DarioHealth Corp. Q2 FY2020 Earnings Call

Hello, everyone, and thank you for joining today’s DarioHealth Second Quarter 2020 Earnings Call. As a reminder, all phone lines are in a listen-only mode. But after the company’s prepared remarks, you will be given the opportunity to ask questions and instructions will be shared at that time. To get us started, with opening remarks and introductions, I am pleased to turn the floor over to Mr. Glenn Garmont, Investor Relations. Good morning and welcome Glenn.

Thank you, Jim, and good morning, everyone. Thank you for joining us today for a discussion of DarioHealth’s second quarter 2020 financial results. Leading the call today will be Erez Raphael, President and Chief Executive Officer. He will be joined by Zvi Ben-David, Chief Financial Officer, and Rick Anderson, General Manager of North America. And of course, after the prepared remarks, we’ll open the call for your questions. An audio recording and webcast replay for today’s conference call will also be available online in the Investors section of the company’s website. For the benefit of those who may be listening to the replay or archived webcast, this call is being held and recorded on August 12, 2020. This morning, we issued a press release announcing our financial results for the second quarter 2020. A copy of the release can be found on 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 demands or 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 annual report on Form 10-Q for the quarter ended June 30, 2020. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the company’s press release issued 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 and 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 regarding the company’s quarterly and year-to-date results. And with that, I’d like to turn the call over to Erez Raphael, Chief Executive Officer. Erez?

Thank you, Glenn. And thanks everyone for joining us this morning for our call. I want to keep our comments brief this morning to allow enough time for a longer session of the Q&A. Joining me this morning are Zvi Ben-David, our Chief Financial Officer, and Rick Anderson, the President and General Manager of North America. As in every quarter, I want to reiterate the three main pillars that are guiding our ongoing transformation into a leadership position in the digital therapeutics space. The first pillar is the transformation into a SaaS, software-as-a-service business model. The second one is the expansion of our platform into multiple chronic conditions, beyond diabetes. And the third one is our ongoing transformation from a direct-to-consumer model into a business-to-business-to-consumer enterprise. Today, I’m pleased to report that we made significant progress in all three pillars, but we are mainly excited about the third pillar under which we made substantial advancements. We are reaching a late stage of discussions with several large entities that will give us access to substantial segments of the type 2 diabetes population. We hope to announce more specifics of these contracts in the very near future. Zvi Ben-David will cover the financials shortly, but I want to highlight a few key performance indicators that we achieved. On the revenue side, we generated $1.78 million, exceeding the consensus analyst expectation. It’s also a 7.2% sequential increase from the first quarter of 2020. While we were pleased with the sequential quarter, as well as the year-over-year growth that we achieved on the revenue, in terms of absolute dollars increase, it’s not reflecting yet our potential, and we anticipate that moving forward we’re going to see much more significant growth. When we look at Q3 and Q4 and the several contracts we have in the pipeline, we feel confident that we can get them signed and have specific agreements with service providers that will make much more meaningful impacts for the company. On the losses side, we managed our expenses such that we reported a lower net loss of $4 million only. This is below the analyst consensus and also approximately 25% lower than the second quarter of 2019. On the margin front, the gross margins declined from 46% in Q1 to 36% in Q2. This is a temporary reduction due to devices we sold on the B2C side, and we expect this to be temporary. As we move forward into the B2B2C, given that we have unit economics of 70% to 80% gross margins, we believe we’re going to be back on track and keep our gross margins moving forward. Looking back at the last eight months, we feel that this period has been very transformational for our company, and we are well-positioned to grow significantly our revenue. As you know, we are entering the B2B2C market with a highly compelling product. We have 55 active paying users on the platform, most of whom were generated from the B2C market. We know we have an excellent product that engages well, and we are top tier in terms of user experience, evidenced by our 4.9 stars on the App Store and a net promoter score of 77. We have also demonstrated that a quality user experience leads to high engagement, which results in positive clinical outcomes, as evidenced in 13 different clinical papers that we submitted over the last few years for substantial user populations. This data is something we are now sharing with potential payers and benefit managers to illustrate our potential cost savings for them. In building our organization, we made notable progress, assembling a world-class team in the U.S. with the experience penetrating the marketplace and executing large projects with significant health plans. This is something that our team has already accomplished. Regarding the transformation into B2B2C, we feel that this shift has the potential for substantial growth in our sales and revenue, generating for us an average of $60 to $80 per member per month, versus $25 on the B2C side. Therefore, once we get the agreements signed, we believe we can rapidly scale our sales. Overall, we are very encouraged by the positive feedback from potential clients, and we feel that our competitive advantage resonates well with health plans and self-insured employers. Rick will elaborate on this shortly. Another significant milestone for us recently was our successful fundraising a few weeks ago. We conducted an oversubscribed private placement and raised $28.6 million. This was a straightforward common deal with no warrants and no discounts. We are particularly excited about the profile of the investors involved, who are respected healthcare-focused institutional investors. Together with the $30 million we had in hand at the end of Q2 on June 30, we now have a pro forma cash position of approximately $38 million in the bank, with no debt. We believe this cash will support us for the next few years and will be crucial for executing our commercial plans. In terms of use of proceeds, we plan to strengthen our operations to facilitate the projects we are set to sign, and we’ll also triple the size of our sales and commercial team in the U.S. to capitalize on this opportunity. Furthermore, one of our key priorities is to maintain a competitive edge in terms of our offerings. Thus, we plan to invest more in personalizing our platform, artificial intelligence, and our capacity to support multiple chronic conditions. An additional milestone is the nomination of Dennis Matheis to our Board of Directors. Dennis is the President of Optima Health, a multi-line health plan with over 850,000 covered members. His extensive background in leadership roles at some of the largest health plans in the country, including Anthem, Cigna, and Humana, will be invaluable as we move forward. With that, I want to hand over the call to Rick Anderson, the President and General Manager for North America. Rick?

