Good morning, ladies and gentlemen, and welcome to the DarioHealth third quarter 2025 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If you require immediate assistance during the call, please press 0 at any time for the operator. This call is being recorded on Thursday, November 13, 2025. I would now like to turn the conference over to Zoe Harrison, VP of Accounting and Corporate Development at DarioHealth. Zoe, please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us today for a discussion of DarioHealth's third quarter 2025 financial results. Leading the call today will be Erez Raphael, Chief Executive Officer of DarioHealth. He'll be joined by our President and Chief Commercial Officer, Steven Nelson, and Chen Franco-Yehuda, our Chief Financial Officer. An audio recording and webcast replay for today's call will also be available online as detailed in the press release invite for this call. For the benefit of those who may be listening to the replay or archived webcast, this call is being held on Thursday, November 13, 2025. This morning, we issued a press release announcing our financial results for 2025. A copy of the release can be found on the Investor Relations page of DarioHealth's website. I'd like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities laws. For example, the company is using forward-looking statements when it is discussing the amount of its targeted new business, its 2026 pipeline, and expected strong revenue acceleration in 2026. That it expects to reach cash flow breakeven by late 2026 to early 2027, that it expects to transition to a high-margin recurring revenue model, that it is on a solid path to profitability, the number of new accounts it expects to sign in 2025, its potential future business opportunities, and that it expects to further cut its operating expenses over the next twelve to fifteen months. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond the company's control, including the risks described from time to time in its SEC filings. The company's results may differ materially from those projections. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. I encourage you to review the company's filings with the SEC, including without limitation, the company's annual report on Form 10-K, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. With that, I'll hand it over to Erez Raphael, Chief Executive Officer of DarioHealth.

Good day, everyone, and thank you for joining our third quarter result review. Before getting into the numbers, I want to start by highlighting what makes Dario truly unique and why we are seeing a growing strategic interest in our business. Today, Dario is a digital companion for whole person health. Our platform unifies physical, mental, and behavioral care into one connected experience, addressing diabetes, hypertension, weight management, musculoskeletal pain, mental health, and more, all within a single data-driven framework. We believe this multi-condition whole person model is where the market is heading, and our results prove it. More than 50% of our new clients this year have chosen our multi-condition solution. Our artificial intelligence-powered personalized engine combines biometric, self-reported, and behavioral data to deliver measurable outcomes. Our software-first model drives 60% GAAP and over 80% non-GAAP gross margins with expanding profitability. We now serve over 125 clients, including four national and seven major regional health plans, and numerous Fortune-level employers, supported by channel partners reaching more than 116 million covered lives. Together, these assets—our engagement engines, scalable infrastructure, deep data, and expanding client base—make Dario one of the most advanced and scalable digital health platforms in the industry. Now let's jump into the numbers. In 2025, our top line and gross margin results reflected the ongoing transition to our high-margin annual recurring revenue model. While revenue came in at $5 million and was lower on a year-over-year and quarter-over-quarter basis, key metrics driving future revenues combined with reductions in operating costs and growing margins set Dario on a track for a strong 2026, including reaching cash flow breakeven by late 2026 to early 2027. We are targeting $12.4 million in new business for implementation in 2026, including committed annual recurring revenues and a portion of our late-stage pipeline that…

