DarioHealth Corp. Aktie

Good morning, ladies and gentlemen, and welcome to the DarioHealth First Quarter 2026 Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, May 13, 2026. I would now like to turn the conference over to Zoe Harrison, VP, 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 First Quarter 2026 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, 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 Wednesday, May 13, 2026. This morning, we issued a press release announcing our financial results for the first quarter of 2026.

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 discusses expected revenue growth and contribution from 2025 signed accounts, its path to profitability and cash flow breakeven, the continued reduction in operating expenses and losses, its expansion of channel partnerships and covered lives reach, its expected revenue and scaling from partner-led and off-cycle opportunities, expected onboarding and implementation of large enterprise accounts, expected growth and conversion of commercial pipeline opportunities, expected expansion into care delivery, claims-based and outcomes-based models, expected benefits from care delivery and GreenKey Health partnerships, expected growth in recurring revenue and operating leverage, expected advantages and future impact of DarioIQ and proprietary data assets, expected improvements in member engagement, retention and outcomes, beliefs regarding competitive positioning and market opportunity and the expected outcomes of the company's strategic review process, including potential strategic transactions.

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 morning, everyone, and thank you for joining us. We started 2026 with continued momentum. Q1 marked our second consecutive quarter of sequential revenue growth, while we continue to reduce our operating expenses. The financial trajectory is on track, and Chen will walk you through the details shortly.

I want to focus my comment today on 3 things: the continued expansion of our Channel ecosystem, the scale we are now operationalizing from the accounts signed in 2025, and the next strategic step in our platform moving closer to care, which opens new revenue streams for us. I'll also share some strong numbers on how our DarioIQ AI engine is further boosting member engagement.

Last quarter, we described 2 compounding layers at the core of our growth strategy. Layer 1, channel partnership that gives access to millions of covered lives or single commercial relationship. Layer 2, our multi-condition platform that captures a far greater share of each account population. That thesis is now playing out and is being accelerated. Our channel partnerships continues to grow.

We have entered the contracting stage with a new channel partner, the largest in Dario's history. The relationship comes from a major Day 1 anchor account, one of the largest hospital network in Northeastern United States. With this partnership, we expect to access approximately 65 million additional covered lives and roughly 3,500 employer relationships.

Combined with our existing relationships with Solera, Amwell and our other blue-chip channel partners, this will bring our distribution reach to over 175 million covered lives. With a strong sales cycle at the end of 2025 and closed out the year with nearly $13 million in contracted and late-stage business, which remains on track to contribute to revenue later this year and in 2027.

In parallel, our Channel model is producing contract flow outside of the traditional benefit cycle [indiscernible]. Steven will share the commercial details. The third area I want to spend time on is an important strategic step we are taking. How we are evolving the platform itself to move closer to care. We have built a strong digital health foundation, a scalable recurring and engaged member per month revenue model with measurable outcomes. That continues.

What is changing is what we are expanding beyond engagement and support into actual delivery of care. We believe Dario is uniquely positioned to lead this shift and the reason is straightforward. We have built one of the deepest bodies of clinical evidence in digital health, more than 100 peer-reviewed clinical studies, more than any other company in our category, demonstrating real measurable outcomes.

This level of validation is what the potential payers and providers require. It is also what makes outcomes-based and claims-based revenue models possible for us. We are building beyond our core ability to engage members and support improved outcomes through behavioral change. We are building to directly impact clinical outcomes, close care gaps and participate in the medical spend associated with those outcomes.

To accelerate this strategy, we are working with the care delivery partner. Steven will share more on this work shortly. The foundation underneath everything I've just described is what we have always said, which is data. Dario is a data company that leverage Generative and Agentic AI on top of one of the most valuable proprietary clinical data sets in digital health. The reason we are confident is that position is structural.

We are fully vertically integrated. We design and manufacture our FDA-cleared connected devices. Those devices generate continuous biochemical and other clinical data directly from the members in real time. The data flows into our platform, our analytics and AI are on top of it from hardware to AI, [ that start ] in ours. We do not license it, rent it or depend on third-party inputs.

Today, we have more than 13 billion proprietary real-world data points tied to clinical outcomes across multiple conditions at the individual member level. That is the kind of data set that takes a decade to build and cannot be replicated quickly. DarioIQ, our proprietary AI engine trained on that data set is the product expression of that advantage.

It delivers personalized real-time clinical recommendation that the general purpose model cannot match because no general purpose model has access to longitudinal data of this depth tied to real outcomes. DarioIQ is now in active deployment and the early results are meaningful.

Our behavioral triggered engagement programs where the DarioIQ identifies the right intervention at the right moment for each member based on their personal data signature are delivering up to 40% improvement in member retention and up to 55% lift in active session versus our control group. These are early data points, but they are directional.

They tell us the AI layer is producing measurable behavioral change today and that the same data flywheel that build the moat is what compounded. The implication is direct. As AI capabilities advance our position strength, every advance in AI raises the value of the underlying data, we own this data. We put this together, our Channel ecosystem continues to scale.

The accounts we signed in 2025 are converting into revenues, and we are evolving the platform from digital engagement into care delivery, backed by clinical evidence and proprietary data and the foundation that compounds with every member we add. We are building a business that is more deeply integrated into how health care is delivered, paid for and measured. This is exactly where the market is going. That is where Dario is positioned to lead.

With that, I will turn the call over to Steven.

Thank you, Erez, and good morning, everyone. I'll start with account growth and channel momentum. Last year, we added 85 new accounts against an original goal of 40, more than double our target, demonstrating the strength of our market demand for Dario's multi-condition platform. That momentum continued into 2026.

In the first quarter alone, we have already added 10 new accounts, most through channel partners and all outside the normal employer benefit cycle timing. That is important because it shows that our Channel ecosystem is beginning to create opportunities on a more continuous basis rather than only through traditional annual buying cycles.

It also reinforces the broader shift in our commercial model from one account at a time direct selling to more scalable partner-led model that can create access to larger populations and multiple downstream opportunities over time. Today, more than 80% of our revenue is generated through partner-driven channels, providing access to over 116 million covered lives.

As these ecosystems expand, each new partner or payer deployment has the potential to bring Dario's platform to significantly larger populations without requiring a proportional increase in commercial infrastructure. We are also continuing to deepen relationships with existing partners and customers.

We are currently working toward a 3-year extension with Aetna and a 4-year extension with Centene, reinforcing the long-term value these organizations see and the outcomes delivered through the Dario platform. In addition, we continue to see strong activity across our Channel ecosystem. Solera remains an important partner and continues to create opportunities through existing client relationships and [ planned ] partners.

Amwell has also identified a new Blue Cross Blue Shield plan opportunity that is expected to launch Dario as a part of its digital health offering. And we continue to see opportunities across larger payer and partner ecosystems, including UnitedHealthcare-related channels and additional payer aligned relationships.

The important point is that our channel strategy is now producing scaled opportunities, larger deployments and a path to further increasing reoccurring revenue growth. At the same time, we are also focused on converting the accounts we already have sold into scaled platform activity. Several of the larger accounts referenced in prior quarters are now moving through onboarding, testing and client-specific requirements.

That includes the technical, operational, eligibility, data sharing, reporting, integration and implementation steps required to support large-scale deployments. Overall, these implementations are progressing well. To-date, the work remains substantially on time and on track. This is an important transition for Dario.

Last year was heavily focused on building the channel pipeline and closing new accounts. This year is increasingly about activating those relationships, scaling them across client populations and converting commercial progress into reoccurring revenue growth.

For accounts such as Aetna, Allegiance, Solera-driven opportunities, Amwell-driven payer opportunities and others previously referenced channel partner relationships, we are encouraged by the progress and expect continued advancement as these clients scale on the Dario platform. Turning specifically to our broader pipeline. Commercial demand remains strong.

As of the end of Q1, our total commercial pipeline increased to approximately $127 million across 241 open opportunities. This includes opportunities across employers, health plans, channel partners and other B2B2C relationships. Importantly, the size and quality of opportunities entering our pipeline continues to increase, driven by multi-condition adoption, large enterprise deployments and increased reach created through our channel partners.

As we expand our presence with payer ecosystems, the scale of these opportunities continues to grow. We are also continuing to engage in government-sponsored health care initiatives with 11 state-level opportunities currently in motion through the Rural Health Transformation Program. These opportunities represent another potential path for Dario to expand through state-sponsored payer-aligned and population health-oriented models.

I'll now turn to our expansion into care, which we believe is one of the most important developments in the business. Erez has already mentioned the opportunity and how Dario is well-positioned to capture more health care spend by delivering improved clinical outcomes. I'll get into the specifics of the execution. To execute this broader strategy of expanding into care, we plan to work with partners that bring the clinical and provider-enabled capabilities that complement Dario's digital engagement platform.

Dario has built a strong ability to identify, activate, engage and support members across chronic conditions. These partners may add the care delivery layer that can help close gaps in care, support provider-led interventions, document clinical activity, help connect engagement to reimbursable health care events and operate across relevant geographies. The strategic logic is very clear.

Dario can find and engage the member, the care partner can help support the clinical intervention. And together, we believe we can create a more complete model that identifies, engages, intervenes, documents and supports monetization through care-related and claims-based models.

By moving closer to care through partnership, we believe we can accelerate the strategy without requiring Dario to build every clinical capability internally from the ground up. This gives us a more efficient path to expand our value proposition, strengthen our relevance with health plans and employers and create new revenue opportunities tied directly to outcomes and medical spend.

A strong example of this direction is our expanded work with GreenKey Health. Building on the strategic co-promotion agreement established last year, we are deepening the integration of GreenKey4Life Clinical Sleep Service Pathway into the Dario ecosystem, creating a national diagnostic and telehealth-enabled pathway for obstructive sleep apnea screening and physician-guided patient choice interventions.

Because unresolved sleep disorders can materially affect cardiometabolic outcomes, this partnership strengthens our ability to support members more holistically while creating additional value for enterprise partners focused on adherence, outcomes and cost savings. Dario is growing beyond its core strength as a digital health platform through participating in the delivery and monetization of care.

