DarioHealth Q3 2026 Earnings Call Transcript

DarioHealth (NASDAQ:DRIO) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

DarioHealth reported a 6% year-over-year increase in revenue for Q3 2026, driven by existing customer expansion and a new state health plan in New Jersey.

The company is focusing on four strategic drivers: account depth, distribution efficiency, AI leverage, and value chain participation, with significant expansion in multi-condition offerings.

DarioHealth emphasized the convergence of consumer and payer-funded healthcare, with a notable 48% year-over-year growth in consumer revenue, now representing 53% of total revenue.

The company managed to reduce operating expenses by 10% year-over-year, and operating loss improved by 15%, reflecting effective cost management.

DarioHealth is on track for revenue acceleration into 2027, with plans to convert $13.1 million in contracted and late-stage annual recurring revenue into recognized revenue.

Management highlighted the potential of new product offerings like women’s health and sleep solutions as part of its multi-condition strategy.

The company is leveraging AI through DarioIQ to enhance member engagement and reduce operating costs, expecting a 10% to 15% increase in annual recurring revenue from existing customers.

DarioHealth’s channel partnerships, accounting for 75% of new accounts, are key to its growth strategy, with plans for continued expansion in 2027.

Full Transcript

OPERATOR

Good morning ladies and gentlemen and welcome to DarioHealth’s third quarter 2026 results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, November 12, 2026. I would now like to turn the conference over to Zoe Harrison, VP, Accounting and Corporate Development at DarioHealth.

Zoe, please go ahead.

Zoe Harrison (VP, Accounting and Corporate Development)

Thank you, operator, and good morning, everyone. Thank you for joining us today for a discussion of DarioHealth’s third quarter of 2026 financial results. Leading the call today will be Erez Raphael, Chief Executive Officer of DarioHealth. He’ll be followed by John R. Palumbo, Chair of the Board, Lara Ann Sherman, our Chief Operating Officer, and Chen Franco-Yehuda, our Chief Financial Officer. An audio recording and webcast replay for today’s call will also be available online as detailed in the press release.

For the benefit of those who may be listening to the replay or archived webcast, this call is being held on Thursday, November 12, 2026. This morning we issued a press release announcing our financial results for the third 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 signed accounts, the timing and extent of revenue recognition under existing customer agreements, the Company’s revenue outlook and financial performance expectations, 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 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, the anticipated benefits of artificial intelligence across the Company’s commercial operations and internal operations including expected cost savings, productivity improvements and potential incremental revenue opportunities, 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, the expected timing of revenue acceleration and of activation under health plan agreements, beliefs regarding the convergence of consumer and payer-funded health care and the re-platforming of chronic care management, the expected delivery of GLP-1 and other therapies within payer programs and marketplaces, the expected contribution of women’s and men’s health programs, 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.

Erez Raphael (Chief Executive Officer)

Good morning, everyone, and thank you for joining us. Before we get into the quarter, I want to start with the leadership change I’m very excited about. We recently announced that John Palombo has become a Chairman of our Board. John joined our Board in April of 2026 and since then he has worked closely with our management team week after week on our commercial strategy execution and on where this market is going. On his first call as Chair, John will share the Board’s view on the market and Dario’s position in it.

In the second quarter of 2026 we described how DarioHealth compounds across four drivers, each acting on a different part of the economics: account depth, distribution efficiency, AI leverage, and value chain participation. Let me give you a quick update on each one of them. Account depth means more revenue from the customers we already won. Healthcare purchasers want fewer vendors and one integrated platform across conditions, and that is how we built DarioHealth.

More than 80% of our contracted and late-stage recurring revenue is now multi-condition. Every additional condition has the potential to generate two to five times more revenue on the same account through the same implementation and the same relationship, and members managing multi-conditions on our platform achieve better outcomes than those managing one. Better clinical results and more revenue from the same client are rare alignment in this industry.

Distribution efficiency means more accounts, faster, for less. Our channel partners continue to open large populations for us, including our third state health plan, this one in New Jersey for MWell this quarter, without a proportional increase in our sales organization. AI leverage means more revenue per member at a lower cost to serve. We are fully vertically integrated from our own FDA-cleared devices to more than 13 billion proprietary data points to DarioIQ, the AI engine that leverages our proprietary data and technology infrastructure. Every new member deepens the data set and every advance in AI raises the value of the data we own. That advantage compounds. This quarter, DarioIQ moved from an individual engagement program to an integrated system that predicts which members are about to disengage and acts before they do.

Lara will share more about those results. Value chain participation means access to more of the healthcare dollar. During the second quarter of 2026, we said this fourth driver was just beginning. Since then the market has moved even faster than we expected toward payers funding the therapy itself and not only the digital engagement program around it. John will speak to that in a moment. We believe that this quarter shows the model is working, with revenue up 6% year over year, existing customers expanding into additional conditions, and a new state health plan signed for our channel. Lara and Chen will take you through the details. We continue to expect revenue to accelerate at the end of 2026 into 2027, driven by the conversion of contracted and late-stage annual recurring revenue.