Thanks, Erez. Last quarter, I discussed Dario’s competitive advantages and what any digital health company needs to be successful in a B2B model. I am pleased to report that we have continued to strengthen our foundation on these key elements. In June, at the American Diabetes Association's 80th Scientific Sessions, we presented new data from two studies. These studies enhanced the clinical outcome data on our digital therapeutics for diabetes and are importantly, the first studies demonstrating significant improvement in hypertension through our platform. Improved clinical outcomes translate into real and often substantial cost savings for payers. Studies such as these establish foundational support for the adoption of our solutions by payers, employers, and providers, creating an increasing competitive advantage in the space. As we noted last quarter, COVID-19 has generated both challenges and opportunities in the digital therapeutic space more broadly. During the second quarter, some of the opportunities we had with self-insured employers remained paused as customers navigated the pandemic's impact on their businesses and employees. However, in other cases, we saw an upsurge in interest from employers and payers, as well as strong provider interest in our remote patient monitoring solution. Digital health has experienced a surge in interest during the pandemic, and we expect that trend to continue in the future. We are well-positioned for this era of virtual care with our clinically validated digital therapeutics that enable the monitoring and care of patients virtually, along with an open platform allowing for integration with virtually any provider or system. In the second quarter, we further enhanced our flexible, powerful solution through our partnership with MediOrbis, a telehealth provider specializing in chronic conditions. We anticipate more partnerships in the coming quarters as demand for virtual care solutions grows. Our transition to the B2B market continued into the second quarter. We expanded our coaching and enrollment management talent to meet our new customers’ needs and have the capacity to rapidly scale our teams to accommodate demand. Our efforts to build name recognition with health plans, employers, and benefits consultants have led to milestones including participation in multiple requests for proposals (RFPs), and the growth of our sales pipeline to over $200 million in potential revenue across the three B2B channels. We have made a significant effort over the last quarter to raise our profile and educate benefit consultants and employers on Dario's solutions. These efforts have resulted in milestones, including being named a preferred vendor by Shortlister, being added to the Mercer VIP platform, reaching the finalist round in RFPs for the first time, and winning contracts over competitors such as Omada and Livongo during that process. We believe these RFP wins validate our value proposition and competitive positioning in the self-insured employer market. Alongside our direct sales efforts, we began selling to employers through the Vitality platform in the second quarter and achieved our first success on that platform. These recent direct and partner wins are now in the contracting phase, with some anticipated to launch in the latter half of 2020 and others set to commence in January 2021 as part of the regular benefit cycle. In addition, we are in late-stage contracting with a large employer in the northeast and have recently commenced implementation. While the contracting process has been slow, we have begun the implementation process aiming for a launch later this year. As I mentioned in the last quarterly call, health plans typically have very long sales cycles, but we have been encouraged by the significant traction we've generated in a short timeframe. As with the employer market, we believe this high level of interest stems from our competitive positioning and value proposition. We previously indicated we are in late-stage discussions with a large health plan, and that plan has shifted into late-stage contract negotiations, and the implementation process has begun. Encouragingly, we are witnessing momentum in this segment beyond our early traction, with payers engaging in late-stage discussions or contracting, which positions us for additional launches in late 2020 or early 2021. Simultaneously, we've observed an uptick in interest and adoption of our Remote Patient Monitoring program, particularly among providers and patients who are wary of visiting hospitals or provider offices during the ongoing pandemic. In June, we announced our first two Remote Patient Monitoring contracts and one in the UK in July. Our RPM offering integrates the company's existing open platform, application technology, and Dario engaged coaching platform to furnish physicians, health systems, and large provider groups with a turnkey solution that leverages the recently approved Medicare Remote Patient Monitoring reimbursement code. RPM is a new offering for us, and we are very encouraged by the early momentum we are experiencing. At this point, I’d like to turn the call over to Zvi for a review of our financials. Zvi?

