Dialogue Health Technologies Reports Fourth Quarter and Full Year 2022 Results

Strong finish to the year highlighted by landmark customer wins and more than $10 million in new ARR

MONTREAL, March 21, 2023 /CNW/ - Dialogue Health Technologies Inc. (TSX: CARE) ("Dialogue" or the "Company"), Canada's premier health and wellness virtual healthcare platform, announced today its financial and operational results for the three months and year ended December 31, 2022. Financial references are in Canadian dollars unless otherwise indicated. Please visit Dialogue's investor relations website to view management's commentary and related presentation on fourth quarter results.

"2022 was another strong year, as new and existing customers continue to see great value in providing our virtual care platform to their employees and members. We enhanced our offering with the addition of a Wellness program, extending our treatment capabilities to include prevention. We completed the sale of our OHS business in Germany to focus efforts on our Integrated Health Platform^TM within markets where we see the highest growth potential. And we strengthened our largest partnerships, as both Sun Life and Canada Life expanded their group health benefits by adding more of our services," said Cherif Habib, Chief Executive Officer of Dialogue. "Dialogue added $23 million in net new ARR in the past year, exceeding $100 million overall, an important milestone that demonstrates our team's unrelenting focus on driving innovation and upholding a high level of service quality. We also made solid progress with large enterprise customers, those with 10,000 employees or more, signing four such agreements in the fourth quarter alone. As we move forward in 2023, we will continue to invest in our platform to help users of Dialogue lead healthier and fuller lives."

Navaid Mansuri, Chief Financial Officer, added: "Dialogue delivered a strong performance in 2022. We saw organic ARR growth and revenue growth in our digital business of 44% and 52% respectively. We added more than 820,000 net new members, many of which signed up for two or more services, and saw our virtual Mental Health and EAP segments scale meaningfully. We are on track to reach positive adjusted EBITDA by the end of 2023, having improved gross margins significantly in 2022 and stabilized our operating expenses in the last three quarters. We ended the year with more than $62 million in cash on our balance sheet and should require between $5 million and $10 million to reach our breakeven target. With no bank debt and cash flow generation on the horizon, Dialogue is in a strong position to execute on M&A. That said, we will remain patient until valuations become more reasonable and maintain our discipline and focus on generating long-term value for all our stakeholders."

Q4 2022 Financial Highlights
(All capitalized terms not defined herein, shall have the meaning and usefulness ascribed to them in the Management's Discussion and Analysis ("MD&A") for the three months and year ended December 31, 2022. Comparison periods in each case are the three months and year ended December 31, 2021, unless otherwise stated.)

Results that were presented in our business update published on January 25, 2023, included our divested Occupational Health and Safety ("OHS") segment in Germany in order to properly compare them to our quarterly guidance issued on November 14, 2023. Results presented below reflect continuing operations only and are not directly comparable to those presented in our business update.