At the same time, something bigger is happening in our market. For years the industry treated consumer health and payer-funded chronic care as two different businesses. We believe that they are becoming one, and DarioHealth sits exactly where they meet. John Palombo, our new Chair, has spent his career inside the payers, providers, and health services organizations that are shaping this shift. So I’ve asked John to walk you through this change. John.

John R. Palumbo (Chair)

Thank you, Erez, and good morning, everyone. Before I go further, I want to thank Yoav Shaked for his service as chairman. Yoav helped guide this company through a formative period, and I’m glad he continues to serve on the board. As we move into this next chapter, I want to start by telling you why I accepted the role. I have spent more than 40 years in healthcare, from early-stage companies to Fortune 50 enterprises. I led the provider business at AmerisourceBergen, I served as Chief Operating Officer of Scripps, and I sit on the boards of companies across care delivery, medical device and diagnostics, conversational AI, and digital health.

I have seen a lot of platforms. Very few have what DarioHealth has built, and the market trends now underway are moving toward what DarioHealth already does. When I joined the board in April of 2026, I expected to help with commercial strategy. What I found working alongside Erez and this team was a company that had built, over more than a decade, the capabilities the market is now moving toward and a strong team with a culture focused on execution, consumer experience, and trusted outcomes.

I’m confident in this leadership team, the company’s capabilities, and the direction it is going. Let me explain what I mean by where the market is going. For a decade, consumer-paid health and payer-paid chronic care were separate markets served by separate companies with separate economics. The consumer companies won the consumer’s choice. Point solutions won a place in health plans’ benefit. Almost no one did both. That wall is coming down, and I see four forces pulling it down at the same time. First, consumers now choose their own front door.

Consumers are increasingly using digital tools, including AI-enabled services, to access health information and navigate care options before engaging with healthcare providers. At home, people have easy access to self-diagnose and self-care. Easy access has never been more essential in health and care management due to our growing shortage of caregivers. Second, pharma is going direct to consumers. Manufacturers now sell branded GLP-1 health and weight therapies straight to consumers.

Third, payers are redefining how they engage the members and redesigning benefit plans. Several of the largest insurers are launching plan designs with fixed upfront costs instead of deductibles, and those plans need proven programs to attract, navigate, and retain members and to optimize care resources. Fourth, payers are bringing consumer choice inside the benefit. We see this directly with one of the largest national insurers that has publicly repositioned itself as a consumer health company.

Across our health plan relationships, we are in active discussions about extending from behavioral digital programming into clinical provider services, including access to FDA-approved branded GLP-1 prescription medications prescribed by licensed healthcare providers. The DarioHealth platform has been built to support this market model convergence and that all the major players are moving toward. That last point is the one I would ask you to remember. The convergence of business to consumer, B2C, and business to business to consumer, B2B2C, is accelerating and bringing two large, previously separate markets together. Payers are moving from buying programs that sit around a therapy to buying the therapy itself delivered inside a managed and measured program.

For DarioHealth, that translates into a much larger share of the healthcare dollar, and we are already seeing it in our own results. In the third quarter, consumer revenue grew approximately 48% year over year and represented 53% of total revenue compared with 38% a year ago. So here’s how I think about it. The consumer picks the door. The payer pays for the chronic condition behind it. The value moves to whoever owns the path between the two. Owning that path requires two things at once. You have to be chosen by the consumer, and you have to be trusted by the payer. Consumer telehealth companies have proven the demand, but most lack consumer acquisition and retention assets, validated payer-grade evidence, and a chronic care engine in front of and behind the prescription.

Point solutions have the payer contracts, but consumers rarely choose them. And here is what is essential to understand: DarioHealth has both. It started as a consumer company selling FDA-cleared connected devices directly to people living with diabetes. It grew into an enterprise platform with 184 customers as of 9-30-2026. It holds more than 13 billion proprietary data points and more than 100 peer-reviewed published studies, and an independent third-party analysis estimates meaningful healthcare cost savings for our users.

It is very hard to replicate, and it becomes more valuable as AI improves. DarioHealth is also multi-conditioned by design: one platform and one member experience across diabetes, hypertension, weight management, musculoskeletal and behavioral health, and more recently sleep and women’s health, all supported by an evidence base built across our established cardiometabolic and behavioral health programs. That is exactly what payers consolidating their vendors are asking for, and it is what makes DarioHealth a natural partner as payers bring specific therapies into the benefit.

This is why I believe chronic care management is being reshaped so that it is reachable from either the consumer door or the payer door. DarioHealth did not pivot into this model. It built it before the market asked for it, and it is the expansion the platform is built for. It also changes how I look at new categories. Women’s and men’s health are not lifestyle side bets. They are chronic care in disguise and can be early indicators across multiple conditions, including cardiometabolic risk.

