• Revenue: $7.42 million, representing an 18.7% increase over Q2 2024 and 111% year-over-year growth.
• Gross Margin: B2B2C business gross margins rose to 83%; overall business gross margins reached 70% on a non-GAAP basis.
• Operating Expenses: Non-GAAP operating expenses reduced to $12.3 million, a 15.9% sequential decline from Q2 2024.
• Client Wins: 10 new client wins in Q3, with an expectation of 17 to 20 new clients for the second half of the year.
• Projected Client Growth: Estimated total of 25 new client signings in 2024, representing approximately 35% growth in the client base.
• Cash Flow Projection: On track to reach cash flow break-even run rate by the end of 2025.

• Warning! GuruFocus has detected 5 Warning Signs with DRIO.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• DarioHealth Corp (NASDAQ:DRIO) reported a significant revenue increase of 111% year-over-year, reaching $7.42 million in Q3 2024.
• The company achieved a gross margin of 83% in its B2B2C business, reflecting strong operational efficiency.
• DarioHealth Corp (NASDAQ:DRIO) secured 10 new client contracts in Q3 2024, with expectations to add 5 more by year-end, indicating strong business momentum.
• The company successfully reduced non-GAAP operating expenses by 15.9% sequentially, demonstrating effective cost management.
• DarioHealth Corp (NASDAQ:DRIO) transitioned its Pharma business to a subscription-based model, enhancing revenue predictability and stability.

Negative Points

• Despite revenue growth, DarioHealth Corp (NASDAQ:DRIO) is not yet cash flow positive, with a target to achieve this by the end of 2025.
• The company faces challenges in converting new client logos into meaningful revenues efficiently.
• DarioHealth Corp (NASDAQ:DRIO) is still in the process of integrating recent acquisitions, which may pose operational challenges.
• The transition from milestone-based to subscription-based revenue in the Pharma channel may initially create revenue volatility.
• The company is undergoing significant organizational changes, including budget reallocations, which could impact short-term operational stability.

Q & A Highlights

Q: As we approach 2025, can you provide some guidance on how we should think about the 2025 growth range for B2B2C revenue? A: Erez Raphael, CEO: We have around 25 new clients this year, which is more than a 30% increase in our client base. While we are not providing precise guidance, we expect to reach a $50 million run rate by the end of next year, which will make the company operationally cash flow positive.

Q: The B2B2C revenue stepped up sequentially this quarter. Should we continue thinking about the annual range of $8 to $9 million as the continued range going forward? A: Erez Raphael, CEO: On the B2C side, we are looking at an $8 million range, which should remain stable. For B2B2C, we are projecting a growth of 50% to 70% in revenues this year.

Q: Can you share what you estimate each of the new Pharma customers can contribute, particularly the large Pharma customer? A: Steven Nelson, Chief Commercial Officer: We have a range for these accounts, from $500,000 to $5 million, depending on their goals and scale. We are working to convert milestone-based contracts to platform fees for more predictable revenue.

Q: Do the prior Pharma partners remain on track under the legacy model? A: Steven Nelson, Chief Commercial Officer: We aim to convert existing contracts to more stable, predictable revenue models. The goal is to eliminate revenue lumpiness and achieve a healthier revenue mix.

Q: What are the key levers for OpEx improvement, and how do you plan to grow on a more stable OpEx base? A: Erez Raphael, CEO: We have absorbed an entire organization with minimal increase in OpEx. We expect to reach a $41 million run rate by Q1 2025. We've strategically shifted budget from R&D to sales and marketing, focusing on revenue growth with existing assets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.