DarioHealth Corp. (Nasdaq: DRIO), a pioneer in the global digital therapeutics market, today reported financial results for the first quarter 2020 and provided a corporate and commercial update.

"In the first quarter of 2020, Dario executed in line with its multi-year strategic operating plan of creating a best in class digital health solution with a strong economic profile, including recurring revenues and high margins. With additional clinical data, an expansion of our platform and new interest from both clients and partners, we believe we have set the foundation for penetration into multiple Business-to-Business-to-Consumer (B2B2C) channels in the second half of this year. Irrespective of the global pandemic, we successfully expanded our remote care offering by partnering with MediOrbis to provide our 50,000 users additional ways to engage using a full-service telemedicine network of physicians," said Erez Raphael, DarioHealth's Chief Executive Officer. "To build on our success in the first quarter, I am thrilled that Dr. Manejwala has joined the team as Chief Medical Officer. He brings decades of experience working with patients to achieve behavioral changes that potentially result in health improvement. In addition, he has spent the last decade working with health plans and other payors to deliver value added clinical programs at the intersection of chronic conditions and behavioral health."

"In a world that is trying to avoid unnecessary physician office visits, urgent care visits, and inpatient treatments, Dario has empowered its members by bringing healthcare solutions to their mobile devices. More importantly, as a new normal emerges post COVID-19, we believe that Dario is well-positioned to thrive in this environment."

"We believe that we continue to be successful in expanding our B2B2C sales channels with new contracts beginning to show 'green shoots' and revenues continuing to grow from our membership services, with increasing margins," Zvi Ben-David, Dario's Chief Financial Officer, Secretary and Treasurer added.

Business Update Q1 2020 and Recent Highlights

Opening B2B2C Channels: Commercial Development & Strategic Collaborations

• Established more partnerships in multiple channels: retailers, self-insured employers, healthcare providers (including chronic condition management companies) and insurers.
• Signed partnership with Vitality Group, a global health and wellness company committed to making people healthier, by providing a menu of services, such as DarioHealth, for employers to choose from when building a benefits plan for their employees.
• Expanded service offering to include Behavior Health coaching for stress, anxiety and loneliness, conditions which have increased drastically due to COVID-19 social distancing restrictions including "shelter-in-place" and "stay-at-home" orders.
• Executed partnership with value-based telemedicine provider MediOrbis, which expanded our service offering with integration of a full-service telemedicine network to deliver access to specialty care physicians with expertise in chronic disease management.

Clinical Evidence Development

• Presented new clinical study outcomes at the Advanced Technologies & Treatments for Diabetes conference, which showed 40-50% reductions of both hypoglycemic and high glycemic events in people with type 1 and insulin dependent type 2 diabetes using Dario's digital therapeutics platform.

Management Appointments

• Strengthened management team with appointment of digital health veteran Rick Anderson as President and General Manager, North America (January 2020).
• Appointed Yadin Shemmer and Adam K. Stern as new board members (March 2020).
• Omar Manejwala, M.D., Chief Medical Officer, and Barbara Stark as Senior Vice President and Head of Managed Markets (March 2020).

First Quarter 2020 Results Summary

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 a 25.6% decrease from the $2.24 million in the first quarter ended March 31, 2019.

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 (DTC) 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 income of $1.27 million, the majority of which we expect to recognize during the remainder of 2020.

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 was 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 $5.0 million, or 84%, compared with $5.9 million for the first quarter ended March 31, 2019. The increase in the operating expenses is mainly due the increase in equity-based compensation to directors, employees and service providers, to $6.3 million in the first quarter ended March 31, 2020 compared to $243,000 in the first quarter ended March 31, 2019.

Non-GAAP operating expenses excluding equity-based compensation for the first quarter ended March 31, 2020 were $4.6 million, compared with non-GAAP operating expenses, excluding equity-based compensation, of $5.7 million for the first quarter ended March 31, 2019, a reduction of $1.1 million. This reduction was mainly due the reduction in our digital marketing activity in the DTC channel.

Operating loss for the first quarter ended March 31, 2020 was $10.1 million, an increase of $4.7 million, or 89%, compared to the $5.4 million operating loss in the first quarter ended March 31, 2019. This increase was mainly due to the increase in stock-based compensation partially offset by the increase in our gross profit.

Net loss attributable to holders of common stock was $11.1 million or $1.57 per share in the first quarter ended March 31, 2020, compared to the $5.4 million net loss or $2.92 per share in the first quarter ended March 31, 2019.

We had cash and cash equivalents totaling $15.8 million at March 31, 2020.

Non-GAAP billings for the three months ended March 31, 2020 were $1.7 million, a 39% decrease from $2.8 million reported in the three months ended March 31, 2019. The decrease is a result of the decrease in our digital marketing expenses in the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

Non-GAAP adjusted net loss for the first quarter ended March 31, 2020 was $3.5 million, a 31.5% decrease from a $5.1 million non-GAAP adjusted net loss for the three months ended March 31, 2019.

A reconciliation of GAAP to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

About DarioHealth Corp.

DarioHealth Corp. (Nasdaq: DRIO) is a leading, global digital therapeutics company revolutionizing the way people with chronic conditions manage their health. By delivering evidence-based interventions that are driven by data, high-quality software and coaching, we empower individuals to make healthy adjustments to their daily lifestyle choices to improve their overall health. Our cross-functional team operates at the intersection of life sciences, behavioral science and software technology to deliver highly engaging therapeutic interventions. Dario is one of the highest-rated diabetes solutions in the market, and its user-centric MyDario™ mobile app is loved by tens of thousands of consumers around the globe. DarioHealth is rapidly moving into new chronic conditions and geographic markets, using a performance-based approach to improve the health of users managing chronic disease. To learn more about DarioHealth and its digital health solutions, For more information, visit http://mydario.investorroom.com/.