This also expands both our value proposition and our revenue opportunities. It makes us even more relevant to health plans, employers and channel partners that are increasingly focused on measurable outcomes, care gap closure, claims visibility and medical cost impact. Stepping back, what we believe investors should take away from this quarter is that Dario is executing its business plan with greater focus and clarity.

We have sharpened the business around employer and health plan growth. We are scaling our distribution through Channel ecosystems. We are preparing the business operationally for larger claims-enabled supported models. We are moving closer to care through clinical pathways, clinical gap closure and provider-enabled capabilities, including our expanded work with GreenKey Health.

Together, these priorities position Dario to expand beyond the strong digital engagement that creates positive behavior change and toward a broader health care platform that can support care delivery, document outcomes and participate more directly in the health care dollars tied to those outcomes. And with large-scale deployments now beginning to come online, we believe we are entering the phase where the strategy begins to translate in a meaningful scale.

With that, I'll turn the call over to Chen.

Thank you, Steven, and good morning, everyone. Q1 2026 demonstrated that our financial model is beginning to reflect the commercial and operational progress Erez and Steven described, revenue growing, cost declining and cash utilization continuing to improve. Revenue for Q1 2026 was $5.6 million, up from $5.2 million in fourth quarter of 2025, our second consecutive quarter of sequential growth.

The year-over-year decline from the first quarter of 2025 reflects a deliberate strategic transition away from non-recurring pharmaceutical revenue that is currently not part of our core business model. That reduction was offset by increased revenue coming from our channel partners and increased sales in our direct-to-consumer channel. Gross margin was 57% in Q1 2026, about the same year-over-year and up from 54% in the fourth quarter of 2025.

The sequential improvement was driven by efficiency. I want to highlight what sits underneath the GAAP margin. Our B2B2C non-GAAP gross margin held at approximately 80% for the ninth consecutive quarter. It reflects the economics of our model. As B2B2C revenue scales, it carries that 80% non-GAAP margin with it, and that is the engine of operating leverage going forward.

On operating expenses, total OpEx for the first quarter of 2026 was $10.5 million, down 21% year-over-year and down 8% sequentially. This is the result of continued operational efficiency across the organization, including utilization of AI and post-merger integration activities following the Twill acquisition.

Non-GAAP operating expenses, which exclude stock-based compensation, depreciation and amortization, were $8.7 million, down 18% year-over-year and down 3% compared to the fourth quarter of 2025. Operating loss for the first quarter of 2026 was $7.3 million, a 22% improvement year-over-year and 15% improvement sequentially.

On a non-GAAP basis, operating loss was $5.3 million, an 8% improvement year-over-year and 11% improvement sequentially. We plan to continue reducing our non-GAAP operating loss through 2026. As of March 2026, we held $20 million in combined cash and short-term deposits, and we were in full compliance with all covenants under the Callodine facility, under which principal payments do not begin until May 2028.

Net cash used in operations was $6 million in the first quarter of 2026 compared to $6.7 million in the first quarter of 2025, a 10% reduction year-over-year. I will close with how we think about the financial trajectory from here. The accounts signed in 2025 are moving through implementation and are expected to convert to recognized revenue primarily in the second half of 2026.

The channel economics are favorable. Each new covered life relationship carries lower incremental cost. The cost structure has been reset materially from where it was a year ago. As we plan to integrate into clinical workflows and support outcome-based and claim-related models, we are positioning Dario to participate in materially larger share of the health care spend.

The potential combination of contracted revenue becoming recognized revenue, high-margin channel growth and a lower cost base is what underpins our confidence in our financial direction of this business.

I'll turn the call over to Erez.

Thank you all for joining us today. This quarter shows the platform [ thesis ] is playing out in the numbers, 2 consecutive quarters of sequential revenue growth, 10 new accounts in the first quarter, most of them through a channel partner. $127 million pipeline across 241 active opportunities, a path that brings our distribution reach to 175 million covered lives.

As a reminder, in September 2025, in response to multiple unsolicitated inbound expressions of interest, Dario engaged Perella Weinberg Partners and established a special committee of Board of Directors to consider a full range of strategic opportunities, including sale, merger, strategic business combination or continued execution of our stand-alone strategy.

The process remains active, and we will provide updates when there is a material development to share. What is increasingly clear is that Dario is positioned to succeed in any scenario we choose to pursue.

We own our hardware, our data and the AI that runs on top of them. We have a commercial engine that compounds, and we have a clinical foundation of more than 100 peer-reviewed studies that powers the expansion from digital engagement into care delivery.

Before I hand back to the operator, I want to take a moment to thank people who make this possible, to our employees, the dedication to our members and to each other is what drives everything we do. To our partners and Channel ecosystem, your trust and collaboration are central to how we scale. And to our shareholders, thank you for your continued support and confidence in our platform and our mission.

I will now turn it over to the operator for a Q&A session.

[Operator Instructions] The first question comes from Charles Rhyee with TD Cowen.

This is Lucas on for Charles. Congrats on the quarter. I wanted to ask more about your guys' expansion into care. Congrats on the partnership. Up until now, most of your engagements have been with the health plan and employer channels. Can you dive a little bit more into how this specific channel will work on the ground level?

See from your comments, it sounds like Dario will be a referral partner to the health systems. And then you guys have highlighted the opportunity to participate in outcomes-based arrangements. Can you dive a little bit deeper into the structure of the economic side of these relationships and how they differ from current arrangements?

Yes. This is Steven. I'll take that one. 3 parts, I'll break it down for you. So you're right, it is a referral-based relationship, a partnership in care. They deliver care, specific care, we do not. So we're working collectively on joint agreements, joint relationships, go-to-market, getting back. We have proposals from health systems that are looking to close gaps in care, where digital care connects to actual care.

And so we're going to collaborate in that space. We also can round out our current chronic management programs with direct care delivery, whether that's specialty care or other forms of specialty care. So that's part one. Part 2, will we be working back and forth with referral relationships? Absolutely. They have clients.

We have clients. There's proposals that we put out in the market that have sought this specific relationship. So one, we know that we're doing the right thing with the product, part one. Two, we have existing proposals in the market that are actually requesting some of these product enhancements, if you will. And we are not a care delivery organization.

And then third, this also allows us to kind of stretch our wing -- spread out and stretch our wings a little bit into some additional profit pools, right, claims-based billing, things that we started just this year in January for the first time. This allows us to get closer to care activities, data, sharing data, being able to curate what a digital engagement looks like and then when they need care, surface care opportunities.

So we've talked about some different things in the past on doing this, Rula around behavioral health services in the past. We did some things with MediOrbis in GLP-1 early last year in that same regard. And we've recently talked about GreenKey and obstructive sleep apnea, which is also in the care space. So we're kind of getting and stretching deeper into that.

And then your secondary question was regarding outcomes. Two things. One, we have a product today already on outcomes. We call it clinical milestones. We do that with our largest channel partner that's evolved to really where you have to meet very specific clinical milestones versus engagement metrics where we didn't get paid. And two, this is a great fit for that.

This brings care directly in line of sight of that. And so that's great for health plans, which is the biggest opportunity where a significant amount of health plans now are trying to cap, close gap closures in care in order to improve their Stars ratings and their HEDIS measures. So it's a one-to-one on outcomes-based product.

What we have today can be enhanced. We will also add additional products that will be on this path. We call it value-based light, kind of what you're getting to is value-based care and value-based light in terms of contracting. Innovative for sure, and making sure that we have other things that are tied to where the market is headed, which is a lot more ROI.

Great. Appreciate all that color. And then I guess in terms of this channel going forward, what are your expectations for the role of getting closer to health systems within your organization moving forward?

And then can you give us a sense of -- obviously, we have this one partnership right now that you guys are highlighting. Can you give us a sense for how many other health systems you guys may be in conversations with?

Yes. So broadly speaking, we'll announce this partnership next week sometime. So we're kind of angling towards a little bit more details, which will probably answer a lot more of your questions or questions that may arise after this call today. That's part one.

Two, currently right now, we have proposals in the pipeline somewhere between 7 and 10 where we have active proposals in the market with health systems specifically looking for us to deliver this work. And so that is very active. All of that would be oriented towards 2027 business, January 2027 business. The majority of that business is Medicare Advantage.

There are some subsets of that that are Medicaid-based. And then the other proposals would tie to what I talked about, which was the Rural Health Care Transformation Initiative, RHT, around The Beautiful Bill.

And so there's really 3 things: what's in pipe today, what we think we can capture doing more work with our partners, going back to our existing health plans. We have a significant amount of health plans today that we can go back and enhance our services with now that we have this.

And then we have the RHT bids. Currently, we are around, I believe, 11 there on those bids as well, 11 in a direct sense, but all states are receiving money from The Beautiful Bill, and that may be opportunistically timing perfect for us as well when we think about this add-on of care.

Okay. Appreciate that. And then I want to ask about the health plan and employer pipeline. And it sounds like implementations this year remain on track, and we're expecting revenue to accelerate in the second half. Can you give us any sense of the magnitude of what we're expecting for that second half acceleration?

Yes. I mean we're trying to get through all the planning and details around that. I mean as I mentioned, I actually got into the detail a little bit into the script about what it takes to onboard them. They're very large accounts. And so how they grow and where they grow, we have modeled all the account behaviors about what we think.

We don't give specific guidance, obviously, in that regard to revenue. But we do see uptick in all of them. They're all onboarding. After we can kind of get the flood gates open per se, we expect them all to be contributing in a more material way as the year continues.

And we don't have a lot of those details because, again, right now, as we announced who they were last year and on the last earnings call, we're now kind of in the thick of it in terms of standing them up, building the product connections, doing a lot of the back-end work to make sure that we have good partners that are stably going to generate that revenue.

So we're still working through a lot of the enrollment and projections in detail. We know what it looks like in a pipeline sense, but we don't know what it looks like in a detailed sense. But Erez, would you like to add something to that?

Yes, sure. So I think that what we disclosed in the press release and also in the earnings script is that we have $30 million worth of contracted ARR late-stage business. And we know specifically about a few of those accounts that are launching by the mid of the year. And this is what put us in a place where we are confident about a more significant growth in the second half of the year and into next year.

