DarioHealth Corp. (DRIO) on Q2 2021 Results - Earnings Call Transcript
Operator: Greetings and welcome to the DarioHealth Corporation’s Second Quarter 2021 Results Conference Call. All this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chuck Padala. Thank you, Chuck. You may begin.
Chuck Padala: Thank you, operator, and good morning everybody. Thank you for joining us today for discussion of DarioHealth’s second quarter 2021 financial results. Leading the call today will be Erez Raphael, our CEO of DarioHealth. He will be joined by Zvi Ben-David, the CFO and Rick Anderson, President and General Manager of North America at DarioHealth. 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 August 16, 2021. This morning, we issued a press release announcing our financial results for the second quarter 2021, 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 and the competitive nature of DarioHealth’s industry. Such forward-looking statements and their implications involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. 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 2021 Annual Report and Form 10-K as well as the second quarter 2021 10-Q filed this morning. Additional information concerning factors that could cause results to differ materially from our forward-looking statements as described in greater detail in the company’s press release issued today and in the company’s filings with the SEC. In addition, certain non-GAAP financial measures may be discussed during this call. These non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company’s current performance. Management believes the presentation of these non-GAAP financial measures is useful for investors’ understanding and assessment of the company’s ongoing core operation and prospects for the future. A reconciliation of these non-GAAP measures of the most comparable GAAP measures is included in today’s press release regarding our quarterly and year-end results. And with that, I would like to introduce Erez Raphael, Chief Executive Officer of DarioHealth. Erez?
Erez Raphael: Thank you, Chuck, and thanks everyone for joining our call this morning. So we're reporting this morning material advances in each of our three pillars that defines our strategy. On the multi condition front, we believe that we have all the right components in place. And furthermore, we also have very good validation from customers on the acceptance of the idea on both -- of both the conditions under one platform. On the transition to B2B2C, we see the fruits -- we see the bearing fruits and in terms of the transformation into a SaaS a high gross margins, we are showing a significant improvement also in this quarter. So Rick and myself will discuss today how the strategy that we have is well timed into today's healthcare market and digital health markets specifically. And given the client feedback that we see we are super confident that the strategic initiatives that we will choosing is putting Dario in a very good position in a place where we can scale and we can create a compounding growth and improvement of our financial results moving forward. So looking into our actual results for this quarter, for Quarter 2, we generated approximately $5.3 million, which is a growth of 46% over the previous quarter sequentially. And it's almost 200% -- 194% year-over-year increase comparing to Quarter 2 of 2020. On the gross margins, we also drove a significant pro forma gross margin expansion and in Q2 reported 49.4%. a sequential growth on 44.7%. If we look back into the second quarter of 2020, the number was only 34.9%. So also here, we see a very nice improvement. And this is due to the fact that we continue the transformation into the B2B2C and also launching more membership programs. And overall, as we stated in previous calls, the objective of the business is to go north to 70%. So we expect that in the next few quarters, we're going to see this plan continues. On the multi-condition strategy, we had the vision that when building a digital therapeutics company that deal with chronic condition, we need to deal with the comorbidities. And we were always talking about personalization and we expanded it into what we are calling hyper-personalization hence, when we are dealing with a patient that has one disease and have comorbidity, we need to create one integrated experience that is driven by one AI engine and AI journey. And this is what we did and we integrated things together. And we are very excited to report today that it's not just that we are growing our pipeline from $700 million to $900 million. We also report that 66%, two-third of the opportunities clients that we have in our pipeline are looking into buying for the full suite. So given the overall transformation in the healthcare market and specifically the digital therapeutics market, we're seeing that by choosing this strategy and to manage multi-condition under one platform, one experience one hyper-personalization experience. This is something that increase our value proposition and also increase the demand for the platform. And we see that with very good feedback that we're getting from our potential clients. In terms of the metabolic and the diabetes, that is something that on a level of ARPU average revenue per user, we think that this is still going to be the backbone of our pipeline. And this is what we see in the -- when we are analyzing our pipeline. But overall, the behavioral health, the physical therapy, the MSK are components that added to our overall portfolio and we believe that's something that is going to improve our win rates moving forward in terms of winning accounts. On the B2B2C transformation, we gained the considerable traction on the self insured employer market, and also in the healthcare provider segment as was demonstrated by market acceptance, and the long way that health plans contract was delayed mainly for logistics reasons. Nonetheless, we remain confident that the agreement is imminent. And in parallel, we also see this pipeline of health plan keep going. In some opportunities, we also have demand for the full platform and not for single condition. So also here, we are still very positive that we are heading into the right direction. On the implementation side, as we reported in previous quarters, we still see a very strong capabilities to enroll users to the platform, we are still north to 40% enrollment rate and on the retention, we are -- we believe that our users will complete the full year with 80% retention rate, which is the numbers that we have seen for many years on the direct-to-consumer where we have a lot of experience. So if we are considering the rapid success with employers and providers, the increase in terms of the percentage of those clients that would like to address a multi-condition under one platform plus the strongimplementation capabilities with high enrollment rate we are having we are very positive that we keep creating a very positive momentum into the second half of 2021 and further than that also into 2022. So overall, we believe that looking into the financial profile, more conditions should generate higher ARPU average revenue per user, because on average users have more than one condition. We are also touching more users because they legible members under one account that can use one or more of our products is much wider when we started with it was 8%, now we are looking to numbers that are as high as 40% of members under one account that eligible to our product. And in parallel the win rate among all the opportunities, we believe that this is something that will grow because of the menu of multiple conditions that we have. So with all these parameters improving under same investment into sales and marketing, we believe that this is something that will improve drastically, the financial profile of the company in the next few quarters. With that I would like to hand over the call to Rick to elaborate more into the commercial strategy.