Thank you, Erez, and hello, everyone. We are seeing stronger demand than at any point in Dario's history, especially from blue-chip employers and national insurers. Our multi-condition platform remains the most comprehensive in digital health, covering more conditions and backed by more clinical evidence than anyone else in the market. Commercial traction is accelerating. We've adjusted our product market fit to better serve health plans, the government sector, and off-cycle employers, and it's paying off. Our 2026 pipeline has grown to $69 million, with more than 50% of our new clients choosing our multi-condition solution. We're meeting payers and employers where they are, delivering personalized data-driven care across five or more conditions, all at equal or lower cost than most single-condition competitors. Our core business, employers, and health plans is performing exceptionally well. The average employer account size that we have won and still remains in our pipeline has almost doubled versus last year, which is a clear validation of the platform and the expanding confidence we are seeing from the market. It's driving real revenue momentum as these clients begin to implement and scale with us. We are targeting $12.4 million in new business for implementation in 2026, reflecting both committed annual recurring revenue and late-stage opportunities nearing completion. Our pipeline includes several opportunities in late-stage development still remaining in 2025. Year-to-date, we've added 45 new clients contributing to that growth. These are high-quality recurring revenue relationships, not one-time contracts. Since the last earnings call, we've signed 24 new employer agreements, including one of the largest in our history. Most of them will onboard in 2026. These wins span multiple industries and validate the market's growing preference for Dario's multi-condition solution and our new value-based pricing model, which aligns our success directly with measurable outcomes for our clients and…

Thank you, Steven, and good morning, everyone. In the third quarter, we continued to strengthen DarioHealth's financial position and advance our transition to a business model centered on high-quality, recurring revenues, strong margins, and operating leverage. We're executing this strategy with discipline, and you can see the progress clearly reflected in this quarter. As of September 30, 2025, we had $31.9 million in cash and equivalents. This reflects the successful completion of an oversubscribed $17.5 million private placement of common stock or equivalents only in the business, which we view as a meaningful signal of investors' confidence in the market opportunity and in our ability to execute. In parallel, we took several steps to simplify and strengthen our capital structure. We completed the conversion of preferred shares into common stock and equivalents, resulting in a clear and more transparent cap table. We also amended our current credit agreement to provide greater flexibility on covenant testing, which enhances our financial resilience while we continue to scale. Let me now turn to the financial results. Revenues for the third quarter of 2025 were $5 million compared to $5.4 million in 2025 and $7.4 million in 2024. As we've discussed in previous quarters, the year-over-year decline reflects the nonrenewal of a large scope of work with a national health plan in early 2025, as well as the deliberate shift from one-time revenue streams towards long-term annual recurring revenue. This transition emphasizes quality, predictability, and scalability of revenue, and we believe it positions Dario for stronger, more durable growth. Gross margin performance continued to reinforce the strength of our unit economics. GAAP gross margin expanded to 60%, up from 55% in 2025 and 52% in 2024. Non-GAAP gross margin in our core B2B2C remains above 80% since the beginning of 2024, reflecting the benefits…

Thank you, Chen. Today, Dario stands at a critical and exciting inflection point where our differentiated offering is exactly what payers are looking for. Our team is executing with focus and discipline. The groundwork is in place, and we are fully aligned with the market dynamics that favor integrated, outcome-driven solutions. We are committed to growing our business by improving health outcomes for users and creating savings for payers. The technology platform we have invested in and built, including integration of several acquisitions over the last decade, is a highly valued strategic asset, in addition to and beyond its ability to generate high-margin recurring revenues. As a reminder, in September 2025, in response to multiple unsolicited inbound expressions of interest, Dario engaged Parella Weinberg Partners and established a special committee of its board of directors. We will not comment further on this matter unless and until there is a material update. With that, I want to hand over the call to the operator for the Q&A session.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. We will pause for a moment. To withdraw your question, please press star then 2. Our first question comes from the line of David Grossman from Stifel. Your line is open. Again, David Grossman, your line is open. Our next question comes from the line of Charles Rhyee from TD Cowen. Your line is open.

Hi. This is Lucas on for Charles. Thanks for taking the questions. Wanted to ask about your UnitedHealth national rollout starting in January 2026. Can you help us understand how much of the $12 million in new business expected to be implemented in '26 is coming from this client? And then can you, I guess, just speak to the overall opportunity you see with this client in 2026 and beyond?

