Good morning, ladies and gentleman. And welcome to DarioHealth First Quarter 2020 Financial Results Conference Call. As a reminder, today’s conference call is being recorded. At this time, I would now like to turn the conference over to David Holmes of LifeSci Advisors. You may begin.

Thank you, operator, good morning everyone. Thank you for joining us today for a discussion of DarioHealth’s first quarter 2020 financial results. Leading the call today will be Erez Raphael, President and Chief Executive Officer of DarioHealth. He will be joined by Zvi Ben-David, Chief Financial Officer and Rick Anderson, General Manager of North America of DarioHealth. After prepared remarks, we will open the call for Q&A. An audio recording and webcast replay for today's conference call will also be available online in the investor section of the Company's website. For the benefit of those who may be listening to the replay or archived webcasts, this call is being held and recorded on May 12, 2020. This morning, we issued a press release announcing our financial results for the first quarter 2020. A copy of the release can be found in the investor relations page of the Company's website. Actual events or results may differ materially from those projected as a result of changing market trends, reduced demand and the competitive nature of DarioHealth’s industry. Such forward-looking statements and their implications involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. The forward-looking statements discussed on this call are subject to other risks, uncertainties, including those discussed in the risk factors section and elsewhere in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2020 to be filed with the Securities and Exchange Commission. Additional information concerning factors that could cause results to differ materially from the forward-looking statements are described in greater detail in the Company's press release issued today and in the Company's filings with the SEC. In addition, certain non-GAAP financial measures may be discussed during this call. These non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the Company's current performance. Management believes the presentation of these non-GAAP financial measures is useful for investors understanding an assessment of the Company's ongoing core operations and prospects for the future. A reconciliation of these non-GAAP measures to the most recent comparable GAAP measures is included in today's press release. And with that, I'd like to introduce Erez Raphael, CEO of DarioHealth. Mr. Raphael?

Thank you, David. Good morning everyone and thanks for joining our call today. Also joining me today, Zvi Ben-David, our Chief Financial Officer and Rick Anderson, the President and General Manager of North America. The four pillars that guided Dario ongoing transformation which we emphasize them in previous calls and I’d like to reiterate them today is this is the way that we are measuring the progress that is related to our multi-year Strategic Plan. Pillar number one is the company ongoing transformation to a software as a service model that generates higher margins recurring revenue for the company. Pillar number two is the evolution from direct-to-consumer into business-to-business-to-consumer which is something that is lower our cost of acquisition as well as creating scale and accelerating our goals. Pillar number three is the expansion of our offering from a single chronic condition that was originally diabetic into multi chronic condition and everything is under product excellence where we are striving to create the best performing product in the market. The last pillar, the fourth pillar is the positioning of DarioHealth as the market leader in the digital therapeutic space that according to Business Insider is projected to be a $9 billion market by 2025. I’d like to start with the first pillar. So, as you’ve heard in previous calls, we are – we started the confirmation on selling a standalone medical device into a full membership program that is integrating software, hardware and service already towards the end of [2019]. And the membership program include the ability to help users not just have the medical device but also get digital intervention driven by our analytics NII that helps them improve outcomes. The overall objective was to increase user engagement to improve the outcomes of the users and for the company…

Thank you, Erez. I am excited to report today on the continued progress we have made on our commercial front. However, before I go through each of the channels or as we sometimes refer to the markets, I would like to review Dario’s competitive advantages that we believe will provide for meaningful penetration in several of our target markets. In order to be successful digital health company, you must have one strong clinical data, two, good technology that is quickly adaptable and configurable. Three, an understanding how the healthcare system works and who the players are. And lastly, the ability to engage people in the solution. Arguably, many digital health companies do not achieve their goals because they lack one or more of these key ingredients. Dario has a strong clinical data across multiple studies and a large number of users. Dario is a software company at its core, with a best-in-class application built on a flexible open platform which allows us to pivot quickly to new opportunities. Dario is brought together a team that understands the healthcare market. And most importantly, Dario has strong consumer engagement, as demonstrated by its high user satisfaction scores 4.9 out of 5 on the Apple App Store, a net promoter score of 77 and 50,000 plus active users on the platform. Nothing says consumer engagement like people paying out of their pocket for a solution each month. Dario checks all the boxes, and our solution is very cost effective to deliver. This enables us to compete in markets others cannot and allows us to provide significantly better product at a significantly lower cost in the employer and health plan markets. We are very pleased with the progress that we have made over the last quarter in spite of the fact that some of…

