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DarioHealth Corp. (DRIO)·Q4 2022 Earnings Summary

Executive Summary

  • Q4 2022 revenue was $6.8M, up sequentially from $6.6M in Q3 and $6.2M in Q2, with B2B comprising 70% of Q4 revenue as the B2B pivot offsets the managed B2C wind‑down .
  • Pro‑forma gross margin reached 58.1% in Q4; management targets ~60% gross margin in 2023 and 70% in 2024, evidencing ongoing SaaS‑like mix shift and operating leverage .
  • Non‑GAAP operating loss fell to ~$6M in Q4 (down >60% YoY) as OpEx efficiencies and mix improved; cash and equivalents ended Q4 at $49.4M, providing runway for 2023 execution .
  • 2023 catalysts include an expected Aetna ramp (PMPM access model) driving a “significant step up” by Q3 2023, additional health plan launches, and incremental strategic partnerships (e.g., Dexcom integration) .

What Went Well and What Went Wrong

  • What Went Well

    • B2B pivot scaled: Q4 B2B rose to 70% of revenue (vs. 63.5% in Q3), validating multi‑condition platform demand and reducing CAC vs DTC .
    • Margin inflection: Q4 pro‑forma gross margin reached 58.1% (vs. 36.1% in Q2), with management guiding ~60% for 2023 and 70% in 2024; B2B ARR cohorts already near 70% GM .
    • Operating discipline: Non‑GAAP operating loss fell to ~$6M in Q4 (down >60% YoY), with cash OpEx baseline near $10M/quarter and further leverage expected as revenue scales .

  • What Went Wrong

    • Strategic revenue lumpiness: Milestone/deliverable timing (Sanofi/Aetna) created volatility in period mixes; mgmt reiterated that strategic streams are recurring annually but not linear quarterly .
    • B2C headwind: B2C revenue declined through 2022; mgmt is stabilizing at Q4 levels ($2M in Q4) to preserve data/testbed benefits without growth investment .
    • Concentration risk: Aetna represents a large portion of signed contract value; management is actively diversifying as the total book expands to mitigate single‑account exposure .

Financial Results

MetricQ2 2022Q3 2022Q4 2022
Revenue ($USD Millions)$6.2 $6.6 $6.8
Pro‑forma Gross Margin (%)36.1% n/a58.1%
B2B Share of Revenue (%)n/a63.5% 70%
Non‑GAAP Operating Loss ($M)n/an/a~$6

KPI and commercial metrics:

KPIQ2 2022Q3 2022Q4 2022
B2B Contracts (cumulative)69 85 ~100
Signed Contract Value (approx.)$55M ~$61M ~$65M
Average Enrollment Raten/an/a~30%+ (targeted and observed)
Average Engagementn/an/a~70%–80%
Cash & Equivalents (end of period)n/an/a$49.4M

Notes:

  • Company press release for full-year/Q4: “DarioHealth Reports Fourth Quarter and Record Revenue in Full-Year 2022 Financial and Operating Results,” Mar 9, 2023 .
  • Preliminary Q4 2022 update (Feb 6, 2023) reaffirmed ~Q4 revenue of ~$6.7M and FY ~$27.5M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Pro‑forma Gross Margin2023~60% target~60% target reaffirmed Maintained
Pro‑forma Gross Margin202470% target70% target reaffirmed Maintained
Profitability Revenue RangeLT Targetn/aProfitability potential at $60–$80M revenue Introduced / reiterated
Aetna Ramp (PMPM Access)2023n/a“Significant step up” expected in Q3 2023 Introduced
B2C Contribution2023n/aStabilize at current levels (no growth investment) Clarified
Cash OpEx Baseline2023n/a~$10M per quarter baseline with modest mix shift toward S&M Clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2022 and Q3 2022)Current Period (Q4 2022)Trend
B2B Pivot / MixQ2: B2B growth offsetting DTC decline; DTC slowdown to improve profile . Q3: B2B share 63.5%; ARR growth; national plan revenue initiated .Q4: B2B 70% of revenue; >100 contracts achieved; multi‑condition wins rising .Positive mix shift accelerating
Gross MarginsQ2: B2B GM >70%; company pro‑forma 36.1% . Q3: reiterated path to ~60% FY23, 70% FY24 .Q4: pro‑forma GM 58.1%; FY23 ~60%, FY24 70% reaffirmed .Margin inflection underway
Strategic Partnerships (Sanofi)Q2: $30M, co‑promotion & milestones; timing lumpy . Q3: strong pipeline, evidence studies advancing .Q4: strategic stream ~60–65% of B2B in Q4; expected to recur annually but not linearly .Recurring, but uneven intra‑year
Health Plan Channel (Aetna)Q2: contracting delay moved revenue into H2 . Q3: integration underway; expected acceleration in 2023 .Q4: Development revenues recognized; PMPM access to drive “significant” step‑up in Q3’23 .Building to H2’23 ramp
OpEx DisciplineQ2: OpEx reductions from DTC slowdown; cash burn declining . Q3: further efficiency; S&M to re‑grow for B2B .Q4: Cash OpEx baseline ~$10M; non‑GAAP OpEx to remain stable with mix toward S&M .Structural efficiency
Product/Tech (Dexcom, multi‑condition)Q3: multi‑condition differentiation; Sanofi evidence generation .Q4: Dexcom CGM integration underway, broad B2B value proposition and personalization .Enhancing data flywheel
Macro DemandQ3: no slowdown observed; tailwinds for cost reduction .Q4: continued employer demand; consolidation to fewer vendors favors best‑of‑suite .Supportive