So practically, the accounts landed, we started to implement them in Q1 and will continue in Q2. But we see a few largest ones that are going to launch by July 1, and this is something that gives us more confidence that we're going to see higher numbers in the second half of the year compared to the first half of the year.

Okay. Appreciate that color. And then my last question, I'll hop into the queue. It seems like consumer revenue continues to see strong growth, up 42% year-over-year and 24% quarter-over-quarter. I guess what's driving this acceleration on this side of the business?

Yes. So this is something that related to general demand that we are having mainly on our MSK product. Our MSK product is very popular. Users like it a lot. And it's done as a respond to a larger demand around that product and the majority of the growth is coming from this product. It's not just in the U.S., it's also selling out of the U.S. So it's the time that the global demand for this product.

Recently, this volume that we see in the direct-to-consumer market is also demand on the B2B side from clinics in the U.S. So we are exploring that as well. And that's a good news. And this product is very good and popular by consumers. So it drives a lot of growth. So we think that we're going to see this year versus last year, a nice growth in the entire B2C business.

We have reached the end of the question-and-answer session. This concludes today's conference, and you may now disconnect your lines. Thank you for your participation.

Good morning, ladies and gentlemen, and welcome to the DarioHealth Fourth Quarter and Year-End 2025 Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, March 19, 2026.

I would now like to turn the conference over to Zoe Harrison, VP, 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 Fourth Quarter and Year-End 2025 Financial Results. Leading the call today will be Erez Raphael, Chief Executive Officer of DarioHealth. He'll will be joined by our President and Chief Commercial Officer, Steven Nelson; and Chen Franco, 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, March 19, 2026. This morning, we issued a press release announcing our financial results for the fourth quarter and year-end 2025. The 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, we 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 statements regarding the expected timing and contribution of agreements signed in 2025 to revenue in 2026 and 2027, anticipated revenue growth trends and the timing of acceleration during 2026, the size, composition and potential conversion of the company's commercial pipeline, expected onboarding, enrollment, ramp and expansion of employer, health plan and channel partner relationships, the anticipated benefits of the company's multi-condition platform, AI capabilities, DarioIQ, expectations regarding the future operating efficiencies, margins and operating expense reductions, the company's expectation that it may reduce the operating loss by 30% in 2026, reach cash flow breakeven by mid-2027 and future strategic opportunities, including a sale, merger, strategic business combination or continued execution of the company's stand-alone strategy.

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 morning, everyone, and thank you for joining us. 2025 was our strongest year on record for new business wins. We signed 85 new agreements against a target of 40, more than doubling our goals. With average contract sizes running 2 to 10x larger than our historical average. Annual revenue declined due to a single legacy client from pre-acquisition that decided not to win the contract, a onetime situation unrelated to the product performance or our value proposition. But the business underneath told a different story. 85 new agreements signed, including wins with Florida Blue, UnitedHealthcare and Premera Blue Cross, our strongest year on record for new businesses.

Fourth quarter of 2025 returned to sequential revenue growth on the term we expected. On a year-over-year basis, our core B2B2C business delivered organic revenue growth, excluding the revenue headwind, which is related to the single industry client. While we do not provide a formal guidance, I want to share how we think about the year ahead. Our existing contracts provide a stable foundation, multiyear agreement with built-in members growth and expansion opportunities. Layered on top of that are the new clients we signed in 2025, many of which are still ramping enrollment and engagement. The new cohort becomes the growth driver for 2026. The 2025 [ set season ], Dario's strongest on record, generated $12.9 million in contracted and late-stage ARR set to contribute revenue in 2026 and 2027. Beyond that, our pipeline of commercial opportunities has expanded to $122 million, establishing both near-term revenue visibility and a strong foundation for sustained growth. We expect our revenue growth to continue in the first quarter of 2026 and build throughout 2026 with the second half of the year expected to show the strongest acceleration.

A few years ago, when we defined our growth strategy in an evolving digital health market, we articulated a thesis built on 2 compounding layers that we believe would become our structural advantage for scale and [ we were ] right. The first layer operates at the client level. Channel partnership like Solera give us access to millions of covered lives through a single commercial relationship, eliminating the account-by-account selling that structurally limits our growth potential and reduces our cost of the condition.

The second layer operates at the member level. Our multi-condition platform means a far greater share of each account population for the size for Dario. A single condition solution is relevant only to members with that one condition. Term and size conditions means materially larger proportion of any accounts population is reachable. More members enrolled, more revenue generated. Together, one layer multiplies how many accounts we access, the other multiplies how many members we serve within each. That is the compounding. The market is validating this in real time. Employers have moved beyond the point solution era. They are consolidating vendors and asking for integrated platforms that addresses multiple conditions with measurable outcomes. Nearly 80% of our pipeline of commercial opportunities now involve multi-condition deployments. And the most common request we receive is to manage diabetes, hypertension and mental health through a single platform. This is one of the reason customers increasingly come to us rather than the other way around. The foundation that makes both vector works is Dario's fully vertically integrated platform. In an era of generative and agentic AI, the vertical ownership from the device that generates the data to the AI that acts on it is itself a compounding advantage. The value of AI is driven entirely by the quality of the data it runs on. And Dario owns this data from the ground up, hardware generated, continuous and proprietary. We own the underlying data infrastructure. We do not license it, rent it or depend on third-party inputs. We believe that this means that our competitive position strengthens as AI becomes more powerful. DarioIQ, our AI-driven intelligence engine trained on more than 13 billion real-world data points is the product expression of that advantage, purpose built on data that no competitor can replicate. Our advantage sets on 3 pillars: proprietary clinical data generated at the point of care; clinical credibility backed by 100-plus peer-reviewed studies; and deep integration with employers and health care ecosystem. Together, they create a position that has the potential to compound with scale. That is precisely the model we built. The digital health market is consolidating around platforms that deliver measurable clinical and financial value. With our integrated technology, expanding distribution network and rapidly growing client base, we believe Dario is well positioned to lead the transition.

With that, I'll turn the call over to Steven.

Thank you, Erez, and good morning, everyone. Erez described 2 compounding layers at the heart of our growth strategy. What I want to show you this morning is this thesis in action in the distribution partnerships we are scaling and the multi-condition demand we are seeing from employers and health plans. These are not separate dynamics. They are compounding each other, playing out simultaneously across our commercial book. Before walking through the commercial progress we are seeing across the business, I want to briefly step back and highlight what we believe is an important shift occurring across the digital health market. Employers, health plans and pharmaceutical companies are all facing the same structural challenge, rising health care costs driven by chronic disease, combined with increasing complexity and how care is delivered and managed. As a result, buyers are increasingly moving away from fragmented point solutions and toward integrated digital platforms that can address multiple conditions while delivering measurable clinical and financial outcomes. We believe this transition is defining a new category within digital health. Vertically integrated multi-condition digital care platforms where providers that can combine clinical engagement, behavioral support and data-driven outcomes across multiple chronic conditions will increasingly become the preferred partners for employers and health plans. This is exactly what Dario offers. With that context in mind, there are 3 areas I'd like to cover this morning. First, the structural shift we are seeing in our go-to-market model as distribution increasingly moves towards large payer ecosystems and curated digital health networks. Second, the continued expansion of several of our most important channel partnerships and payer deployments. And third, there are several emerging opportunities we are evaluating that could open additional pathways for growth over time, and I will specifically go over one of these significant opportunities today. Taken together, these developments reinforce what we believe is an important inflection point for the company.

Let me start by revisiting the theme we introduced during our last few earnings calls, the growing role of one-to-many distribution channels in our business. Historically, much of the digital health market operate through direct employer sales and individual point solution deployments. What we are seeing now is a shift towards payer ecosystems and curated digital health networks that allow health plans and large employers to deploy integrated platforms across much larger member populations. The commercial model we are building allows Dario to move from selling individual programs, one employer at a time to becoming embedded within payer ecosystems that distribute digital health solutions across entire populations. During our last call, we discussed several examples of this strategy beginning to take hold, including our launch of UnitedHealthcare's digital marketplace, our deployments through Solera Health supporting plans such as Premera Blue Cross and our growing partnerships with Amwell, supporting payer-sponsored digital health programs. Through these partnerships, Dario now has access to more than 160 million covered lives through our distribution ecosystem. As these distribution ecosystems expand, each new payer or partner deployment has the potential to bring Dario's platform to significantly larger populations without requiring proportional increases in commercial infrastructure. These relationships dramatically expand our reach. A single distribution partner can unlock access to millions of covered lives and significantly accelerate our ability to scale. Importantly, we are also seeing continued commitment from our existing health plan partners. We are currently finalizing a 3-year contract extension with Aetna and a 4-year contract extension with Centene, reinforcing the long-term value these organizations see in the outcomes delivered through Dario's fully vertically integrated platform.

What we are seeing now is the next phase of this strategy, where these distribution ecosystems begin to activate across additional health plans. For example, through our partnership with Amwell, Florida Blue selected Dario as a part of its digital health ecosystem. The program is currently in migration and implementation phases, and we expect revenue from the partnership to begin contributing in the second half of 2026 as enrollment ramps, with the broader expansion anticipated into the 2027 plan year. Florida Blue represents one of the largest and most influential Blue Cross Blue Shield organizations in the United States and their selection reinforces the growing demand among major payers for a fully vertically integrated platform that can deliver measurable clinical and financial outcomes.

In addition, our channel partner, Solera Health, recently announced that HCSC, the second largest Blue Cross Blue Shield organization in the United States with approximately 25 million members, will be launching a new digital health capabilities through its network beginning in January 2027. Dario has been selected as a preferred in-network partner with Solera's curated digital ecosystem supporting that rollout. We are also pleased to share that Amwell is preparing to launch another Blue Cross Blue Shield Health plan relationship in July of 2026, and Dario has already been selected to be that preferred partner. We will share additional details expected as the program moves closer to launch.

