DarioHealth Corp. Common Stock 2026 Q2 Earnings Call

Zoe, please go ahead. Thank you, operator, and good morning everyone.

Thank you for joining us today for a discussion of DarioHealth's second quarter of 2026 financial results. Leading the call today will be Erez Raphael, Chief Executive Officer of DarioHealth, who will be joined by Chen Franco-Yehuda, our Chief Financial Officer, and our Chief Operating Officer, Lara Dodo. Steven Nelson, the company's President and Chief Commercial Officer, is on medical leave. 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 Tuesday, August 11, 2026. This morning, we issued a press release announcing our financial results for the second quarter of 2026. A copy of the release can be found on the investor relations page of DarioHealth's website.

I would like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities law.

For example, the company is using forward-looking statements when it discusses expected revenue growth and contribution from signed accounts, its path to profitability and positive cash flow, the continued reduction in operating expenses and losses, its expansion of channel partnerships and distribution, expected revenue and scaling from partner-led opportunities, expected onboarding, implementation, and enrollment of large enterprise accounts, expected conversion of contracted annual recurring revenue into recognized revenue, expected expansion into care delivery, claims-based and outcomes-based models, expected benefits from care delivery participants, expected growth in recurring revenue and operating leverage, expected advantages and future impacts of DarioIQ and proprietary data assets, expected improvements in member engagement, retention, and outcomes, the anticipated benefits of artificial intelligence across the company's commercial operations and internal operations, the anticipated expansion of existing customer relationships into additional chronic conditions, the expected timing and contribution of new product offerings, the company's ability to increase revenue per customer through its multi-condition strategy, the expected benefits of provider-backed clinical care, and beliefs regarding competitive positioning and market opportunity.

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. Thank you for taking the time to be with us today. Before reviewing the quarter, I would like to step back and discuss where Dario is today, and more importantly, how we believe the business is positioned going forward. For more than a decade, we have been building the foundation of this company. We built a digital health platform connected to our FDA-cleared devices. We built one of the industry's first comprehensive multi-condition platforms. We expanded from diabetes into hypertension, musculoskeletal health, behavioral health, weight management, and additional chronic conditions. We generated extensive clinical validations with more than 100 published studies, built proprietary longitudinal data sets comprising approximately 13 billion proprietary data points, developed our AI capabilities, established national channel partnerships, and most recently, moved into provider-backed clinical care.

We have created a scalable enterprise platform capable of serving employers and health plans by delivering an end-to-end patient journey that is designed to optimize care for members while improving return on investment for employers and insurers. That investment phase has created something we believe the market is only beginning to recognize now. Today, we are leveraging a platform that has reached a level of maturity where we view each new commercial success as strengthening the value of everything already in place. The best way to think about Dario today is through the lens of compounding growth. Four drivers, each acting on a different part of the economics, and each one multiplying what the others produce. Account depth increases the revenue we generate from a customer we have already won. Distribution efficiency lowers what it costs us and how long it takes to win the next one.

AI leverage raises the revenue we generate per member while reducing our cost to serve. Value chain participation gives us the access to leverage pool of healthcare spend from the same member base. More revenue per account, more accounts, faster for less, more from every member and lower cost, and more of the value chain. Three of those four are operating across our business today. The fourth is now beginning. Let me take them one at a time. The first is account depth. More revenue per account. Healthcare purchasers increasingly want pure vendors. They want integrated solutions capable of managing multiple chronic conditions on one platform, one member experience, and one implementation. We recognized this shift years ago and deliberately built Dario as a multi-condition platform.

Every additional condition increases the eligible population within the existing customer while leveraging the same commercial relationships, the same implementation, and the same technology platform. That has the potential to generate 2 to 5 times more revenue from the same account while delivering a greater clinical value through a more integrated approach to care. The value we deliver is supported by more than 100 published studies demonstrating improved clinical outcomes across multiple conditions and significant total cost savings for our customers. Published research also shows that members managing three chronic conditions achieved better outcomes than those managing one. Better clinical results and more revenue from the same member is a rare alignment in this industry. The second is distribution efficiency. More accounts, faster, with less dependency on Dario sales resources. Over the past several years, we transformed our commercial model from primarily direct selling into channel-enabled distribution.

Through our channel partners, we reach substantially more customers without proportionally increasing our sales organization. We spend less to acquire new business, we close it faster, and our reach expands while our cost base holds. The third is AI leverage. More revenue per member at a lower cost to serve. The foundation underneath everything I have described is what we have always said, it is the data. Dario is a data company that leverages generative and agentic AI on top of what we believe is one of the industry's most extensive proprietary longitudinal clinical dataset. The reason we are confident in that position is structural. We are fully vertically integrated. We design and manufacture our own FDA-cleared connected devices. Those devices generate continuous clinical data directly from the members in real-time. That data flows into our platform. Our analytics and AI run on top of it.

From hardware to AI, the stack is ours. We do not license it, rent it, or depend on third-party inputs. Today, we hold over 13 billion proprietary real-world data points tied to actual clinical outcomes across multiple conditions at the individual member level. We believe dataset of that depth would be difficult to replicate in a short period of time. DarioIQ, our proprietary AI agent trained on that dataset, is the product expression of that advantage. It delivers personalized real-time clinical recommendations that a general-purpose model cannot match because, to our knowledge, no general-purpose model has access to longitudinal data of this depth tied to a real outcome. DarioIQ is also what makes account depth work operationally. A member managing three conditions require one current clinical experience rather than three parallel programs. DarioIQ is what resolves that into a single intervention path.

DarioIQ is in active deployment across existing book of business, and we measure it where it matters commercially. The recurring revenue it produces from customers we have already won. Based on current experience, we believe DarioIQ could contribute an increase of approximately 10%-15% in recurring revenues from existing customers over time through a higher engagement, utilization, and overall customer value. The same capabilities run inside our own operations, expanding what we can do while holding our cost base. That is a direct contributor to the reduction in operating expenses and operating loss Ken will walk you through. This is also where four drivers connect. Every new member deeper the dataset. A deeper dataset makes DarioIQ more precise. A more precise DarioIQ produces better outcomes and a higher engagement, and that is what win the next account and expand the last one.

We believe the advantage in DarioIQ capabilities may further enhance the value of our platform and datasets. Every advance in AI raises the value of the underlying data, and we own the data. The moat is not static asset, it compounds with every member we add. The fourth is the value chain participation. Access to more of the healthcare dollar. I want to emphasize that we do not view this as a new strategy. It is a natural extension of the platform we have spent the past decade building. The market is moving beyond digital engagement alone towards integrated models that connect monitoring, AI-driven insights, and clinical intervention.