• Annual Recurring and Reoccurring Revenue ("ARR") from continuing operations in the fourth quarter of 2022 grew 27.9% year-over-year to $103.2 million, driven by new Customer wins, by existing Customer and Partner expansions, by the addition of Tictrac in the second quarter of 2022, and offset in part by churn at Optima, as disclosed in September 2022. Dialogue's core digital business in Canada, which represents 84% of total ARR, increased 44% year-over-year.
• New customer wins in the period included a large telecommunications company, a leading public utility, and a national entertainment and hospitality company. We also saw the addition of new services by several existing Customers, including a global IT and business consulting firm and a global manufacturer of recreational products.
• Revenue from continuing operations in the fourth quarter of 2022 increased by 31.5% year-over-year to $23.5 million, driven mainly by organic growth in Members, by an increase in the Attach Rate as existing Customers added more services, by price increases, and by the acquisition of Tictrac.
• Members grew to more than 2.7 million in the fourth quarter of 2022, an increase of approximately 820,000, or 44.5%, year-over-year. Excluding the contribution from Tictrac, Members grew 30.3% year-over-year to more than 2.4 million.
• Attach Rate grew to 1.55 in the fourth quarter of 2022 from 1.50 in the same period last year.
• Member-Service Units ("MSUs"), which we define as total Members multiplied by the Attach Rate, rose 49.3% to 4.1 million in the fourth quarter of 2022 from approximately 2.8 million in the same period last year. Excluding the contribution from Tictrac, MSUs grew 39.8% year-over-year to nearly 3.9 million. This increase demonstrates the success of Dialogue's land & expand strategy, as both existing and new Customers continue to leverage our integrated services.
• 44% of new direct Customers signed up for two services or more in the fourth quarter of 2022. Combined with current Customer expansions, the cumulative number of direct Members with two or more services was 31% at the end of the fourth quarter of 2022, compared to 21% at the same time last year.
• Average Monthly Net Retention Rate ("NRR") was 100.4% for the fourth quarter of 2022, marking another consecutive quarter of NRR greater than 100%. Churn within our direct mid-market and enterprise Customer segments remained low in the period at approximately 400 Members.
• Gross Margin from continuing operations increased to 56.5% in the fourth quarter of 2022, compared to 42.5% in the same period last year, as we realized efficiencies in our operations, implemented price increases, continued to scale our Mental Health service and Employee Assistance Program ("EAP"), and integrated Tictrac's higher margin Wellness service.
• Adjusted EBITDA[1] loss from continuing operations was $2.1 million in the fourth quarter of 2022, compared to a loss of $5.5 million in the same period last year. The smaller loss was due to higher gross profit and strong cost control, partially offset by a loss at Tictrac.
• Net loss from continuing operations was $5.6 million in the fourth quarter of 2022, compared to $6.9 million in the same period last year. The smaller loss was primarily due to higher gross profit and net financing income, offset in part by higher operating and income tax expenses compared to the fourth quarter of 2021.
• Cash and cash equivalents were $62.7 million as of December 31, 2022, compared to $104.3 million as of December 31, 2021. The decrease was the result of cash used in operations during the year and the cash outlay to close the acquisition of Tictrac, offset in part by proceeds from the sale of our Occupational Health and Safety ("OHS") business in Germany.

Q4 2022 Key Business Developments and Subsequent Events

• On October 2, 2022, Sterling Capital Brokers, Canada's largest independent benefits consultant, partnered with Dialogue to promote healthy living by offering our Wellness program to its current and prospective customers.
• On October 11, 2022, myHSA Ltd., an employee benefits platform, announced a partnership with Dialogue that allows advisors to offer Dialogue's full suite of services, including Wellness, to organizations in Canada, through an easy-to-use central application.
• On November 1, 2022, Dialogue became the first virtual care company to receive the Accreditation Canada Primer award, recognizing a high level of quality and safety of care.
• On December 27, 2022, Dialogue announced the sale of its OHS business, which it identified as a non-core asset that did not fit within the Company's integrated platform strategy and did not feature the high scalability necessary for international market growth.
• Dialogue surpassed $100 million in ARR, an important milestone that demonstrates the scalability of our business model and traction with our growth strategy.
• We were recognized by Great Place to Work® as a 2022 Best Workplaces^TM in Quebec and 2022 Best Workplaces^TM for Inclusion.
• We were ranked #17 on the 2022 Deloitte Technology Fast 50 list of Canada's fastest growing technology companies with a three-year revenue growth of 1,596%.

_________________________

¹ Adjusted EBITDA is a Non-IFRS financial measure. Refer to the reconciliation contained in the Non-IFRS Financial Measures section, beginning on page 4 of this earnings release.

Financial Outlook

Dialogue is providing an outlook based on current market conditions and expectations. For the first quarter of 2023, we expect:

• Revenue to be approximately $24.0 million to $24.5 million.
• Gross profit margin to be in the range of 55.0% to 56.5%.
• Adjusted EBITDA to be in the range of ($2.1) million to ($1.8) million.

Upcoming Events

• Laurentian Bank Securities Diversified Technology Conference held virtually on April 12, 2023.
• Canaccord Genuity Quebec Conference in Toronto on May 16, 2023.
• CIBC Technology and Innovation Conference 11.0 in Toronto on May 24, 2023.