Finally, we are currently in the final stages of contracting with another distribution partner that we expect will become an important addition to our channel ecosystem. Through that relationship, we anticipate launching what would represent the largest fully insured client in Dario's history. Another area we are seeing encouraging traction is within government-sponsored health care programs, particularly through the Federal Rural Health Transformation initiative, a $50 billion program rolling out $10 billion in spending over the next 5 years. This program represents a major effort, designed to improve health care access and outcomes in underserved rural communities across the United States. Today, Dario is engaged in direct discussions with approximately 10 state offices that are evaluating digital health infrastructure as a part of rural health transformation planning. In parallel, we are working closely with one specific channel partner to ensure Dario's platform has exposure within broader proposals, supporting these initiatives across the remaining 40 states.

Turning now to our employer pipeline of commercial opportunities. Demand for integrated Digital Health Solutions continues to strengthen as employers seek measurable outcomes and simplified vendor ecosystems. In 2025, we added 85 new employer accounts, many of which have been onboarding and ramping throughout the first half of this year, providing an expanded base of reoccurring revenue entering the second half. For the 2026 benefit cycle, we are currently tracking approximately 44 employer opportunities, representing roughly $35 million in pipeline value. Looking further ahead to the 2027 cycle, we are already engaged in 58 additional employer opportunities, representing approximately $19 million in pipeline value. Taken together, our total employer pipeline represents 102 opportunities totaling approximately $54 million in value. Importantly, the average size of these opportunities entering our employer pipeline today is materially larger than the accounts we have historically pursued, 2 to 10x larger. In addition to the employer demand, we are also seeing strong momentum across our health plan pipeline of commercial opportunities. Today, our health plan pipeline includes approximately 70 active opportunities, representing roughly $33 million in pipeline value across national and regional payer organizations. Looking ahead to 2027 planning cycle, we are also engaged in 11 additional early-stage health plan opportunities, representing approximately $27 million in potential value. Taken together, our health plan pipeline now represents 81 opportunities, totaling approximately $60 million in value. As we expand our presence within payer ecosystems, we believe that the scale of these health plan opportunities has the potential to continue to grow. Another area we are beginning to explore is within our Pharma Services segment. Historically, pharmaceutical companies have focused primarily on direct-to-consumer engagement or provider-based education models. What we are starting to see now is early interest from select pharmaceutical companies in exploring employer-based engagement strategies where digital health platforms may help support patient identification, therapy adherence and outcomes measurement. Today, we are in discussions with 3 pharmaceutical organizations, evaluating whether employer-based engagement supported by digital health infrastructure could represent a viable commercial approach. At this stage, we view Pharma as an emerging opportunity that we are actively evaluating rather than a core revenue driver today. Stepping back, what we believe is important for investors to understand is that Dario's commercial expansion today is being primarily driven by 2 core growth engines. Layer 1, client scale through channel partnerships that give us ecosystem level access to millions of covered lives without proportional increases in our commercial infrastructure and related expenses. Layer 2, member scale through our multi-condition platform, which means a far greater share of each account's population qualifies for Dario, generating more revenue from the same client base without acquiring a single new contract. These 2 layers compound together exactly as Erez described. One multiplies how many accounts we reach. The other multiplies how many members we serve within each. That compounding is already visible in our fourth quarter numbers and it will become increasingly visible as 2026 progresses. And as these payer ecosystems activate and employer demand continues to expand, we believe the commercial foundation we have built positions Dario to scale across significantly larger populations in the years ahead.

With that, I'll turn the call over to Chen.

Thank you, Steven, and good morning, everyone. In the fourth quarter of 2025, we delivered sequential revenue growth to $5.2 million and posted our lowest operating expense run rate on both GAAP and non-GAAP basis since the 2 acquisitions. That combination, growing revenue and declining cost is the inflection we have been building towards. Revenue for the 12 months ended December 31, 2025, was $22.4 million compared to $27 million in 2024. As Erez explained, this was driven entirely by a single legacy client nonrenewal from the 2 acquisition, partially offset by organic growth. GAAP gross margin expanded from 49% in 2024 to 57% in 2025, primarily reflecting the reduction in the technology amortization expenses. Our core B2B2C ARR business has sustained approximately 80% non-GAAP gross margin for 2 years, which we believe is the most representative measure of the underlying unit economics of our platform.

On operating expenses, the improvement is significant and accelerating. Full year 2025 total operating expense declined by 31% to $49.3 million compared to 2024 and full year non-GAAP operating expenses declined by $13.6 million or 26% year-over-year from $52.2 million to $38.6 million. In Q4 alone, GAAP operating expenses declined 28% to $11.4 million and non-GAAP operating expenses also fell 28% year-over-year from $12.4 million to $9 million. Full year operating loss improved by $21 million or 37% on a GAAP basis and by $9.6 million or 29% on a non-GAAP basis.

On cash, we ended 2025 with $26 million in cash and short-term deposits. Net cash used in operating activities declined from $38.6 million in 2024 to $25.9 million, a 33% reduction, driven by the compounding effect of margin expansion, AI utilization and cost discipline. Based on our contracted and late-stage ARR, growing pipeline of commercial opportunities and continued OpEx reduction, we expect to narrow our non-GAAP operating loss by approximately 30% in 2026, targeting towards cash flow breakeven by mid-2027. A reconciliation of GAAP to non-GAAP measures has been provided in the financial statements table included in our earnings press release. An explanation of these measures is also included below under the heading Non-GAAP Financial Measures.

With that, I'll turn the call over to Erez for closing remarks.

Thank you all for joining us today. 2025 demonstrated something important. The work we did to build a differentiated platform is now reflected in the demand we see commercially and strategically. We entered 2026 with our strongest commercial pipeline ever, a record new business year behind us and 3 vertical integrated platform whose competitive position deepens with every member we had, and every data point we generate. As a reminder, in September 2025, in response to multiple unsolicited inbound expressions of interest, Dario engaged Perella Weinberg Partners and established a special committee of our Board of Directors to consider a full range of strategic opportunities, including sale, merger, strategic business combination for continued execution to our stand-alone strategy. The process remains active, and we'll provide updates when there is a material development to share. What is becoming increasingly clear is that Dario is positioned to succeed in any scenario it chosen to pursue. We believe that the demand that we see from the market, from payers, employers and strategic partners reflects what we have built, a platform that owns its data, compound with scale and delivers outcomes that no point solution can replicate.

Before I hand it over to the operator, I want to take a moment to thank the people who make this possible. To our employees, your dedication to our members and to each other is what drives everything we do. To our partners and channel ecosystem, your trust and collaboration are central to how we scale. And to our shareholders, thank you for your continued support and confidence in our platform and our mission. We look forward to sharing more progress with you on our next call.

I'll now turn it over to the operator for Q&A session.

[Operator Instructions] Your first question comes from Charles Rhyee with TD Cowen.

Congrats on the [ end of ] the year here. Obviously, pretty exciting in terms of the pipeline opportunities. Obviously, some big contracts starting to ramp up as you move through the course of the year. And I think you had one big one, I think you just mentioned starting here in January. Can you give us a little sense on how that's progressing? And maybe in broad strokes, how should we think about revenue growth in 2026? You have sort of a consensus number kind of signaling significant growth here. Just kind of get a sense of your comfort with that? And how should we think about the cadence of revenue growth as we go through the year?

Thanks Charles, for the question. Yes. So as we mentioned on the quarter, we had like 85 wins, and we had a contracted ARR of $12.9 million, and it's including also very late-stage opportunities. Obviously, not everything is going to be recognized for the full year and it will take time to implement. What we already see in Q1 is that we see a growth between Q4 to Q1. Some of the implementation already started. So we are expecting growth, that growth is going to accelerate in the second half of the year. And when I'm looking into the consensus of all the analysts that we have today, we feel comfortable with this forecast that we see out there. We are not providing guidance, but we do think that what exists at the moment is something that the company feels comfortable with. And the way that we are operating is planning, obviously, to at least achieve or beat the consensus of the analysts that we have at the moment.

I appreciate that. And in terms of sort of the target of breakeven, it seems like we've been slowly getting pushed out a little bit. Can you give us a sense for what's kind of driving that? Is that just trying to take advantage of current pipeline opportunities and trying to stay on top of growth overall? Or anything that you can kind of share regarding that?

Yes, absolutely. It's going to be like 80% of the picture is the growth and 20% is keep optimizing the OpEx. We did a lot of cost reduction in the last 2 years, as everyone knows. We think that with the implementation of AI and agentic AI that we are implementing, we will be able to push the cost down by another few percentage year-over-year. But the bigger part of why we believe we can get to cash flow positive is our ability to grow the top line. That's going to be the major part. And with what we have signed so far plus what you see in the pipeline, we think that that's something that will get us to the cash flow positive point. The overall top line that we see, that will take us there is somewhere in the ranges of like $38 million to $42 million in revenues. That's the point where we think the business is going to be cash flow positive. So yes, Steven, do you want to add something?

Charles. Yes, Steven here. Steven Nelson. I just want to add one thing, which is as we've evolved these channel partnerships and brought them on, one to many and as these health plans, they're health plans, so we're dealing with large organizations, how do we kind of weave our way in. And then the platform partners, whether it's Solera, Amwell or others that we'll announce, we have to structurally, and I talked about that in the call, we have to structurally get ourselves organized for that. So there's things that we have to do and prepare normal, ramp up things, not large expenses, but work. And so we need to get focused on what that work is, how do we do it in a fluid way because it needs to be repeatable, and it needs to continue with these channel partners as we move forward. So they have some changes that have altered our business in a good way, definitely noticeable in the contracts that we've won and therefore, how do we implement in an effective manner. But that takes a little bit of pivot on how we've done it before. Now we're going more one to many. And so we're working on that work, being very mindful of OpEx as the company has historically, and we've shown recently in the results. But we also need to make sure we're making the right investments in that business. So those 2-, 3-, 4-year agreements is what they come with are sticky and longitudinal. So it's very important that we kind of reflect that as we think about our investment.

