DarioHealth Corp. (Nasdaq: DRIO), a leader in the global digital health market, today reported financial results for the second quarter 2024.
In the second quarter, we drove significant growth in our core business-to-business-to-consumer (B2B2C) channel. Our B2B2C channel grew 60% sequentially over the first quarter of 2024, and 315% over the second quarter of 2023, primarily due to Aetna customer sign on, expansions of existing customer contracts, new customer launches, and the addition of Twill, Inc. (“Twill”) revenues following our acquisition of Twill in the first quarter of 2024. The organic sequential growth of this channel is 28%. Our legacy direct to consumer (B2C) business remains at its consistent run rate at $7.6 million.
We are continuing the momentum of scaling of our business and realizing the benefits of the strategic decisions we have made over the past few quarters. Our growing confidence in our ability to meet our target of cash flow breakeven by the end of 2025 is supported by recent progress in our core high margin B2B2C channel that reached $21.6 million in annual recurring revenues (ARR). We signed multiple contracts in 2024 so far, saw more employers sign on to the Aetna platform, and many of Dario’s clients have agreed to adopt the Twill platform, providing validation that our cross-selling efforts will help further us towards reaching cash flow breakeven.
“Looking ahead, we anticipate a significant reduction in operating losses over the next three quarters driven by continued revenue growth and aggressive cost-cutting measures implemented post-Twill merger. These cost reduction initiatives, which commenced in early May 2024 and were completed in early August 2024, are expected to yield a 24% decrease in GAAP operating expenses, and a 40% decrease in non-GAAP operating expenses from the first quarter of 2024 to the first quarter of 2025. Additionally, we expect gross margins to climb to 80% by the first quarter of 2025, as our core B2B2C revenues have already reached 82% gross margins in the second quarter. These combined efforts are anticipated to result in a 58% reduction in GAAP operating loss and 75% reduction in non-GAAP operating losses between the first quarter of 2024 and the first quarter of 2025, providing a clear path to cash flow breakeven by the end of 2025,” stated Erez Raphael, Chief Executive Officer of Dario.
“Our core B2B2C revenue saw an increase in the second quarter as we saw the significant impact of new customer launches, customer expansions, and the transformative impact of the Twill acquisition,” stated Steven Nelson, Dario’s Chief Commercial Officer. “We continue to see meaningful traction with our GLP-1 product among new and existing contracts, with 9 clients already implementing the product and several others in the pipeline. We see an increasing opportunity for revenue growth with the GLP-1 product as more and more clients have expressed interest in this product each quarter. Aetna continues to add customers to its existing Mind Companion platform, a trend we expect to continue. We’ve signed agreements to expand with a health plan customer and other off-cycle employers, which are anticipated to launch this year.
Our commercial pharma channel, traditionally reliant on milestone-based revenue, presents a significant growth opportunity. The industry’s shift towards direct-to-consumer models aligns perfectly with our expanded capabilities following the acquisition of Twill. We are confident that our Dario-Twill consumer hub platform, coupled with our enhanced offerings, positions us as a premier partner for pharma companies seeking to engage patients effectively. We are actively collaborating with existing and potential pharma clients to accelerate this transformation and maximize the value of our new, recurring, and more stable revenue-based business model. To facilitate this strategic transition, we have granted a one-time price concession of $1.1 million to a strategic partner. This decision reflects our commitment to balancing short-term adjustments with long-term growth prospects. While we anticipate a potential near-term reduction in channel revenues as we focus on securing long-term, sustainable growth, we are actively collaborating with existing and potential clients to accelerate this transformation and maximize the value of our new business model.
We see a growing opportunity to expand on our foundational artificial intelligence (AI) capabilities given the data and tools that have had for years and are now of growing importance to our business model. We believe that the integration of generative AI and microservices is set to revolutionize drug discovery, consumer engagement, and personalization, with proprietary data sets poised for internal and external monetization, and we have a market leading capability to capitalize on this movement. With our strong cash position, we believe that we are well-equipped to execute our strategy and solidify Dario’s leadership in the digital health space,” concluded Mr. Nelson.
Additional Q2 2024 and Recent Highlights
- Signed multiple new customer contracts and obtained commitments from some Dario clients to adopt the Twill platform beginning in January 2025, because of cross selling efforts.
- Announced a strategic management restructuring with the appointment of Steven Nelson as Dario’s inaugural Chief Commercial Officer.
- Announced two new studies presented at the 84th Annual American Diabetes Association (ADA) Scientific Sessions in Orlando, demonstrating 12 months of sustained healthy behavior change for Dario members taking a GLP-1.
- Announced new research published in the leading peer-reviewed journal for digital health and medicine, Journal of Internet Medicine (JMIR) demonstrating a clinically significant reduction in blood glucose levels for members using Dario to manage weight alongside diabetes.
- Announced two new studies published in the leading peer-reviewed journal for digital health and medicine, Journal of Internet Medicine (JMIR), including a Randomized Controlled Trial (RCT) demonstrating the impact of a digital stress reduction program for teens.
Second Quarter 2024 Results Summary
Revenues for the second quarter ended June 30, 2024, were $6.26 million, a 1.7% increase from $6.15 million for the second quarter ended June 30, 2023, and an increase of 8.6% from $5.76 million for the first quarter of 2024. The increase compared to the quarter ended June 30, 2023, resulted from an increase in revenues from the B2B2C channel and the consolidation of Twill revenues.
B2B2C, employers and health plans recurring revenues for the second quarter ended June 30, 2024, were $5.5 million compared to $1.34 million in the quarter ended June 30, 2023, representing an increase of 315%, and compared to $3.5 million in the first quarter of 2024, representing an increase of 59.7% sequentially.