Thank you, Rick. I will now provide a brief overview of our financials. Additional details on our results can be found in our Form 10-Q filed yesterday evening. Revenues for the second quarter were $1.78 million, an increase from $1.67 million in the first quarter of 2020. Revenues were again derived mainly from the sales of products and from the offering of our membership plans to our customers in the U.S. We anticipate moderate sequential revenue growth through the latter half of this year, reflecting our continued transition to a SaaS revenue model. Gross profit in the second quarter ended June 30, 2020 was $636,000, an increase of $310,000 or 95% compared to a gross profit of $326,000 in the second quarter ended June 30, 2019. Our gross profit margin increased to 35.6% in the second quarter ended June 30, 2020 from 19.7% in the second quarter ended June 30, 2019 but was subject to a sequential decrease compared to the quarter ended March 31, 2020. The increase compared to the second quarter of 2019 was primarily attributable to increased revenues generated from our membership plans. The sequential decline in gross profit in the last quarter resulted from our overall assessment of the cost of acquiring new customers. We concluded that reducing the initial excess cost of our platform for new users pays off with much lower acquisition costs. Implementing price reduction campaigns during the last quarter led to reduced marketing expenses compared to the second quarter of 2019, resulting in a lower operating loss and a reduced burn rate. Our non-GAAP marketing expenses for the second quarter ended June 30, 2020 were therefore only $2.4 million, compared to $2.9 million in the second quarter ended June 30, 2019. During the second quarter, we also implemented additional savings measures, including temporary salary reductions due to the heightened uncertainty following the COVID-19 outbreak. These savings were in addition to long-term voluntary saving measures implemented by our Board members and management over the last few years to preserve cash by receiving part of earned compensation in shares instead of cash. These voluntary cash waivers have contributed more than $4 million to the company’s cash flow during the last five years. Overall, the above actions reduced our cash balance to $2.6 million during the second quarter, representing a 42% reduction compared to the previous quarter. As of June 30, we had cash and cash equivalents totaling $13.2 million. Subsequently, on July 31, we closed a private placement financing of common stock that yielded gross proceeds of $28.6 million. As a result, our pro forma cash balance as of today is approximately $38 million. Back to you, Erez.