Rick Anderson: Thanks, Erez. One of the keys to our success in the strategy of moving to B2B is our ability to generate enrollment and revenue from those accounts. As Erez just said, we've been very pleased with the operational results so far. Enrollment where we are running the enrollment program continues to be greater than 40% and as previously stated we used 35% in our pipeline calculations and our internal models. Current trends suggest that we remain on track to achieve 80% annual retention because consistent with historical trends and we have grown users on the platform to approximately 197,000 and we are seeing growth in average revenue per user. These operational metrics speak to our ability to convert the contracts to revenue and continue to grow gross margins. Last quarter we also discussed our partnership with the telehealth firm MediOrbis to provide virtual care offerings directly to patients. MediOrbis is providing the telehealth services, we are providing the remote patient monitoring and coaching. Now with a quarter of experience we have proven we can obtain patients deliver the services bill and get paid. We've generated learnings and improve the efficiency of our overall operations which has significantly decreased the cost to onboard patients. And we are even more enthused by this partnership offering now than we were a quarter ago. And we anticipate continuing to scale it in the coming quarters. On the business development side, the pipeline is now above $900 million. We continue to make progress in all three channels, starting with health plans. As most of you know, we anticipated health plan contract in the second quarter. We acknowledge this deal taken longer than planned but we feel great about the progress and the prospects despite the delay in signing by way of an update. The terms of the dealer agreed. We did have some unforeseen logistical delays unrelated to any deal points, but we believe the signing is now imminent. Customer has stated that they desire to launch this year. This is just one of several health plan opportunities that we believe could close this year. And while we saw delay in this first health plan contract, we are pleased that we are in a position to close it and others in under 18 months in a market segment that typically see sales cycles that are 18 to 24 months and sometimes longer. On the employer side, employers represented the largest growth in our pipeline since last quarter as we work our way through the sales cycle through first quarter 2022 launches. We are pleased with the traction we have gotten and anticipate we will be finalizing contracts throughout the rest of this year. We have progressed to final stage and have been chosen as the winning vendor in several competitive RFP processes against our best knowing competitors. We are demonstrating that we can be competitive in the mid-market and the very largest in employers. On the remote patient monitoring side with providers and health systems, we have recently announced two large provider contracts. Several additional contracts are pending final agreement and we expect will contribute to revenue this year. We are seeing an increasing interest from larger health systems and more deals are moving through the pipeline faster meaning closer to closing. With the addition of MSK and behavioral health to our product, we believe we now have one of the most complete integrated offerings in the industry. This has given us the ability to meet the growing demand in the market for single vendor multi-condition solution. And as Erez mentioned, while the metabolic suite remains the backbone of our offering, two-thirds of our pipeline is now for the full product suite. We have solutions covering most of the conditions in high demand from employers and health plans and it has expanded our opportunities to penetrate customers and compete for business that would otherwise have been possible. As we look back the half of this year into 2022, we are even more confident that we will see strong growth in the B2B segment. We're starting to see the efforts we put into building product and brand awareness translate to contracts, our operational results with our first few customers are building reference customers on which we are already seeing a benefit. First, customers are always the hardest and happy reference customers increased momentum of the overall business in contracting. We see strong growth of members on the platform from business already contracted in deals anticipated this year in all segments. We continued to grow our commercial teams with a significant number of new team members coming from competitors and large health plans which speaks to the quality of our offering and how they see our prospects in this market. We continue to see wins in competitive RFP processes against the most established competitors in the space. Most importantly, with the expansion of all of our channels, employers, providers, health plans, and RPM with MediOrbis, we have multiple growth engines. We are not dependent on any individual channel to achieve our growth objectives. During the rest of 2021, we expect at least a few health plans. several additional employers some watching this year and many more in 2022 several providers in health systems, a handful of partnerships and potentially in interesting strategic deal and most of the deals to include more than one condition. With that I would like to hand it over to Zvi.