Gross profit for the second quarter ended June 30, 2024, was $2.76 million, an increase of $682,000 or 32.9%, compared to gross profit of $2.07 million for the second quarter of 2023, and an increase of 13.3% from $2.43 for the first quarter of 2024. The reason for this increase is the increase in our B2B2C revenues. Gross profit as a percentage of revenues increased to 44.1% in the second quarter of 2024, from 33.7% in the second quarter of 2023, and 42.2% in the first quarter of 2024.
Pro-forma gross profit, excluding $1.23 million of amortization expenses related to the acquisition of technology, was $4.0 million, or 63.8% of revenues, for the three months ended June 30, 2024, compared to pro-forma gross profit of $3.17 million, or 51.5% of revenues, for the three months ended June 30, 2023, and a pro-forma gross profit of $3.6 million, or 62.4% of revenues, for the three months ended March 31, 2024. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Total operating expenses for the second quarter ended June 30, 2024, were $18.9 million compared with $16.1 million for the second quarter ended June 30, 2023, and $20.3 million for the first quarter of 2024, an increase of $2.8 million, or 17.7%, compared to the second quarter of 2023, and a decrease of $1.4 million, or 6.6%, compared to the first quarter of 2024. The increase compared to the second quarter ended June 30, 2023, resulted mainly from the acquisition of Twill. The decrease compared to the first quarter of 2024 resulted mainly from a decrease in stock-based compensation expenses.
Total operating expenses excluding stock-based compensation, acquisition related expenses and depreciation for the second quarter of 2024 were $14.7 million compared to $10.7 million for the second quarter of 2023, and $12.7 million for the first quarter of 2024.
Operating loss for the second quarter of 2024 was $16.2 million, an increase of $2.2 million, or 15.5%, compared to $14 million for the second quarter of 2023, and a decrease of $1.7 million, or 9.3%, compared to $17.9 million for the first quarter of 2024. The increase compared to the second quarter of 2023 was due to the increase in operating expenses. The decrease compared to the first quarter of 2024 was due to the decrease in operating expenses.
Financing income was $2.6 million for the second quarter of 2024, compared to financing expense of $2.6 million for the second quarter of 2023. The reason for this increase was the revaluation of the pre-funded warrants issued as part of the consideration for the acquisition of Twill, due to its classification as a liability according to GAAP rules.
Net loss was $13.6 million in the second quarter of 2024, a decrease of $3.0 million, or 17.9%, compared to a net loss of $16.6 million in the second quarter of 2023, and an increase of $6.4 million, or 89.7%, compared to $7.2 million in the first quarter of 2024.
Net loss excluding stock-based compensation, acquisition related expenses and depreciation for the second quarter of 2024 was $8.1 million compared to a loss of $10 million for the second quarter of 2023, and a profit of $1.6 million in the first quarter of 2024.
A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Financial Results for the Six Months Ended June 30, 2024:
Revenues for the six months ended June 30, 2024, were $12 million, a 9.1% decrease from $13.2 million for the six months ended June 30, 2023.
Gross profit for the six months ended June 30, 2024, was $5.19 million, a decrease of 1%, or $54,000, compared to gross profit of $5.24 million for the six months ended June 30, 2023.
Pro-forma gross profit, excluding $2.4 million of amortization of expenses related to acquisitions, was $7.6 million for the six months ended June 30, 2024, compared to a pro-forma gross profit of $7.4 million for the six months ended June 30, 2023. Pro-forma gross profit margin, excluding amortization of acquisition related expenses, was 63.1% for the six months ended June 30, 2024, compared to 56.1% for the six months ended June 30, 2023. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Total operating expenses for the six months ended June 30, 2024, were $39.2 million, an increase of $7.5 million, or 23.9%, compared with $31.7 million for the six months ended June 30, 2023. The increase resulted from the acquisition of Twill. Total operating expenses excluding stock-based compensation, amortization of acquisition related expenses and depreciation for the six months ended June 30, 2024, were $27.4 million compared to $21.4 million for the six months ended June 30, 2023.
Operating loss for the six months ended June 30, 2024, increased by $7.6 million to $34.0 million, compared to a $26.4 million operating loss for the six months ended June 30, 2023. This increase is mainly due to the increase in operating expenses.
Financing income was $11.3 million for the six months ended June 30 2024, compared to financing expense of $3.0 million for the six months ended June 30, 2023. The reason for this increase was the revaluation of the pre-funded warrants issued as part of the consideration for the acquisition of Twill, due to its classification as a liability according to GAAP rules.
Net loss was $20.8 million for the six months ended June 30, 2024, compared to a net loss of $29.4 million for the six months ended June 30, 2023. The decrease was driven by the increase in financing income.
A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
About DarioHealth Corp.
DarioHealth Corp. (Nasdaq: DRIO) is a leading digital health company revolutionizing how people with chronic conditions manage their health through a user-centric, multi-chronic condition digital therapeutics platform. Our platform and suite of solutions deliver personalized and dynamic interventions driven by data analytics and one-on-one coaching for diabetes, hypertension, weight management, musculoskeletal pain and behavioral health.
Our user-centric platform offers people continuous and customized care for their health, disrupting the traditional episodic approach to healthcare. This approach empowers people to holistically adapt their lifestyles for sustainable behavior change, driving exceptional user satisfaction, retention and results and making the right thing to do the easy thing to do.
Dario provides its highly user-rated solutions globally to health plans and other payers, self-insured employers, providers of care and consumers. To learn more about Dario and its digital health solutions, or for more information, visit http://dariohealth.com.
