations, we made a change to a work or a microphone that will only be delivered. Eventually, we negotiated something in order to be able to look into the future and give up something small in order to get something big in the future. That's the way that we're thinking about it. It's more like balancing future growth versus the presence of the revenues that we have.

Erez Raphael: It is a combination that is more where we can.

Speaker Change: Calling over 11 years at two small out of the car.

Erez Raphael: And as part of the conversations.

Erez Raphael: This channel remains our primary revenue driver, contributing approximately 75% of our total revenue within any our run rate of 21.6 million dollars. This high-market business with such-like characteristics is gaming, section-demonstrated, 82% non-gab gross margins in this quarter. Taped with the aggressive cost reduction initiative implemented post-school mergers, we are confident in our ability to achieve an extension of 40% reduction in non-gab operating expenses from Q1 2024 to Q1 2025. On a performer-based, we have already seen a reduction in all effects from Q1 to Q2 of this year of approximately 10%.

Erez Raphael: We made a change.

Erez Raphael: Changes to it.

Erez Raphael: The work that Oh, and milestones that will only be delivered.

Erez Raphael: Eventually we negotiated something in order to be able to look.

Erez Raphael: Looking to the future.

Erez Raphael: Giving up something small in order to get something big in the future. So that's.

Erez Raphael: The weighted towards thinking about it it's more like balancing future growth.

Erez Raphael: This is versus the presence of the revenues that we have.

Erez Raphael: Sure.

Erez Raphael: I hope that gives you enough to kind of in that one.

Lucas Romanski: Yeah, that's helpful. Thank you. Lucas

Speaker Change: Yeah that's helpful. Thanks.

Erez Raphael: Yes.

Lucas Romanski: Okay.

Erez Raphael: This financial discipline will be evident in our results over the next three quarters in a more intensive way. Our Gross margins continue its upward trajectory toward 80% target by early next year. As mentioned, our B2B2C has already reached 82% non-gab gross margin. In addition, we anticipate a large reduction of over 70% in non-gab operating losses between Q1 of 2024 and Q1 of 2025. This progress aligns perfectly with our roadmap to profitability by the end of 2025.

Lucas Romanski: Yeah, that's helpful.

Speaker Change: Lucas I lost you.

Lucas Romanski: Okay.

Speaker Change: I think that we lost Luca Savi.

Operator: Let's give it another 30 seconds to see if he's...

Lucas Romanski: I have to give it another 30 seconds to say it.

Operator: Yeah.

Lucas Romanski: Calling back.

Operator: Yeah.

Operator: Yeah.

Erez Raphael: In the last few quarters, we made a series of strategic decisions in a very challenging market environment. We believe that test decisions positioned us as one of the strongest players in the digital health base with a stronger financial profile. We have built one of the most comprehensive platforms in the market, covered in six different conditions from their bidding, to eye-dependence, either a bidding, market scalator, well-being, and the other all-health. Beings of data points collected through years of direct-to-consumer engagement have created substantial competitive advantage.

Operator: Okay.

Operator: We're not hearing any response from him at the moment, but I'm seeing it.

Speaker Change: We're not hearing any response from him as well.

Speaker Change: No moment, but.

Operator: Do we have any other questions in the queue? You don't have any questions, right?

Speaker Change: So we have I don't know.

Speaker Change: In the Q.

Speaker Change: You don't have any questions right now.

Operator: Okay.

Operator: Thank you. We don't have any questions right now. This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Speaker Change: Thank you we don't have any questions right now.

Erez Raphael: This data-centric approach has produced a best-in-solution validated by real-world evidence, which includes health outcomes and reduced costs for employers in health. Beyond the financial result, we see a compelling evidence of our growth trajectory. Our combined product of the link following the Tweet acquisition, is having core selling success already, with 10 of value clients already adopting the Tweet account. Our GF-1 product has seen a rapid adoption with non-client already on board. While GF-1 is proven weightless medication, its potential is maximized when coupled with the overall support.

Speaker Change: Thank you.

Erez Raphael: By integrating value through the overall health capabilities, we have created a comprehensive solution to support GF-1 adoption among employers in health. Our offering provides a streamlined approach to delivering GF-1 therapy and driving optimization platforms. On the farmer channel side, we see that the pharmaceutical industry is undergoing a significant transformation. With many leading companies seeking direct-to-consumer member engagement solutions, we see a substantial opportunity to leverage our integrated offering to meet this growing demand.