Thank you, Rick. I will now provide a brief overview on our financials. Additional details on our results can be found in our Form 10-Q which we have filed yesterday evening. Revenues for the first quarter ended March 31, 2020 were $1.67 million, a 7.3% sequential decrease from fourth quarter ended December 31, 2019 and 25.6% decrease from that $2.24 million in the first quarter ended March 31, 2020. Revenues generated during the first quarter ended March 31, 2020 were derived mainly from the sales of DarioHealth's components and from the offering of our membership plans to our customers in the U.S. Revenue declines are attributed to lower spending in the direct-to-consumer channel and shifting efforts to the larger B2B2C channels which we anticipate will drive growth later this year. At the end of the first quarter ended March 31, 2020, we had accumulated deferred revenues of $1.27 million, the majority of which we expect to recognize during the remainder of this year. Revenues from membership services were $778,000, or 46.7% of revenues for the first quarter ended March 31, 2020, compared to $608,000, or 27.1% of revenues for the first quarter ended March 31, 2019. This increase in revenues from membership services contributed to the increase in our margins. Gross profit in the first quarter ended March 31, 2020 was $779,000, an increase of $221,000, or 39.6%, compared to gross profit of $558,000 in the first quarter ended March 31, 2019. Our gross profit increased from 24.9% in the first quarter ended March 31, 2019 to 46.7% in the first quarter ended March 31, 2020. The increase is mainly due to the increase in revenues generated from our membership plans. Total operating expenses for the first quarter ended March 31, 2020 were $10.9 million, an increase of $5 million,…

Thank you, Zvi. So in summary, it's very exciting time for DarioHealth as we keep executing on our multi-year Strategic Plan, we believe that we're going to create substantial value for our shareholders. Just few points to summarize the earning call as a takeaways. Number 1, is there space digital therapeutics. We see it growing. We believe that DarioHealth the right technology to disrupt the healthcare market as part of the digital therapeutic space. We anticipated Business Insiders anticipate that this market will grow into $9 billion market by 2025. We believe that we are well positioned to be one of the leaders in this market. And we see that COVID-19 is something that in the medium and long-term will push the transformation into digital. We also believe that we have the product excellence, prudent ways more than 50,000 users on the platform. We have clinical the clinical data that demonstrated the health -- the improved health outcomes. And as we evolved with the confirmation we are doing, in terms of the business model into SaaS, and improvement of margins. We believe that we're going to keep seeing improvement in our margins to exceed the 70% and we also believe that the transformation into B2B2C that is happening as we speak is going to help us scale our business. And we believe that we have the best-in-class management team that already did it and execute on similar models. And we believe that this is something that increased the chances that we're going to be successful. From a capital raise standpoint, we did a rising in December, so we are also very well funded to continue the transformation. With that, I would like to open the call for questions. Operator?

Thank you. The floor is now open for questions. [Operator Instructions]. And our first question comes from Alex Nowak with Craig-Hallum. Please go ahead.

Great. Good morning, everyone. Rick, you joined about four months ago. And in that time, we've seen some nice B2B wins and also the addition of behavioral health. If you step back, what have you have uncovered in the last four months? And with the Dario platform, what do you still believe needs to be modified with Dario. And the platform that that rise itself to position the business to succeed with B2B?

Thanks for that question. I think that from what I'm seeing, I was actually more pleased than I thought walking through the door in terms of the flexibility of the platform. And what that gives it the ability to do and some of the other partnership opportunities have been created. I think that -- the pivoting into the remote patient monitoring, for example, was a good example of what we were able to do with the technology. As a result, I mentioned I think we need to continue to evolve the B2B product which is underway, and I think will be completed in time for some of the deals that we see coming in the short-term. And, we need to just continue to do the marketing and get the name out there. Dario is only really started in the last few months, just a couple months before I got here, really on that transformation. And it takes a little bit of time to get the name out into the marketplace and get people to see it. We're already starting to see some traction in that and was very pleased this quarter to see the Dario name being involved in the RFPs and having some great success in that marketplace. So I think it's really a matter of finalizing the products and getting the name out there, getting people to understand what Dario is capable of.

Yes, that's great. And can you point to anything that worked well at Catasys and that you're trying to implement at Dario?

