DarioHealth Corp (DRIO) 2020 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to DarioHealth's First Quarter 2020 Financial Results Conference Call. As a reminder, today's conference call is being recorded.

At this time, I would now like to turn the conference over to David Holmes of LifeSci Advisors. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us today for a discussion of DarioHealth's First Quarter 2020 Financial Results. Leading the call today will be Erez Raphael, President and Chief Executive Officer of DarioHealth. He'll be joined by Zvi Ben-David, Chief Financial Officer; and Rick Anderson, General Manager of North America DarioHealth. After the prepared remarks, we will open the call for Q&A. An audio recording and webcast replay for today's conference call will be available online in the Investors section of the company's website.

For the benefit of those listening to the replay or archived webcast, this call is being held and recorded on May 12, 2020.

This morning, we issued a press release announcing our financial results for the first quarter 2020. A copy of the release can be found in the Investor Relation page on the company's website. Actual events or results may differ materially from those projected as a result of changing market trends, reduced demand and the 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 and performance to differ materially from those projected. The forward-looking statements discussed on this call are subject to other risks and uncertainties, including those discussed in the Risk Factors section and elsewhere in the company's quarterly report on Form 10-Q for the quarter ended March 31, 2020, to be filed with the Securities and Exchange Commission. Additional information concerning factors that could cause results to differ from the 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 to 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 operation 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.

And with that, I would like to introduce Erez Raphael, CEO of DarioHealth. Mr. Raphael?

Thank you, David. Good morning, everyone, and thanks for joining our call today. Also joining me today, Zvi Ben-David, our Chief Financial Officer; and Rick Anderson, the President and the General Manager of North America.

There are 4 pillars that guided the very ongoing transformation that we emphasize them in previous calls, and I would like to reiterate the today, as the way that we are measuring the progress that is related to our multiyear strategic plan. Pillar number one is the company's ongoing transformation to a Software as a Service model that generates high margins, recurring revenue for the company. Pillar number two is the evolution from direct-to-consumer into business-to-business-to-consumer, which is something that is lower our cost per acquisition as well as creating a scale and accelerating our growth. Pillar number three is the expansion of our offering from a single chronic condition that was originally diabetes into multi chronic condition, and everything is under product excellence where we striving to create the best-performing product in the market. The last pillar, the fourth pillar is the positioning of DarioHealth as the market leader in the digital therapeutic space that according to Business Insider is projected to be a $9 billion market by 2025.

I would like to start with the first pillar. So as you've heard in previous calls, we are at -- we started the transformation from selling a stand-alone medical device into a full membership program that is integrating software, hardware and service already towards the end of 2018. And that the membership program includes the ability to help users not just have the medical device, but also get digital intervention driven by our analytics and AI that helps them improve outcomes. The overall objective was to increase user engagement, to improve the outcomes of the users and for the company, improve the gross margins, and also increase the average revenue that is generated per member per month.

We're already seeing an indication that the success into Software as a Service model is improving and is reflected in the financial profile of the company, especially on the gross margin part. While the revenues for the first quarter of 2020 were $1.67 million, a slight decrease from the previous quarter, both gross margins and overall gross profit was significantly higher relative to the previous year. Gross profit increased from 24.9% in the first quarter of 2019 to 47 -- to 46.7% in the first quarter of 2020. This is something -- this is reflecting an overall 87% improvement in our gross margins. The gross profit in the first quarter of 2020 was $779,000 an increase of $221,000 or 39.6% compared to a gross profit of $558,000 reported in Q1 2019.

This trend of improving margins is expected to continue in the next few years, where the overall goal is to be above 70% margins as we move forward. The total operating expenses for the first quarter of 2020 were $11.2 million compared to $5.9 million in the first quarter of 2019. The increase in the operating expenses is mainly due to the increase in onetime stock-based compensation to directors, employees and service providers. Operating expenses, excluding the equity-based compensation for the first quarter of 2020 were $4.6 million only compared to $5.7 million in the first quarter of 2019. This is a reduction of $1.1 million, overall reduction of 19% comparing to Q1 2019. The reduction in the total operating expenses reflect a reduced spending in the direct-to-consumer and transforming budget into B2B2C, so some of the reduction was offset by this increased investment into building the B2B team in the U.S. So overall, we already see an evidence and the -- put a benefit with the transformation into Software as a Service model is impacting our financial profile especially the gross margins and reduction in the user acquisition cost.