They are natural consumer entry points into the conditions DarioHealth already manages. These also sell into the employer and health plan relationships DarioHealth already holds. DarioHealth Women is the first example. Let me say a word about how the board approaches this. Our focus is on converting the contracts DarioHealth has already signed, scaling through channel partners, and building the capabilities that let payers fund what consumers choose. Our job is to make sure the company captures the full strategic value of the position it has built. For more than a decade, the industry treated consumer health and chronic care as two different businesses. They are becoming one.

The convergence flywheel is our differentiated value, and I believe DarioHealth is built for exactly that moment. And this is a large and growing area of need. According to the Partnership to Fight Chronic Disease, chronic disease is projected to cost about 2.2 trillion a year in medical spending, roughly 40% of the nation’s more than 5 trillion in annual healthcare spending, and 93% of Medicare spending goes to beneficiaries with chronic conditions.

I look forward to sharing our progress with you. With that, I will hand it to Lara to walk you through our commercial execution.

Lara Ann Sherman (Chief Operating Officer)

Thanks, John. At DarioHealth, we have more than 180 signed accounts across employers and health plans. Five are Fortune 50 companies and approximately 25% of our B2B2C client base comes from the Fortune 500. I want to focus on four areas we are refining in our strategy to accelerate revenue: winning new accounts, growing existing accounts, converting health plan agreements into revenue, and bringing new capabilities to market. First, let’s discuss new account growth. Channel partners continue to account for about 75% of our new accounts, expanding our access to self-insured employers and health plan populations with shorter sales cycles and lower customer acquisition costs and a direct sales model. Importantly, we now have multiple sales teams supporting the strategy rather than relying on a single team. A good example of this traction is our in-quarter win through the Amwell channel partnership.

We were selected by one of New Jersey’s largest health plans, representing about 1.5 million covered lives. This is our third state health plan signed through Amwell in the past 12 months following Arizona and Florida. Other significant channel wins during the third quarter of 2026 include a commercial opportunity covering more than 100,000 lives and a regional health plan ASO opportunity representing approximately 250,000 lives. Launch planning is expected to begin in mid-Q1 2027 and will extend through 2027.

These opportunities serve geographically dispersed employer populations, potentially nationwide. Our channel model is designed to repeat. In fact, our channel-market revenue is on track to deliver 2x growth year over year with the potential to replicate that performance again in 2027. We are actively developing additional innovative channel partnerships and expect channel distribution to remain the primary engine of our growth into 2027 and beyond.

We have also made DarioHealth easier to buy. Self-insured employers can contract with us directly, through a reseller, through their health plan or TPA, or through a marketplace. By simplifying selection and contracting, and with automated SSO implementations already established with various channel partners, we are making it easier for consultants, brokers, and clients to activate Dario. This is one of our most practical growth levers. A second focus is growing the accounts we already have. This is where our multi-condition strategy is most evident. We grow accounts in two ways: we land with one condition and expand, and increasingly we win multi-condition contracts from the beginning. Most of our new enterprise opportunities now involve multiple conditions. These results are reflected in the composition of our business. More than 80% of our contracted and late-stage recurring revenue is multi-condition.

This demonstrates how the strategy is compounding. An in-quarter example is a leading regional grocery retailer, an existing self-insured employer client which expanded its contract to include Dario Women, our program supporting women navigating perimenopause and menopause. A third focus area is converting health plan agreements into revenue. We ended the quarter with approximately $13.1 million in contracted and late-stage annual recurring revenue, approximately 40% of which comes from health plan ASO agreements. An ASO, or administrative services only, agreement gives us access to a health plan’s self-insured employer book. Revenue builds as individual employers activate, their members enroll, and eligible populations expand.

While conversion takes longer than a direct employer contract, it provides access to a substantially larger population and the potential for a stickier revenue stream. To accelerate this process, our channel sales efforts are increasingly moving toward co-selling, working alongside our health plan partners to engage local employers and consultants directly and drive ASO activation. The fourth area of focus is our speed to market, turning new capabilities into commercial opportunities. Our integrated GLP-1 program spans three channels: our direct-to-consumer shop, employer programs, and health plan marketplaces. FRING goes beyond digital health support for members taking GLP-1 medications. It provides a digital front door to clinical providers and medication access and management alongside innovative employer program designs.

These include narrow networks, GLP-1 carve-outs, and alternative employer subsidies that extend beyond traditional PBM carve-out models, including approaches that provide access to directly sourced FDA-branded medication. In the second quarter we also launched Dario Women and Dario Sleep. Both are designed as add-on programs to our existing cardiometabolic platform, which addresses diabetes, hypertension, and weight management. With one in three women developing metabolic syndrome during the menopause transition, and nearly 45% of our book of business represented by women over the age of 40, this represents a relevant market opportunity and a natural cross-sell opportunity within our existing customer base and a broader commercial market.

