10-Q: DarioHealth Corp. Reports First Quarter 2024 Results, Including Twill Acquisition

DarioHealth Corp. reported a net loss of $7.175 million for the first quarter of 2024, which includes the acquisition of Twill, impacting revenue and expenses.

Summary

• DarioHealth Corp. reported a net loss of $7.175 million for the first quarter of 2024, compared to a net loss of $12.825 million for the same period in 2023.
• The company's revenue decreased by 18.5% to $5.758 million, primarily due to a decline in partnership revenue, but this includes the consolidation of Twill's revenue.
• The pro forma revenue, including Twill as if it was acquired at the start of the quarter, would have been $7.721 million.
• Operating expenses increased to $20.287 million, driven by higher research and development, sales and marketing, and general and administrative costs, largely due to the Twill acquisition.
• The company's financial income was $8.686 million, a significant increase compared to a $417 thousand expense in the same period last year, primarily due to the revaluation of pre-funded warrants issued in the Twill acquisition.
• The company's cash and cash equivalents decreased to $34.367 million from $36.797 million at the end of 2023.
• DarioHealth completed the acquisition of Twill on February 15, 2024, for $10 million in cash and pre-funded warrants, aiming to create a comprehensive digital health offering.
• The company issued 17,307 Series C, 4,000 Series C-1 and 1,115 Series C-2 preferred shares at $1,000 per share, raising approximately $22.422 million.
• The company has a loan facility with Avenue Lenders with an outstanding balance of $28.462 million as of March 31, 2024.

Sentiment

Score: 5

Explanation: The document presents mixed results. While the net loss decreased and the company made a strategic acquisition, revenue declined and operating expenses increased. The company also highlights the need for additional capital, which introduces uncertainty. The sentiment is neutral to slightly negative.

Positives

• The net loss decreased by 44% compared to the same quarter last year.
• The company successfully acquired Twill, expanding its digital health offerings.
• DarioHealth raised $22.422 million through the issuance of preferred shares.
• The company's financial income increased significantly due to the revaluation of pre-funded warrants.

Negatives

• Revenue decreased by 18.5% year-over-year.
• Operating expenses increased significantly due to the Twill acquisition.
• The company's cash and cash equivalents decreased during the quarter.
• The company continues to incur net losses and negative cash flows.

Risks

• The company has incurred net losses since its inception and has an accumulated deficit of $358.570 as of March 31, 2024.
• The company is dependent on raising additional funds to fund its operations.
• The company's revenues are concentrated with two major customers, and a loss of these customers could significantly decrease revenue.
• The company's operations are subject to political, economic, and military instability in Israel.
• The market price of the company's common stock has been extremely volatile.
• The company may be unable to scale up its commercial launch of its products or meet its commercial sales targets.
• The company may be unable to obtain additional capital resources in the near term.

Future Outlook

The company expects Aetna to continue to add employers to the platform and anticipates growth throughout 2024. Management believes that the company has sufficient funds to support its operation for at least a period of twelve months from the date of the issuance of these interim condensed consolidated financial statements. The company expects to incur future net losses and its transition to profitability is dependent upon, among other things, the successful development and commercialization of the company's products and the achievement of a level of revenues adequate to support the cost structure.

Management Comments

• We are revolutionizing how people with chronic conditions manage their health through the innovation of a new category of digital health: Digital Therapeutics as a Service (DTaaS).
• We believe that our innovative approach to digital therapeutics disrupts the traditional provider-centered system of healthcare delivery by offering user-centric care that is continuous, customized supportive of better overall health.
• Our solutions combine the power of technologies and behavior science to make better health accessible, affordable, and easy for all by solving for what people need, when and where they want it, with hyper-personalized care that is always connected to services, devices, and people and delivered continuously.
• Our solutions are proven to drive savings for health plans and employers by improving the health of their populations.

Industry Context

The acquisition of Twill positions DarioHealth to compete more effectively in the growing digital therapeutics market by offering a broader range of solutions, including mental health and well-being, alongside its existing chronic condition management platform. This move aligns with the industry trend of consolidating digital health solutions to provide more comprehensive care.

Comparison to Industry Standards

• DarioHealth's revenue decline contrasts with some digital health companies that have shown growth, but the inclusion of Twill's revenue in future quarters may change this trend.
• The increase in operating expenses due to the Twill acquisition is a common occurrence in mergers and acquisitions, and the company will need to demonstrate cost synergies to improve profitability.
• The company's focus on a multi-condition platform is similar to other players in the digital health space, such as Livongo (now part of Teladoc), which also offers solutions for multiple chronic conditions.
• The company's emphasis on clinical publications and real-world data is in line with industry best practices for demonstrating the efficacy of digital therapeutics.

Stakeholder Impact

• Shareholders may be concerned about the revenue decline and increased operating expenses.
• Employees may experience changes due to the integration of Twill.
• Customers may benefit from the expanded range of solutions offered by the combined company.
• Creditors may be monitoring the company's financial performance and ability to repay its debts.

Next Steps

• The company will continue to integrate Twill into its platform.
• The company will focus on scaling its B2B2C business model.
• The company will continue to generate clinical publications.
• The company will seek stockholder approval to reprice the warrants issued to the lenders on May 1, 2023.

Key Dates

Keywords

Digital Therapeutics, Chronic Condition Management, Twill Acquisition, Healthcare, B2B2C, Preferred Stock, Financial Results, DarioHealth, Digital Health, EBITDA