Yeah. Hi. This is Steven Nelson. Yeah. I am happy to take that question. Two things. One is they have launched a digital marketplace for all their book of business. They're rolling it out in chunks. They soft announced that in Q3. We've been active in that pilot rollout, and now they're doing it with scale against their entire book. We don't get specific in terms of client segments and revenue by client by the book. But we're really encouraged by what they're doing. We were one of the few selected in terms of that digital marketplace. And as they roll that out, they're rolling it out in chunks, I believe, in membership books as they go quarter by quarter, with the formal rollout. So it's more of what they've done before to have a market. They've done a little bit of this in the past, but this is kind of a newer launch for them. I'd say quite innovative, to say the least. And this is a group-sponsored business where the group benefits people, members, consumers can go on and use their benefits to then purchase within a digital portfolio of products. So not necessarily built within their product. In direct form, more through a group type of plan. And so it's a pretty innovative launch. We're excited to be a part of it, and that will all kick off in a formal way in January.

Okay. Appreciate that. And then, still want to focus on the $12 million in new business expected to be implemented in '26. Can you help us understand what sort of pacing we should be modeling in and expecting for this new business?

Yeah. So some of it's already started. We've been in Q4, the time period, as we kind of launched a lot of these accounts. As we noted on the call, our expectation was to have 40 that would be signed this year that would impact this year or start in next year. We've achieved 45. Specifically already to date, and we still have some time left to sign some others. So it's kind of rolling in now as open enrollment kind of kicked in now. Some of those accounts did start earlier. The majority of those accounts will start in January. In normal benefits time frame. Some of them will roll in in January as normal benefits from open enrollment. Some of them may start in terms of February. Just delayed slightly after their open enrollment. We've seen a lot of employers that are starting things in an off-cycle but still within the benefits stack. So a lot of them are starting things within the time frame of their benefits. But not necessarily at the start of the benefits year. So it's gonna roll in, I'd say, over the course of Q1. We do have some off-cycle things that we're still engaged in. Some of the health plan businesses off-cycle. Obviously, some of the things we've done in the government sector is just waiting for the government to kind of finish their budgets and move forward. And that's we're pretty encouraged about a couple of those as well in maternal health. And some digital health initiatives that have already been spoken about. And then lastly, we also have a little bit of other new business from employers that are off-cycle. So we've done things around some different sectors of business and employer business with our specific channel partners that are also off-cycle. So it's kind of a little bit of a roll-in. I'd say the majority of that was in Q1. But some of that has already started, and some of that also will be a tail after Q1 will start. But the majority will definitely be in Q1 timing.

Okay. I appreciate that. And then, I mean, you guys are saying, you know, the commercial pipeline is growing. You talked about a 90% renewal rate. When we look at the B2B2C revenue, we're still seeing sequential declines. Can you help us understand what's driving this? You spoke to a nonrenewal that took place in early 2025. Is this the primary driver for, you know, continued sequential declines here? Can you kind of peel back the layers on what the underlying trends are in this business in Q3?

Yeah. I'm gonna take it. So Lucas, we mentioned in the previous quarters, we had this one national health plan that didn't continue this year. I think that this is what created the decline. Other elements that are showing a decline between this quarter to the previous quarter is the transition of the pharma business from milestone-driven into recurring revenue-driven. If we are looking into the book of business that is purely employers and health plans, it's stable between Q2 to Q3, and we believe that it's gonna be stable and even going a bit up between Q3 to Q4. I want to also assign some numbers to your previous questions. You asked specifically about UnitedHealthcare. We are not exposing exactly how we are modeling everything, every opportunity, and every client. But if I'm gonna look into the numbers from 30,000 feet, you have 45 new accounts that have been signed this year. 90% of them will launch only in Q1. So you're gonna see the ramp-up only in Q1. And the way that we modeled all the accounts is that we don't have a single opportunity that is contributing more than a million dollars out of the $12.4 million. So I think that we have here a very diversified approach where we are not putting all the weight on one client in order to get us the growth for 2026. Hope it's helpful.