Great. And maybe one last question for me. As being like a preferred partner and we think about like HCSC, for example, obviously, that by itself is a big opportunity. What is the selection process there? Is it like each member within HCSC can make a decision? Or is it within -- even within each of the Blue Cross Blue Shield plans within HCSC, do their employer customers make a decision? Maybe talk us a little bit through how to take advantage of that opportunity. Like is it more RFPs within that as well? Or is it people can just kind of select off of menu as they're kind of selecting options? And what's your assumption in terms of what you'll be able to capture?

Yes. So I'll try to unpack that. I'll probably go beginning to the end in terms of a capture rate. But I'll start at the beginning first, which is we are -- as you can go to Solera and see in their architecture and their website, we're a preferred partner. Just like using a doctor in a normal health network, there is in-network and there is out-of-network partners. And with Solera on what they bring on board, we're preferred. So we are as I said in the script, "in-network". It's a good way to look at it. Now if I go to HCSC, the account, HCSC will have decisions that they make with Solera, not with us, but with Solera, when they look at how they want to move their books of business. And then obviously, ASO or self-insured books of business, they get to make that call. So I'm going to take a step up for a second before I round out that thought, which is this. Just like any, all the digital marketplaces that are coming forward, always self-insured markets get to make a call. There is no more RFP. There is no more business to win, but they have to decide do they want to go with something in-network? Do they want to go with something out-of-network? And obviously, self-insured employers get to make that call on all their benefit design, just like normal health benefits.

In terms of the fully insured book or what HCSC or other Blue's plans control, that's up to them. And so as they form those partnerships, we do get to work with them in that regard, how they want to construct the network, how we can work with them in general. So there's some variations there, Charles, that works across the board on all these. But within Solera's partnerships, as they come up with recommendations with their partners, we again are preferred and in-network, which is important for us because that makes the decision very easy, easy to do business, start it up, run a network, [ we're in it ] and launch it. So we're working with them on that execution. They are a very large plan, both fully-insured and self-insured. We think that there's plenty of business to be had there for sure. And we're hopeful that through our preferred status, we'll be able to kind of shore that up and what it looks like for 2027.

In terms of the capture rate, I don't say this flippantly, but obviously, with that many millions of lives with that size of share, us being in network for any portion of that book is meaningful to a company our size, for sure. That also said, anything that they do in their fully insured book, Illinois, Texas, some of their larger states would also be meaningful in that regard. So we're working across the board. I'd close by saying capture rate on fully -- on self-insured, we do normal predictive modeling accordingly. Nothing really changes in that regard. But keep in mind, with fully-insured, we're often built into the product. And as I noted today, we're launching -- not HCSC, I might add, but we will be launching our largest fully insured client January of 2027 as well, largest by far. Today, we have 3 accounts today that are fully insured, smaller in nature, but we're moving forward with the fully insured piece of business in January.

[Operator Instructions] your next question comes from Theodore O'Neill with Litchfield Hills Research.

Congratulations on the good quarter. I have 2 questions this morning. The first is on operating expenses, which are down year-over-year substantially. How should we think about how that changes in 2026?

And my second question is the commercial pipeline here at $122 million. I looked back at the last quarter's press release, and it was $69 million. So there's a big uptick in the commercial pipeline value. And I was wondering, is it a change in definitions? Or is that adding into 2027, on to 2026? Just wondering what the difference is there?

[indiscernible] take the first one.

Yes. Theo, thank you for your question. So with regards to operating expenses, indeed, we reduced dramatically the OpEx during this year and comparing it to last year, and we continue to reduce the OpEx. We mentioned several efficiencies, post-merger integrations, AI, et cetera, which we expect to continue and see a reduction in the OpEx through 2026. We also see that we can project that we can narrow the non-GAAP operating loss by 30% during 2026 comparing it to the full year of 2025. So that's for your first question. On the second question, I'll let Steven to respond.

Yes. So that's correct, Theo. We did outline -- you covered it at the very end there. What we've done is we're now in the 2027 year, so reflecting the combination of 2026 and 2027. And so last quarter, obviously, we talked about what was just in year in that regard for 2026. Now that we're in 2026, we're also doing a combined pipeline view. So that you can -- and that's why I kind of broke out in detail a little bit of the pipeline as well.

Yes, I thought you covered it. I just wanted to ask it explicitly.

Sure.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Good morning, ladies and gentlemen, and welcome to the DarioHealth Third Quarter 2025 Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 13, 2025.

I would now like to turn the conference over to Zoe Harrison, VP, 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, 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 the third quarter of 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 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 12 to 15 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 identify 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 thanks you for joining our third quarter results 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. Artificial intelligence or AI-powered personalized engine combines biometric, self-reported and behavioral data to deliver measurable outcomes. And our software-first model drives 60% GAAP and over 80% non-GAAP gross margins with expanding profitability.

We now serve over 125 clients, including 4 national and 7 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 engine, 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 the third quarter of 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 is in the final stages of contracting. With 45 new signed accounts year-to-date in 2025 contributing to revenue momentum for 2026, we have already surpassed our 2025 goal of 40 new accounts. This brings our client base to over 125 in counting, which includes over 110 employers, 4 national health plans and 7 major regional health plans.

Our new accounts and large portion of our $69 million pipeline are customers that are 2x to 10x larger than our clients have been in the past, creating a multiplier effect on new business coming in for the balance of 2025 and 2026.

Dario business economics are healthy and stronger than ever. In the third quarter of 2025, we achieved a GAAP gross margins to 60%, and we achieved our 7 consecutive quarters of 80% plus non-GAAP gross margins on our core B2B2C business. With the help of AI and our commitment to optimizing efficiency, we reduced operating expenses by an impressive $17.2 million or 31% in the first 9 months of 2025 and reduced by $3.4 million or 21% during the third quarter compared to the year ago period.

Several new accounts are now onboarding and beginning to contribute to revenue with full impact expected in 2026. Of this, 2 are large health plans and are among the most sizable and strategic clients in the Dario's history. Our 90% renewal rate underscores the value we deliver to our clients.

As an early leader in digital health, we aim to continue to drive the industry-wide shift from fragmented point solution to integrated multi-condition platforms that deliver measurable outcomes and cost savings. With health care costs continuing to rise, Dario's approach to powering lasting behavioral changes through personalized digital solution is in a high demand.

I will now turn the call over to Steven.

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 5 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 reoccurring revenue relationships, not onetime 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 their members.

This is why we now have more than 125 clients, including Fortune 100 employers and national and regional health plans. Our diversified mix across employers, health plans and pharma ensures multiple revenue streams and low customer concentration. Client retention remains strong at 90%. We expect our win rate velocity will only accelerate, driven by our effective go-to-market strategy and the strength of our channel partners, which account for more than 80% of our new logo wins this year.

Through our top-tier channel partners, we now reach over 116 million covered lives, expanding our market access and helping deals move faster through contracting. Many of these partners were newly contracted or re-contracted this year under win-win agreements that strengthen alignment and create even greater momentum going into 2026.

We've made major progress with several top-tier health insurers, some of the most meaningful launches in Dario's history. UnitedHealthcare launched Dario on its digital marketplace in a soft launch during the third quarter of 2025, which is a full suite offering. A full national rollout will be coming in January 2026. We're proud to be a part of this innovative go-to-market approach with the largest health insurer in the U.S., serving more than 50 million people.

In partnership with our valuable channel partner, Solera Health, Premera Blue Cross, one of the largest not-for-profit health plans in the Pacific Northwest, has also launched Dario. Solera Health has built a powerful digital network where Dario is a preferred partner. And Premera Blue Cross deserves credit for leading with vision in executing an innovative rollout.

Additionally, Solera and their partner, Aetna, have selected Dario to work with one of our largest employers in our company's history, representing 126,000 lives. This is our biggest channel partner launch to date, offering Dario to Aetna's employer network, reaching millions of covered lives.

And most recently, we announced another large health plan launch with another key channel partner, Amwell. As shared on Amwell's recent earnings call, they were selected by Florida Blue, and Dario has chosen as a part of that new business. Through this partnership, Florida Blue's self-insured employers will have access to our multi-condition solution for cardiometabolic health, while the fully insured line of business will offer Dario's diabetes program. This is a major strategic win and a tremendous validation of our platform. We're proud to partner with Florida Blue for 2026 and beyond.

Taken together, we believe these launches mark a turning point for Dario, expanding our reach, validating our leadership and setting the stage for accelerated growth in 2026. While we are well-established with commercial partners in the private sector, we are also seeing opportunities opening in the public sector.

Policy tailwinds are driving the adoption of digital health solutions for federal and state-funded health programs. Dario, with our attractive pricing, proven clinical benefits and return on investment, or ROI, is very well-positioned to be competitive in this space.

We previously announced our partnership with GreenKey Health, and we're now seeing that come to life through Temple University Health Systems announcement last week at the Beckers Healthcare CEO and CFO Roundtable. Tempel's Executive Vice President and Hospital CEO, Abhinav Rastogi, shared on the main stage that Temple is collaborating with DarioHealth and GreenKey Health to manage the cost and clinical utilization of GLP-1 medications and obstructive sleep apnea therapies, 2 of the fastest-growing and most expensive areas in health care.

Dario is also in final stages of executing a similar GLP-1 digital utilization management program for a national account employer launching early in 2026. We are excited about the product market fit both opportunities afford Dario for the future in 2026 and 2027 sales. This collaboration was achieved through product partnership model, requiring minimal R&D investment from Dario, demonstrating our ability to scale innovation efficiently and drive meaningful impact without significant internal spend.

We believe that this also reinforces Dario's expanding leadership in helping major health systems achieve measurable ROI through digital, data-driven engagement and outcomes and represents another step forward in our growth across employers, payers and now integrated delivery networks.

We are also continuing to expand our capabilities through other strategic collaborations in alignment with Dario's whole-person condition management strategy. One recent example is our partnership with OneStep, which integrates its AI-powered fall risk assessment and prevention technology directly into Dario's platform.

Falls represent more than $50 billion in annual medical costs, and this integration further enhances our ability to deliver measurable ROI for health plans by improving safety, reducing avoidable claims and broadening the overall clinical and economic value of Dario's platform.