Zvi Ben-David: Thank you, Rick. Revenues for the second quarter ended June 30, 2021 were $5.26 million, 46% sequential increase in first quarter ended March 31, 2021 and 194% increase or $1.8 million in the second quarter ended June 30, 2020. Gross profit in the second quarter of 2021 was $1.5 million an increase of $872,000 or 137% compared to a gross profit of only $636,000 in the second quarter of 2020. Gross profit margin was 28.7% in the second quarter of 2021 as compared to 35.6% in the second quarter of 2020. Pro forma gross profit excluding $1.1 million of amortization of expenses related to the acquisition of Upright Technologies and wayForward was $2.6 million. Pro forma gross profit margins excluding amortization of expenses relating of those acquisitions was 49.4% in the second quarter of 2021, the sequential increase from 44.7% in the first quarter of 2021. Operating loss for the second quarter of 2021 was $18 million, an increase of $13.9 million or 337% compared to $4.1 million, operating loss in the second quarter of 2020. This increase was mainly due to an increase in our operating expenses. Net loss was $17.8 million in the second quarter of 2021, an increase of $17.8 million, or 343%, compared to the $4 million net loss in the second quarter of 2020. Adjusted non-GAAP net loss excluding stock-based compensation, acquisition amortizations and costs is detailed in the reconciliation attached to the press release, we issued today was only $10.6 million in the second quarter of 2021, an increase of $7.5 million or 239% compared to the $3.1 million in the second quarter of 2020. Cash and cash equivalents totaled $63.9 million on June 30, 2021. Back to you, Erez.
Erez Raphael: Thanks, Zvi. So as a way of summary, I would like to emphasize that in this quarter, we will keep validating the strategy of the company in terms of wins on the B2B2C transformation, we have seen wins in employers and providers and on the health plan as Rick stated, We believe it's imminent -- the agreement is imminent. And we expect it very shortly. In terms of the multi-condition. The idea is something that is getting a very positive validation from the market as represented by 66% of the pipeline. That is for clients that want to embark on the full platform. And on the implementation side of the accounts that we already signed, we still getting a very, very strong numbers in terms of enrollments and adoption and retention. So we feel very positive that we know how to convert the accounts into dollars. So overall, given this positive validation of the strategy, we believe that we are building momentum into the second quarter of this year and also into next year. So on that end, we do feel really comfortable that we're going to grow and even accelerate the growth. In terms of the cash position to 3 point we ended the quarter with almost $64 million in cash, if we're looking on the adjusted loss after stock-based compensation the loss was $10.6 million. So overall, we believe that we have very good position in terms of cash. We have the run rate moving forward and we're going to still -- we're going to stay very cash protective in order to operate on our current plans. With that, I'd like to pause and to hand over the call and start the Q&A.
Operator: Thank you. We'll now be conducting a question and answer session. One moment, please while we pull for questions. Thank you. Our first question comes from Alex Nowak with Craig-Hallum Capital Group. Please proceed with your question.
Alex Nowak: Very good morning, everyone. Rick, I want to start with a question with you regarding some remarks you made. You mentioned upcoming as a few health plans. But you also said there's an interesting strategic deal coming. So a two part question. Can you expand on the health insurance deal that is in the pipeline that was expected to close in Q2 just why that was delayed just a bit more color there? And then what other health plans do you have behind that? And then second, can you elaborate on this strategic deal they have in the works?