Erez Raphael: While past partnerships with Dario and Tweet clients like Novarti, we still have limited maintenance and offer you generated mainly micro-based revenue, we are focused on redefining our integrated offering to leverage on this market opportunity for direct patient engagement and transition of farmer business to a more stable and more recurring level, to accelerate this shift. We made a strategic decision to issue a $1.1 million vice contestion, inputting our top line to this water warning.

Erez Raphael: But position asks for a long-term growth. We anticipate return to normal revenue pattern on the farmer's island toward the end of this year. Our product also laying as strong and robust and impressive clients based including top S&P 5 other companies. Our revenue growth is not fully materialized to our expectations. To address this, we have undergone a strategic organization and confirmation including tightening our structure and appointing a season chief commercial officer. Our goal is to create a commercial organization focused on two tiers first, keep focusing on acquiring new clients and second, maximizing the growth of our existing customer base where we see an opportunity to do much better. We believe this dual approach will accelerate revenue generation and better leverage our strong market position.

Steven Nelson: And please to introduce Steven Nelson, our new chief commercial officers. Steven will provide more details on our commercial strategy and steps we are taking to drive top line goals. I'll turn the corner up this evening.

Steven Nelson: Thank you, Res. Good morning, everyone. I'm Steven Nelson. As many of you are aware, I started in June, 2024 as chief commercial officer at Dariel. I have had the privilege of spending over 20 years in the payer industry with Elevants and high-marked Blue Cross Blue Shield and most recently led a direct employer company for five years named Contigo Health. Early in my career, I honed my B to C skills to experience his impact at goods and retail.

Steven Nelson: Today, I am excited to share some context around my four key focus areas since my rival and discussed some details on our Q2 2024 financial results. First, refining our strategy and operational processes. Our roots in B to C companies as well as the comprehensive multi-chronic condition product offering have built a solid and unique value proposition that most of our competitors lack, especially in this market environment where we see a consolidation of vendors.

Steven Nelson: Dariel has an impressive client base that is very unique in the market and it is my belief that with a refined strategy and well-designed commercial operation, we can accelerate revenue growth. We have recently completed a detailed product market-to-strategy, providing us with focused insights to drive more credible revenue across all segments. With these insights, I have collaborated closely with our commercial team as well as others in key cross-functional roles throughout the company to implement a focused scalable operating model within the commercial department.

Steven Nelson: This model is meticulously designed to enhance operational efficiencies, streamline processes and to a resident's point strengthen both our pipeline for new clients but even more important ensure we accelerate revenues from existing clients. By understanding and anticipating our customers needs and their mode of operation, we can focus on what we do best, enroll and engage with more members for every account that we serve. Second, we have and will continue to accelerate B-2B-2C growth.

Steven Nelson: RB2B2C channel is a powerhouse of potential and we are determined to unlock its full value. While we have established a solid foundation we recognize that there is much more to achieve, especially on how to extract revenues from our clients based on a faster and larger scale. My goal is to accelerate growth in this channel by having specific focus and accountable resources allocated to existing clients as well as deepening existing strategic partnerships with the right strategy, leading to higher utilization of existing contracts in terms of member enrollment as well as expansion of our customer contracts with both expanded offering as well as access to a larger population.

Steven Nelson: This will help us solidify a robust reoccurring revenue base that is crucial for long term sustainability. We are leveraging our existing relationships and assets to drive more value from RB2B2C channel. This includes actively pursuing cross-selling and upselling opportunities with our current partnerships targeting both employers and large health plan channels. Our GLP1 product for example is gaining significant traction already implemented by nine clients for several more of the pipeline. This product represents a rapidly growing segment that we are prioritizing in our client contracts.

Steven Nelson: In the second quarter RB2B2C channel was the primary driver of growth with a 315% year over year increase and a 60% sequential rise from Q1. Looking forward, we see a sizeable opportunity among specific client segments and I am confident in our ability to expand these relationships. For instance, health plans like Etna are making timely progress and with our focused approach to products that they are poised for much higher growth given the potential size of business.

Steven Nelson: We are initiating collaborative strategies for them to use our newly combined behavioral health platform to compete in a differentiated way with the market. Our large employers including Amazon, Microsoft and Google and others have been very supportive in our current products and are open to exploring how our assets can further solve health problems. We must lead health plans through effective activation engagement and reducing their cost to deliver health care with our SaaS-based digital health technologies and expert experience journeys.

