DarioHealth Corp. (DRIO) on Q1 2021 Results - Earnings Call Transcript
Operator: Greetings and welcome to the DarioHealth Corp. First Quarter 2021 Financial Results Call. Please note this conference is being recorded. I will now turn the conference over to your host, Glenn Garmont of Investor Relations. You may begin.
Glenn Garmont: Thank you, Shamali and good morning everyone. Thank you for joining us today for a discussion of DarioHealth’s first quarter 2021 financial results. Leading the call today will be Erez Raphael, Chief Executive Officer. He will be joined by Zvi Ben-David, Chief Financial Officer and Rick Anderson, President and General Manager of North America. After the prepared remarks, we will open the call for Q&A. An audio recording and webcast replay for today’s conference call will also be available online as detailed in the press release invite for this call. For the benefit of those who maybe listening to the replay or archived webcast, this call is being held and recorded on May 18, 2021.
Erez Raphael: Thank you, Glenn and good morning, everyone and thanks for joining our call this morning. Joining me today, Rick Anderson, the President and General Manager for North America and Zvi Ben-David, the CFO of the company. So, we are very excited this morning to report our Q1 results and also to give some updates about our news that we just put earlier this morning about the acquisition of wayForward. I want to be very persistent and therefore I want to reiterate the main three pillars that we keep mentioning every quarter for the last I would say 1.5 years or 2 years with regards to how we are planning our strategy, how you see the future business and how we are reporting our progress. So, the main three pillars are the expansion into multi-conditions, which is something that we keep repeating; the second pillar is the expansion into a SaaS high gross margins revenue and that’s the second one; the third one and obviously the most important one is the transformation into the B2B2C. As you all know, this company started as a direct-to-consumer. We are big believers in the consumerization of healthcare. And this is why we started B2C. We created one of the best products and we are transforming the business into B2B. And we believe that the combination of these three pillars together is something that each of them will have a very important impact on our financial profile, but the combination of the three of them together is going to create exponential growth for our company. And that’s how we are looking into the business.
Rick Anderson: Thanks, Erez. One of the keys to our strategy to move into the B2B accounts is generating enrollment in revenue from those accounts. That’s a key factor, not just winning them, but actually being able to enroll people, engage them and continue to generate revenue. And as Erez said, we launched several accounts in the first quarter. We have been very pleased with where that enrollment is running. We are running north of 40% enrollment in under 10 weeks, which exceeded our internal goals. And as I have stated several times, we used 35% enrollment in our pipeline and our internal models. So, since we are substantially above 40% that really shows what we are able to do and that it bodes well for converting from contracts to revenue. It also happens to be from what we know best-in-class in terms of enrollment of our competitors and we continue to be excited about that.
Zvi Ben-David: Thank you, Rick. Revenues for the first quarter ended March 31, 2021, were $3.6 million a 73% sequential increase from the fourth quarter ended December, 31, 2020, and 116% increase from the $1.7 million in the first quarter ended March 31, 2020. Revenue generated during the first quarter ended March 31, 2021, were derived mainly from the sales of DarioHealth’s products and services and from the consolidated revenues of Upright commencing February 2, 2021. Gross profit in the first quarter of 2021 was $1.081 million, an increase of $302,000 or 38.8% compared to the gross profit of $779,000 in the first quarter of 2020. Gross profit margin was 30.1% in the first quarter of 2021 as compared to 46.7% in the first quarter of 2020. Pro forma gross profit excluding $526,000 of amortization of expenses related to the acquisition of Upright Technologies was $1.6 million. Pro forma gross profit margin, excluding the amortization of expenses related to the acquisition of Upright was 44.7% in the first quarter of 2021, a sequential increase from 24.2% in Q4 2020. Total operating expenses in the first quarter of 2021 were $15.4 million compared to $10.9 million in the first quarter of 2020, an increase of $4.5 million or 41.6%. The increase resulted from an increase in our research and development activities, sales and marketing expenses and from the consolidation of Upright Technologies, partially offset by a reduction in stock-based compensation. Operating loss in the first quarter of 2021 was $14.3 million, an increase of $4.2 million or 41.7% compared to the $10.1 million operating loss in the first quarter of 2020. This increase was mainly due to the increase in our operating expenses. Net loss was $15 million – was $15 million in the first quarter of 2021, an increase of $5.1 million or 51.3% compared to the $9.9 million net loss in the first quarter of 2020. Cash and cash equivalents totaled $81.1 million at March 31, 2021. Now with that, I will turn the call back to Erez.