Notice of Conference Call

Starting this quarter, we are making changes to our format for the conference call with analysts and investors. Management's prepared remarks on the Company's quarterly performance and accompanying slides have been published concurrently with this press release and are available here. This will allow more time to interact with analysts and to answer questions. Cherif Habib, CEO, and Navaid Mansuri, CFO, will host the live video webinar on Wednesday, March 22, 2023, at 8:30 a.m. ET. All interested parties can join the event at the following link, which is also available in the Events and Presentations section of Dialogue's website. Please connect at least 15 minutes prior to the event to ensure adequate time for any software download of Zoom that may be required to attend the event. Listeners that prefer to dial in by phone may do so by accessing the same web link and the dial in details will be provided by email upon registration.

Non-IFRS ("International Financial Reporting Standards") Financial Measures

This press release makes reference to certain non-IFRS measures, such as "EBIT" (which stands for net profit or loss before net profit or loss from discontinued operations, net financing (income) expenses and income taxes), "EBITDA" (which stands for net profit or loss before net loss from discontinued operations, net financing (income) expenses, income taxes, depreciation of property and equipment, amortization of intangible assets and amortization of right-of-use assets) and "Adjusted EBITDA" (which stands for net profit or loss before net loss from discontinued operations, net financing (income) expenses, income taxes, depreciation of property and equipment, amortization of intangible assets, amortization of right-of-use assets, disposal costs, acquisition costs, restructuring costs, change in fair value of conversion feature, share-based payments expense, change in fair value of contingent consideration, asset write-off and impairment and foreign exchange gain or loss). This earnings release also makes reference to Annual Recurring and Reocurring Revenue ("ARR"), Net Retention Rate ("NRR"), Member-Service Units ("MSUs"), Attach Rate and Members, which are key performance indicators. The key performance indicators used by the Company may be calculated in a manner different than similar key performance indicators used by other companies. These measures and key performance indicators are not recognized under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information as reported under IFRS. We also believe that other users, such as securities analysts, investors and other interested parties, frequently use non-IFRS measures, particularly in the evaluation of issuers.

Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. Where applicable, we provide a clear quantitative reconciliation from the non-IFRS financial measures to the most directly comparable measure calculated in accordance with IFRS.

The following table reconciles net loss to Adjusted EBITDA loss for the three months and year ended December 31, 2022 and 2021:

DIALOGUE HEALTH TECHNOLOGIES INC.
ADJUSTED EBITDA
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2022 and 2021

(in thousands of CAD)		Three months ended December 31,				Year ended December 31,
		2022		2021		2022		2021
		$		$		$		$
Net loss		(4,506)		(7,142)		(25,953)		(251,351)
Net (gain) loss from discontinued operations		(1,088)		258		1,444		3,402
Net financing income		(522)		(178)		(994)		(363)
Current income tax expense		64		36		148		70
Deferred income tax expense (recovery)		173		(114)		(615)		(393)
EBIT		(5,879)		(7,140)		(25,970)		(248,635)
Depreciation of property and equipment		115		161		536		431
Amortization of intangible assets		563		344		2,045		1,364
Amortization of right-of-use assets		192		107		644		423
EBITDA		(5,009)		(6,528)		(22,745)		(246,417)
Share-based payments expense		858		677		3,470		2,061
Acquisition costs		72		150		1,064		380
Change in fair value of conversion feature		—		—		—		225,417
Change in fair value of contingent consideration		74		193		340		193
Restructuring costs		490		37		542		37
Disposal costs		604		—		604		—
Assets write-off and impairment		1,179		—		1,179		—
Foreign exchange loss (gain)		(371)		—		3		87
Adjusted EBITDA		(2,103)		(5,471)		(15,543)		(18,242)

About Dialogue
Incorporated in 2016, Dialogue is Canada's premier virtual healthcare and wellness platform, providing affordable, on-demand access to quality care. Through our team of health professionals, we serve employers and organizations who have an interest in the health and well-being of their employees, members and their families. Our Integrated Health Platform™ is a one-stop healthcare hub that centralizes all of our programs in a single, user-friendly application, providing access to services 24 hours per day, 365 days per year from the convenience of a smartphone, computer or tablet. Dialogue is the first virtual care provider to receive the Accreditation Canada Primer award, a third-party validation of safety and high-level quality of care.