Management Commentary

  • “Pro‑forma gross profit was 58.1% of revenues for the fourth quarter of 2022… we are targeting an average of 60% gross margins for 2023 to reach our goal of 70% gross margins by 2024.”
  • “Operating loss in the fourth quarter on a non‑GAAP basis declined by more than 60% to only $6 million compared to $15 million in the fourth quarter of 2021.”
  • “We achieved our goal of 100 accounts by the end of 2022… our relationship with Aetna is progressing and we recognized revenue this quarter and anticipate accelerating revenues throughout 2023 and beyond.”
  • “One of our recent studies demonstrated that people who manage both diabetes and hypertension on the Dario platform had better clinical outcomes than those that manage diabetes alone.”
  • “We believe… we are in a position to build a truly differentiated digital health company with the potential to reach profitability with $60 million to $80 million in revenue.”

Q&A Highlights

  • Revenue composition and strategic mix: Of Q4 revenue ($6.8M), ~59% reflected strategic + ARR contributions; mgmt expects additional milestones recognized in Q1 as well .
  • Aetna ramp cadence: Expect a “significant step up” in Q3 2023 as PMPM access model scales; development and integration revenues recognized in Q4 and expected in Q1–Q2 2023 .
  • B2C stabilization: Q4 B2C ~$2M; expected to normalize around current levels in 2023 serving as data/test lab without P&L drag .
  • Cash OpEx baseline: Cash OpEx fell to “a bit less than $10M” in Q4; viewed as a 2023 baseline with slight increases toward S&M and reductions in R&D/G&A .
  • Book of business: Signed contract value ~$65M at year‑end; majority ARR; strategy to increase average deal size, multi‑condition mix, and diversify beyond Aetna .

Estimates Context

  • Wall Street consensus from S&P Global for Q4 2022 revenue and EPS was not retrievable via our S&P Global access at this time (rate‑limit). As a result, we cannot provide authoritative consensus comparisons for this quarter. Values retrieved from S&P Global are unavailable due to data access limits.
  • Company‑reported and call‑disclosed figures (revenue, margins, OpEx) are presented above with document citations; no independent estimate comparison is shown .

Key Takeaways for Investors

  • Mix‑led inflection: Rapid mix shift to B2B (70% of Q4 revenue) and multi‑condition platform is driving sustained margin expansion and lower CAC—key to the path toward 60%/70% GM in 2023/2024 .
  • Operating leverage emerging: Non‑GAAP OpEx baseline ($10M/quarter) and falling operating losses ($6M in Q4) suggest incremental revenue drops through at improving margins .
  • Pipeline to revenue: ~100 B2B accounts and ~$65M of signed contract value at year‑end underpin 2023 growth; mgmt expects a meaningful Aetna PMPM step‑up in Q3 2023 plus additional plan launches .
  • Strategic stream is durable but uneven: Sanofi/Aetna strategic revenues recur annually but are milestone‑based intra‑quarter—investors should focus on annualized growth/GM trajectory vs. quarterly lumpiness .
  • Data flywheel: Dexcom integration and multi‑condition outcomes advantage should enhance personalization, engagement, and payer value proposition, supporting pricing power and win rates .
  • Risk watch: Concentration (Aetna weight), milestone variability, and DTC headwinds remain; diversification of large accounts and continued ARR growth are critical mitigants .

Supporting Data Sources

  • Q4 2022 Earnings Call Transcript (Mar 9, 2023) .
  • Q3 2022 Earnings Call Transcript (Nov 15, 2022) .
  • Q2 2022 8‑K Press Release (Aug 15, 2022) .
  • Dario Press Releases: Mar 9, 2023 full‑year/Q4 results; Feb 6, 2023 prelim results .