I think that the primary thing -- well, I think there's a lot of things actually. They all really sort of [boiled] down to understanding the health plan market, as I mentioned in my remarks, one other things is that a company like Dario or any company doesn't matter how big they are, is going to get a health plan to change to the way that they do things or an employer for that matter. It's very, very hard to change the healthcare system. And so a lot of times you have to be flexible and fit within how the health plans function, how the employers function. And I think that the flexibility the solution here is one of the things that really works well in that and I found the same thing to be true in Catasys. By being flexible, we were able to accomplish things that others could not accomplish. I think the other big thing is you really have to understand the way that the system works, who the players are because it's a very complex, multi individual type of sale. And so being able to understand how they see those value propositions and position the product to deliver on those is important. One of the things that we have here that we didn't have there is actually, the -- having the competition in the marketplace really helps. And being not the pioneer, but the fast follower and a couple of the market helps too because you can position yourself against the weaknesses that the other products have in the feedback that you're getting from the market.

And the pivot behavioral health that fits with the Catasys background, but it is a complete pivot from Dario’s diabetes platform. So why do you think the pivot towards behavioral health makes sense? And what sort of additional investments that Dario need to make to succeed in that market?

So it -- let me be clear in terms of what we've done from a behavioral health perspective, and there's two pieces to it. One is that, we very well understand that behavioral health and chronic condition management are tied together, if you do not deal with the behavioral health portions. You're not going to be successful with chronic conditions where those exist. But rather than have behavioral health as a separate add on module, as some of the other companies in the space have what we're doing is pushing behavioral health into all of the other modules. And so you won't be able to go through anything with DarioHealth without there being a background in behavioral health where we'll be looking for issues and potentially coaching and steering people to the right resources to address those. But in the near-term, what we've done is really add coaching, which was existing Dario coaching that has been repurposed, if you will, to provide coaching around stress, anxiety and loneliness, especially in the current environment. That's why we rolled it out quickly. You will always find those coexisting with chronic conditions. And so that's why we think that it's important, but we're not building a standalone behavioral health module with coaches and psychologists and things like that we will use partners to address that as needed. But what we're really focused on is making this part of the overall product offering.

Okay, that's helpful. And then I think one of the biggest question is among investors is, how many names and what sort of names as Dario partner who with or is in the pipeline. So Erez or Rick, are you -- as you're starting to win deals here with clinics, employers and payers? Should we expect to see a press release with the names of these actual organizations? So we can start to get an idea for the quantity and the quality of the names and also is there any way to come up with going forward a standardized lives under contract metric that you can share in each of these earnings calls going forward just so we can start to benchmark the performance?

Rick, can you please take it?

Sure. So, we will endeavor as we will -- I mean, we will announce what we do. And we will endeavor to let everybody know who those partners are that we're working with. I am very familiar with the fact that lots of partners want to control their name as it gets out there, but I think that we will be able to announce some very interesting deals for people as it relates to the metric absolutely, we're looking now at what are the right metrics so that everybody can understand or progress in the business as we move it forward. And, go from -- essentially six months ago a standing start to as we move through the rest of the year, so everybody can assess the progress because that's the way that we look at it and understanding how many people do we have on platform and where are those people coming from? And what are the opportunities that are created by the additional deals that we're signing?

Okay, got it. And you still do have a good amount of business today with direct-to-consumer. So what has been the dynamics within April or May around diabetes equipment purchases by consumers at Amazon, bestbuy.com, walmart.com?

Yes, so and -- thanks for the question, Alex. So you are right we are – we still have the business and we have a very powerful business on the membership side, we have seen that in some cases, users because we are out of pocket business on the direct-to-consumer. We have seen that when the old crisis started some users had challenges in terms of paying out of pocket, but on the other hand, we have seen a growing demand because a reduction in the cost of acquisition because the importance of such a solution for those that are under high risk for COVID-19 like the flu, diabetes or hypertension. So overall, it was -- it was something that was offsetting. With regards to the marketplaces, we felt that Amazon is getting stronger on behalf of others. So Amazon, we believe had their own challenges and one of the things that they did is prioritizing suppliers like Value Health that are dealing with health products and this is what we got priority by Amazon. And this is also something that helped our members. So overall, we cannot say that it was pushing the business forward, but it was not reducing it as well. So we are more or less table here.

