DRIO | 3Q21 Pound Foolish
Dario missed the consensus revenue estimate and our estimate for 3Q21. They are calling for sequential growth into 4Q21, but without a point estimate or clear metrics, it's likely the 4Q21 consensus estimate will come down. Our estimate of platform users was on target, but the contribution from lower ASP products skewed the results. These are small differences in absolute terms in the range of hundreds of thousands of dollars and don't reflect the reason we're long the name and believe there is an outsized opportunity here. The key metrics discussed on the earnings call were on success transitioning to a B2B2C company. Management announced they've closed 47 new B2B contracts, with another handful yet to sign, up from 5 at the start of the year. Each of these deals is worth between $200k to $1M, excluding the one large health plan deal, which we have reason to believe is Aetna and the company says is worth "tens of millions of dollars annually." The arithmetic of existing business retention, new contract contribution at the low end, and a small percentage of the large health plan being implemented in 2022, yields ~$45M in 2022 revenue, versus the consensus estimate at $39.6M.
At this point with evidence of success signing new B2B deals, our growth expectations into 2023 look more likely as new deals are likely accelerate from this inaugural 2021 selling season, and the large health plan implementation moves into the final phase 3 implementation and significantly higher revenue contribution. As Dario completes the transition to a B2B2C company, we think there is upside to $50 that should come into focus. The mistake at this point would be to punt the name over 3Q21 results, a pennywise move, and forego the benefits of owning the transition into a legitimate player in the digital health arena.
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Thomas Tobin
Managing Director
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