Dario Sleep enables eligible members to complete a one-night, clinical-grade home sleep test, with real-time data transmitted directly to licensed healthcare providers for evaluation. Data show that cardiometabolic patients with obstructive sleep apnea generate approximately 50% higher annual medical costs. This creates a logical opportunity for existing cardiometabolic customers to add our sleep program, with the potential to enhance in-year medical cost savings while addressing a broader commercial population.

Technology and clinical evidence also further strengthen our commercial opportunity. DarioIQ, our proprietary AI layer built on more than 13 billion real-world data points, advanced this quarter from individual engagement programs to an integrated system that predicts which members are about to disengage and acts before they do. The early results are strong. Members that it flags as at risk for disengagement are disengaging at maybe three times the rate of other members.

This gives us time to act. Members we reach early in their lapse come back within a week at 1.7 times the rate of those members that we do not reach. We have also started a randomized trial of AI behavior agents with encouraging early signals. Last quarter we said DarioIQ could add 10% to 15% to our B2B2C annual recurring revenue from existing customers. The results we measured this quarter now support that, up to approximately 14% in engagement-based ARR.

Last quarter it was an expectation. Today it is built on measured results. DarioIQ is now deployed across the organization and is one of several contributors to an approximately 10% year-over-year reduction in operating expenses. Clinical evidence and in-year medical cost savings also contribute to strengthening our commercial position. DarioHealth now has more than 100 studies and scientific publications, including 27 through the American Diabetes Association. Additionally, we announced on October 6th a press release of a third-party analysis that evaluated 17 published Dario studies and showed an estimated 2.5% to 7.2% annual reduction in total healthcare costs across a covered population.

We will continue to use real-world health outcomes and claims-based data to demonstrate how DarioHealth delivers in-year savings and clinically significant health improvements. Finally, I want to leave you with one broader market observation. We are increasingly hearing from our health plan, employer, and marketplace clients that employer-sponsored benefits are moving toward a hybrid model, combining traditional benefits with direct-to-consumer access for services and medications that may be better suited to a carve-out offering. The objective is to help offset payer costs while providing members with quality alternative care options and greater flexibility.

DarioHealth is well positioned to address this opportunity with an established direct-to-consumer channel that has served more than 1 million consumers, alongside our growing B2B2C business. At the core of this model is strengthening member self-agency, helping individuals take greater ownership of their health through behavior change while ensuring appropriate escalation to care when needed. That is precisely the platform that DarioHealth has built.

With that, I will turn the call over to Chen to review our financial results.

Chen Franco-Yehuda (Chief Financial Officer)

Thank you, Lara. Our third quarter results reflect continued progress in building a more efficient business. Revenue for the quarter was $5.3 million, up 6% from $5.0 million in the third quarter of 2025 and up 3% from $5.2 million in the second quarter of 2026. Gross margin was 59% compared with 60% in the third quarter of 2025 and 62% in the second quarter of 2026, primarily reflecting the lower tariff refund benefit in the third quarter and a higher direct-to-consumer mix, partially offset by lower hosting costs.

Our non-GAAP B2B2C gross margin remained at approximately 80% for the 11th consecutive quarter. Operating expenses were $11.2 million, down 10% from $12.5 million in the third quarter of 2025. Sequentially, operating expenses increased, primarily reflecting higher stock-based compensation, mainly in general and administrative expenses. Operating loss improved 15% year over year to $8.0 million, and net loss improved to $8.8 million compared with $10.5 million in the third quarter of last year. Non-GAAP operating loss narrowed to $5.3 million compared to $6.0 million in the third quarter of 2025.

A reconciliation of GAAP to non-GAAP measures is included in our earnings press release. For the first nine months of 2026, operating expenses declined 17% and operating loss improved 22% compared with the same period last year. We continue to apply AI inside our own operations, and it is one of several contributors to lower operating costs alongside lower headcount, lower stock-based compensation, and post-merge integration savings. As of September 30, 2026, we had $31.2 million in cash, cash equivalents, and short-term deposits, following our July 2026 registered direct offering priced at the market under Nasdaq rules.

We believe we have the resources to execute on our priorities as contracted revenue is recognized and our new programs are implemented. From a financial perspective, we believe that what matters most is the operating leverage. In our model, the platform, the commercial infrastructure, and the clinical evidence are already built. As signed accounts activate and existing customers add conditions, we expect each additional dollar of B2B2C revenue to carry a high gross margin and to contribute to narrowing our operating loss and cash burn.

With that, I will hand it back to Erez.

Erez Raphael (Chief Executive Officer)

Thank you, Chen. Let me close with two things. First, the model we described last quarter is working. Account depth, distribution efficiency, and AI leverage are compounding in the business today, and the fourth driver, value chain participation, is moving faster as payers bring therapies into the benefit. We remain on track, as we said, for revenue acceleration in 2027 as late-stage and contracted arrangement accounts convert. Second, the market is moving toward us. Payers are bringing consumer choice inside the benefit and they are moving from buying programs around therapy to buying the therapy itself, delivered inside a managed program. Very few companies can serve both the consumer and the payer on the same platform.