Rick Anderson: Okay. So, in terms of the health plan contract, essentially there was a few different logistical things that happened one and probably the most significant was that the health plan implemented a new IT policy because they had brought in a new head of their -- basically Chief Information Officer. And we got caught in the process. We were actually the first vendor that they put through that process, they were not anticipating that. So when they put in their timelines to make things happen, they had not built that into the process. The good news was we were first in line, the bad news was we were first in line. And we kind of got caught in that process. So that delayed us several weeks on the back of that, and as I'm sure you're probably well aware of going into August, we got caught in some of the vacations and some personal leaves that ended up happening. So we believe that we are through those processes. The terms of the agreement have not changed in months. And we do believe at this point that signing of that contract is eminent. On the strategic deal, there's not really a lot I can add to it other than to say that we've been talking to a number of different parties that are very interested in what Dario has been able to do, what we've been able to achieve in the market and our overall technology that's underlying what we're doing. So that's why we think that there might be certainly not promising anything here. But there might be an interesting strategic deal still this year based on the several different things that we're -- that we have going on.
Alex Nowak: All right, understood. Got it. And regarding the pipeline, I think last quarter, you said that the number of deals expected to sign this year was 20 to 30 in 2021. We've obviously seen a number of deals come in so far. But what do you think that number is going to stand right now is it still 20 to 30 in 2021? And then can you give us the contracted value of the deals that are signed, just so we can start to put some numbers behind each sort of when we see to the press releases?
Rick Anderson: I think that we're still probably in about the same place, give or take in terms of number of deals by the end of the year that we'll see we're seeing a little bit of a delay in some of the processes happening. So we've got processes that are running a little bit later. But based on the activity that we've seen so far in the deals that are currently in contract, and I think that's probably about right. I think as we go forward in the quarter isn't a letter as comment here as well. But, I think as we go forward in the quarters, we'll be providing some additional detail around how much value we see coming out of those contracts as we start to see that finalize for the overall book of business.
Erez Raphael: Go ahead. Go ahead. Sorry.
Alex Nowak: I was just going to say Erez, I know, you don't provide the guidance here. But you did mention the growth is rough the script, you mentioned the growth accelerating the Street has you modeled up with a pretty big ramp here in the second half of the year? Just given all these deals that you mentioned, the more that are coming? Are you comfortable with the ramp that the Street has you modeled? And what sort of growth do you think is achievable in 2022?
Erez Raphael: Yes, so the moment if we are looking into the consensus of the Street for the full year, yes, we comfortable with what we see from the Street. It's very hard to provide an average revenue from contract because it might be a small employer with 200,000 and it might be a health plan with 7 million. And we have also health plans that might have 15 million or 25 million. So this is why we feel it's early to talk to in terms of each and every contract but we believe that it is going to take us another couple of quarters before we're going to start to provide more value for every contract, and then it will be much easier to model. But if we are looking into accounts that we signed plus to which point signing overall 20 to 30 before the end of the year, plus taking into account that we're going to have at least one or two implementations of health plans that will start this year. I do feel very comfortable with the consensus that we see by the Street for this year and also for next year.
Alex Nowak: That's great. Appreciate the update. Thank you.
Erez Raphael: Thanks, Alex.
Operator: Thank you. Our next question comes from Charles Rhyee with Cowen. Please proceed with your question.
Charles Rhyee: Yes, thanks for taking the question guys. Just wanted to ask, Rick, this first health plan, obviously seems like it's imminent. Anything about the next couple that you are in discussions with that you could give a little bit more details on is that -- are those ones where you're still waiting to be selected or you've been selected in our terms already said and is it also in sort of this last stage any kind of additional details around for the next couple around for the next couple that we could assume? And then maybe for the first one that you expect, I mean any kind of sizing, you can kind of give a sense for in terms of lives covered or at least numbers within the plan, so we can kind of think about penetration rates, et cetera?
Rick Anderson: So in terms of the others that are in late stage discussions, they are both in contracting, we have a couple others that were in discussions with finalizing terms. So I would say we've got a couple that are, terms agree to one probably a little bit further ahead than the other just in terms of where we are in trading back and forth. But that's about where I would say that those are. So that's, why we feel confident that we will see more health plans in this year. The -- in terms of the one that's coming -- we'll have more information when we announce it. But it is a large regional plan. It is in one of their lines of business. And, happy to give a little bit more detail after we announced that.
Charles Rhyee: Okay, appreciate that. And then earlier, you talked about a number of direct employer wins and being a competitive field here, what were some of the key metrics that clients were pointing out in selecting Dario over other solutions?