Erez Raphael: Thank you, Zvi, and thanks, Rick, for the overview. So a few closing remarks, first, I want to reiterate that the B2B2C transformation, hence, winning employers, health plans and providers is our first priority. And as Rick stated, we believe we will have a win of health in this quarter. Another very important data point that I think that investors should understand is that in terms of implementing employers, we are showing that we know how to do that. We managed to take the B2C capabilities and transform them into the B2B. So from a product standpoint, from a team standpoint, we have all the tools in order to be successful in this transformation. And I think that the fact that we also managed to conclude 2 acquisitions in 4 months, this is another indication on our aggressiveness in terms of in a positive manner on how we want to lead the market in terms of building the digital therapeutics platform. And I want to emphasize digital therapeutic platform for chronic condition management, hence, consumer centric scalable. We are integrating with telemedicine platforms in order to provide one integrated experience, but we believe that the future of the market and scalability will be achieved only by involving the users with their own health. And that’s why we keep improving our strategic position. And I am very glad that after we raised more than $100 million in the last 12 months, I would say, we are utilizing the capital in a very smart way. The 2 acquisitions that we did were minimal in terms of spending cash. And also the acquisition of wayForward is now going to add on our burn rate, something that is meaningful. So practically, we are utilizing the capital in a very smart way, and we feel that we have a long runway. So as Zvi stated, we ended the quarter with more than $81 million in cash. And we already see inside Q2 that we will be able to continue the growth from Q1 to Q2. And I am talking about growth that is organic. With that, I would like to open this call for Q&A.
Operator: Our first question is from Alex Nowak with Craig-Hallum Capital Group. Please proceed with your question.
Alex Nowak: Great. Good morning everyone. Thanks for the call here. We have continued to see the pipeline get built up here, $700 million now, $600 million last quarter. But it also looks like the conversion to deals has been quiet the last few months, maybe a little bit slower than you would have thought. I think last quarter, the expectation was 20 to 30 different deals could be signed over the course of 2021. You mentioned the health plans. You mentioned a couple employers that are in the works and a couple of providers. But can you provide an update on the deals that you expect to sign over into customers during 2021 and just the status across providers, employers and payers? Thanks.
Rick Anderson: Sure, Alex. Thanks for that question. Yes, the pipeline has continued to grow. And part of that was just where we are in the transition, really starting in mid-2020 for the most part, for most of the markets that we are pursuing from a very low number and then continuing to expand that as we go forward. We are not expecting that the pipeline will continue to grow at the rate that it’s been growing in the future as these deals – most of the sales cycle for health plans, as you have heard me say several times are 18 months to 2 years. We are very pleased that we have some that look like they will come out of the pipeline in essentially a year or under a year, which is pretty quick, and I think that, that speaks to the value proposition and the opportunity that’s there. But there also are ones that will continue to move on what we would think would be a normal cycle. As I mentioned, employers – most of the employers that we are working with that are in the pipeline, although not all of them are 2022 launches, which means those contracts, which we are referencing will be coming to play in the fourth quarter. We have a couple, including some things that are fairly large that we would anticipate would come probably in the third quarter based on where we are in terms of the contracts with some revenue in 2021, but the majority of it really launching into 2022. And then on the RPM side, that’s where we anticipate certainly a larger volume of contracts over a period of time. And at the moment, we have a fairly healthy number that are sitting out waiting for signature. So it may be the nature of the beast that sometimes we get a bunch in clumps as it relates to that. We still anticipate the same number of contracts that we were anticipating last quarter. Nothing has changed from that perspective. If anything, we have probably seen an increase in the potential for contracts, especially through partners around that. And all of those comments are pre-acquisition of wayForward, which we anticipate will also contribute now to that as well. But excluding that, I would say we are in the same or we are a little bit better place than we were last quarter in terms of having those come out. Certainly understand the – some of the frustration as it relates to seeing those on a regular basis. I think we will see more RPM contracts on a regular basis, health plans we – like I said, we really aren’t going to see a ton of those until we get later in the year because those are 2022 revenue launches with a few exceptions and health plans tend to be a little bit further in between. But we are – we believe we are well positioned for this quarter and then going forward for the rest of the year, we also anticipate some additional.