And again, I want to thank our employees for their dedication to our members and to each other, our channel partners for their trust, and our shareholders for their continued support. And I want to thank John for stepping into the chair and Yoav Shaked for his years of leadership as a chairman. I will now turn the call to the operator for a Q&A session.

OPERATOR

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press the star key followed by the number one. On your touchtone phone you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star key followed by the number two. One moment please, while we assemble the queue. Your first question comes from Charles Rhee of TD Cowen.

Please go ahead.

Charles Rhee (Analyst at TD Cowen)

Yeah, thanks for taking the questions. Just wanted to understand a little bit about, I think last quarter, I guess. I’m sorry, let me start this way. In the press release you talked about contracted and late-stage ARR about $13 million. Can you talk a little bit about sort of the timing for how we should expect that implemented? I think last quarter you noted we should start converting, you know, some of this to revenue in the fourth quarter. Is that still the right trajectory, and maybe give us a sense for, you know, how much of a step-up we should see, you know, going into fourth quarter and then into next year.

Erez Raphael (Chief Executive Officer)

Yeah, thank you, Charles. So as we mentioned on the earnings call, we think that this $13.1 million will be converted into 2027 and also some of it in 2028. What we disclosed is that some of the $13.1 million is an ASO business. Usually the ASO business is something that is taking longer to build and to implement. More than 50% is not an ASO business. So we think that what we’re going to see is gradual ramp up toward the end of the year, mainly the beginning of next year, and then during 2027 and into 2028.

We did have more wins this quarter. The Jersey is one of them. But we didn’t count it on top of the $13.1 million for now because it is also an ASO business and we wanted to play conservative with the total contracted ARR that we are counting in. When we are looking into the consensus of the analysts for 2027, we think that it’s aligned with the statement that I just provided.

Charles Rhee (Analyst at TD Cowen)

Okay, so if we look at where consensus is for ’27, you feel that’s a comfortable range to think of based on what you’re seeing right now?

Erez Raphael (Chief Executive Officer)

Yes, the answer is yes.

Charles Rhee (Analyst at TD Cowen)

Okay. And then obviously, expenses. You managed that very well. Maybe talk about, sort of, are we still on track for reaching a break-even as we get into 2028?

Erez Raphael (Chief Executive Officer)

Yes. I mean, if we are looking into the contracted ARR, additional business, plus the additional things that are getting in, including what we signed this year, I think that we’re in the trajectory to hit breakeven in 2028. Yes.

Charles Rhee (Analyst at TD Cowen)

Maybe a question around sort of this GLP-1 support. Can you talk about what are your clients looking to do, maybe either on the health plan side in terms of covering GLP-1s, because a lot of the anecdotes and discussions when we speak with consultants is that employers are slowly actually pulling back from coverage. And just so, just want to understand what you’re seeing right now in terms of GLP-1 coverage overall and what that kind of means for sort of a GLP-1 support program.

Larry

Hi, it’s Larry. I’ll take that. The first thing is the space is changing. It’s a consistent change of flight. So what we’re seeing and we’re hearing, almost from some of the largest consulting houses, is that there’s almost a divide of about 50% in the market. So 50% of employers in more traditional industries like financial services who are choosing to actually move away from traditional PBM structure, be hit by the rebate change in that, but to pursue a different strategy for the GLP-1, versus the, I would say, industries that have higher turnover — so high tech as an example — where they are staying with more of a traditional structure.

For those who are keeping reimbursement, then there’s a whole other group as well who are choosing not to reimburse. And what they’re wanting to do — and this is where the space is really interesting — is they’re looking for alternatives or alternative strategies, saying, as an example, we want to provide some kind of employee funding and looking to either direct-to-consumer offering or bringing in alternative ways of subsidizing that could include subsidizing or incentivizing members to do a behavioral-based program and then go with more of a hybrid PBM, which is emerging out as well, that would have more direct access to FDA-branded drugs.

So there’s a lot going on. There’s a lot of conversation we have with a client, existing client, that doesn’t include looking at their strategy, but those are the three things: either having a more gated access to the drug through traditional PBM, carving it out with no reimbursement but having some type of a subsidy support, or looking at a hybrid opportunity that could go as creative as direct-to-consumer.

Charles Rhee (Analyst at TD Cowen)

And can you talk about how then at DarioHealth, how you guys would support customers if they are choosing more of a direct-to-consumer approach? And I know John, you had mentioned that one of the trends that you’re seeing is obviously the shift to direct-to-consumer. And we are seeing pharma in their development of new drugs also looking mainly — not increasingly, but starting to look — at a direct-to-consumer approach in their development plans as well.

Maybe talk about how DarioHealth could be supportive in that shift.

Larry

Would you like to take it?

