Q3 2024 DarioHealth Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to the Dar Yo health third quarter 'twenty 'twenty four results call.
Speaker Change: I'm all lines are in listen only mode. 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 operator.
Speaker Change: This call is being recorded on November 7th 2024.
Speaker Change: I would now like to turn the conference over to cut Perella Investor Relations manager at Daurio. Please go ahead.
Perella: Thank you operator, and good morning, everyone. Thank you for joining us today for a discussion of <unk> third quarter 'twenty 'twenty four financial results.
Perella: Leading the call today will be Erez Raphael CEO, Jerry well he'll be joined by Steven Nelson Chief Commercial officer.
Perella: An audio recording and webcast replay for today's call will also be available online as detailed in the press release and wait for this call.
Speaker Change: For the benefit of those who may be listening to the replay or archived webcast. This call is being held on Thursday November seven 2024.
Speaker Change: This morning, we issued a press release announcing our financial results for the third quarter of 2024.
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.
Speaker Change: 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 third quarter 2024 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: non-GAAP measures used by management to make strategic decisions forecast future results and evaluate the company's current performance.
Speaker Change: Management believes the presentation of these non-GAAP financial measures is useful for investors understanding and assessment.
Speaker Change: Of the company's ongoing core operations and prospects for the future.
Speaker Change: Conciliation of these non-GAAP measures to the most comparable GAAP measures is included in this mornings press release.
Speaker Change: With that I'd like to introduce Erez Raphael CEO of cardio health.
Erez Raphael: Thank you Ken Good morning, everyone. Thank you for joining us today for value health third quarter earnings call.
Speaker Change: Over the past few quarters, we have made the bold strategic moves to establish them as one of the leading forces the digital health space, even in the challenging market environment.
Speaker Change: No office one of the most comprehensive digital health platform in the industry supporting six different chronic conditions, including diabetes hypertension weight management.
Speaker Change: In Spain, we have upheld and maternity support.
Speaker Change: Filling expansion in metabolic Hill has been organic while we expand it into other strategic.
Speaker Change: Strategic acquisitions.
Speaker Change: The recent acquisition of twist exemplifies the strategy anything robust behavioral health capabilities and advanced navigation tools to guide planes in matching patients to appropriate therapeutic area.
Speaker Change: With Twilio integrated does provide unmatched consumer centric.
Speaker Change: Health solutions, making it the most comprehensive platform in the market.
Speaker Change: This quarter.
Speaker Change: A crucial step towards positioning value.
Speaker Change: Talk to the service like business with high gross margin targeting over 80%.
Speaker Change: Okay.
Speaker Change: Today, we are excited to show.
Speaker Change: How this strategic initiatives are delivering tangible results.
Speaker Change: It was a significant improvement across all dimension of it.
Speaker Change: Including globe topline.
Speaker Change: <unk> operating expenses.
Speaker Change: Substantial decrease in net loss.
Speaker Change: Additionally, Q3 marks the periods of robust business momentum with 10, new client wins this quarter alone.
Speaker Change: We're also in a process of the fueling ultimate fight more for Bob.
Speaker Change: Yeah.
Speaker Change: Which would bring our focal point.
Speaker Change: For the second half of the year.
Speaker Change: So something between 17 to 20 new planes.
Speaker Change: This strong business momentum highlights being shifting to merit.
Speaker Change: Comprehensive platform and our ability to deliver value to growing most of the time.
Speaker Change: For Q3, we reported $7 $2 million in revenue.
Speaker Change: Representing 18, 7%.
Speaker Change: Over Q2 of 40 to 44.
Speaker Change: And an impressive 111% year over year as well.
Speaker Change: This growth is largely fueled by our b to B to C business, which has become the engine the revenue base.
Speaker Change: Through continued optimization revenue China.
Speaker Change: Full business school smelter, reaching 70% when they noticed that space.
Speaker Change: This improvement reflects our commitment to enhancing the quality and predictability of our revenues.
Speaker Change: Following the recent merger with twist.