I would like to move from here to the second pillar which is the transformation of the business from direct-to-consumer only into a B2B2C channels. So here, despite the fact that B2B2C might have a long sales cycle, we see here a few significant benefit for this overall strategy. Number one is that through this kind of business-to-business-to-consumer, we have the ability to access a broader patient population, which is something that can accelerate the growth intensively, the cost per acquisition per user is reducing down once we are approaching this strategy. And also, we have the ability by selling our premium membership product to generate much higher revenue per member per month comparing to what we are doing today in the direct-to-consumer. I'd like to deep dive into the unit economic of the few membership programs that we had. So you can understand the potential of the sales growth that we can generate in the next few quarters. So if we are looking on how the company was operating toward the end of 2018, we were selling a device and disposables, where, on average, we were generating between $5 to $7 per member per month.

As we move forward into the membership program still under the direct-to-consumer, we're generating $25 on average per member per month on our standard membership program. Once we are evolving into the business-to-business-to-consumer and selling our membership program, the price point here is between $60 to $70 per member per month depending on the number of conditions that the specific user is getting on the platform. If we simulate a new 10,000 users that will go on the platform under premium membership, on the business-to-business-to-consumer channel, we are generating in revenue approximately $8 million for every 10,000 users on a yearly base. This is a significant -- this can be a significant improvement to our top line as we are continuing our transformation and executing on our B2B2C strategy.

I'd like to move from here and give few updates on a few of the initiatives that we are doing on the B2B2C. And here, the overall goal is to have access to a broader pools of users. We also have the overall target to reduce the cost per acquisition. And as a reminder, this is not something that we started today, this is something that we started by mid last year. And today, we can update with that we made some progress here on the different channels under which we are operating. Just as a reminder, we are operating on the employer's channel, on the retailers channel, on the healthcare providers channel as well as on the insurers channel.

So since we started in May 2019, we already signed a few significant agreements with partners. Some of them already announced. I'm going to talk about of them shortly. We also have few contracts that are significant, that are under negotiation. And we feel that in some cases, the COVID-19 is pushing them forward. We also see a significant increase in our pipeline. So we think that already this year, we can see the results of this transformation into B2B2C, translating into concrete increase in sales. So I want to talk about one of the agreements that we already signed and we announced on it earlier this year on March. And this is a significant example for the progress that we are making on self-insured employer market. I'm talking about the agreement that we signed with Vitality Group. This is a partnership with a company that is selling wellness programs.

Vitality is an entity under a big insurer called Discovery Health. That have more than 16 million insurers. And through Vitality, we have access to hundreds of employers in the States. While together, we are marketing our overall offering on the disease management side. So we have a Vitality as a strategic partner that also has equity interest in our company. And we have them as a motivated organization to get us an immediate access to the network of employers that they have that otherwise we'll have it to do it one by one. So this is an example for a deal that provide a concrete evidence that the strategy of transforming our go-to-market strategy from direct-to-consumer into B2B2C, is a strategy that is already beared some fruits for us, and we are assure that we're going to see it in dollars later this year.

Other than that, I would like to talk also about the health plans channel because we believe that this is of the major channels for the company. We strongly believe that this is going to be our largest growth engine in the next 5 years. And we believe that the majority of the revenue from -- for the company is going to come from this channel, and we are spending a lot of time and efforts, making sure that our solution will be appealing for health plans. That we can help them with the most expensive patients, and we can help them reduce the overall cost. We think that we have the right solution. We also proved with more than 50,000 users and with more than 10 different clinical papers that we submitted to multiple entities that users that we're operating on our platform are improving outcomes in a way that we can show a concrete savings. And we know how to do that in a very, very cost-effective way.