Lara Ann Sherman (Chief Operating Officer)

Yeah, absolutely. So from that end, what we’re seeing is, when the discussions come in, a lot of it has to do with the subsidy — of how they’re going to subsidize it. So it can get, there’s a couple of flavors. So for the employee who is wanting to say, you know, they could even be in discussion on narrow network. So it could be a case of they’re wanting to have direct access to a branded drug, but they actually want to make sure there’s a really rigorous clinical protocol in place.

And so DarioHealth is stepping up, creating a rigorous clinical protocol that would have an employee or member go directly to a narrow network of providers through DarioHealth that would then script through to Lilly or Novo so that the employee is benefiting from rigorous care, appropriate care, and discounted drugs at that point, or going direct to the brand. So that’s one pathway. The other pathway is in the marketplace where we’re working through various solutions, where a member would come in through a marketplace and have the option through that provider care to send scripts to, really, a pharmacy of their choice. So we’re answering that call in a few ways: it’s providing rigorous care for those who want to make sure that protocol’s in place; providing choice of access of where the member can get their drugs from, whether it be their pharmacy or direct to brand; and there are emerging new groups that we’ll be talking about in the next several weeks on hybrid PBMs who have other options for such types of employer arrangements.

Charles Rhee (Analyst at TD Cowen)

But if an employer doesn’t cover, is there anything that you can work with them, or is that just… that’s the area where then—

Lara Ann Sherman (Chief Operating Officer)

No, not at all, actually. That’s exactly — in fact, that’s a great question because that’s exactly where we’re stepping up. So for those employees, and we know now statistically it’s about 50%, there’s a few things. Number one, the price differential on going direct to Lilly or Novo is quite substantial. So for the employer who wants to take on that option by funding a program like DarioHealth to really work on the behavioral side and then allowing DarioHealth to work with either a designated provider network through the employer or through the member’s own practitioner, those scripts can be sent directly to Lilly or Novo.

So that oftentimes is actually a far less expensive route for a member than through any deductible they may be accountable for. These employers are also then able to provide other savings — HSA, FSA savings — through alternative PBM arrangements or direct buy through a DarioHealth direct-to-consumer channel. So we absolutely are working very much so with those employers who are saying we want to carve it out. That’s probably about 80% of our commercial conversations at the moment. Does that make sense? I mean, I’m happy to go into more detail if needed. Are we still connected?

OPERATOR

Yes. I don’t see any action on his line. I think he might have dropped the call.

Lara Ann Sherman (Chief Operating Officer)

Okay, got it. I was like, oh dear, I have not answered sufficiently. Anyway, if anyone has any more follow-up questions on that, it’s a passion topic, it’s a hot topic, and we’ve a lot of detail to share on that.

OPERATOR

All right, your next question comes from David Grossman from Stifel. Please go ahead.

Aidan Kniff (Analyst at Stifel)

Hi all, good morning. This is Aidan Kniff on for David, thanks for taking my questions. I wanted to start with the new women’s and sleep solutions you’re adding to the multi-condition platform. How should we think about the incremental revenue opportunity coming from those? Is it primarily just larger eligible populations can use the solution, or an increase in revenue per member? And when should we start seeing those kind of contributions hit the model?

Lara Ann Sherman (Chief Operating Officer)

Right. Another two really exciting chapters in DarioHealth’s evolution. So the first thing, David, just to ground it, is we are firmly rooted in cardiometabolic health, and it is our thesis based on data that perimenopause and menopause, as well as sleep disturbances like obstructive sleep apnea, compound to really impact — worsen, if you will — cardiometabolic outcomes. It basically makes care more expensive. So our fastest track to be able to help those members and to add revenue to DarioHealth is to look within our existing book of business. We, in a very early go-to-market strategy, already have two early adopters going live 1/27. So the opportunity is as follows: existing book of business — it’s an easy routed pathway to add on women and sleep to the existing cardiometabolic program.

It’s a very simple process for us for enhanced programming that also has a bridge to move those members to appropriate care — appropriate care meaning a woman who may be a candidate for hormone replacement therapy, or on the sleep side, folks who are at risk of sleep apnea, likely obstructive sleep apnea. So from a revenue perspective, the opportunity is in existing book of business as either a retention tool — which we’ve seen actively happen — or as an expander, part of our land-and-expand strategy. And for net new clients, there’s a tremendous demand out there both on unaddressed women’s health — where we know that one in three women who are at that stage of midlife change, menopause, perimenopause, are at risk of metabolic diseases — so there’s a tremendous call to get involved to again avert the cost curve.

And on the sleep side, just one data point as an example, CPAPs — approximately $2,500 — have a very low adherence rate, very, very low. So for our plan members or payers out there who are providing CPAPs that are going unutilized, you’re getting hit on unutilized equipment and worse-than cardiometabolic outcomes. So it’s just a lose-lose versus having an at-home, really easy-to-experience sleep test and having a therapeutic that’s appropriate that the member’s part of selecting.