Speaker Change: We implemented focused cost management strategies.
Speaker Change: Using a non-GAAP operating expenses to $12 3 million.
Speaker Change: The 15, 9% sequential decline from Q2 2024.
Speaker Change: This disciplined approach to cost management has been the St Joe and driving margin expansion and operational efficiency.
Speaker Change: Looking ahead, we are confident that the improvement in our financial profile will continue into the next few quarters.
Speaker Change: The cost reduction initiatives, we initiated earlier this year.
Speaker Change: Fully reflected in our current numbers yet.
Speaker Change: Is that airports mature, we expect to see even a greater reduction in Q4 2020 full in Q1 2025.
Speaker Change: 69% reduction in non-GAAP operating losses from Q1 2024 for Q1 2025.
Speaker Change: This poses keeps us firmly on track.
Speaker Change: Our cash flow breakeven.
Speaker Change: Run rate by the end of 2025.
Speaker Change: Between you'd look at these accounts as we have them anywhere between 500000 up to say two to three we have some clients that I'd say full scale could get up to $5 million. So technically speaking.
Speaker Change: We have a range in there again, we got to bring them on board then we have to establish platform fees the platform fees. Our mutual so we don't really we don't jump in it would be like Hey, This is what it costs to gives us we kind of work with them on what are your goals. What are your patient drivers. What are you trying to do in your direct channel all pharmaceutical companies and end product.
Speaker Change: <unk> within those companies are different they.
Speaker Change: They have different goals different expectations client targets pre prescription post prescription engagement, they're all a little bit different but I think right now we're seeing them fall anywhere between I'd say halfway into a man on the front end and then on the backend as type for fevers evolve we see those contracts as we begin to rescale, which will take some time, but.
Speaker Change: We're working on that anywhere between I'd say a million $2 million upwards of four to five again, depending on the product set and per client what their goals are either pre prescription or post prescription on the platform.
Speaker Change: Understood is it right to think that prior pharma partners are the ones that were paying milestone payments under the legacy model here. So those remain on track going forward.
Speaker Change: Yes, we need to eliminate those.
Speaker Change: We need to be really intentional on trying to convert the contracts that we have and convert them as partners and work with them to kind of move into a new area.
Speaker Change: It's lumpy it creates lumps in our revenue it's hard to project I kind of noted that in what I said earlier, it's hard to project, where our revenue will fall, we're trying to get to stable confident credible revenue that's predictable and we're trying to get out of the lumpiness of our business. So it's a crosswalk of kind of bringing in new revenue that is exactly.
Speaker Change: The revenue, we're looking for versus letting revenue go and trying to bring them onto the platform in a unique way and hopefully we can cross that bridge.
Speaker Change: With them. So we're trying to be really intentional about the longevity of the company and our goals of profitability and that includes our revenue mix by segment by product by client and so we're trying to be thoughtful in that obviously not degrade our revenue, but at the same token we needed to be healthier more confident more predictable.
Speaker Change: That's very helpful. Thank you and then last for me is around Opex improvement I know you guys are targeting still improvement in Opex over the next few quarters and then to the end of 2025, but I'm wondering if you can share what between R&D sales and marketing et cetera would be the key key levers there to continue reducing opex or maybe maybe all of those.
Speaker Change: And then from there also once you reach a stable more stable opex base kind of growing on a more stable opex basis, if that's the base case going forward.
Speaker Change: Yes, thanks, Adam so.
Speaker Change: On the Opex, we keep the transformation as we communicated in the previous quarter.
Speaker Change: These two leafs and we are.
Speaker Change: You seem to be.
Speaker Change: The integrated Opex. If you look into Q3 2023 with Valeo was a standalone versus Q3.
Speaker Change: 2020 full value is also embedding.
Speaker Change: Well, we're almost in the same office, which means that we manage in like literally six months to absorb an entire organization to choose to have a plenty of Canadian dollar opex embedded into that it almost always the same hope it's like about it as a stand alone which is a very very.