So on one hand, we can show the significant evidence that we are improving outcomes with real data from real users. But at the same time, we know how to do it in a very cost-effective way, which is something that we believe that ensures need to have. We also believe that the major success factor in having is -- in making this overall move successful is having a best-in-class management team. A team that understand these channels very well and have the experience and the relationships to execute on this channel. Also here, we made a huge progress on executing and -- on our strategic objectives. In January, we appointed Rick Anderson to be the President of the company as well as the General Manager for North America. Rick brings a lot of experience, a lot of it comes from Catasys, where he spent more than 10 years cultivating its business, building a scaling business that generated tens of millions of dollars in recurring revenue for Catasys.

Most recently, we also announced that Ms. Stark, join in -- joined the company as the SVP and Head of managed markets, [Bee] also have an extensive experience with the Health Plans market, our major channel. In addition, we also announced that Dr. Omar Manejwala, joined our company as the Chief Medical Officer. Dr. Omar will lead our clinical delivery as well as supporting our product offering as well as the sales team. Dr. Omar spent the last decade building -- working with health plans and payers. You -- he specialized in delivering value-added clinical programs, and he understand very well the intersection that is very important for us, which is the intersection between chronic conditions to behavioral health.

So we are thrilled to have Rick, Bee and Omar our team. So as we transited the progress in the 2 pillars that are just mentioned, into specific economics, we expect that we're going to see continuous improvement in our margins, and we are also confident that we're going to see the results of signing all this agreement and the progress that we are making. We're going to see this result in a better top line as we move forward toward the second half of this year, and we're going to see also a positive impact on our P&L.

With that, I would like to hand over the call to Rick to expand more on the marketing initiatives. As well as on our evolving product offers. Rick?

Thank you, Erez. I am excited to report today on the continued progress we have made on our commercial front. However, before I go through each of the channels or as we sometimes refer to the markets, I would like to review Dario's competitive advantages that we believe will provide for meaningful penetration in several of our target markets.

In order to be successful digital health company, you must have: One, strong clinical data; two, good technology that is quickly adaptable and configurable; three, an understanding of how the health care system works and who the players are; and lastly, the ability to engage people in the solution. Arguably, many digital health companies do not achieve their goals because they lack one or more of these key ingredients. Dario has a strong clinical data across multiple studies and a large number of users. Dario is a software company at its core with a best-in-class application built on flexible open platform which allows us to pivot quickly to new opportunities. Dario has brought together a team that understands the health care market.

And most importantly, Dario has a strong consumer engagement, as demonstrated by its high user satisfaction scores 4.9 out of 5 on the Apple App Store, a Net Promoter Score of 77 and 50,000-plus active users on the platform. Nothing says consumer engagement like people paying out of their pocket for a solution each month. Dario checks all the boxes, and our solution is very cost-effective to deliver. This enables us to compete in markets others cannot and allows us to provide significantly better product at a significantly lower cost in the employer and health plan markets. We are very pleased with the progress that we have made over the last quarter, in spite to cycles, and we are still in the first inning of the transition to the B2B model.

I will expand on our 4 market segments and highlight, how Dario has made significant headway in the first quarter to position ourselves for growth in the second half of the year. But first, I want to briefly discuss the impact recent events have had on the digital therapeutic space. On an overall basis, we have seen an impact of COVID-19 on our opportunity pipeline. In some cases, we have seen decisions and projects delayed however, in others, including some employers and in the remote patient monitoring market, we have seen an acceleration of interest. On an overall basis, we have significantly grown our pipeline across all channels in the first quarter.

On a more macro level, the recent pandemic has highlighted several inadequacies and antiquated features of our current health care system, which has been slow to modernize with the rest of our now digital society. The challenges created by the pandemic are dramatically accelerating the adoption curve for digital health solutions, such as telehealth, remote patient monitoring, and a digital therapeutics as providers and patients look to provide care remotely and reduce risk for both the patient and the payer.

We believe that the trend towards more acceptance and utilization of digital health will continue even when the pandemic mitigates as people have experienced these advantages.