That could be a GLP-1 drug, it could be an oral, it could be a positional pillow — all significantly less expensive than a CPAP — and will have a high adherence rate, and then scripting CPAP where it’s absolutely appropriate. So these are the pathways we’ve designed. We’ll be actively taking them to market in Q1 for sales cycle. We are prepped, we’re ready in the back end, and early indication discussions through existing clients, where we kind of trial-socialized it, have come back with tremendous enthusiasm about the offering.

Aidan Kniff (Analyst at Stifel)

Great, thank you. I appreciate the kind of incremental detail there. And then just on a follow-up on the channel partner business, how much of the growth opportunity is coming from existing channel partners versus adding new relationships? And then is there a way to quantify how much implementation time is needed and the time to ROI landing from different clients versus, like, just direct sales notion?

Erez Raphael (Chief Executive Officer)

So we already have the channel partner strategy in place and also the partners themselves in place, and we keep disclosing the names. It’s Solera, it’s American Well, and we are expanding through existing channel partners. So to make a long story short, we do have them in place, and this is why the timing is going to be sooner rather than later. We do have another big channel partner that is just about to be signed, and that one is going to add more.

That one is going to be signed alongside with a health plan that is going to be announced alongside this channel partner. But in general, all the channel partners’ agreements are in place with all of them. We already have clients that we won, and it’s just a matter of getting more clients and implementing it. As we disclosed on the earnings call on the script, we have like 75% of our clients coming from the channel partners, and this is why we think that it’s going to be fast and scalable.

OPERATOR

Your next question comes from David Larson of BTIG. Please go ahead.

David Larson (Analyst at BTIG)

Hi. Congratulations on the inflection to year-over-year revenue growth. That’s great to see. Can you talk a little bit about this health plan win in New Jersey? I mean, that looks pretty big to me. And typically, what percentage of lives—so if they have 1.5 million lives, what percent would typically convert onto the platform or perhaps be, you know, good members to basically get benefit from the platform? Thanks.

Lara Ann Sherman (Chief Operating Officer)

Thanks, David. There is indicator, we’re taking a conservative approach. We really are trying to work more on our preciseness and predictability. So I really want to underscore that it’s an administrative services only opportunity. So, I mean, the upside is tremendous. With 1.5 million members, the timeframe—realistically, we aren’t anticipating a lot in the first two halves of ’27; it’s probably in the back half of 2027 because the full socialization with the employees has not begun yet.

So that’s first part. The second part, our pathway we’re going to take is very much on the full cardiometabolic bundle. We are aware that some of the existing employers have—I’ve called it old-school point solutions in place. And so we really are working on our strategy to make sure that we are exact in positioning the value contribution we bring with compounded savings to those employees by activating what they can with a very simple, literally just activation through American Well, the full cardiometabolic offering.

So I would be cautious to make any prediction right now on what the revenue will be. I think if we chat about this in Q1, by the end of Q1 we’ll have much more indication of where the upside will be on this account.

David Larson (Analyst at BTIG)

Okay. When you say ASO, I mean, I would think an ASO account would have more incentive to basically use DarioHealth because the employer group is paying their own healthcare bills for their employees. So if you can improve trend, I would think that there would be more incentive to get on the platform. Just, I guess, another quick one: for direct to consumer, the revenue growth in the quarter—can you just remind me what is the difference between your direct to consumer growth versus, I guess, B2B2C, and why was it so significant this quarter?

Lara Ann Sherman (Chief Operating Officer)

Can I just quickly answer your comment first on the comment of the ASO, then I’ll hand to Erez. I wanted to just say, David, before handing over: We at DarioHealth 1,000% agree that these employers should definitely be looking into the savings from DarioHealth. That is probably what keeps us up at night—that we know we have the antidote to their cost situation, and that’s a big part of the value prop of how we try to figure out exactly how to best communicate with each of these various accounts in the ASO.

Because that’s 100% the case. We do represent cost savings reduction; we do bring about innovation for them. So I just wanted to underscore we are 1,000% aligned, and that’s the strategy for the ASO. Erez, over to you.

Erez Raphael (Chief Executive Officer)

Yeah. In terms of direct to consumer versus what we are calling B2B2C—so some terminology. At the end of the day, DarioHealth started as a direct to consumer, and we’re a very consumer-centric company. At the end of the day, we do the best for our consumers, the best experience, and eventually we help them to be engaged, and with engagement we’re improving outcomes, and eventually we’re also saving money to payers. So when we are saying direct to consumer, it’s what we are selling directly through multiple platforms like Amazon, Meta, and others.

And when we are saying B2B2C, we refer to our main two clients that are managing and insuring members, which is self-insured employers or health plans or health systems that eventually are buying the solution from us, and then we are getting the opportunity to enroll members through multiple channels that we are getting from the payer. Today, DarioHealth has around 11 different payers and around 175 different self-insured employers that bought our solutions for their members.

David Larson (Analyst at BTIG)

Okay, congrats on a nice quarter.

Erez Raphael (Chief Executive Officer)

Thanks very much.