Speaker Change: Good achievement that we're very proud of them.
Speaker Change: The actions that we took.
Speaker Change: There's been a keep the opex down and we expect that if we're going to get to the run rate to $41 million in late Q1.
Speaker Change: 2025 on a non-GAAP basis.
Speaker Change: For full year, so it should be somewhere in that I'm, just sustain five quota.
Speaker Change: We believe that that's going to be the new baseline that flu b, there's analytics for the entire next June.
Speaker Change: We believe that the.
Speaker Change: The physical positive point will be also in this range just in terms of the Opex.
Speaker Change: Very important.
Speaker Change: Stephen mentioned the transformation of the revenues from milestone two.
Speaker Change: Platform.
Speaker Change: Revenue.
Speaker Change: On Davita BTC as a stand alone we generated 83% gross margin. So we ended the confidence with its $50 million run rate with the new baseline of focus postal totally indication we.
Speaker Change: We will get to cash flow positive.
Speaker Change: We achieved this is.
Speaker Change: This opex reduction by a combination of.
Speaker Change: The reduction in the overall expenses managing the organization.
Speaker Change: And also very strategic offshore activities well the organization is mainly in the U S. But also have allowed our team in India.
Speaker Change: So all in we saw both in the smaller team in Israel.
Speaker Change: The overall change in the reduction we also stated budgets full 92.
Speaker Change: <unk> social marketing so the company will just reduce the budget. We also changed the merge and in terms of percentage of revenues.
Speaker Change: We rotated budgets from RMB to the commercial side, because we do believe that.
Speaker Change: The company would be a lot building. These products, we know that we have a very very mature.
Speaker Change: And.
Speaker Change: We are all about growing the revenue with the existing assets that we have.
Speaker Change: Still we have some R&D projects.
Speaker Change: It required the budget, but the budget is like more than 35% lower than what we used to have.
Speaker Change: When we acquired the twin so overall, we're going to see the platform integrated already communicated but everything is going to operate under one integrated brand one usual Jeremy and everything is being done by the end of this year. So I think that investors should expect right.
Speaker Change: Huge expenses, so far and b that they're going to go up but we are there.
Speaker Change: We think that we need and now we only need to scale in terms of the revenue.
Speaker Change: It's something that we have a very high confidence that youre going to achieve in.
Speaker Change: In the next few quarters based on the accounts that we have signed on.
Speaker Change: So those are the three I was getting.
Speaker Change: <unk>.
Speaker Change: Understood Thanks for that color.
Speaker Change: Second quarter guys.
Speaker Change: Stephen do you want to say something.
Stephen: I was just going to add that we really refocused.
Speaker Change: Yes.
Speaker Change: Whereas our product leader, we've really refocused on what was going to be good to go to market.
Speaker Change: I think there's a feedback there.
Speaker Change: Is that better.
Speaker Change: Okay.
Speaker Change: We really refocused our approach on on what we're going to do from a go to market perspective, I mentioned that product market fit both in the last Q and in this Q and that's in collaboration with our product leader.
Speaker Change: She's wonderful really kind of leading us to a very specific approach on what we're trying to execute and again Erez mentioned, how we're doing our R&D. That's in India. It's also worth noting those are our people our offices that's not in offshore activity. That's our people. It's our company. So I think we have a lot of leverage on how we approach our R&D and what we bring to the market.
Speaker Change: The market feedback the way that we have in commercial also the way that we've consistently got voice of customer loop coming back to our product teams allows us to refocus and a way to get really what we need to bring to market to market. So I think there's been a conscious effort to not just reduce cost, but as I've said a couple of times now in the Q, it's literally getting refocused on the product.
Speaker Change: Get fit and what we need to bring to market very very operational execution away. So worth, noting I think theres an intentional effort. There for sure is we built.
Speaker Change: That's all.
Speaker Change: Very helpful. Thanks again guys.
Speaker Change: Ladies and gentlemen, there is no further questions. This concludes today's conference call. Thank you very much for your participation you may now disconnect.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].