Now for the market segments. First, on the retail front, we have continued to expand through the relationships we entered into in 2019 with Best Buy and Walmart. We believe that we have built the foundation to see an increase in our business through these partners in 2020. In addition, we believe that we are close to entering a significant opportunity that would leverage our membership model in the retail space and provide significant growth during the rest of this year.

One of the most substantial changes that we have made this quarter was in how we are approaching providers, health systems and provider groups. We have pivoted away from trying to convince providers to distribute our solution or have their patients acquire Dario through a retail channel. Given the flexibility of our open platform, the efficient cost structure and high engagement, we evolved our product into the remote patient monitoring offering. Whereby we can provide the infrastructure to allow providers to remotely monitor patients between visits. With the new remote patient monitoring codes that became available in January of this year for Medicare, this shift allowed us to offer providers improved clinical care, increasing their revenue from their existing patient population. As such, we began pursuing larger provider practices and provider consolidators like chronic management companies or CCMS, who already are providing services to a number of providers.

We believe our solution is a natural fit for these existing businesses. Our RPM solution has become even more relevant during the pandemic, and we have seen increasing interest as a result. We are pleased to report that we have signed our first 2 RPM contracts with others in negotiation. One of the channels that we are most excited by, as Erez mentioned, is the self-insured employers. We have significantly increased our activity and traction directly with employers and through benefit brokers in the first quarter. We are now in the traditional benefit sales window for self-insured employers, while many of those opportunities, which we are now in competition for, will be implemented in 2021, also working several that we believe will provide revenue in the second half of 2020, including one that we are in late-stage discussions with.

In addition, as Erez previously mentioned, we recently entered into an agreement with the Vitality Group. Which is a health and wellness that provides integrated and curated solutions for employers. We are beginning now to co-market the Dario solution to the employers on their platform. And this represents a significant opportunity for us in the second half of 2020. Health plans represents of our largest and most complex opportunities. With the recent additions to the team, we now have a team of seasoned health care executives with a track record of success in this market. We have spent the first quarter working diligently to position Dario to be able to aggressively pursue health plans and are now launching those efforts.

While the health plan market has long sales cycles, we are already seeing some interest and have moved to late-stage discussions with a plan that has the potential to close as early as the second quarter. One thing I would like to highlight is this that Dario's open platform, which allows for data sharing and integration with health plan care resources is a significant advantage in this market segment. The ability to integrate into existing systems and workflows with minimal disruption, is often a make or break proposition, especially in an increasing complex health care environments. We anticipate that the health plans will grow into being one of our most significant channels in the medium and long term.

Interestingly, beyond the 4 identified market segments that we usually speak of and in a testament to the power of our platform and applications, we have also recently seen interest from several parties on partnerships that would utilize our platform to integrate our solutions. We believe that this creates the potential for high-margin revenue opportunities, and we look forward to discussing these more with you in the future.

Our continued success in all of our market segments and a large value driver in the medium and long-term lies in the capability of our platform to engage and help members manage multiple chronic conditions. As Erez mentioned, our initial focus was diabetes as it was the biggest opportunity to make meaningful improvements in health care outcomes and costs. Since then, we have expanded our offering. At the end of last year, we added hypertension and integrated a blood pressure monitor.

Recently, we have announced our expansions into telehealth and behavioral health coaching for stress, anxiety and loneliness. The behavioral health coaching is especially relevant today as we know that many of our members are suffering from stress and loneliness due to the risk and social distancing made necessary by COVID-19. And further aggravated by factors such as unemployment, financial stress, bereavement and fear surrounding the global crisis. Given the well-established link that exists between mental health and chronic disease outcomes, we believe that implementing these changes will lead to better more comprehensive care for Dario members and improve our members' experience.

The implementation of full-service telemedicine on a platform has been achieved through our recent partnership with MediOrbis. This partnership runs our SaaS-based business model and provides our members with access to physicians in a range of medical specialties, including primary and acute care as well as chronic disease management. With these recent additions to our product, we now have the ability to offer an almost entirely remote solution to our members, which is a compelling value proposition in the current stay-at-home reality. Even as restrictions are eased, high-risk populations, such as those we serve, will continue to need to exercise care. We anticipate that this integrated complete remote solution will have a significant value in all of our markets.