OPERATOR

Thank you, David. Your next question comes from Scott Henry of Alliance Global Partners. Please go ahead.

Scott Henry (Analyst at Alliance Global Partners)

Thank you. Good morning or afternoon, depending on your location. I appreciate John with his opening remarks as well. That was really helpful to hear that outlook. I guess starting in the GLP-1 category—obviously GLP-1s have many indications well beyond weight loss. Do you think, for your platform, you would be more involved with, say, the sleep apnea, the cardiovascular, the women’s health, overall patient conditions as opposed to weight loss, or would you do both?

Thank you.

Lara Ann Sherman (Chief Operating Officer)

Guys, thank you so much. Yes. The short answer is yes. So going back to our grounding, we are being very deliberate about how we take on expansion. So, again, everything we’re doing is rooted in cardiometabolic, with appropriate extenders. So the sleep apnea GLP-1 is an excellent—shown excellent indication of appropriateness for treatment there. Obviously there’s weight. There’s a lot more coming up on some other topics as well. So for sure, stay tuned.

We’re working closely with our clinical team to make logical expansion, and GLP-1 is part of that.

Scott Henry (Analyst at Alliance Global Partners)

Okay, great. And, at the risk of oversimplifying it, but we’ve heard a lot about this channel—could you just walk through how this procedure will work as simply as possible? From the patient—I assume they’re already a member of your portal—and then do they go to the physician and then go back to the portal? Just connecting from the patient to receiving the GLP-1. And if you could talk about where your value add comes into the equation. Thank you.

Lara Ann Sherman (Chief Operating Officer)

Yeah, I would describe this as configurable, again depending on each payer’s request of DarioHealth. So I would think of it in the thinking of before GLP-1, during GLP-1, and post GLP-1. So we have some employers who want DarioHealth to be a part of that before a member is routed to care for GLP-1, looking to see appropriateness or having some kind of behavioral programming component before they will essentially approve reimbursement. So there’s before care.

During, we have many employers and payers who work with us to ask to support their members who are already taking a GLP-1. In fact, we’re in discussion with a group on quite a large study to demonstrate members who are taking a GLP-1 with a digital health program exhibit better outcomes than those that don’t. So there’s this whole support component. Then there’s also the off-boarding for folks who may be—due to cost, side effects, or various other pieces—want to come off the GLP-1, working with them to lock in weight loss, if you will, that they’ve had and make sure they’re sustainable when they stop the drug. So there’s kind of three pathways.

On the payer access to prescription, again, different ways to do it. We can bring a narrow network—so where all members who want to be reimbursed are pushed to a DarioHealth network. There are other options where it could be, DarioHealth, can you—we’re going to carve out reimbursement; can you bring an opportunity again of your prescribers, or anyone have access to different manufacturer programs directly to Lilly and Novo? But the protocol that I think you’re angling at, I’ll share with you an example of where we are doing the digital front door.

So members access DarioHealth through a digital front door. They are screened as eligible by FDA guidelines. They are offered the option, of course, of going through a behavioral route only. But should they meet the clinical guidelines that are appropriate, they would then be routed onto our provider network. Providers would then have a session with them to, again, go through their medical history and all other relevant topics. And should they be appropriate, they would then provide a script—and it’s a whole dosage regimen; it starts at a certain dosage and it has a whole titration route. They’ll work with that member directly on where to send the script, if there’s a preference of a brand of medication or maybe based on, again, their medical history—and then that script is routed off to the pharmacy.

And what DarioHealth is doing in the back end from our digital perspective is we are continuing on reminders of appointments, we’re continuing education, digital coaching where it is desired, to really gain support and give wraparound services on their GLP-1 journey. So we are offering behavioral support. There’s always support to our provider network’s care team for medical reasons and to make sure that if there’s any side effect, it’s correctly and clinically managed.

I hope that addresses the question.

Scott Henry (Analyst at Alliance Global Partners)

Yeah, that was great. Thank you for that color. And if I could just shift gears: When we think about modeling for 2027, how many account adds would one expect to have in that year? Obviously there are different size accounts and they’re not all valued the same, but just from a sense of sheer number.

Lara Ann Sherman (Chief Operating Officer)

Yeah, it’s a bit of a nebulous question because it depends on the size of the win. Right. So when we, you know, we’ve got a couple of accounts coming on-boarding next year that could be—once we add Independence—up to 200,000 folks. That’s going to—don’t need as many of those than with some of our accounts that are coming in at 5 to 10,000. So a bit of a nebulous question, but we are anticipating, you know, that there’ll be a significant coming through again as we get into these ASOs.

Some of the ASO networks have a larger average employee size than others. So, again, a question I think is better asked in Q1 when we have our arms around more what the final stage launches are going to look like.

Scott Henry (Analyst at Alliance Global Partners)

Okay, great. Thank you, and thank you for taking questions.

Lara Ann Sherman (Chief Operating Officer)

Of course. Thank you.

OPERATOR

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

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