Thank you, Zvi. So, before opening the call for questions, I want to address our projected revenue growth path for 2021. Currently, research estimates indicate a full-year 2021 revenue range of $10 million to $12 million. While we aren’t positioned to provide specific guidance this morning, we believe this estimate is conservative given the opportunities at hand. As I’ve previously indicated, we expect to announce substantial transformational deals with health plans and other institutions during Q3 and Q4. While we understand that implementing such projects may take time, we believe that accessing tens of thousands of users will significantly impact our revenue. To remind everyone, on the B2B2C side, when selling to plans, every 10,000 users should generate between $8 million to $9 million annually, which represents significant growth compared to our current position. With that, I want to conclude our comments for this morning and hand the floor over for a Q&A session.

Firstly, this morning, we’ll hear from Alex Nowak at Craig-Hallum.

I just want to dive into a couple of pieces that were mentioned. When you’re submitting RFPs, what are the insurers of the self-employed plans primarily looking to evaluate? Obviously, price is a major component of it. But, what else are they looking at when you submit the RFPs?

So, they’re looking at price obviously, as you said, but they’re also evaluating the overall solution. They want to examine the data that supports the solution, satisfaction scores, and the functionality of the platform and application. This sometimes includes demonstrations of the product as well. So, as you would expect, it's an overall review of the product, the solution, and how users will engage with it.

And then, regarding the plans that you expect to announce in the coming weeks, can you speak to the size of these programs? I believe you mentioned all the contracts you’re working with, which total in excess of $200 million. How should we think about those plans? Are they full deals, or are these pilot programs? And can you help us understand how to convert this into revenue over the next couple of years?

I think they really run the gamut in terms of size. Some are small to medium-sized employers, while others are what I would classify as jumbo-sized employers, particularly with those currently in late-stage contract negotiations. In some instances, the additional plans we've seen come online in the past few months will involve larger, initial implementations, and we expect those to grow over time. The ones that are of medium to large size, including larger health plans, we anticipate will be full implementations. The health plans I’m referring to are all regional players, though some of them are large.

Are most RFPs going out to self-employed insurer plans, or is it a good mix between self-employed and traditional health plans?

All the traditional RFPs we have participated in have been with self-insured employers. In a couple of cases, we've responded to requests for information from health plans. But most of our health plan work is related to direct sales, not RFP related.

For these RFP contracts, are there minimums associated with them? I’m just trying to get at the mention around the 2021 revenue growth. I assume you have a good sense of how big these employer plans are and the potential they can bring to the Dario business. But, are there minimums tied to it, so if a deal closes, you know what the minimum will be next year?

No. In all cases, our contracts allow us to enroll members within either the health plan or the employers. But we have a good estimate of what we can expect to enroll in these programs, based on our past experience at Dario, industry expectations, and insights from others in the space.

Okay, got it. And just to clarify, did you say you would expect to sign at least one of these transformational deals this year, or are there a couple of deals in the works that could convert?

A couple.

Moving to the RPM side, can you just walk us through what you’re ultimately providing to clinicians and patients? Who purchases the Dario device and gives it to the patient under the RPM agreement? How does reimbursement work there?

Generally speaking, our business model involves contracting with the provider, provider group, or health system to offer them our technology solution. This includes our devices, the application, and coaching, if they choose us as their coaching provider, or even other coaches who can utilize our platform. Providers distribute the devices to their patients directly or record the data in our web portal. We provide those devices directly and manage onboarding for those patients, continuing monitoring remotely. It’s essentially an adjustment to our standard product delivered in a slightly different way. Regarding billing, there are three primary remote patient monitoring codes recently approved for Medicare patients. One is an implementation code, a one-time code. Another is a monitoring code that allows billing as long as participants maintain their engagement each month. The third code pertains to coaching. Your level of engagement dictates who might conduct that coaching and how we charge for it. Monthly, we provide the clinician with the list of eligible members, and they can bill Medicare directly.

Looking across RPM and the health plans of the self-insured insurers, which market do you believe is more attractive or better suited for Dario? If you had to choose one?