Gotcha. That's helpful. And then the last question I have, and I'll jump back in the queue, is just speaking, can you give us an update on the pharma services pipeline? What kind of demand you're seeing following your sharper focus on therapeutic areas? And just be curious to hear how prospective clients in that side of the business are responding to this approach.

Yeah. So, the way that we are looking into the few B2B channels, employers, healthcare, and pharma, is that our priority is, first of all, employers and health plans. This is where we are focusing all the efforts and also the sales and marketing budget perspective. We do believe that we have a very impressive portfolio of products that is helping and helped pharma in the past. I mean, if we're looking into previous business that we had, we had a lot of business with all the big names. From Sanofi to Eli Lilly to Novo Nordisk. All of them were clients of Dario or Twill. The issue that we had with the business is that we wanted to make sure that we are operating as a SaaS-oriented business, and we are running recurring revenue only. Which means that we transformed the business and literally shut down accounts that were only one-time revenues. The way that we view it in the future is that we're gonna be extremely selective. And I believe that for next year, we're gonna have between two or four accounts that are gonna contribute to the revenue. And I believe that the numbers are gonna be relatively smaller compared to the employers in the health plan channel.

Okay. Great. Appreciate the color. Thanks.

Our next question comes from the line of David Grossman from Stifel. Your line is open. Our next question is from Theodore O'Neill from Witchfield Hills Research. Your line is open.

Thank you very much. Steven, you talked about adjusted product market fit. And in the press release, it also highlights the new performance-based pricing model. And I'm wondering between those two things, what are you finding is working for you better now than, say, twelve months ago?

Yeah. Two things. One is that we're really focused on which multi-condition offerings we're taking in the market for clients. So we're doing more around claims-based analytics. We're doing more around claims-based engagement. Trying to make sure that our product fits kind of what they're looking for. A solution, first of all. That's from the marketing to the presentation to the sales process to closing it and then reporting on it, engaging it, you know, etcetera with the clients. So I think that's one big broad thing. I think the second thing is, you know, we didn't do it all ourselves. I noted in the earnings release, specifically in my script, that we talked about how we added in a couple of key partners to round out our product solution where we didn't have to necessarily develop the R&D but they are presenting market opportunities for us, specifically most recently, Green Key around sleep. Again, partnering with what we have in cardiometabolic offering, tying that into sleep gets us into a different category. Doesn't increase our R&D expenditures, and allows us to go to market with a new offering. Again, product market fit, finding ways to reduce the cost of care for payers, specifically in the sleep category. We're looking at the same thing with OneStep recently announced around falls prevention, Medicare Advantage, One Step. So, again, we're trying to think differently about how our product and how the market, either through partners or our core bread and butter product, really goes towards certain segments. Strategically, we also went after some different accounts. So we went at certain accounts that were a certain size. Type, where they operate a certain way. Manufacturing, production, etcetera. So we tried to really make sure that our product, digital health being kind of how we engage people remotely, would fit with people and how their segments were, their employer segments were, etcetera. So one was really a detailed approach about the clients we were targeting. Two was the partners that we brought on to our product. And three is how we actually went to market to win.

Okay. And then talking about federal and state interest in DarioHealth, is that as a customer, does that present some more unique challenges compared to your successes here in the commercial side?

Yeah. Not necessarily. If you know, the details of what the government has actually released fits with what we're doing. So one of the things actually I didn't cover in your first question was how we went to market with really a value-based light offering. We have a milestone-based payment model now we went out regarding clinical milestones being met in order for us to get paid. And that really kind of proves that we're getting after clinical metrics, clinical data, claims data to kind of get paid with the client. So it's a better ROI model. That's more appealing to government-sponsored plans, which also fits well with Medicaid, Medicare plans, etcetera. And for us, doesn't present a challenge as long as they can get out of each other's way. And appropriate budgets effectively. We feel pretty good with where we sit right now with a couple of initiatives that went out. Maternal health initiatives, some rural health initiatives as well. So some things that occurred that allow us to kind of get back out into the market differently. We worked with those offices on those proposals. Now we're just really waiting on how the government's going to fund them. From the federal down into the states. And I think that you're gonna see some healthcare funding. I think once they get out of their own way, healthcare is a hot topic right now on no matter which side of the house you're on. No pun intended. I think that at the end of the day, we'll have some offerings that were a good product fit for them.