Another important growth driver is our pharma business. About a year ago, we began transitioning Dario Pharma Services from milestone-based projects to reoccurring revenue model, and we've made some strong progress in that effort. We've now launched the business with a sharper, more targeted focus on therapeutic areas where we can deliver the greatest impact.

Dario Pharma Services remains a smaller part of our broader business today, but momentum is clearly building. We bring deep experience helping pharma companies find, onboard and keep patients engaged across their treatment journey.

Our platform consistently delivers between 5x and 10x ROI through 30% to 60% lower recruiting costs, 32% higher engagement, 4x better prescription conversion and more than 20% improved adherence compared to traditional approaches. This is how we're positioning Dario as a long-term strategic partner in pharma, one that drives both clinical and commercial value through digital precision and re-occurring relationships.

Our latest pharma services initiative focuses on MASH, formerly known as NASH, a fast emerging $10 billion market driven by the first drugs for fatty liver disease. Most patients remain undiagnosed and need support beyond the pill, which is where Dario adds value.

Through our FAIR-A framework, find, assess, initiate, retain and augment, we help pharma deliver whole-person digital engagement and behavioral support. Our new 12-week thought leadership campaign launched this week, highlighting how this model not only unlocks the MASH opportunity, but could be replicated across cardiometabolic, mental health and other high-burden therapeutic areas.

As we approach January renewal cycle, our commercial teams are fully engaged in finalizing contracts and onboarding new clients. This is one of the busiest and most important times of the year for us, and the team is working hard to ensure a smooth transition into 2026.

We've established an internal benchmark to retain roughly 85% of our clients on a year-over-year basis, a standard consistent with leading health SaaS companies, and we feel very good about achieving that target based on the renewal conversations underway.

With the rapidly expanding pipeline, proven outcomes and a strong renewal foundation, we're seeing continued acceleration in our business as we move into 2026. The combination of new growth, reoccurring revenue and disciplined client retention gives us real confidence in the year ahead.

With that, I'll turn the call over to Chen.

Thank you, Steven, and good morning, everyone. In the third quarter, we continued to strengthen Dario's financial position and advance our transition to a business model centered on high-quality recurring revenues, strong margins and operating leverage. We are 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, which we view as a meaningful signal of investors' confidence in the business, 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 was $5 million compared to $5.4 million in second quarter of 2025 and $7.4 million in the third quarter of 2024. As we've discussed in previous quarters, the year-over-year decline reflects the non-renewal of a large scope of work with a national health plan in early 2025 as well as the deliberate shift from a onetime 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 the second quarter of 2025 and 52% in the third quarter of 2024. Non-GAAP gross margin in our core B2B2C remains above 80% since the beginning of 2024, reflecting the benefits of a software-led model and a disciplined cost management.

Turning to operating expenses. We continue to execute on efficiency and scale. For the first 9 months of 2025, operating expenses declined by $17.2 million or 31% year-over-year. For the third quarter, operating expenses declined by $3.4 million, a 21% reduction from prior year period. These improvements were driven by post-merger integration of Twill, process automation, organizational streamlining and expanded use of AI-based workflow across all operations.

As a result, operating loss improved by $18 million or 39% for the 9-month period compared to last year. Looking ahead, we expect an additional 10% to 15% improvement in operating expenses over the next 12 to 15 months as we continue to automate core processes and improve efficiency.

To summarize, as of the end of the third quarter, we have a strong balance sheet and a simplified capital structure. Our operating expenses continue to decline, and we are building a durable base of recurring revenue supported by high retention with an existing customer base and accelerating momentum signing and onboarding new clients. This includes a target of $12.4 million in new business for implementation in 2026, reflecting both committed ARR and late-stage opportunities nearing completion.

Given the committed ARR, a healthy and expanding pipeline, and continued progress on operational efficiencies, we reiterate our expectations to reach run rate cash flow breakeven by late 2026 to early 2027.

I'll now turn the call back over to Erez before we go to Q&A session.

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 outcomes-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 acquired platforms over the last decade is highly valued strategic asset in addition to and beyond its ability to generate high margin recurring revenues.

As a reminder, in September of 2025, in response to multiple unsolicited inbound expressions of interest, Dario engaged Perella Weinberg Partners and established a special committee of its Board of Directors. We will not comment further on this matter unless or until there is a material update.

With that, I want to hand over the call to the operator for Q&A session.

[Operator Instructions] Our next question comes from the line of Charles Rhyee from TD Cowen.

This is Lucas on for Charles. I wanted to ask about your guys' UnitedHealth national rollout starting in 1/1/26. 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?

Yes. This is Steven Nelson. Yes, I'll answer 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 a formal rollout.

So, it's more of what they've done before to have a marketplace. 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 Jan 1.

Okay. I appreciate that. And then I 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?

Yes. 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 benefit 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 going to 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 business is 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 you guys are seeing the commercial pipeline grow. You talked about 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 non-renewal that took place in early 2025. Is this the primary driver for continued sequential declines here? Can you kind of peel back the layers on what the underlying trends are in this business in 3Q?

Yes, I'm going to take it. So, Lucas, the as we mentioned in the previous quarters, we had this one national health plan that didn't continue to this year. I think that this is what created the decline.

The 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. So, 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 going to 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 going to 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 going to see the ramp-up only in Q1.

And the way that we model all the accounts is that we don't have a single opportunity that is contributing more than $1 million 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. I hope it's helpful.

Got you. That's helpful. And then the last question I have, and I'll jump back in the queue. 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 I'd just be curious to hear how prospective clients in that side of the business are responding to this approach.

So, the way that we are looking into the few B2B channels, employers, health plans 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 the 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 onetime revenues.

The way that we view it in the future is that we're going to be extremely selective on what are the accounts that we're going to sign up for. And I believe that for next year, we're going to have between 2 to 4 accounts that are going to contribute to the revenue. And I believe that the numbers are going to be relatively smaller comparing to the employers and the health plan channel.

Our next question is from Theodore O'Neill from Litchfield Hills Research.

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 2 things, what are you finding is working for you better now than, say, 12 months ago?

Yes. 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 in 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, et cetera, with the clients. So, I think that's one big broad thing.

I think the second thing is 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 GreenKey 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 cost of care for payers, specifically in the sleep category. We're looking at the same thing with OneStep recently announced around false prevention, Medicare Advantage, OneStep. 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, et cetera. 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, et cetera.

So, one was really a detailed approach about the clients we are 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, is there present some more unique challenges compared to your successes here in the commercial side?

Not necessarily. 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 now model that 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 clients. So, it's a better ROI model. That's more appealing to government-sponsored plans, which also fits well with Medicaid, Medicare plans, et cetera.

And for us, doesn't necessarily 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, there are 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. So, now we're just really waiting on how the government is going to fund them from the federal down into the states.

And I think that you're going to see some health care funding. I think once they get out of their own way, obviously, health care is a hot topic right now on no matter which side of the house you're on, no pun intended. And I think that at the end of the day, we'll have some offerings that were a good product fit for them, not really cloggy in terms of their budget offering, just more around how we can meet the needs of members in those states specifically.

We have a question from David Grossman from Stifel.

This is [indiscernible] 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 were really deliberate in terms of the market that we're going after, the accounts we are going after, et cetera. So, one would be our channel partners were 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 went 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, et cetera. So, one big one would be our distribution channel partners for sure.

And 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 are going at it in a certain way. We kind of pivoted to make sure that we could win 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, and we're seeing some uptake in those as well.

Great. 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 - have 1 condition right now. They gave us a chance to have 1 condition in the market, not necessarily 2. 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 the channel partners were multi-condition, 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 50%.

But candidly, I think if we get in 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 come 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 been able to capture that and really spend 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 percentagewise is 50%. So, I think that given where the market is and where the market is going, 50% clients that are signing for multi-condition shows a very consistent trend that the market is consolidating for sure.

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.

Good morning, ladies and gentlemen, and welcome to the DarioHealth Second Quarter 2025 Results Conference Call. [Operator Instructions] This call is being recorded on Tuesday, August 12, 2025.

I would now like to turn the conference over to Zoe Harrison, VP, Accounting and Corporate Development. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us today for a discussion of DarioHealth's Second 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, 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 website, this call is being held on Tuesday, August 12, 2025. This morning, we issued a press release announcing our financial results for the second quarter of 2025. The 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 or the competitive nature of DarioHealth's industry. Such forward-looking statements and their implications may involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. For example, the company is using forward-looking statements when it discusses the company's expectations regarding revenue gaps, growth, acceleration, expansion, collaborations, pipeline, new clients, AI leverage, cash flow breakeven and leadership in the field of digital health.

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 second quarter 2025 quarterly report on Form 10-Q. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the company's press release issued this morning and in the company's other 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 operations and prospects for the future. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in this morning's press release.

With that, I'll hand it over to Erez Raphael, CEO of DarioHealth.

Good morning, everyone, and thank you for joining us. We'll start the call with a high-level overview of the financial results, along with key metrics that we believe are leading indicators for improving performance in the future. We'll go to Steven for commercial update and more on some very positive momentum with contracts and pipelines. We'll then turn the call over to Chen for a deeper look into our numbers. I'll wrap up with a quick message on our drivers for future growth and how AI is a fundamental part of our operations and offerings. Then we'll open the call for Q&A.

Before we dive into the numbers, I want to start by acknowledging that our second quarter revenues results came in below our expectations. While we continue to make strong progress on growth indicators, especially around channel partnerships, recurring revenues, gross margins and client quality, there are a few short-term headwinds that impact that top line performance.

As reported last quarter, we experienced a shift in scope with large national health plan clients earlier this year. While we were optimistic that the revenue gap would be offset quickly through new business ramp-up, that trend proved slower than expected. Several large accounts that we signed in 2025 are onboarding and generating revenue, but the full impact will be felt more meaningfully in the end of 2025 and into 2026. Some of the shift is also due to our focus on sustainable ARR rather than one-time payments, which affect some of the changes in the revenues for this quarter compared to Q1 2025.