Rick Anderson: As you can imagine, that's something that we have a high level of interest in and are continuing to get feedback on. But the primary thing that we're seeing that folks are responding to are one is the breadth of the platform that we have. Two is the direct-to-consumer experience that we have, and people feel confident that we'll be able to get the engagement of the members and the members will be happy with what we're doing. And I think just as a general buckets, the third, and -- I can go into more detail. But I think that the third is really more the way that we've structured our arrangements. As we talked about several times in the past billing for engaged members, I think that there is a growing understanding in the industry that there's a lot of people that are not necessarily engaged, that are getting billed for by some of our competitors. And, people are not overly thrilled with that approach. I guess that's the biggest piece of it, but also our flexible approach and our ability to integrate with other solutions and work within whatever the context is that our customers want. I mean, we are very clear about the fact that we do not define the digital strategies for our customers. Whereas others really are much more rigid around the way that they approach that. And I think that, we're also seeing the market move to understanding that there's other options in the market. And so it gives them a better ability to assess what really works within, the context of their business at this point.
Charles Rhyee: It’s helpful. And the last one for me, gross margins, obviously a strong margin performance of the quarter. What we should we think about for maybe the remainder of the year? Is this sort of the right level or should we expect continued improvements as we go through the year maybe any kind of comments or on OpEx, any kind of update -- investments that we're going to be putting in I know, you're trying to develop ahead of MSK getting integrated into the platform, any color on that expenses and margins would be great? Thanks.
Erez Raphael: Yes, absolutely. So the MSK will be integrated and launched by the end of the third quarter and then also the behavioral health will be integrated in the fourth quarter. So we are spending some money on R&D in order to make all these integrations. In terms of the gross margins, the more conditions we add, the more -- the higher the percentage of the revenue that is coming from the B2B and the membership program that we are launching, the higher the gross margins. So I think that we should expect additional improvement this year. I don't know if it's going to happen significantly in Q3 or Q4, but we do expect to have better margins. This is something that should give indication of the progress of the initiatives, the strategic initiatives that we have. So this year, we're going to see improvement in the gross margins. Next year, we're going to see a continuous improvement. And we expect as I stated that the business should be in the ranges of above 70% gross margins. That -- I hope that I provided an accurate enough answer.
Charles Rhyee: That's great. Thanks.
Erez Raphael: Thank you, Chuck.
Operator: Thank you. Our next question comes from Ben Haynor with Alliance Global Partners. Please proceed with your question.
Ben Haynor: Good morning, guys. Thanks for taking the questions. I'll just start-off with a couple of housekeeping ones. Can you give us the breakdown between the consumer products revenue and the membership services revenue? I -- maybe I missed it, but I didn't see the table in the 10-Q this quarter?
Erez Raphael: Yes, so overall, if we are looking on the total users on the platform is 197,000 users on the platform, the revenues at the moment is I would break it down like 15%, 17%, that is coming from the B2B, what is under considering B2B versus B2C. We still don't say the full potential of all the accounts that we sign that are getting into implementation. So we expect that moving forward in Q3 and in Q4, the portion of the B2B is going to go way higher.
Ben Haynor: Okay. And then on the B2C are effectively all those users now just product users or are they getting subscriptions as well or not?
Erez Raphael: Yes, so on the B2C around the 50% of the users are under subscriptions. And on the B2B everyone that is joining as part of the B2B is under subscription, either PMPM or that engagement for members on the --
Ben Haynor: Is that going to recognizes under services revenue or is that to the memberships scheme recognize that a product revenue as well?
Zvi Ben-David: We are there analyzing it and breaking down to the various components, what we can recognize as product we recognize upon shipment or delivery? And whatever is the membership is being recognized over the membership period.
Ben Haynor: Okay. Okay, so I just looked at it from the standpoint of -- at least within the filing it says, 600 or 1,000 in service revenue. And if I look back a couple of years, Q3 2019, that was 624,000 a couple of years ago the third -- the services revenue was a third of revenue. And now we're only looking at like 11% of revenue. So I'm just trying to understand how these folks are paying for the product and what's recurring and what's product because it looks like it's gone more and more towards product as time is going on?
Erez Raphael: Yes, so over the years, we need to remember that also the B2C revenues were going as well. And now when we are implementing the B2B, we're going to see more revenues that is getting from few membership and under the membership, it's going to be less product and more kind of service. So that's something that we're going to see moving forward. Because there is also some kind of movement inside the B2C from selling through Facebook to selling through Amazon you see, in some cases that the product is going. It's internal shift inside the B2C.