Okay, got it. And then just really quick, clean up questions, a huge jump in stock-based compensation expense in the G&A line, anything that happened in the quarter to lead to the huge jump?

Yes, I think that that was one of the things that what we did is like expanding the team and advisory team and those that are helping the company taking to the next stage. We bought a very powerful team. And this is something that we are doing a lot professionally. We were doing it every few years in order to make sure that the team Board of Directors and the service providers are all incentivized to take the company to the next stage. So that's something that -- it's a one-time.

Okay. And how long do you expect the current cash balance to last through?

So we updated our financial reports and we reported that September 2021 is well, the cash should be sufficient for. So we raised significant amounts of money in December with very good group of investors, very supportive investors. More than a third of the deal was done by investors that already support the company. So we believe that we are building a community of believers which will help us take the company to the next stage also from a valuation standpoint.

Okay, excellent. Thank you.

Thanks, Alex.

And our next question comes from Ben Haynor with Alliance Global Partners. Please go ahead.

Good morning, gentlemen. Thanks for taking the questions. First off for me when employers are going through Vitality and building these benefits plans. I know that Vitality has an interest in the company itself, but how many other options are they presenting or are on the menu that could be considered digital health or potentially competitive to Dario on some level?

They certainly have a couple on there that could be considered competitive. And actually, I think one of the things we really welcome is that opportunity to be set up side-by-side for those opportunities. I actually consider that a win, if somebody will take a look at us side-by-side. So we view that as an advantage.

In the sense of your -- the strength of your offering, but also that there are multiple offerings out there. That's so maybe employers believe that well, please I should, should choose one of these.

Yes, I think there is a couple of things that are going on in the marketplace. I mean, clearly, we see an expansion in the diabetes and hypertension, chronic condition management with these kinds of platforms. And I think that speaks to the overall need that the market is seen. And I think that you're seeing a growth and acceptance that this isn't something should we do it or not do it, but -- which solution should we use to do it. And I think that that works to our advantage, as I mentioned earlier, we are -- the fact that we're not necessarily the pioneer, somebody else has opened this market, which is, I mean, I've done it, it's really hard to do, and it costs a lot of money and takes a lot of time. And we're going to take advantage of that. And the fact that, we believe we've got a best-in-class solution that we can provide at an extremely competitive price, I think speaks well for our ability to compete in that market.

Okay, thanks. The color is helpful there. And then just in the -- in terms of the insights that you're getting, if getting to the Vitality program, all of the employers that have made a choice so far do you get a sense on how often you're winning versus the competition on the platform or don't you get that detailed of data or any color they can -- you might be able to share there?

I think that's more than just a Vitality question. I think that's, a question of as we go through the process, we're really in the sales window right now for these types of opportunities. So it's a little early for me to comment on, what those statistics look like would hope to have more of that available here in the future.

Okay, so basically, the way it works, if I'm understanding it correctly, is right now the employers are going in figuring out what they want to offer to their employees, the employees later on this year make a decision and further enrollment and then the likely most of the revenue that is generated or will be generated shows up probably starting in 2021. Is that the right way to think about it?

I think we will start to see revenue at the back half of 2020. But then, the normal sales cycle would have employers that are bind to in RFP process during the sales cycle would be implementing in January 2021. But I do believe that we will see some revenue this year based on some of the contracts.

Got it? And then just lastly, for me in terms of where the efforts are kind of being directed at present and going forward, I mean, are you spending, if you had to break it down how much time are you spending on going after health plans versus employers versus RPM providers? And, how does that all shake out?

About -- probably about 80% of our efforts over the last quarter have been spent in the RPM in employer space, and the remainder of getting ready to pursue the health plan space. And part of that was making sure that we had the team in place and really have spent the last 60 days let's say in terms of getting ready for launching that. So, going forward, I expect we'll see a little bit more health plan effort than we have for the last couple of months, but I think that in the short-term, a lot of the efforts going to continue to be employers. And we've seen some nice traction in the RPM market. So we did pivot resources into that.

Okay, great. Thanks for all the color there. Gentlemen, that'll do it for me. Thanks for taking the questions.

Thank you.

Thanks for that.

And that does conclude our Q&A session for today. I'll turn it back over to a Erez Raphael for any closing remarks.

So thanks, everyone, and thanks for joining our call today and looking forward to see you in our next call. Have a good day. Thanks.

And that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. And have a great day.