OVerview
The arithmetic around Dario is fairly simple: if they convert 10% - 20% of the $900M pipeline, revenue will ramp from the current annual run rate of $25M to something much bigger. The company has been transforming from a niche consumer-focused diabetes disease management tool with annual revenue in the single-digit millions to an enterprise disease management suite of products and 2021 is the first year to expect meaningful evidence of success.
Our take on 2Q21
2Q21 revenue came in ahead of expectations, which after missing 1Q21 was a relief. Unfortunately, DRIO also announced the second delay of a health plan partner they expected to close last quarter. Following up on a series of client win announcements that appear small and lacking in detail (impact to users and revenue), the delay was a big negative and we think a big driver in the decline in the shares alongside an unfavorable factor exposure for small caps in Macro Quad 3. Looking ahead, the path to upside remains relatively easy to model with modest drawdowns on the backlog. For example, we think Dario needs to add a similar number of lives in 3Q21 as it did in 2Q21 to hit consensus. Another step up in 4Q21 will get to a 5% close rate on their stated pipeline. Looking ahead to 2022, our model pushes above $50M (vs consensus of $43M) in revenue assuming the team can close 9% of the pipeline, which is below the low end of the targeted 10-20% management expects to close annually. If Dario does that, then the shares can recover and trade back above $30.
Earnings Call Notes
Link to DRIO's 2Q21 Updated Presentation
- Users on the platform to approximately 197,000 as of 3Q21
- The pipeline is now $900M
- The anticipated health plan did not close in 2Q21 - closure "imminent"
- In the final stages and selected winner in several RFPs, contracts being finalized
- 66% of the pipeline is a full suite
- Still expect 20-30 deals to close by the end of the year
- Contracts range in size from $200K to $25M
- "Comfortable with consensus estimates" and 2H21 ramp
- Contracting based on engaged members is an attractive option versus others
- 15% - 17% of revenue coming from B2B
- The top-end of ARPU is $90 for the full suite of products
- Q2 to Q3 growth is implementing current announced deals, expect a significant ramp Q3 to Q4 from deals signed Q3
- Sales effort has expanded from a team of 3-4 to 40+
All data available upon request. Please reach out to with any feedback or inquiries.
Have a great day out there!
Thomas Tobin
Managing Director
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