I don’t think I can choose one. I see both employers and health plans as linked due to their reliance on each other in the marketplace. They differ somewhat in that health plans aggregate large populations, whereas employers consist of a broader range of self-insured entities. I find both markets attractive for various reasons, including the demand therein. Health plans generally have longer sales cycles than employers. Our remote patient monitoring, especially under the new codes, is a newer venture, and interest has surged, primarily due to the effects of the pandemic. While the RPM market is projected to be worth around $32 billion, my expectation is this will likely be the smallest of these three markets over time but will still serve as a revenue source in the next 12 to 18 months.

Lastly, with Livongo being acquired, how does this affect the competitive landscape and your strategic focus as you enter the B2B market?

That’s a significant deal that alters the industry landscape somewhat. However, from a strategic standpoint and in terms of competition, there hasn’t been much overlap between our offerings. Thus, it doesn’t substantially change our value proposition or competitive stance against them. We have been competing with them directly and have seen customers respond positively to our value proposition. This acquisition may accelerate, particularly among the larger players, the concept of virtual care. We were moving in that direction regardless. While this acquisition introduces an entity with that capability, I think it might spark interest among other players in the market to enhance their offerings accordingly. Strategically, we will continue to expand our partnerships and offerings to position ourselves for comprehensive remote virtual care for chronic conditions. This evolution benefits the market overall, addressing issues like access to care and quality of care, though it will depend somewhat on future regulations. Currently, some regulations have been temporarily altered; some of these changes may become permanent while others may not.

Our next question will come from the line of Scott Schoenhaus at Stephens.

As a follow-up regarding the B2B pipeline, are these health plans and self-insured companies primarily already using a chronic illness platform, or are clients just starting to adopt digital therapeutics or digital health solutions? Is it a mix of both, and can you comment on that mix?

Sure. In terms of the average length of the contract, the industry standard, including ours, is around three years. There can certainly be variations. Regarding whether these customers are new to these solutions or currently utilize another product, it’s a mix. If I had to estimate, I would say it's probably around 70-30 or 60-40, in favor of new customers to this solution. This market is still relatively untapped, and I expect we'll see significant business from those not currently using these solutions. The remote patient monitoring side, especially with new Medicare guidelines, adds an enticing element here. A number of the users we've engaged have yet to transact with other products, but around 30% or 40% of the individuals we are in discussions with have alternative solutions. And this observation is within the one-third that are in late-stage discussions for the pipeline overall, it'd likely break down more evenly around 50-50.

Just as a follow-up question, you’ve successfully raised capital. How do you plan to utilize this capital for future growth? Could you elaborate on your focus, whether that be on M&A or enhancing your sales efforts to grow your B2B pipeline?

Yes. Thank you for the question, Scott. We believe we have the right product and offering in the market. Our first priority is to implement on potential clients to ramp up revenue and demonstrate significant growth. This is priority number one—implementing on the existing pipeline. The second priority is expanding the pipeline by increasing our sales capabilities. As I mentioned in the call, we plan to at least triple our ability to grow the pipeline with our existing offering. We are confident we have the right offering at the right moment in the market. The third priority involves potential consolidation in the space of digital health and digital therapeutics. There are many interesting solutions available, and as we establish this bridge into the health plans and employers market, we anticipate expanding our platform with additional technologies. This is a third priority and not our first or second at this stage, as we need to focus on making our current offerings successful.

Next, we’ll hear from Ben Haynor at Alliance Global.

Regarding your sales pipeline, I believe I heard you mention about $200 million that’s available. How do you calculate that? Is it an annual opportunity, or is it projected over the average three-year life of contracts? How do you view that?

We’re assessing it on an annual basis. That figure represents the annual opportunity.

Do you have a close rate goal for your pipeline, or any additional color you can offer?

What we’ve observed has exceeded my historical expectations regarding interest thus far. Therefore, it's a bit early for a definitive comment. If I were to speculate, I’d expect something in the area of 20% closure, but currently, we’re seeing considerably more success in this regard, making it challenging to predict the outcome.

Fair enough. Regarding project implementation timelines once won, how long does that take? Is it a month, a quarter, or longer? How much does that timeline affect potential customer decisions?