Forward-Looking Information

This release includes "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of applicable securities laws. Forward-looking information may relate to our financial outlook (including revenues and Adjusted EBITDA), and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives.

In some cases, but not necessarily in all cases, forward-looking statements can be identified by the use of forward-looking terminology such as "plans" "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "is positioned", "estimates", "intends", "assumes", "anticipates" or "does not anticipate" or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-looking statements. Forward-looking statements are not historical facts, nor guarantees or assurances of future performance but instead represent management's current beliefs, expectations, estimates and projections regarding future events and operating performance.

Forward-looking statements are necessarily based on a number of opinions, assumptions and estimates that, while considered reasonable by Dialogue as of the date of this release, are subject to inherent uncertainties, risks and changes in circumstances that may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ, possibly materially, from those indicated by the forward-looking statements include, but are not limited to, the risk factors identified under "Risk Factors" in the Company's latest annual information form, and in other periodic filings that the Company has made and may make in the future with the securities commissions or similar regulatory authorities in Canada, all of which are available under the Company's SEDAR profile at www.sedar.com. These factors are not intended to represent a complete list of the factors that could affect Dialogue. However, such risk factors should be considered carefully. There can be no assurance that such estimates and assumptions will prove to be correct. You should not place undue reliance on forward-looking statements, which speak only as of the date of this release. Dialogue undertakes no obligation to publicly update any forward-looking statement, except as required by applicable securities laws.

Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not currently known to us or that we currently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, you should not place undue reliance on forward-looking information. The forward-looking information represents our expectations as of the date of this earnings release (or as the date it is otherwise stated to be made) and is subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable Canadian securities laws. All of the forward-looking information contained in this earnings release is expressly qualified by the foregoing cautionary statements.

DIALOGUE HEALTH TECHNOLOGIES INC.

CONSOLIDATED STATEMENT OF NET LOSS AND OTHER COMPREHENSIVE  LOSS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(in thousands of CAD except share and per share data)	Three months ended December 31,				Year ended December 31,
	2022		2021		2022		2021
	$		$		$		$
Continuing operations
Revenue	23,471		17,850		87,132		64,534
Cost of services	10,205		10,257		43,788		38,067
Gross profit	13,266		7,593		43,344		26,467
Operating expenses
General and administrative	12,400		7,966		42,593		27,900
Sales and marketing	3,485		2,850		12,727		10,437
Product and development	2,402		3,240		10,524		9,287
Share-based payments expense	858		677		3,470		2,061
	19,145		14,733		69,314		49,685
Operating loss from continuing operations	(5,879)		(7,140)		(25,970)		(23,218)
Other expenses
Change in fair value of conversion feature	—		—		—		225,417
Net financing income	(522)		(178)		(994)		(363)
	(522)		(178)		(994)		225,054
Net loss before income taxes from continuing operations	(5,357)		(6,962)		(24,976)		(248,272)
Current income tax expense	64		36		148		70
Deferred income tax expense (recovery)	173		(114)		(615)		(393)
Net loss from continuing operations	(5,594)		(6,884)		(24,509)		(247,949)
Net loss from discontinued operations	1,088		(258)		(1,444)		(3,402)
Net loss	(4,506)		(7,142)		(25,953)		(251,351)
Other comprehensive loss from continuing operations
Items that may be reclassified subsequently to net loss from continuing operations
Foreign currency translation gain (loss)	486		14		157		(45)
Comprehensive loss from continuing operations	(5,108)		(6,870)		(24,352)		(247,994)
Other comprehensive loss from discontinued operations
Foreign currency translation gain (loss)	(737)		204		(140)		797
Comprehensive (loss) income from discontinued operations	351		(54)		(1,584)		(2,605)
Total comprehensive loss	(4,757)		(6,924)		(25,936)		(250,599)
Loss from continuing operations per share - basic and diluted	(0.08)		(0.10)		(0.37)		(4.42)
Loss from discontinued operations per share - basic and diluted	0.02		—		(0.02)		(0.06)
Loss per share - basic and diluted	(0.06)		(0.10)		(0.39)		(4.48)