Ben Haynor: Okay, so before too long here, we should start to see the services or the membership revenue, start to grow rather than being flat or I guess even down like it has that?
Erez Raphael: Yes, you think yes, that's something that should happen. And if you know, from connecting it to Alex’s questions about building the momentum and accelerating the momentum in the next couple of quarters, we should see this product side starting to grow higher much moving intensively. Yes.
Ben Haynor: Okay. Thanks Erez. And then just one more kind of housekeeping. You mentioned 197,000 users. Do you remind us what that's up year-over-year sequentially? I want to say it was like 185,000 at the end of Q1, but I -- maybe you could refresh my memory there?
Erez Raphael: Yes, I need to refresh my own memory, but the thing that the same time last year, we were somewhere in the ranges of 60,000. So this is where we were, now we are getting closer to 200,000. I think that moving forward, if we are looking into the growth of the users versus the growth of the revenues, I think that in terms of percentage, the revenue should grow in higher percentage than the growth of the users, because the ARPU the average revenue per user that we are generating on the B2B side is higher than what we are generating on the B2C side. So alongside – so, I just want to make sure that the audience understand that when we are moving forward, we're going to have a slower growth in the membership and higher growth in the revenue because of the ARPU, the average revenue per user. And this is something that will -- that should provide the even better indication to investors, because if we're going to have, for example, a health plan for employers that are going to sign up on the full platform, the ARPU or the membership program can go as high as $90 per member per month, which is something that should spike our revenues even if the number of users are not going in the -- growing in the same pace.
Ben Haynor: Okay, that’s helpful. And then lastly for me, I noticed the Upright go as being launched, can you talk a little bit more about that product and I'll jump back in queue? Thanks.
Erez Raphael: Yes, absolutely. So when it comes to MSK, we have two main initiatives, one initiative that we kept under the brand of Upright, we call it Upright go to which is another more advanced version of the posture product. And this is have -- this is something that have -- it's a smaller product with a better capabilities in terms of charging and so on which -- so from our perspective is the next generation of the posture. In parallel, we are having another initiative, which is a bigger one, which is what we are calling it the value move, which is the MSK full offering that we are launching into the employers and health plan market. And that's another brand powered by Upright that will be launched by the end of this quarter. So I've seen some questions from investors that approached me and asked about the difference between these two, it's two different products. The first one is no device and . And the second one is full physical therapy treatments for multiple MSK conditions, that we're going to launch for employers by the end of this quarter.
Ben Haynor: Great. Thank you very much.
Operator: Thank you. Our next question comes from David Grossman with Stifel. Please proceed with your question.
David Grossman: Hi, thank you. Erez, I don't know if I missed this. But can you perhaps give us a breakout by segment. I know some of the numbers may not be that large at this point. But just the breakout between behavioral MSK and metabolic?
Erez Raphael: Yes, so let's start from the behavioral. On the behavior we ended -- we closed the deal very late into the quarter. So I would consider behavioral out of the revenues for this quarter was something that is close to zero. So whatever you see here, you see coming from, from MSK and from the metabolic. And at the moment, I would say that the MSK is somewhere in the ranges of 35% to 40% of the revenue and the rest is for the metabolic.
David Grossman: Got it. And then obviously, there was a question earlier about just, some metrics and can give us some tools to think about how we model the business going forward? Is there any -- can give us any sense of what is going into the third quarter based on all the new contracts, because you did have several announcements in a quarter in terms of what the run rate of the business looks like or look like exiting the quarter?
Erez Raphael: Yes, so it's very hard because we are trying not to guide because we feel that the business need more contracts and more implementation in order to start and build more accurate models. At the same time, we do see a growth into the third quarter. And this growth is mainly from the employers and providers that we signed earlier in Q2 and in Q3. So this is something that will be reflected in Q3. In Q4, we expect to have additional business including health plans. And this is why we think that in Q4, we're going to see a more significant ramp up. And then what we're going to see between Q2 to Q3. Overall to Alex's question, the one thing that I can refer to is the consensus that we see from 8 or 9 analysts that are covering us. And for the full year, the consensus of the analyst is $22.5 million, which is a number that we feel comfortable with. And we do see that in most of the models, in all the models, we see a spike in Q4 comparing to Q3, which is also something that makes sense to us. If I can provide more data points, we had employers that we signed that have a contract size that can be as low as $100,000. And we had employers that have a contract size that can be as high as $600,000 and $700,000. This is the ranges of these accounts. Rick mentioned also, the partnership with MediOrbis, which is a partnership that helps us bill or MediOrbis are billing for CPT code of RPM, remote patient monitoring, this is something that might be worth millions of dollars for the company. So this is an example of something that can be as high as a health plan or multiple health plans. And on health plans, we can see contracts, that will be somewhere between $3 million to $5 million. And we might have also contract for the full platform that might be as high as $15 million to $25 million. And a lot of the things that we are talking about are getting signed as we are speaking. So you can appreciate the fact that it's very hard to provide accurate guidance on the short-term on each and every quarter. But at the same time, we have enough -- let's say we have enough revenue engines in order to feel comfortable with the numbers that we see by the analyst across the Street.