Alex Nowak: Okay, that’s great. That’s really helpful. Okay. On the behavioral health with the wayForward acquisition, Rick, you have obviously experienced – have experienced with behavioral health companies before. You mentioned the reason why this drew your attention to wayForward. But you also said you don’t need to make any major investments to it. So, I guess just expand on that because I am sure you want to shape wayForward into a little bit of the vision that you have had from your prior experience. And then ultimately, what do you need to do to modify the wayForward platform to fit the Dario network? Is it going to be something similar to what you are doing with up right? I guess I didn’t necessarily get that message. And then just last question of the bunch here. Among the 20,000 customers that wayForward has, what is the revenue from that? And do you expect to expand the diabetes solutions into the 20 employer plans that wayForward has?
Rick Anderson: Sure. So let me try and make sure I get all of those, if I miss something, let me know. Yes, I probably wasn’t as clear as I could have been in terms of we don’t expect it to add a significant burn to what we are already spending. So we are not expecting a very large additional incremental burn associated with that. Part of that is because they are generating revenue and part of that is because they already have a robust software development team. Their software development team is located in India and has really been doing some great work, and we anticipate that they will continue to do that great work and continue to refine the offering of wayForward. But they have built the platform. They are operating that platform. So, a lot of that heavy lift has already been done as it relates to that. The primary thesis in terms of bringing wayForward in Dario is really the integration, as I talked about, we want to make this available in this – by this, I mean, the different offerings available to members, not necessarily all in the same application. We don’t think that, that is the best member experience. So, we anticipate we will continue to maintain different applications, but have integration as it relates to things like members being able to see where they are across different conditions if they have those and have ease of use back and forth between them, consistent look and feel. So, you feel like you are in an integrated experience. And of course, the whole thing is supported and underlined by our AI journey engine, which enables us to do a more personalized and hyper-personalized approach to those members. So, we will be integrating the data feeds And then the recommendation engines, etcetera, that come from that AI engine into the wayForward piece. And we anticipate that, that will happen over the next couple of months. But wayForward is a little different than Upright to the extent that they are already operating. Most of their customers are self-insured employers, whether that’s direct contracts or through resellers that they have. So, their offering is already a B2B offering. And like I mentioned, we have been partnering with them on RFPs already earlier – well, throughout the first part of this year as we have entered especially on the employer side. So, there is not a lot that needs to be done for us to start that process. Over the next few months, we will be integrating them into sort of that overall look and feel from that perspective. And I feel like I missed one of your questions.
Alex Nowak: Just on the revenue contribution that you would expect once the deal closes?
Rick Anderson: We don’t expect it to be terribly material to our existing revenue that we have in the current year. The – you asked the question in terms of the billing, the 20,000 members, approximately that they are bringing, like I said, that doesn’t include their technology solution. They are a little different in terms of the way that they are billing in that they are billing per user – or excuse me, per member per month. So, they are actually a fixed charge every month, related to those folks because of the way that their platform works is the ability to screen people and then provide the digital CBT and the CBT plus coaching. So, most of the rest of our solutions are being build on an engaged member basis. They have existing customers that are on a PMPM basis, and they have ones that are in process of being implemented as well. So, we will continue to see – so there is contracted revenue there that will continue to come into play over the rest of 2021 and really building into 2022 as they continue to expand.
Alex Nowak: Okay, understood. And then just any update on how the Upright acquisition, that transformation is happening moving that into more of a B2B platform?
Rick Anderson: In terms of – from an offering perspective, we have already integrated, as I mentioned, we have several opportunities actually for MSK as a standalone, and we also have several where it’s integrated where we are working with a couple of different health plan customers, and we have been including it from that perspective. We have also seen an interest, by the way, in the Upright Go from a B2B perspective as well. So there are – and that is obviously an existing product that is in process. And we expect that we will have all of the pieces that we need from a B2B side in the late summer. Erez, do you want to add anything to the B2B integration for MSK?
Erez Raphael: Yes. So that’s something that, as we stated in our last earnings call, we are going to get this MSK offering the package into the B2B market for Q3. That’s still the plan that we have. So – and we start to commit to clients to get it delivered for Q3. The existing product as Rick stated, Go 2, is distributed now for some of the B2B accounts.
Alex Nowak: Alright. That’s great. And then last question, just to confirm, what was the revenue of just Dario organic excluding Upright in the quarter?