I will now turn it over to Zvi to discuss our financial results.

Thank you, Rick. I will now provide a brief overview on our financials. Additional details on our results can be found in our Form 10-Q, which we have filed yesterday evening.

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, 2020. Revenues generated during the first quarter ended March 31, 2020, were derived mainly from the sales of DarioHealth component 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 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 revenues of $1.27 million, the majority of which we expect to recognize during the remainder of this year. 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 is 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 million or 84% compared with $5.9 million for the first quarter ended March 31, 2019.

The increase in the operating expenses has -- is mainly due to the increase in equity-based compensation to directors, employees and service providers to 6.6 -- $6.3 million in the first quarter ended March 31, 2020, and compared to only $243,000 in the first quarter ended March 31, 2019. Non-GAAP operating expenses, which are excluding equity-based compensation, for the first quarter ended March 31, 2020, were only $5.6 million compared with non-GAAP operating expenses, excluding equity-based compensation of $5.7 million in the first quarter ended March 31, 2019.

This is a reduction of $1.1 million. This reduction was mainly due to the reduction in our digital marketing activity in the direct-to-consumer 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 margin. 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 $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. Now back to you, Erez.

Thank you, Zvi. So in summary, it's a very exciting time for DarioHealth as we keep executing on our multiyear strategic plan, we believe that we're going to create substantial value towards our shareholders. Just few points to summarize the earning call as a takeaways. Number one is the space, digital therapeutics. We see it growing. We believe that value have the right technology to disrupt the health care market as part of the digital therapeutics space. We anticipated Business Insider's, anticipate that this market will grow into $9 billion market by 2025. We believe that we are well positioned to be one of the leaders in this market. And we see that COVID-19 is something that in the medium and long term, will push the transformation into digital.

We also believe that we have the product excellence proved with more than 50,000 users on the platform. We have the clinical data that demonstrated the health and improved health outcomes. And as we evolve with the transformation we are doing, in terms of the business model into SaaS, an improvement of margins, we believe that we're going to keep seeing improvement in our margins to exceed the a 70%. And we also believe that the transformation into B2B2C that is happening as we speak, is going to help us scale our business, and we believe that we have the best-in-class management team that already did it and execute on similar models. And we believe that this is something that increased the chances that we're going to be successful. From a capital raise standpoint, we did a raise in December. So we are also very well-funded to continue the transformation.

With that, I would like to open the call for questions. Operator?

(Operator Instructions)

And our first question comes from Alex Nowak with Craig-Hallum.

Rick, you joined about 4 months ago. And in that time, we've seen some nice B2B wins and also the addition of behavioral health. If you step back, what have you uncovered in the last 4 months? And with the Dario platform, what do you still believe needs to be modified with Dario and the platform that Erez has built to position the business to succeed with B2B?

Thanks for that question. I think that from what I'm seeing, I was actually more pleased than I thought walking through the door in terms of the flexibility of the platform. And what that us the ability to do and some of the other partnership opportunities have been created. I think that the -- pivoting into the remote patient monitoring for example, was a good example of what we were able to do with the technology. As Erez also mentioned, I think we need to continue to evolve the B2B product, which is underway. And I think it'll be completed in time for some of the deals that we see coming in the short term. And we need to just continue to do the marketing and get the name out there. Dario has only really started in the last few months, just a couple of months before I got here really on that transformation, and it takes a little bit of time to get the name out into the marketplace and get people to see it. We're already starting to see some traction in that. And I was very pleased this quarter to see the Dario name being involved in the RFPs and having some great success in that marketplace. So I think it's really a matter of finalizing the products and getting the name out there, getting people to understand what Dario is capable of.

That's great. And can you point to anything that worked well at Catasys, and that you're trying to implement at Dario?