Steven Nelson: Worth noting, our cross-selling efforts are gaining momentum with at least 10 initial clients targeted for 12 platforms or vice versa. Third, enhance pharma collaborations. The pharma market is undergoing a significant transformation with companies increasingly seeking ways to engage consumers directly. This shift presents a huge opportunity for Dario Health, one that is currently underutilized. Our integrated Dario 12 top of funnel and navigation capabilities offer exactly what pharma companies need as demonstrated by successful projects with clients like Sonophi, Novartis, Merck and others.

Steven Nelson: To capitalize on this opportunity, we are driving an innovative change in our business model moving away from milestone driven revenues to a more sustainable reoccurring revenue model. Our commercial farmer channel is a critical pillar of our growth strategy, but we believe this redesign is integral to maximizing its potential. This shift will lead to a temporary slowdown of evidence for this channel this year, as we transition to a more stable and predictable revenue stream, an adjustment that is essential for creating long-term value and ensuring that we remain aligned with the farm industry trends and positioned as a premier partner for companies considering or already executing direct-to-consumer models.

Steven Nelson: The recent integration of Dario 12 platforms significantly enhances our offering, making it more attractive to farm clients. We are engaged in promising discussions with key clients like Merck and Sinofi who are interested in how our SaaS-based consumer engagement capabilities can bolster their efforts. This technology, which has historically supported our farmer channels, can now go further with our newly formed consumer hub model. Our decision to grant a one-time price concession of 1.1 million to a strategic partner underscores our commitment to balancing short-term adjustments with long-term growth prospects.

Steven Nelson: This price concession accelerates the timeline of this shift to a higher quality revenue supporting our highest objectives of reaching profitability by the end of 2025. The future of our farmer collaborations is bright and we are excited about the potential for growth in this area. Fourth, our comprehensive integrated product offering. We believe the combination of Twills Behavioral Health Expertise in Dario's Cardio Metabolic Foundation creates a powerful platform that delivers exceptional value to employers and health plans.

Steven Nelson: By integrating AI-driven navigation tools, we enable clients to optimize care delivery, improve number outcomes, and achieve significant return on investment. Our platform's ability to match members with the right programs at the right time sets us apart. Behavioral Health is a foundational component of managing any chronic condition, including metabolic disorders. Our platform seamlessly integrates behavioral health interventions with other therapeutic areas, providing a comprehensive and holistic approach to care. Finally, leverage our AI capabilities.

Steven Nelson: We believe AI will be a meaningful change for Dario Health as we proceed with our focused product and technology roadmap. Integrating and updating aspects of AI that have already been deployed in the past and accelerating generative AI and microservices in a targeted way within product and or technology can further revolutionize our industry leading content activation. Engagement and personalization capabilities. Our proprietary data sets, especially within the BDC segment, provide us with a unique advantage enabling both internal and external monetization in this rapidly evolving market.

Steven Nelson: The future of AI and healthcare is incredibly promising and we are at the forefront of this exciting transformation. Our AI capabilities will enable us to offer unparalleled value to our clients and drive our growth in new and innovative ways.

Steven Nelson: In conclusion, DarioHealth is on a transformative journey and I am incredibly optimistic about our future. The strategy we have developed underscores our commitment to sustainable growth and innovation. We are well positioned to continue our momentum with greater stride and deliver exceptional value to our stakeholders.

Steven Nelson: Thank you for your trust and support as we embark on this exciting journey together.

Erez Raphael: Erez back you. Thank you, Stephen.

Erez Raphael: We have identified the three key strategic areas that will help us accelerate growth and lack of business to profitability. First, we will optimize our operations to increase revenue generation from existing employer and health and clients, expanding the adoption of GMP-1 offering is also a priority for us. Second, we will capitalize on the pharmaceutical industry shift toward direct-to-consumer borders by leveraging our unique twin-dollar solution, our focus is transitioning from a micron-based to a recurring revenue stream in this specific sector. Lastly, we will remain committed to rigorous cost management by aggressively controlling operating expenses we expect to deliver tangible results in the coming quarter.

Erez Raphael: As mentioned, we see our operating loss reducing by at least 70% by Q1 of 2025 on our way to profitability by the end of 2025.

Erez Raphael: Thank you.

Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by number one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by number two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment please for your first question.

Lucas Romanski: Your first question comes from the line of Charles Reilly from TD Colvin. If your line is now open, please ask your question. This is Lucas on for Charles. Thanks for taking the questions. I was wondering if I could ask about how your cross-sounding efforts are progressing since the 12 acquisition as well as some restructuring and commercial operations. Now it's just early reason how it's translating the bookings. It appears that maybe X12 B2B2C growth was up mid single digits in 22.