David Grossman: Sure. Yes, that's very helpful. But let me just maybe ask, just another dimension to that is you talked a lot about the demand for kind of multi-condition offerings and just how that's gaining momentum in the marketplace. Can you give us any sense of what -- how that ARPU looks across these different types of businesses that you're signing?
Erez Raphael: Yes. So when we were -- I mean this is, this is something that appears also on our investors presentation, I mean the average revenue per user that we are getting on a typical employer or health plan is for single condition, $60 per member per month, okay. That -- this is something that's the number that exists. And we had at the beginning, when we added more conditions. We, we added another $10 for every comorbidity. And now when we have the full, integrated platform, we feel that we can be more comparative. And we are creating bundles with our clients. And at this point, I don't want to disclose the exact bundles because of competition elements. But in general, we are creating bundles that we are selling for the full platform. And this is something that is obviously above $60 or $70 per bundle per month, but under this bundle, a plan over an employer that is going to embark on the full suite is going to get for one price on the conditions. And that's something that resonates very well. So to your point, the whole idea and if you think about the digital health market and you think about employers and health plans, specifically employers that are getting a lot of point solutions and every point solution have its own pricing. And they need to deal with multiple vendors, each of them, they need to hand over eligibility file and then run the billing process. These clients appreciate the fact that they have one vendor under which they are providing one eligibility file. And we are having one process of enrollment on the multiple conditions, we know how to identify users that have other conditions and in all them on additional condition. And when they are looking on the pricing. And when they are -- , the clients are looking into the pricing of the full suite, when they are walking with Dario, they're going to get a price for the full bundle that is cheaper than what they're going to pay for every condition that is provided by single vendor. And I think that the combination of the easiness of the operation and the pricing and the return on investment that is -- that we know how to show from 10s of 1,000s of users that are coming mainly on the metabolic side, all these elements together makes this whole idea of best of suite and bundle makes a lot of sense for our clients. And this is something that helps us convert a significant portion of our pipeline into selling the full suite. Is it something that provides you the answer, David?
David Grossman: Yes. Thank you very much for that. And just one last question. You announced this relationship with workplace options during the quarter, could you perhaps give us a little more detail on exactly the mechanics of that relationship and kind of how you hope to see that relationship evolve?
Erez Raphael: So workplace options is a partnership that we're utilizing with the behavioral health offering, as you will probably recall way forwards core offering is around an AI based screening mechanism to assign folks into one of sort of three generalized areas. I mean, obviously, it works a little bit differently at the user level, but that would be CBT, that's provided on a self help basis would be one, second would be coaching combined with that CBPT modules. And the third would be reference -- referral excuse me to a network provider. In most cases, we are working with the network providers that the customer has. So we -- it actually works well in a lot of situations, especially health plans, because you're not disrupting the network that's already there, which is key from a quality into a sort of approach. And oftentimes, there's existing relationships. So what that means is a wayForward can integrate with any other telehealth or physical provider network that's out there. So if an employer for example, uses teledoc or another telehealth provider, we can integrate directly with those. However, in some cases, folks are looking for us to bring a provider network to the table. So one of the primary things for the WPO offering is to bring that provider network to the table. The other piece of that is the ability to supply EAP like services, so that we can offer a completely integrated solution that essentially goes from EAP all the way through a provider network if required or we can scale that back based on what provider needs are. The other thing that WPO gives us which has been important in the last quarter, I would say is that it gives us the ability to work on a worldwide basis. So it gives us the ability to compete for RFPs for employers that are looking for behavioral health services that are somewhat consistent delivered, not only in the U.S., but in other countries. As you know, Dario has the capability wayForward has capability to work internationally and in globally for that matter in a number of different languages in a number of different jurisdictions. And WPO offers our ability to provide provider services actually in those jurisdictions as well. So those are the primary reasons for that transaction.