I think that the primary thing -- well, I think there's a lot of things actually. They all really sort of boil down to understanding the health plan market. As I mentioned in my remarks, one of the things is that a company like Dario or any company, doesn't matter how big they are, is going to get a health plan to change to the way that they do things or an employer for that matter. There's -- it's very, very hard to change the health care system. And so a lot of times, you have to be flexible and fit within how the health plans function, how the employers function. And I think that the flexibility of the solution here is one of the things that really works well in that, and I found the same thing to be true in Catasys. By being flexible, we were able to accomplish things that others could not accomplish. I think the other big thing is you really have to understand the way that the system works, who the players are? Because it's a very complex, multi individual type of sale. And so being able to understand how they see those value propositions and position the product to deliver on those as important.

One of the things that we have here that we didn't have there is actually the -- having the competition in the marketplace really helps. And being not the pioneer, but the fast follower in a couple of the market helps, too, because you can position yourself against the weaknesses that the other products have and the feedback that you're getting from the market.

And the pivot to behavioral health that fits with the Catasys background, but it is a complete pivot from Dario's diabetes platform. So why do you think the pivot towards behavioral health makes sense? And what sort of additional investments did Dario need to make to succeed in that market?

So let me be clear in terms of what we've done from a behavioral health perspective, and there's 2 pieces to it. One is that we very well understand that behavioral health and chronic condition management are tied together. If you do not deal with the behavioral health portions, you're not going to be successful with chronic conditions where those exist. But rather than have behavioral health as a separate add on module as some of the other companies in the space have. What we're doing is pushing behavioral health into all of the other modules. And so you won't be able to go through anything with DarioHealth without there being background of behavioral health, where it'll be looking for issues and potentially coaching and steering people to the right resources to address those. But in the near term, what we've done is really add coaching, which was existing Dario coaching that has been repurposed, if you will, to provide coaching around stress, anxiety and loneliness, especially in the current environment. That's why we rolled it out quickly. You will always find those coexisting with chronic conditions. And so that's why we think that it's important, but we're not building a stand-alone behavioral health module with coaches and psychologists and things like that. We will use partners to address that as needed. But what we're really focused on is making this part of the overall product offering.

Okay. That's helpful. And then I think one of the biggest questions among investors is how many names and what sort of names as Dario partnered with or is in the pipeline? So Erez or Rick, are you -- as you're starting to win deals here with clinics, employers and payers. Should we expect to see a press release with the names of these actual organizations? So they can start to get an idea for the quantity and the quality of the names. And also, is there any way to come up with going forward, a standardized lives under contract metric? That you can share in each of these earnings calls going forward, just so we can start to benchmark the performance.

Rick, can you please take it?

Sure. So we will endeavor, as we -- I mean, we will announce what we do, and we will endeavor to let everybody know who those partners are that we're working with. I am very familiar with the fact that lots of partners want to control their name as it gets out there, but I think that we will be able to announce some very interesting deals for people. As it relates to the metric, absolutely, we're looking now at what are the right metrics so that everybody can understand our progress in the business as we move it forward and go from essentially, 6 months ago, a standing start to, as we move through the rest of the year. So everybody can assess progress because that's the way that we look at it, and understanding how many people do we have on platform. And where are those people coming from? And what are the opportunities that are created by the additional deals that we're signing.

Okay. Got it. And you still do have a good amount of business today with direct-to-consumer. So what has been the dynamics within April or May around diabetes equipment purchases by consumers at Amazon, bestbuy.com, walmart.com?

Yes. So thanks for the question, Alex. So here -- you're right, we are -- we still have a business, and we have a very powerful business on membership side. We have seen that in some cases, users, because we are an out-of-pocket business on the direct-to-consumer, we have seen that when the oil crisis started, some users had challenges in terms of paying out of pocket. But on the other hand, we have seen a growing demand because -- and reduction in the cost per acquisition because the importance of such a solution or those that are under high-risk for COVID-19 like people who has the diabetes or hypertension. So overall, it was something that was offsetting.

With regards to the marketplaces, we felt that Amazon is getting stronger on behalf of others. So Amazon, we believe, had their own challenges and one of the things that they did is prioritizing suppliers like ValueHealth that are dealing with health products, and this is why we got priority by Amazon. And this is also something that helped our members. So overall, we cannot say that it was pushing the business forward, but it was not reducing it as well. So we are more or less stable here.