In general, potential customers prefer solutions that are easy to implement. Complicated projects requiring additional internal resources are often judged negatively. Our offerings are designed for ease of implementation. What’s required is information to determine eligibility, and we can manage most of the rest. Implementations typically fall within the 60-day timeframe, with some possibly requiring 30 days and others up to 90, depending on customer dynamics and complexity. We're currently finalizing agreements with two customers and have already begun the implementation process. Thus, I expect these specific implementations to happen quicker.

Lastly, just for housekeeping, I believe you previously mentioned having over 50,000 users on the platform. How many do you currently have, and could you break down the types? Are they primarily on subscription plans, or do they use piecemeal plans? Any additional detail would be appreciated.

Currently, we have 55 active paying users on the platform, 95% of whom are in the United States. Approximately 40% of these are our members. We plan to transform our business to align completely with SaaS offerings. Expect that in the upcoming quarters, we will concentrate entirely on members on the platform. This transformation aligns with our strategic shift into the B2B2C market and is one we aim to achieve in the next two quarters.

Great. Thanks for the questions and congratulations on the progress.

Thank you so much, Ben.

Next, we’ll hear from John Vandermosten at Zacks SCR.

Good day, everyone, and thanks for taking my questions. Starting with the remote patient monitoring services, I know you announced a few deals in the last quarterly call. I wanted to grasp how the trend has continued as we move into the sixth month of the pandemic.

Thanks, John. We've maintained strong interest and have larger players also showing gradual movement. We've had steady interest, though larger organizations tend to progress more slowly. As Erez mentioned, we intend to allocate additional sales resources in this space. We initially reallocated some resources towards health plans, given higher interest there. I expect the overall positive trend to continue.

You mentioned facing Livongo in a couple of competitive deals. What attributes are notable for potential clients choosing you over competitors? What is it about Dario that stands out?

The feedback we receive from the marketplace underscores the flexibility and transparency of our solution, alongside the capability for users to engage with our service. Our approach to sharing and integrating data with other solutions also appeals to clients, as does our substantial member engagement. I think our 55,000 paying users reflect positively on how engaged users are with our platform, which certainly helps highlight patient outcomes. Our pricing strategy, which allows billing only for engaged members, has also been well-received in the market.

You’ve mentioned that some ingredients are eminent, and as those deals close, what milestones should we expect to see? You've indicated a 60-day implementation estimate but what should we observe during that timeframe? How long will it take to see full engagement with the total number of members using DarioHealth's product?

For milestones, larger clients will likely have announcements, contingent on customer approvals. The timelines for member penetration post-launch range from three to six months based on previous experiences, though some instances have been faster. We consistently assess implementations for their effectiveness.

How important are studies in your operations? In your decision-making process, how significant is efficacy? What new studies will you be conducting to answer potential questions from partners?

At a level, having data supporting the solution is essential. This is core to being a member of the Digital Therapeutics Alliance, which demands solid evidence backing our claims. Efficacy data highlights user outcomes and serves as validation for the product. We expect forthcoming studies focusing on hypertension and weight loss, as well as specific financial outcome assessments.

Our next question comes from an investor, Ashok Kumar.

Erez, could you provide the key take-home messages from your dashboard metrics? I have a three-part question: First, on the SaaS model transition, what’s your timeline for achieving a 70% gross margin? Secondly, concerning OpEx, given that they've normalized, what are your quarterly normalized expenses, either in absolute terms or as a percentage relative to the $4.6 million in Q1? Lastly, regarding your B2B2C model, what’s your cost per acquisition per user? What do you anticipate as a steady-state target for that? Finally, what's the revenue mix at $5 to $7 per user per month compared to $60 to $70 per user per month?