David Grossman: Great, thanks very much.
Erez Raphael: Yes.
Operator: Thank you. Our next question comes from with Zacks SCR. Please proceed with your question.
Unidentified Analyst: Hey, Erez, Zvi and Rick, thanks for taking my question sitting in for John Vandermosten in this morning. To kind of piggyback on earlier question on expense. What's the current state of your sales force? And do you anticipate any changes to sales expense through 2022?
Erez Raphael: Yes, so. So thanks for the question. The size of the team, I mean, for those that are following the company know that once we announced from the transformation into the B2B we -- I mean, we will going intensively in terms of the size of the team. So we started 2020 as low as three or four employees when Rick joined. Today, we have purely on sales, including the acquisitions, we have 16 sales representatives. And overall, the number of employees that we are considering them commercial including marketing, sales enablement, sales support and so on. We are having somewhere around 40 to 45 employees. We do expect that into next year, we're going to see a shift and into spending more into the commercial that is more B2B oriented than B2C oriented. And we expect that the team is going to grow. Overall, as I stated the average revenue that we are getting per user for the bundle that is being bought by employers or health plans is much higher than what we are generating on the B2C. So we're going to see a shift of budget and we're going to see a continuous growth of the team into 2022.
Unidentified Analyst: Okay, thank you. And shifting gears earlier, you made a comment on Amazon and Facebook, your direct-to-customer channel has served as like a testbed for you since the beginning. Any updates on the direct-to-consumer channel? And do you see continued investment in this channel? And will it continue to serve as kind of feedback from the user perspective?
Erez Raphael: Yes, so I think that, if you think about the philosophy of the company -- and by the way, that's also the philosophy of the industry, the industry of healthcare is talking about consumerization of health, getting solutions that are much more user centric. 99% of the companies out there that are talking about consumerization of health, are still building solutions that are very healthcare provider centric and not patient centric. So it's, it's easy to say and much more complicated to implement. And one of the things that we are very proud of and this is also where clients are very satisfied with and this is one of the reasons why they are signing with us is the fact that we are extremely consumer centric. So for us getting our solutions into the hands of the users and on the consumer market, dealing with the feedback, dealing with the complaints when there are complaints and improving this is out of the philosophy of the company. I think that into the future, we're going to see this channel keep operating. But based on the optimization between how good we want the product to be versus how we can get our financial profile to be more and more were healthy and good. This is where we will have to make the right balance. So for your first question, we're going to see budget moving from B2C into B2B. To your second question, B2C is here to stay, at least for the next few years, where we are still working very hard on establishing the D&A of this company, that is, by nature, consumer centric. So Rick always is telling me that few years ago, plans didn't used to look into how users are being engaged and what is the retention level and the engagement level. And today they are looking into this kind of parameters, Dario without being a consumer centric company and B2C first. We wouldn't be today in a place where we could sell into the health plan. This is why we're going to keep operate with this channel. So we're going to keep the D&A of the company as consumer centric.
Unidentified Analyst: Wonderful. Thank you. And as the final question and that's kind of a follow on, not for your consumer, customers, but for your business customers, who are obviously satisfied with the solution and referring new business. Are there some metrics that they're using internally, that kind of informed that were helped to inform them the efficacy and the success of implementing your solution that's driving the satisfaction?
Erez Raphael: So it -- that's an excellent question. I think that there's really a few different phases as we continue to expand and this would be true of any customer as we go forward as well, some of the very early things that folks look at are how easier we would to work with? How easy is it to implement the solution? And several of our customers have a look at that at this point. And then they start to look at things like how much do people use it? How engaged are they? Are they getting the data that they anticipated being able to get? And I think that's really the stage that we're at this point versus true clinical outcomes, although they're starting to see some there's usually not enough, I would say, generally speaking, for folks to be looking at that at this point, but that what they're seeing is the pattern that we have outlined for them in terms of based on our past experience, about the way that things would proceed, that they're on those pathways and that the ability to work with us in the way that their patients and our, employees/members are liking the solution is a lot of what their current satisfaction is based on.
Unidentified Analyst: That's great to hear. That's it for me. Thank you so much. And congrats on the good quarter.
Erez Raphael: Thank you so much.
Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to management for any closing comments.
Erez Raphael: Thank you so much. Thanks, everyone, for joining our call. And looking -- have a good day and looking forward to seeing you on our next earnings day. Thanks. Bye-bye.
Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