Erez Raphael: That’s something in the ranges of $2.3 million or $2.4 million. I am not sure of the exact number, but that’s the ranges. I mean we had the growth from Q4. In terms of the Upright…
Alex Nowak: Yes. Okay. Yes. That makes sense. And understood on the Upright, you can pick back on that. Alright. Thank you. I appreciate the updates.
Rick Anderson: Thank you, Alex.
Operator: And our next question is from Charles Rhyee with Cowen. Please proceed with your question.
Charles Rhyee: Yes. Hi guys. Thanks for taking the question. Maybe first, just to follow-up on Upright. So, you talked about that the – I think in the release you talked earlier, a good chunk of the first quarter revenue is typically captured in the first quarter. So, is that just a function of seasonality? And so when we think about revenue from Upright for the rest of the year, should we be using sort of February and March monthly kind of run rate as the run rate through, let’s say, the middle of the year and then more of Upright revenue comes in the fourth quarter and first quarters of the year?
Erez Raphael: Yes. Thanks for the question. So yes, since the majority of the revenues that we are generating today is still the same. And that’s also the case for Upright. There is a seasonality. So usually, January is very strong, and this is why January is higher than February and March for Upright. And then towards the end of the year, November, December are going to be, again, high comparing to the month before. So between, I would say, February, and September, October, these are the months. And as you said, you should consider the run rate and the potential growth on this run rate from February, March and onwards. That’s the way to think about it.
Charles Rhyee: Okay. That’s helpful. So when you guys talk about – I think at one point in the release or I think you mentioned once that there was about 90,000 active users for Upright. Does that represent the sort of steady-state membership of this February to September period? Because my guess is right, if you are paying a monthly PMPM and maybe correct me if I am wrong. The fourth quarter, first quarter effect, is that really a lot of people trying it out because of the holidays or they want to get better or whatever reason, but then they can’t – people cancel. right? Maybe they choose not to continue. And what you are really seeing in February to September are the consistent active users?
Erez Raphael: Yes. So first of all, I just want to – I just want to emphasize that we put a new deck on our website this morning, and we provided the link on the press release and also in our 8-K. So, information about number of users and so on is disclosed as part of the presentation. So it’s out there, just as a comment. With regards to your question, we have the majority of users that are coming from the metabolic are moving into a membership program. And that’s the transformation that we had in the last couple of years. In terms of the Upright users, those that are coming from the B2C are buying the device as one-time and then trying it, and then they are getting them to the platform and keep trying it. So, they are more on a program that is one-time. And the others that are joining as part of the B2B are getting on programs that are more like a membership program. That’s the way to think about it.
Charles Rhyee: I see. So it’s a little bit less about the subscriptions side, but it’s also the device charge as part of the Upright that are people purchasing more in the – more as gifts or at the start of the year?
Erez Raphael: Yes. People are buying more online towards the end of the year and the start of the year, and this is why we see the seasonality. And it’s less about the membership program because that’s the nature of the B2C sales that we are doing. And when I am talking about the transformation of the Upright business into B2B MSK, I am talking about turning it into a membership under a yearly program where you are going to see something that is more kind of less seasonal and more stable. So, the more we move the business and overall revenues into the B2B, you are going to see this stability improving. Obviously, this is something that you also already see in the Dario metabolic disease because we started doing this transformation 1.5 years ago, and that’s something that you are going to see towards the end of the year also for the MSK business.
Charles Rhyee: Okay. But just on the B2C part of Upright, just to be clear, right, it’s – we should be modeling more of the February, March run rate through September and then ramp up in fourth quarter and in first quarter for not only this year, but as we think of next year as well, right?
Erez Raphael: Yes, that’s exactly right.
Charles Rhyee: Okay. I just want to ask one more question around wayForward. You talked that it sits in this middle part between either not getting care but or getting all the way to like a real full-blown telebehavioral health kind of visit. What part of the market because if you think about – and I am looking at your slide deck right now and you show this ven diagram of the addressable market of $9 billion. Is this just a segment of the behavioral health that you think that wayForward represents or is this Just – or is this year just saying this kind of 1% penetration estimate? Because I’m trying to understand like what part of the behavioral health market fits into where wayForward is trying to play in?