Okay. Thanks very much.

We have a question from David Grossman from Stifel. Your line is open.

Hi, guys. This is Aiden on for David. Are you able to hear me?

Yes. We can hear you.

Okay. Great. Sorry about that. I had some technical difficulties. But I wanted to ask on the new client wins, 45 already for the year, exceeding the target. Has anything changed in your approach for go-to-market? And what's resonating with these new clients?

I mean, our first biggest thing that I noted on the script, and obviously important for the market to note, is we doubled down with some of our key channel partners. And our channel partners really delivered in terms of the market that we're going after, the accounts we're going after, etcetera. So one would be our channel partners. We're a big difference than what we had from wins of last year at the same time. Two is our fit with them. I mean, I know there's a product market fit to the clients, but there's also one with our distribution partners as well. And that also has gone well. From how we're contracted with them to creating win-win agreements to making sure that we meet the needs on how they're reporting, how we engage, etcetera. So one big one would be our distribution channel partners for sure. Then I'd say, secondarily, just how we targeted. We are targeting without getting into the specific strategy and the detail of the strategy. I mean, we're going at it a certain way. We kind of pivoted to make sure that we could win in a differentiated way. Again, I don't want to get into all the details of that competitively, but I would say that we really thought about it differently, approached it differently, and won. And our channel partners are a big part of that. However, we had some other partnerships as well that weren't channel-specific that were just kind of at the table. Our consultant relationships that came through a couple of new ones that have been really favorable for us as well. And I'd say also a couple of different segments that we dipped into. We were dipping into the TPA segment for the first time in a while. We now have a PBM relationship for the first time. So we have some other different market segments that aren't channel partners but are good partners to go to business with. We're seeing some uplink in those as well.

Great. Thanks for that. And then just a follow-up on the 45 new clients. You guys had said that 50% are taking multi-condition offerings. I think last quarter, that number was around 80%. So is that just client mix? Anything changed there with clients taking less of a multi-condition approach?

No. I mean, most of that was driven specifically off of our channel partners. Some of our channel partners have more than, you know, have one condition right now. They gave us a chance to have one condition. In the market, not necessarily two. We've proven out that we can win now with them, and so they're giving us a chance to have more products through their channel partnership. And so, some of their channel partners were multi. A couple of the larger ones that drove care through their channel partnership only had one condition. So the uptake just watered down our 80 to fifty. But, candidly, I think if we get in with these clients and see what we can do to grow them and upsell them and cross-sell them into what we have, I feel pretty confident about that. So I know that it came down in terms of 50. I'd say 50 as a multi-condition platform is still pretty substantial. Again, our value proposition is really relevant here. I'd be remiss not to cover it, which is, no matter what condition you're engaged into in our platform, it's the same price. So the investment of the ROI, return on investment, the investment side for clients is the same. And that gives us a chance to go to market and win differently. And so we've let they'll capture that and really send that in the market and our product market fit and win. So while that's come down, in terms of more than one, we're still really happy that we have 50 plus or more.

Just one reminder. When we reported last time, I think that we were in 23 or 25 accounts. So the sample was relatively low, and now we are looking into 45. And in 45, the number now percentage-wise is 50%. So I think that given where the market is and where the market is going, 50% of clients that are signing for multi-condition shows a very consistent trend that the market is consolidating for sure.

Great. Thanks, guys.

There are no questions at this time. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a wonderful day.