Erez Raphael: Can you remind us what the target for B2B2C growth is for 2024 and what your expectations are now for the second half? Absolutely. So far, I will answer your specific question about the cross-sounding efforts. I mentioned on the call that we already have 10 of them offline with the cross-sounding efforts. We saw them there at the twill platform, and this is relatively small clients and we have a specific few other specific opportunities for larger clients that are looking either twill clients that are looking into Dario, or Dario clients that are looking into twill.

Erez Raphael: As we mentioned on the call, the sequential growth of the organic part of the beta-b2c between Q1 to Q2, just though Garnick was approximately 30% between Q1 to Q2. An integrated base was twirly, it was 60%. That's the numbers that we have at the moment. We are anticipated that the overall growth of our revenues for beta-b2c for the entire year is going to be larger year over year, it's going to be larger than 30%.

Erez Raphael: It should be in the ranges above 50% that's the expectations. The other area where we see a course and an opportunity is the farmer on the farmer side, both Dario and twill had a business model that was very milestone-driven, which created a lot of issues in the revenue recognition. Some of it we saw now in the quarter when we had to provide the concession and we did some changes, so we are trying to streamline this revenue stream in a way that it's going to be a recurring revenue also.

Erez Raphael: We can do that because there is a specific opportunity in the market now when farmers are transforming to be much more direct to consumer and we have the platform to help them go directly to patients. This capability is the result of the combination of the twill platform, the twill care, which is the top of final capabilities with what Dario had. This is why we see an opportunity also to do a transformation there.

Erez Raphael: On the twill side, the beta-b2c, the employers and health was not going between Q4 to Q1 to Q2. This is due to the financial situation that will experience before we acquire them and we anticipate that this is something that will be changed in the next two quarters and twill are going to go back to growth once we are stabilizing the situation there. So that's on the revenue side. On the op-ex side and the operation side, as we mentioned on the script, we had two large wits.

Erez Raphael: One at the beginning of May, the other one at the beginning of August, where overall we reduced the headcount and we reduced expenses that are also related to non-headcount. In this quarter, we have seen 10 percent reduction in the op-ex performer between Q1 to Q2 and we're going to see in Q3, 4 and 1 the significant reduction in the op-ex. Overall, the companies are managing much faster than what we anticipated in day one when we made the acquisition. We were thinking about 30 percent of the 8 quarters. It's going to be something that is more like 40 even more than 40 percent over three to four quarters. So that's from a merge standpoint.

Erez Raphael: From an operation, we see a lot of synergies between the companies that are more synergies than what we anticipated from the first place when this is the good news because we think that we can retain revenue, grow revenue, and in parallel, take the op-ex down and this is why we are positive about our ability to reach commercial positive by the end. Thank you for all the color.

Erez Raphael: I guess I want to dig in on the price concession that you provide to your preferred partner. In your 10K, it says it's maybe related to dispute. I guess in terms of, you know, one, I guess what's brought about this price concession, if I can ask. And then does it have any impact on the expected six months? Six to eight million and expected payments that we were expecting from this partner, understand that you're talking about this converting maybe to more recurring revenue stream.

Erez Raphael: Can you kind of give us more details on, you know, what kind of came about of this price concession? Yeah, so I'll start from the end where we're not going to see this kind of concession or something like that in the future. So this is one time that appeals in this quarter. It's related to recognition that we had the previous quarter. So it's a one time. It's not going to repeat again.

Erez Raphael: That's number one. Number two, I don't want to mention the name of the client, but we we had a discussion with them about the transformation from one business model to another business model. And then one of the things that we want that we are trying to do is to transform from Dario only or twill only to something that is more combined. That's number one. And number two, we are trying to move into recognition that is more recurring or revenue that is more recurring in a spot of the conversations.

Erez Raphael: We made a change to a work that always milestones that were already delivered and eventually we negotiated something in order to be able to look into the future and giving up something small in order to get something big in the future. So that's the way that we're thinking about it. It's more like balancing future growth versus the presence of the revenues that we have. I hope that it gave you enough time on that one. Yeah, that's helpful. Okay. Lucas, I lost it. Yeah. Okay. We're not hearing any response from him. As of the moment, but I'm thinking. Okay.

Unknown Executive: Do we have other questions in the queue? We don't have any questions right now. Okay. Thank you. We don't have any questions right now. This concludes today's conference call. Thank you for your participation and you may now disconnect.

Unknown Executive: Thank you.