DarioHealth Corp. (NASDAQ:DRIO) Q3 2022 Earnings Call Transcript

Ben Haynor : First off for me, just thinking about R&D expenditures. What’s really going into those at the moment? Are those mostly kind of implementation details? Is it something you’re developing internally, new features, functionality, et cetera, what’s kind of the right way to think about higher allocating R&D dollars?

Erez Raphael: Yes. Thanks, Ben, for the question. So the way to look at it is that we have like a few main bulks of spending. Number one, we are pushing to promote each of the products as a stand-alone. I mean we want to have the best diabetes solution. We want to have the best MSK solution. So we are promoting each of the products and taking them to the next maturity level, better engagement, improvement. That’s bucket #1 for each of the product lines. Bucket #2 is that we are investing on integrating pieces together into 1 integrated experience, which is something that is very important when we are selling the suite, we are talking about best of suite. This is one of the advantages that we are creating over the competitors.

Because we are creating a 1 integrated journey, 1 clinical journey and use cases that are cost conditions. So that’s bucket number 2. Bucket number 3, we had many years of experience as a B2C company, transforming everything to B2B making sure that all the operation is functioning from billing to IT, security and all what we are calling operational side is significant, especially when you are combining few technologies together. And here, we have a very big investment that we are doing, and we’re going to keep spend there in order to make sure that we are very stable and can keep the scale if we really want to continue and double the number of accounts next year. So these are where we are investing the money. Usually, when companies are running M&As and technologies are being integrated together.

Usually, you see a ramp-up in the R&D expenses in the first 2 years of the acquisitions and then things are getting consolidated, then we are — and companies are creating more efficiencies. And I think that here, we’re going to see the same kind of trend.

Ben Haynor : Kind of trend in the sense that after you’ve digested these acquisitions that you made over the past, I guess, couple of years, we should start to see the R&D line come down a little bit. Is that the right way to think about it?

Erez Raphael: Yes. Absolutely.

Ben Haynor : Okay. Great. And then I apologize if I missed this, but did you guys zero out B2C advertising now? Or does that — do you still do a little bit of that?

Rick Anderson : We still do some of it. So we just — we reduced it to a level that made the business very sustainable. We still see strategic benefits to the B2C business, just like from always, we use as a test bed as well as of other things. So we’re not expecting to zero out the spend but we’ve got to spend in at a level that makes sense relative to the cost of the market and the margins associated with it.

Ben Haynor : Okay. So some of that sales and marketing spend is sort of effectively R&D spend as well.

Rick Anderson : You can think about it that way.

Erez Raphael: Yes. That’s a very good way to look at it.

Ben Haynor : Okay. Fair enough. And then last thing for me, this is, I guess, more curiosity or housekeeping. I know last quarter you talked about a customer that was — had some revenue that was slipping into Q3. Was that Aetna that slipped from — you guys expected some revenue in Q2 that slipped on the Q3?