Okay. Got it. And then just 2 just quick cleanup questions. A huge jump in stock-based compensation expense in the G&A line. Anything that happened in the quarter to lead to this huge jump?

Yes. So I think that what -- one of the things that we did is like expanding the team and our advisory team and those that are helping the company take it to the next stage. We brought a very powerful team. And this is something that we are doing, not occasionally, well we are doing it over a few years in order to make sure that the team, Board of Directors and the service providers are all incentivized to take the company to the next stage. So that's something that it's a onetime.

Okay. And how long do you expect the current cash balance to last through?

Yes. So we updated our financial reports. And we reported that September 2021 is where the cash should be sufficient for. So we raised significant amount of money in December with very good group of investors, very supportive investors. More than 1/3 of the deal was done by investors that already support the company. So we believe that we are building a community of believers that will help us take the company to the next stage also from a valuation standpoint.

And our next question comes from Ben Haynor with Alliance Global Partners.

First off for me, when employers are going through Vitality and building these benefit plans, I know that Vitality has an interest in the company itself. But how many other options are they presenting? Or are on the menu that could be considered digital health or potentially competitive to Dario on some level?

They certainly have a couple on there that could be considered competitive. And actually, I think one of the things we really welcome is that opportunity to be set up side-by-side for those opportunities. I actually consider that a win if somebody will take a look at us side by side. So we view that as an advantage.

In the sense of your -- the strength of your offering, but also that there are multiple offerings out there that -- so maybe employers believe that, well, geez, I should choose one of these?

Yes, I think there's a couple of things that are going on in the marketplace. I mean clearly, we see an expansion in the diabetes and hypertension chronic condition management with these kinds of platforms. And I think that speaks to the overall need that the market has seen. And I think that you're seeing a growth in acceptance that this isn't something, should we do it or not do it, but which solution should we use to do it. And I think that, that works to our advantage. As I mentioned earlier, the fact that we're not necessarily the pioneer, somebody else has opened this market, which is -- I mean, I've done it. It's really hard to do, and it costs a lot of money and takes a lot of time, and we're going to take advantage of that. And the fact that we believe we've got a best-in-class solution that we can provide at an extremely competitive price, I think, speaks well for our ability to compete in that market.

Okay. The color is helpful there. And then just in terms of insights that you're getting, if any, through the Vitality program. All of the employers that have made a choice so far. Do you get a sense on how often you're winning versus the competition on the platform? Or don't you get that detailed of data? Or any color that you might be able to share there?

I think that's more than just a Vitality question. I think that's a question of as we go through the process, we're really in the sales window right now for these types of opportunities. So it's a little early for me to comment on what those statistics look like. We'd hope to have more of that available here in the future.

Okay. So basically, the way it works, if I'm understanding it correctly, is right now, the employers are going in figuring out what they want to offer to their employees, the employees later on this year, make a decision and then further enrollment and then the likely most of the revenue that is generated -- will be generated, shows up probably starting in 2021. Is that the right way to think about it?

I think we will start to see revenue at the back half of 2020. But then the normal sales cycle would have employers that are buying through an RFP process during the sales cycle would be implementing in January of 2021. But I do believe that we will see some revenue this year. Based on where we are with some of the contracts.

Got it. And then just lastly for me in terms of where the efforts are kind of being directed at present and going forward? I mean are you spending -- if you had to break it down, how much time are you spending on going after health plans versus employers versus RPM providers? And how does that all shake out?

About -- Probably about 80% of our efforts over the last quarter have been spent in the RPM and employer space. And the remainder of getting ready to pursue the health plan space. And part of that was making sure that we had the team in place and really have spent the last 60 days, let's say, in terms of getting ready for launching that. So going forward, I expect we'll see a little bit more health plan effort than we have for the last couple of months. But I think that in the short term, a lot of the effort is going to continue to be employers. And we've seen some nice traction in the RPM market. So we did pivot resources into that.

And that does conclude our Q&A session for today. I'll turn it back over to Erez Raphael for any closing remarks.

So thanks, everyone, and thanks for joining our call today. I'm looking forward to see you in our next call. Have a good day. Thanks.

And that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.