DIALOGUE HEALTH TECHNOLOGIES INC.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT DECEMBER 31, 2022 AND DECEMBER 31, 2021

(in thousands of CAD)	December 31,		December 31,
	2022		2021
	$		$
Assets
Current assets
Cash and cash equivalents	62,697		104,296
Trade and other receivables	17,190		13,659
Prepaid expenses	2,443		1,811
	82,330		119,766
Investment	1,004		—
Property and equipment	936		1,137
Right-of-use assets	784		1,568
Intangible assets	6,237		5,819
Goodwill	24,586		6,963
Deferred income tax asset	3,511		—
	119,388		135,253
Liabilities
Current liabilities
Trade payable and accrued liabilities	16,724		9,534
Unearned revenue	912		68
Current portion of contingent consideration payable	1,425		718
Current portion of long-term debt	400		400
Current portion of lease liabilities	404		541
	19,865		11,261
Non-current portion of lease liabilities	343		911
Non-current portion of long-term debt	707		1,074
Non-current portion of contingent consideration payable	664		1,300
Deferred income tax liability	458		766
	22,037		15,312
Commitments and contingencies
Shareholders' equity
Share capital	459,962		458,962
Equity reserve	6,112		3,514
Cumulative translation adjustment	112		347
Deficit	(368,835)		(342,882)
	97,351		119,941
	119,388		135,253

DIALOGUE HEALTH TECHNOLOGIES INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(in thousands of CAD)	2022		2021
	$		$
Operating activities
Net loss	(25,953)		(251,351)
Items not affecting cash
Increase (decrease) of contingent consideration	340		(165)
Unrealized Foreign Exchange gain	(3)		—
Deferred income tax recovery	(615)		(393)
Change in conversion feature on preferred shares	—		225,417
Depreciation of property and equipment	572		519
Amortization of right-of-use assets	807		600
Gain on lease modification	(21)		—
Net financing income	(966)		(363)
Amortization of intangible assets	2,173		1,502
Loss on intangible assets write-off and impairment	1,179		—
Share-based payments	3,470		2,061
Gain on disposal of discontinued operations	(360)		—
Foreign exchange gain realized on disposal of discontinued operations	(246)		—
	(19,623)		(22,173)
Net changes in non-cash operating working capital items
Trade and other receivables	(3,677)		(2,301)
Prepaid expenses	(326)		(1,065)
Trade and other payables	6,929		2,045
Unearned revenue	80		(409)
Interest paid	(185)		(128)
Interest income	1,233		753
	(15,569)		(23,278)
Investing activities
Purchase of property and equipment	(454)		(651)
Purchase of intangible assets	—		(87)
Sale of asset held for sale	—		910
Acquisition of Botfront	—		(292)
Acquisition of e-hub Health Pty Ltd. net of cash acquired	—		(3,138)
Investment	(1,004)		—
Payment of Optima contingent consideration	—		(1,500)
Payment of Botfront contingent consideration	—		(199)
Payment of e-Hub Health Pty Ltd. contingent consideration	(849)		—
Acquisition of Tictrac Ltd. net of cash acquired	(24,253)		—
Proceeds from sale of discontinued operations	1,900		—
	(24,660)		(4,957)
Financing activities
Issuance of shares	—		100,008
Share issue costs	—		(9,371)
Performance share units settled in cash	(172)		—
Options exercised	290		604
Repayment of liability related to asset held for sale	—		(430)
Repayment of long-term debt	(400)		(400)
Repayment of lease liabilities	(873)		(699)
	(1,155)		89,712
Effect of foreign currency translation	(215)		752
Net (decrease) increase in cash and cash equivalents	(41,599)		62,229
Cash and cash equivalents, beginning of the year	104,296		42,067
Cash and cash equivalents, end of the year	62,697		104,296

SOURCE Dialogue Health Technologies Inc.

Investor relations, Jean Marc Ayas, Director, Investor Relations, [email protected]; Media Relations, Jean-Christophe de Le Rue, Director, Public and Government Relations, [email protected] / [phone]