Rick Anderson: Yes. So that represents where we think that they are playing right at the moment. But if you think about behavioral health as a pyramid for the moment, where you’re looking at the number of people that would be in a level of acuity, let’s just call it, for the moment, it’s probably not exactly the right term. But at the very top of the pyramid, you’re going to have a small number of people with seriously, persistently mentally ill and they have very high costs associated with them on the behavioral health side and also, by the way, on the physical health side. The next group of people down is a little bit bigger number of people, but those are people that are usually incurring significant amount of costs, maybe on the medical side instead of the behavioral side, but they have significant behavioral health issues And then there is – depending on how you want to look at it, two to three categories below that have decreasing severity of behavioral health condition and also decreasing costs. So if you really look at that on an overall basis, the base of that pyramid is the largest group of people that have behavioral health conditions that would benefit from care. And if care is not provided, a significant portion of those will continue to progress into higher levels of acuity and cost associated with that. The challenge with the bottom end of that pyramid is that they don’t cost a lot of money. They are not spending money on behavioral health. They don’t really need a traditional provider is the way that we would think about it necessarily in a lot of cases, some do. But a lot of them really could benefit from other interventions. And so the trick has always been how do you provide services to that low end of that pyramid there at a very cost-effective way. And what I think is unique and interesting about what wayForward is doing is that they are really focused on using sophisticated screening to understand who’s in what category, what kinds of treatment or care would be appropriate and then helping direct them to those pieces and in some cases, providing that care themselves and in some cases, sending folks to care outside of themselves as part of the referral. And don’t get me wrong that referral is part of the value, the ability to do that referral as part of the value as well. But this is really kind of addressing that lower end piece of the market on a cost-effective basis. And because they are not providing and making their money, so several of the players that are out there are essentially charging for telehealth visits or telebehavioral health visits at significant cost, oftentimes it’s actually in excess of what it would cost for an in-person visit. So if that’s where you’re making your money, you’re incentivized actually to send people to that level of care, which is not necessarily appropriate or needed for those members. So it’s a better member experience. It’s more convenient, it gives them what they need and also allows you to address this very large portion of the market. And doing that, the only way you can do that is through a digital approach to doing that. And that’s also why they – their structure from a business model perspective is a true PMPM versus an engaged member piece. So I mean, we think that the opportunity is even potentially larger than that, Charles, that’s there, but we’re starting with something that is smaller, but we think appropriate.
Charles Rhyee: Okay. Last question, can you give a rough estimate what the PMPM is for wayForward?
Rick Anderson: It really depends on what the underlying services are, but it’s going to run somewhere between 250 and 4.
Charles Rhyee: Okay, great. Thanks guys.
Erez Raphael: Thanks, Charles.
Operator: And our next question is from David Grossman with Stifel. Please proceed with your question.
David Grossman: Good morning, thank you. I’m wondering – I know you gave us some good statistics on some of the pro forma numbers for the first quarter. And I was just wondering if you look at the clients that are currently under contract and ramping, can you give us a sense for what the run rate revenue is under that definition, just if you assume that all of the visibility that you have that’s in the process of ramping what that run rate would look like?
Erez Raphael: Yes. So the run rate of the revenue at the moment in between, I mean, we need to count in both the B2C of the metabolic, the B2C of Upright and the B2B that started. I would say that the run rate is above – at the moment is above the $4.7 million pro forma that we presented to Q1, okay, because we are in the middle of Q2. So it’s above debt numbers. I cannot provide the accurate split or how it’s divided between B2C to B2B But I would say that it’s more like in the range of 15% B2B and 85% B2C. That’s high level, and we don’t have an accurate number for that one, but that’s on a high level.
David Grossman: Right. And I guess, similarly, on the OpEx for the balance kind of the year was the first quarter kind of the EBITDA loss? Is that a high water mark, do you think for the year? Or is there – how do you want to think about how that trends for the balance of the year?
Erez Raphael: Yes. So I think that some of the expenses that we had in Q1 were higher because of the acquisition. So we had the expenses of legal and from a cash flow perspective. We had to cover that and other things. So I think that in terms of losses and burn, you shouldn’t think that Q1 is going to be the run rate for the rest of the year, I think that we’re going to see a gradual decline in the losses and in the burn. Like, I would say, like as we move forward, something in the range of 15% decline as we move forward. So that’s on high level. Q1 was a very special quarter with this acquisition of Upright. The impact of wayForward with regards to cash, as Rick stated, it’s going to be very minor because again, for wayForward, we are not making any B2C investment because everything is on the B2B side. And in terms of the commercial teams, the team at WayForward is relatively small. And we’re going to ramp up the sales of wayForward with the team that we already have on board from Dario, and this is something that is reflected into our OpEx already. And in terms of the operational team of wayForward including the AI and the software development team and the costs are lower than the average that we have in the company. Because it’s in – the majority of the team is in India. So with regards to that, we think that from a cash flow perspective and P&L perspective, the impact of wayForward to the OpEx is going to be very low. And in fact, it also gives us an opportunity when we are expanding our teams to rely on the development center in India and moving forward to improve our financial profile also in terms of cost when we want to grow with additional employees, we have also the India site. So that’s an operational opportunity also for the rest of our business that we are very happy about.