As a result, we are adjusting our estimates for reaching cash flow breakeven by approximately 12 to 15 months, which is now expected into the end of 2026 to the beginning of 2027. So while we see this quarter as a transition period, our forward momentum remains strong, and we are already seeing early evidence of that in the key metrics. We have signed 21 new clients year-to-date and remain on track to meet our goal of 40 by the end of the year. 80% of the new 21 accounts are for multi-condition programs aligned with our strategy for multi-condition platform.

We have secured about $5 million in newly committed annual recurring revenues or CARR, plus our pipeline has grown to $53 million with an additional over $5 million of which is in final stages towards CARR. New logos include some of the largest and highest quality accounts in the history of the company. This includes 2 health plans with national scale, representing a multi-million dollar opportunities. One of them is launching this second half of 2025.

And we are seeing increasing traction from our channel and consultant relationships, which are fueling requests for proposals or RFPs flow and bringing in the kind of strategic accounts that align with our long-term model. All of this gives us confidence that the short-term gap will be closed and growth will be accelerated.

Importantly, our financial profile continues to strengthen. This is not just about growth, it's about the quality of that growth. GAAP gross margin increased to 55% from 44% year-over-year in the second quarter. Importantly, our B2B2C business continues to operate at over 80% gross margins on a non-GAAP basis. We reduced GAAP operating expenses by 36% and narrowed operating loss by 43% year-over-year this quarter.

Our strategy, margin-driven, AR focused and powered by AI-enabled scale is working. Steven and Chen will share more on our commercial traction and financial performance, but I want to emphasize that we are building a company designed to thrive not just in today's environment, but in the future landscape of digital health where efficiency, outcomes and value will define the winners.

I will now turn the call over to Steven Nelson, our President and Chief Commercial Officer.

Thank you, and good morning, everyone. Before I get started, I want to thank Lara Dodo for stepping in to handle my portion of the earnings call last quarter, while I was out due to a medical emergency. She's an amazing COO, and it's a privilege to have her leadership and partnership at Dario.

As Erez shared, this was a transition quarter, one that highlights the durability of our model and the momentum we're building. Our focus remains on sustainable [ reoccurring ] revenue growth fueled by differentiated solutions and disciplined execution. At the center is our multi-condition platform, fundamentally reshaping how health care is delivered for users and payers. To make that real, think about someone prescribed a GLP-1 for obesity or diabetes. Instead of a short burst of weight loss followed by a relapse, Dario surrounds that medication with personalized digital engagement, behavioral reinforcement and integrated chronic condition management that extends the benefit for years while lowering the total cost of care.

We have more clinical and ROI data than anyone in the market to back this up. Dario delivers a 5x ROI, more than double other leading digital health solutions with medical cost reductions exceeding $5,000 per engaged user. Year-to-date, we serve over 100 clients, including 4 national health plans, 6 regional health plans, self-insured employers and 5 pharmaceutical partners. This diversified footprint is critical as we scale, and our health plan partnerships have grown meaningfully over the past year. Combined with PBMs, benefit consultants and other channel partners, these relationships give us access to most of our target employer market without the friction of lengthy contracting and security reviews, making Dario one of the easiest solutions to buy and implement.

In the first half of 2025, we signed 21 new clients, including a top U.S. health care institution, 2 regional health plans, 18 employer clients, 80% of which are multi-condition programs. These wins reflect demand for unified clinically integrated platforms that address multi-chronic and behavioral conditions together with measurable outcomes, ROI accountability and strong customer engagement. This quarter also marked the completion of a full review of our channel partner network. We reset relationships, restructured contracts where needed to ensure product market fit and align with partners' go-to-market models. The result, revitalize partnerships and stronger value proposition that matches how benefits are bought and sold in the U.S., particularly around January renewal cycles.

That work is paying off. We've seen significant traction from benefit consultants like locked in and channel partners such as Amwell and Solera. With months still to go, we already have contracts and verbal commitments for 2026, and our pipeline is the strongest and most qualified it has ever been. That includes 2 of our largest health plan cardiometabolic accounts, both with national scale, with one of them set to go live in the second half of this year. That launch will contribute revenue in 2025 while building a significant momentum for 2026.

Before I go deeper into each of our core segments, our new committed annual reoccurring revenue for next year now stands at approximately $5 million, with an additional $5 million in late-stage contracting, all outside of pharma. Our pipeline is healthy at roughly $53 million. This strong foundation reflects both new client wins we've secured and the high-quality opportunities we're advancing towards closing. Our revenue growth today comes from 2 levers: expanding eligible lives and improving yield. We've seen higher eligible lives from both new client wins and expansions within existing accounts and stronger enrollment yields driven by targeted engagement and integrated partner campaigns directly translating to ARR growth.

In our Employer segment, our differentiated GLP-1 support program remains a leading entry point. We've built it as a digital utilization management solution that allows employers to control the cost of GLP-1 medications now at all-time highs. Through our partnership with a national third-party administrator, a TPA, we are live and generating ARR with several new employer clients. The combination of clinical oversight, behavioral reinforcement and digital tools supported by outcomes-based pricing and claims-based billing is resonating with cost-conscious ROI-driven buyers.

We're also seeing accelerated RFP volume from leading benefit brokers, opening doors to high-value, mid-sized and jumbo employers ahead of the 2026 plan year. In fact, we are in final stages, specifically a clinical review with the largest employer in Dario's history, representing 125,000 employees for a January 2026 launch of our diabetes and hypertension offering.

Momentum with health plans is also accelerating. Two top-tier payers are advancing full suite evaluations for 2026 implementation and several others are in pilots or preparing to launch additional conditions this year. At this time last year, we had 3 health plans in our pipeline. Today, that number is more than 25 qualified plans for 2026. With MediOrbis, we've expanded prescriber and remote monitoring capabilities, giving health plans more tools to manage utilization, cost and access, especially in Medicaid and Medicare Advantage populations.

Our pharma business continues to evolve as a strategic high-margin opportunity for the future. As mentioned before, we've changed this channel from one-time revenues into reoccurring revenues. This channel is under transformation, and we believe a few of the top accounts, including Sanofi, will move to full commercial stage with reoccurring revenues. To be clear, none of the $5 million in committed ARR I mentioned earlier comes from pharma.

I mentioned that GLP-1 is leading entry point for us with new customers. GLP-1 medications are reshaping obesity and diabetes care, but without sustained behavior change, weight relapse is inevitable, and cost will rise. Dario's solution is designed for this reality, pairing medication with proven engagement strategies to drive lasting results before, during and after GLP-1 therapy. We ensure cost control through smart eligibility and short scripting, promote adherence through engagement-linked fulfillment criteria and secure long-term outcomes via post-medication behavioral reinforcement and habits.

As the GLP-1 market matures beyond weight loss, we are applying our approach to other high-cost, high-need categories. In June, we entered the $150 billion sleep health market through our partnership with GreenKey, extending our platform into sleep apnea and related sleeping disorders, a natural and scalable addition to our multi-condition model. We are already in multiple active conversations that will leverage GreenKey's capabilities, Dario's engagement platforms to help health plans reduce cost of care, specifically by addressing wasted spend on sleep apnea machines when other interventions can deliver better outcomes at a lower cost. Based on meaningful ROI we are modeling, we expect to sign our first client in this category in the near-term.

With more than 90 peer-reviewed publications and over 2 dozen American Diabetes Association presentations, Dario is widely viewed as a clinical and scientific leader in digital health. In Q2, a major study in the Journal of Medical Internet Research demonstrated improved flu vaccination outcomes in high-risk diabetes populations, another example of how our platform drives measurable behavioral change. We are winning strategic high-quality business. We are aligning operations with buying cycles of our markets, and we are scaling through trusted, optimized channels. As we look to the remainder of 2025 and into 2026, our platform, partnerships and pipeline are well positioned for sustained commercial growth.

With that, I'll turn it to Chen Franco. We are pleased to welcome Chen to Dario as our new CFO. The deep experience she has in health care and capital markets is great value to us.

So thank you, Steven, and hello, everyone. I'm truly excited to be here at Dario and contribute to our mission of delivering impactful, scalable digital health solution.

Before reviewing the numbers, I'd like to share how we strategically analyze, monitor and forecast revenues in our core B2B2C business, which is comprised primarily of health plans and self-insured employers. Our approach is built on 3 pillars. The first one, retention of existing clients and members. These are signed and onboarded accounts where we expect at least 85% retention year-over-year based on our historical performance and engagement levels.

Second, expansion within current accounts. We leverage our robust multi-condition platform to cross-sell and upsell, adding new services and conditions to existing relationships. Here, we expect to see between 10% to 15% growth. The third one, new logo growth. Onboarding new clients is a key engine for long-term growth, subject to the timing and seasonality of benefits revenue cycles, as Steven described earlier.

When analyzing Dario's performance across the 3 pillars, we see that the first and second pillars are performing in line with our targets. Retention of clients and users is strong, supported by the quality of our products and the efficiency of our member engagement. The third pillar, new logo acquisition is the area where we have the greatest opportunity to improve, and it remains a key focus for the organization.

As Steven covered earlier, we believe we are moving in the right direction here as well. Looking at the broader financial profile of the company, we're seeing meaningful progress also in other parts of the P&L. Continued integration of AI across our solution and operational workflow is delivering measurable efficiencies and reducing operating expenses. Post-merger integration and ongoing efficiency initiatives continue to drive OpEx down and narrow our operating loss year-over-year.

Successful rollout of our SaaS-like pricing is shifting our revenue mix towards high-quality ARR and reducing reliance on one-time payments. Maintaining a high gross margin above 80% in our core B2B2C business is encouraging as it provides clear evidence that our model works. All these elements position us to continue reducing losses and strengthen our path towards achieving operational profitability and positive cash flow over time.

Total revenues for second quarter of 2025 were $5.4 million compared to $6.3 million in the second quarter of 2024 and $6.8 million in the first quarter of 2025. The decline reflects the nonrenewal of a large national health plan earlier this year and our strategic shift towards SaaS-like recurring revenue model. Despite the short-term top line impact, we are encouraged by our growing committed ARR, high client retention and an expanding pipeline, both in brief and quality. Slower-than-expected ramp-up of new accounts and onboarding of new logos led to the revenue gap. We know our product continues to work well as demonstrated in high user engagement and measured improved outcomes.