I’ll start with expenses. I won't go by order, but in terms of our costs, we expect overall expenses to rise due to ongoing team building, which began around eight weeks ago, designed to implement our potential client contracts. This increase will eventually offset some of the revenue. In terms of expenses and losses, we anticipate a slight uptick overall. Regarding our transition to SaaS—with the movement away from device users—we expect to complete the transition over the next two quarters. We have legacy assets consisting of many users from the old system, which still yield significant value in terms of data contributing to our platform and AI development. Therefore, we are not in a rush to remove these assets. Overall, we project hitting gross margins close to 70% within 8 to 12 quarters, as we strive to scale up our B2B2C model and move towards obtaining 80% to 90% of our sales from health plans. For B2B2C, we estimate our cost of acquisition on the B2C front at about $100; on the B2B2C side, it should decrease to about $20 to $30, considering some enrollment costs. Our average revenue per user is anticipated to increase from $25 to around $60 or $80, contingent on how many chronic conditions we manage. We aim for our acquisition costs to drop from $100 to about $30. This translates into a significant impact on our overall business.

Thank you. And lastly, regarding the sales cycle length with your health plan channels, could you share your qualitative insights?

Typically, the sales cycles for health plans range from 12 to 24 months, with some extending to five years. Generally, these cycles are lengthy. However, we've seen good traction and opportunities for swift engagement. We’re optimistic about closing a few plans within the shorter window of six to nine months, which is unusual but promising. Beyond this, I would expect the timelines to revert to norms.

Thank you.

Of course, regarding health plans.

Next, we’ll hear from Nathan Weinstein at Aegis.

Good morning, Erez, Rick, and Zvi. Congratulations on the achievements in the quarter. Thanks for your time today. Just one quick inquiry from me: Noting the many chronic conditions outside diabetes, could you elaborate on your roadmap and potential expansion areas in the future?

Thank you for the question, Nathan. We believe that the technology we are developing—integrating medical devices with services around user behavior and routines—is impactful in altering chronic condition management behaviors. A lot of methods applicable to diabetes can extend to patients with hypertension and other chronic conditions. We contend that overseeing chronic conditions in silos is ineffective, and approaches grounded in digital therapeutics should offer personalized solutions driven by data. In our ongoing efforts, we aim to expand into further conditions, looking to integrate continuous glucose monitoring (CGM), implementing more artificial intelligence for more personalized interactions. This is the directional path we see for our business and as we move forward, we feel we can expand our competitive advantage by adopting this strategy.

We will now proceed with the question-and-answer portion of the call.

Regarding the revenue growth quarter-over-quarter, year-over-year, can you provide additional insights on what specifically contributed to that growth?

Regarding our revenue trajectory, you’re addressing my earlier comments about anticipated growth for 2021. Current research estimates project full-year revenue fall between $10 million and $12 million. We believe our forecasts are conservative relative to the opportunities available. If we acquire the contracts we anticipate, it could open up access to tens of thousands of users, and as our average revenue per user falls between $60 and $80, this could generate an additional $6 million for every 10,000 users on the platform. Being under a SaaS model with recurring revenue means every dollar we generate from a new user will contribute to our existing run rate. All these elements encourage our confidence that current analyst expectations may be understated. Investors should stay alert for updates in the coming months to track our progress in signing contracts and onboarding patients onto our services, potentially leading to significant growth.

You noted earlier that once you reach a new health plan agreement, what does the onboarding process entail? How long to realize an initial increase in revenue?

In terms of onboarding, we expect it to typically take 30 to 60 days, with some variance depending on individual client needs. Internally, we’re looking at a timeline of three to six months for ramping up enrollment within these plans. Historically, it has been slightly faster than this, but this gives us a good framework.

What aspects of the platform resonate with payers during your ongoing discussions?

As previously noted, key attributes drawing payers' attention center on the flexibility and openness of our solution, complemented by the level of user engagement. Currently, we observe increasing focus on the experience users have, as evaluator groups recognize that such aspects correlate directly with achieving clinical and financial outcomes in the long run. Consequently, satisfaction scores and usage level data are becoming key metrics. Our substantial body of clinical evidence serves to verify the value we deliver, and our pricing strategy—charging only for genuinely engaged members—aligns with market expectations.

Thank you for your questions. This concludes our question-and-answer segment.

Thanks, Jim. Thank you all for joining us this morning. We appreciate the ongoing interest in our journey and what we’re striving for. We hope to see you in the next quarter. Have a wonderful day. Goodbye.