David Grossman: Got it. And just to be clear, when you said that it will have nominal impact on your losses, does that mean that they are losing less as a percentage of revenue or that they just have nominal absolute losses currently?
Erez Raphael: They have an absolute losses that are relatively low if we are considering the revenues that it’s getting in is the expenses and the losses are very low. The idea of doing M&A, and this is something that we – I did before in my previous company. Usually, what we are seeing in year 1 is that the two P&Ls are getting together, and we’re not going to see cost reduction here. But at the same time, we forward are not losing a lot of money. So it’s relatively very, very, very small comparing to our overall expenses. And usually, in the second year, we start to see an improvement in cost-effective activities that will improve the overall P&L. And so we’re going to send that – to your previous point, we think that moving forward toward the second half of the year we are going to see improvement in the P&L. And obviously, into 2022, we want to be in a much better position in terms of losses.
David Grossman: Got it. Thanks very much for that. And then just on the revenue model. I think a question came up a moment ago about the PMPM and wayForward. So when you go into sell a bundle, are each of these products going to be sold separately? Are you going to have a base price for the platform like you were talking about when you closed Upright? I just want to get a sense of how to think of new clients coming on and how to think of a base revenue per client and how that may scale by adding the different products?
Rick Anderson: Yes. So I would think about that we – as Zvi mentioned in the comments, our primary objective is really to sell an integrated solution. We’re getting a lot of interest and traction from that from having that integrated solution because that does make it different than other things that are out there in the marketplace. And we have been market testing different kinds of pricing models in looking at that. We will be offering it on both an engaged member, per engaged member per month, so really kind of translating that PMPM to basis and offering it stand-alone as well as on an integrated basis. So the reality in the marketplace is that different players want to address different things in different ways. And we do pride ourselves on our flexibility in terms of both the offering and the ability to integrate with others. And then also how we deliver on that value to our partners. So the way that I would probably think about it just because it’s probably easier is to think about it on a per engage member per month basis from a model perspective. And it’s just a matter of adding additional dollars to that to cover that on an integrated basis.
David Grossman: Got it. And just one other question was I was just wondering, if you look at how you’re selling today and what you may look like kind of 12 months from now, do you have any change to the channels that you’re using? And the ones that you’re using today, maybe give us a sense for how those are performing? And what I mean is channels outside of the internal direct sales efforts? And just trying to get a sense for how your partners are performing now and what you’re expecting to add over the next several months, if any.
Rick Anderson: Yes. I mean we’re seeing additional interest from – if I understand your question correctly, we’re seeing additional interest from distribution partnerships. And we kind of look at those in two broad buckets, one being making it easier for our customers to adopt what we’re doing. So they have some ability to either pass data or facilitate payment or they already have contracts in place, and we can fit or tuck-in underneath that as part of their offering. We think we will see some expanded relationships there over the next couple of quarters. And then we look at it as folks that are truly really kind of reselling what we’re doing. And there is fewer of those opportunities, but we have gotten – definitely gotten some traction with some of the ones that we have. We’re not really pursuing those in a significant way right now from that perspective. We’re more interested in the first part of partner – the first category of partnerships and the direct sales pieces that we’re doing, but that will continue to evolve and we’re always reassessing where is the market going? How is it doing deals, who can we partner with. I think that there is more and more emphasis in the marketplace right now in terms of – and I think there was a Wall Street Journal article that timely and appropriate is there is a certain amount of point solution fatigue in certain parts of the market. But the other thing that’s interesting thing that’s going on is because digital health has been in the market now for a while, but it’s primarily been in the larger employer part of the market is there is now an interest that says, okay, how do we get this into smaller customers that just aren’t economically feasible for somebody like Dario to pursue 100, 200, 500-employee type of contract, and there are some interesting partnerships that are happening in that area as people are looking to how they could leverage their existing base of customers at that level and pursue that. So I think we will see some activity there as well.