Gross margins was 55% GAAP and 64% non-GAAP. In our core B2B2C channel specifically, we have maintained a non-GAAP gross margin of around 80% since the first quarter of 2024, an important validation of our efficient business model. Operating expenses were $12.2 million, down 36% from $18.9 million in the second quarter of 2024, driven by post-merger integration, operational efficiencies, offshore initiatives and AI-enabled efficiencies. This resulted in a 43% year-over-year improvement in operating loss, narrowing it from $16.2 million to $9.2 million.

We ended the second quarter with $22.1 million in cash and short-term deposits, strengthened by our recent debt restructuring, which provides additional flexibility for execution. I'm confident our strategy positions us for a sustained growth over the coming years.

With that, I'll hand it back to Erez to close the call.

Thanks, Chen. As we wrap up today's call, I want to take a step back and talk about the broader digital health landscape and where Dario fits within it. Recent IPOs like Hinge Health and Omada have signaled how the market value digital health. It's about delivering high-margin recurring revenues, clear operating leverage and real-world impact, just like Dario.

These companies are now trading 5x to 10x revenues, and that's creating a meaningful benchmark for Dario. Here are key fundamentals driving our path to profitable growth. One is our B2B2C business has delivered a non-GAAP gross margins of approximately 80% since Q1 2024. Two, our contract renewals rate is 85% with increasing contract sizes and multi-condition scope, we leverage cross-selling and upselling opportunities with a goal to expand clients value by another 10%.

Three, our strategy with partners works. We see significant growth coming from the partnership we have. Four, we operate with a lean cost structure and scalable financial profile, creating a clear pathway to cash flow positive. But beyond the fundamentals, what truly sets us apart is our AI-powered operating model. Our generative AI is built to create value across 3 core dimensions.

For operating efficiency, we are embedding AI agent internally to streamline operations and reduce cost to serve. To further enhance our member engagement, we are leveraging conversational intelligence to deliver hyper-personalized, proactive and clinically guided interventions, boosting customer value. We are supporting employers and health plans clients with a measurable, scalable ROI model for managing chronic populations.

Our proprietary AI engine built on 13 billion data points and 25 years of user journeys powers personalization at scale. It's already driving measurable improvements in engagement and outcomes, while enabling approximately 15% cost reductions in OpEx for Dario through automation of onboarding, care navigation and support over the next 12 to 15 months. We believe this combination of strong clinical validation, high-margin ARR and embedded AI makes Dario one of the most differentiated platforms in the digital health space. We are not chasing growth at all costs. We are building a company that can scale efficiently, deliver results and become a long-term category leader.

Thanks again for your continued support. With that, let's open it up for Q&A session.

[Operator Instructions] Your first question comes from Charles Rhyee with TD Cowen.

This is Ethan on for Charles. So just looking at the sequential revenue decline in 2Q, I know you guys talked about a scope reduction with the health plan as well as some new clients maybe ramping a bit more slowly than previously expected. But we're just thinking, was there any churn that maybe also contributed this quarter?

Thanks for the question. As we mentioned in the script of the call, we haven't seen a churn in the ARR of the company. We had a one-time revenue that appeared in Q1 that didn't repeat in Q2. Overall, the ARR given the clients that we have and as we mentioned, 85% retention on the clients and the members, this is what we see year-over-year. So here, we haven't seen any additional reduction with the exception of the big health plans that we mentioned in the previous quarter that created the reduction year-over-year that we have. As we mentioned on the call, we had a lot of new business going in that didn't manage to offset the one big health plan loss that we had at Q1 of this year.

Do you think you could give a little bit more color on potentially any of the services that health plan may be decided to discontinue?

Yes. They decided to discontinue what would have been a Medicaid maternity program and they in-sourced it. So it really wasn't us. In fact, it was more about what they wanted to do to in-source their own work. And so in that regard -- and this is Steven, by the way, sorry, I didn't introduce myself. In that regard, it just gives a little bit more context for what they were trying to do. Obviously, there are some opportunities we're still seeing in maternal health, specifically in Medicaid. This one proved a good ROI for them to the point where they wanted to in-source that capability specifically.

The next question comes from David Grossman with Stifel.

This is Aidan on for David. I just wanted to start back on that health plan and just dive into like what reduction in that health plan is different from kind of the wins you're seeing in that space going forward in the second half? And why should we not expect any others to kind of reduce scale going forward?

Yes. So just to be clear, this is a contract that was part of the Twill business that was existing for 3 years. And by the end of last year into this year was not renewed. So it's not a loss. Overall, and this one was a relatively large deal when it comes to the revenues. And this is not -- if we are looking on the more than 100 accounts that we are having in production, at the moment, number one, we don't see a big concentration like that one. I mean the largest account that we have is in the ranges of $2 million. So at the moment, we see a very high diversification.

And number two, the specific maternity business that we have here -- it's not something that we'll not be able to support in the future, but that's not the core thing of what we are doing today. So we might see business getting in for this specific type of condition. But in general, we haven't seen with the existing business that we have, hence, the metabolic, mental health and the rest of the book of business, we haven't seen any trend of losses. There is also something that is very specific for this account that was related to the capital structure of Twill that we acquired that was also played an argument here when it comes to the relationship between us to the specific client.

We are still in relationship with the clients, and we are exploring other businesses with this specific line. So this -- we expect that at some point, we're going to see a renewal of relationship with this client. But I wouldn't look into this specific void of renewal as something that is trend in the business. The other way around, if we're looking into the trends that we have today, we have like, as Steven mentioned and I mentioned, we have 2 huge accounts that one of them is already signed. Another one is getting signed now. Both of them have a very wide national distribution that is going to impact our revenues.

So I would say that when looking into the big picture in terms of the trends of the accounts, we see a trend of more accounts getting signed. So we are trending up, plus large accounts that are getting in, 2 of them are for national distribution. One of them is for launch for the second half of 2025. So in general, we are positive, and we see this specific account as an exception. And this is something that we also mentioned in the previous quarter.

Okay. And then just on the partnership network. I think last quarter, you called out like Rula Health having 3 or 4 clients live, the sleep apnea one going live shortly. Can you just talk a little bit how you've kind of restructured that program, just the partnership program in general and kind of the positive impacts that are coming from those changes?

Yes. I think, first of all, our 5 core conditions being cardiometabolic 3, behavioral health and MSK, where we have grown our 2 conditions were mostly around adding in virtual care network to behavioral health, that's Rula. And we're still progressing with them as a partner, targeting our clients today that would like to add in those services, but they add in virtual services or our combined services for January and beyond. Again, Rula is really important for that for adding virtual care.

But then the expansion, as you noted, into sleep is kind of an extension of the conditions that we have. Again, putting cardiometabolic services together with sleep, sleep apnea, specifically obstructive sleep apnea, kind of adds us into a different category and gets us some different business around cardiometabolic, but obviously connected to a partnership. So we're trying to grow partners where we don't want to grow our own capabilities and we're specifically anchored around commercial deals where we help them and together, we can go attack the market and kind of get some business.

So we're thinking about how we add on the conditions, but strategically adding conditions or reaches or extending a reach of our condition towards clients for new revenue opportunities. Did that answer your question?

Okay. Yes. Great. And then just one last one. Just in terms of the cash flow outlook getting pushed out, I wanted to start on just the reduction of OpEx from AI. Can you go a little more into those initiatives and just like what's being recognized and where we should -- how we should expect those expenses to kind of come out over the 12 to 15 months?

Yes. So we are very aggressive in our approach when it comes to running the company efficiency, and we are obsessive about adopting AI capabilities. So if you're looking overall, since the acquisition of Twill, we did a significant reduction in the cost of the company. Some of it is duplication of roles. Some of it is offshore to -- mainly to India. And the third portion is implementation of AI agents across the organization that while we are planning to increase the revenues in a more aggressive way, we're going to keep -- take the OpEx down by 15% in the next year or so. That's the plan.

So I would look into a goal for OpEx toward the end of next year to be in the ranges of a bit more than $8 million a quarter. That's the expectation. And the areas that we are looking in are related to how we are managing the members on the platform, how we are enrolling members in an efficient way, retaining them in an efficient way and also other elements in the organization that related to the G&A areas and the sales and marketing areas where AI agents can be adopted relatively quickly. So that's the areas when it comes to the overall operation.

There are other elements that related to AI, as I mentioned on the call, that related to the product performance. This is a separate area of AI that we are managing. The OpEx specifically related to the ability of the company to utilize AI agent in order to keep cost low.

The next question comes from Theodore O'Neill with Litchfield Hills Research.

I have a question about the claims-based billing infrastructure. In your prepared remarks, you noted you're adding this. And I was wondering if you could talk about the issue this solves or what the key benefit is for you or the customer for adding this?

Yes. For us, this is Steven Nelson. For us adding in the claims-based billing, today, all of our engagement billing goes through to the admin budget of the employer or the health plan. And so as we engage, we get paid for engagement that comes from administrative budgets. Instead, we're trying to add in clinical oversight to our capability with clinical oversight, we now get to render those as claims, and that then passes through as premium.

So today, we're doing very little billing through premium and claims, and we're adding in that enabler so we can really get after what I would say is the larger profit pool of the industry. If you look at our competitive set of Omada or even if you look at what Hinge has done, and they've been very articulate in stating how they've grown and where they've grown, there's a channel play and then there's how you're rendering the revenue.

And so we're trying to get closer to claims-based billing so we can kind of close the loop on that. We think we're there in terms of the channels now, getting after TPAs, starting into PBMs and going after health plans to get to one to many types of executions. But then we need to close the loop on that by having claims-based billing infrastructure, again, clinical oversight applied to coaching, engagement, et cetera, that allows us to render claims. And that gets into CPT codes and how you bill. And really, the majority of the industry, I'd say, a significant portion, 90%, 95% of the industry is all billing through claims. So this opens up a brand-new revenue path for us.

There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.