David Grossman: Alright. Great, thank you. That’s it for me.
Erez Raphael: Thanks, David.
Operator: And our next question is from Steven Halper with Cantor Fitzgerald. Please proceed with your question.
Joe Downing: This is Joe Downing on for Steve. And just a quick question for me. So given the experience of the management team at Ontrak, do you guys expect integration of the wayForward business to be – go more smoothly than past acquisitions and could this potentially lead to future behavioral partnerships with some other companies?
Rick Anderson: So it absolutely could lead to other partnerships. As I said, I mean, I think wayForward is well positioned to be a partner in the ecosystem, which fits with our philosophy versus compete with a lot of the offerings that are out there directly. Now they can definitely – they have partners, we have partners that we can bring to the table to provide those offerings, and we anticipate we will have more partnerships to do that in the future. We do have behavioral health expertise in the organization, but I think we’re also that is part of the reason for doing the wayForward acquisition is that we’re bringing their expertise and their platform to the table. But we certainly understand how behavioral health fits in the overall offering that we’re doing and how those pieces are integrated. And we also have several advisers that are assisting us with that as well that are coming from other places that have that behavioral health experience. And our clinical coaching leads also coming from a variety of different companies that are out there, including CIGNA, etcetera, that are very familiar with how the behavioral health pieces work in relation to overall chronic conditions. So yes, we – I mean on an overall basis, yes, we believe we’re well positioned to integrate wayForward into the overall offering and operations of the company given the breadth of experience that exists within Dario today. And we’re really pleased to bring the offering and the expertise that wayForward brings to the table as well. We also think that, by the way, wayForward will enhance our behavioral science approaches as well. So that’s an additional benefit that they are bringing to Dario.
Joe Downing: Great. Thanks, guys.
Operator: And our next question is from Nathan Weinstein with Aegis Capital. Please proceed with your question.
Nathan Weinstein: Good morning, Erez, Rick and Zvi. Congrats on the wayForward acquisition. And thanks for taking my question. So just one quick one. There is been a lot of discussion about how the pandemic has had a deleterious effect on mental health. And so luckily, we’re seeing an influx of innovation in the space. So I’m just wondering, when we think about the next few years for this acquisition and for DarioHealth, how you see the opportunity evolving in the market, especially as the country goes through reopening?
Erez Raphael: So, I think, that the – go ahead, Rick.
Rick Anderson: No, no, go ahead, Erez.
Erez Raphael: Okay. So we are part of this industry for the last 8, 9 years. I think Rick is almost 14 years. From our perspective, healthcare is managed in an inefficient way. And the idea of starting all these businesses is to digitalize the space. And we think that the consumer is the way to digitalize it. We have seen the pandemic accelerating our vision, which is good, and we are happy about it. And we truly think that eventually, all the changes are here to stay and we’re going to see the continuous of the transformation. So from our perspective, the strategy is to provide a consumer-centric to get the users under one journey. So I think as one of the statements that I had in this earnings call is that we are not a holding company. We are a technology company. We are going to eventually integrate the solutions that users will have one journey in a thoughtful way. It’s not that we’re going to have one app necessarily. We’re going to have a very hyper-personalized experience. And as I said, we think that it’s the next generation of the digitalization of the space. We have seen in the last 15, 20 years, a lot of telemedicine solution. We have seen that companies are trying to scale up treatment by getting software solution to healthcare professionals. We are going one step forward with our digital therapeutics platform. We are scaling up the capabilities through the users, and we are supporting them with healthcare professionals and not the other way around. And I think that, that’s the future if we want to create a scalability and if we want to create high-margin business, that we will be able to scale up treatment. And that’s what we are focusing on. And today, with this acquisition, you have seen the seed for all our plans in the next 2 and 3 years. So we really think strategic and we really think few years in advance.
Nathan Weinstein: Thank you very much. Appreciate the insight. Thanks, Erez.
Operator: And we have reached the end of the question-and-answer session. And I’ll now turn the call back over to management for any closing remarks.
Erez Raphael: So thanks, everyone, for joining in our call this morning. I just want to reiterate that we had a new presentation loaded to the website with additional information that can be complementary to the press releases that we put this morning and also to this earning call. And thanks for your continued support, and have a good day. Bye-bye.
Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.
