Dialogue Announces Record Third Quarter 2021 Results

Strong and Sustained Demand Drives Near Doubling of ARR to Over $75M, 120% Growth in Revenue, and 1 Million New Members Y/Y

MONTREAL, Nov. 9, 2021 /CNW Telbec/ - 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 and nine months ended September 30, 2021. Financial references are in Canadian dollars unless otherwise indicated.

"We continue to see robust demand for Dialogue's products, which doubled our revenue and drove our pipeline of opportunities to a historical high as we entered the fourth quarter," said Cherif Habib, Chief Executive Officer of Dialogue. "These results, as well as strong momentum in a number of our key indicators as we exited the third quarter, underscore the growing need within the Canadian market for the power and convenience of our Integrated Health Platform^TM ("IHP"). Our customers increasingly recognize its usefulness, not only to deliver better health and wellness outcomes for their employees, but also to attract and retain talent, especially in a competitive labour market."

Navaid Mansuri, Chief Financial Officer, added: "We showed solid discipline on cost and capital allocation through the first nine months of the year and have seen our operating expenses plateau. While we will continue to make measured investments in our operations, we see the third quarter as an inflection point in driving operating leverage. Our balance sheet is well capitalized, providing Dialogue with ample capacity to act on M&A opportunities and further strengthen our IHP."

Q3 2021 Financial Highlights
(All capitalized terms not defined herein, shall have the meaning ascribed to them in the Management's Discussion and Analysis for the three and nine months ended September 30, 2021; Comparison periods in each case are the three and nine months ended September 30, 2020, unless otherwise stated)

• Annual Recurring and Reoccurring Revenue grew 99.5% year-over-year to $75.4 million, driven by new Customer wins, which include a global consulting and engineering firm, a global testing and inspection company, a leading network of dental practices, and a national apparel retailer, as well as program expansions and the addition of new services by existing Customers.
• Third quarter revenue increased by 119.6% year-over-year to $17.2 million, due to growth in Members, both Direct and from agreements with strategic distribution partners, an increase in Attach Rate, as well as the acquisition of Optima Global Health Inc. ("Optima") on October 1, 2020.
• Members grew to nearly 1.8 million, an increase of more than 1 million, or 132.2%, year-over-year, and approximately 312,000, or 21.5%, compared to the second quarter of 2021.
• Attach Rate grew to 1.11 from 1.06 in the same period last year.
• Member-Service Units, a new reported metric which we define as total Members multiplied by the Attach Rate, rose 143.2% year-over-year to just under 2 million from approximately 800,000 in the same period last year. This meaningful increase demonstrates the success of Dialogue's land and expand strategy, as both existing and new Customers continue to leverage our IHP.
• 59% of new direct Members signed up for two services or more in the third quarter of 2021. Combined with current Customer expansions, the cumulative number of direct Members with two or more services is now 17%, compared to 12% at the same time last year. This traction builds on that of the prior quarter, which saw 44% of new direct Members sign up for two services or more, and provides further support in favour of Dialogue's IHP.
• Average Monthly Net Retention Rate ("NRR") was 102% for the third quarter of 2021, marking another quarter of NRR greater than 100% and a virtually non-existent member churn.
• Gross Margin increased to 42.6%, compared to 32.7% in the third quarter of 2020, as the lower margin profile at Optima was more than offset by a favourable utilization rate and by greater scale year-over-year in both our Mental Health service and Employee Assistance Program ("EAP"). Additionally, the Gross Margin in the third quarter of 2020 had been negatively impacted by a meaningful ramp-up in staffing and Member onboarding. Compared to the first two quarters of 2021, the Gross Margin improved by 110 basis points, mainly due to a lower seasonal utilization and the continued migration of Optima customers to our digital EAP.
• Adjusted EBITDA¹ loss was $4.9 million, compared to a loss of $5.3millions in the same period last year. The loss was due mainly to higher operating expenses year-over-year to support our growth, to launch and promote new services, to develop our technology platform, and to sustain a public company structure, partially offset by higher gross profit.
• Total Comprehensive Loss was $6.4 million, as compared to $6.3 million in the same period last year, due mainly to higher operating expenses, partially offset by higher gross profit.
• Cash and Cash Equivalents were $110.9 million as of September 30, 2021, compared to $42.1 million as of December 31, 2020. The increase was the result of net proceeds from the initial public offering of $90.6 million, offset in part by cash used in operations during the first nine months of 2021.

Q3 2021 Business Highlights

• We built on the successful acquisition of internet-based cognitive behavioural therapy ("iCBT") provider e-Hub Health Pty Ltd ("eHH") in Q2 by completing the launch of self-care toolkits, thus enabling Dialogue members to manage anxiety and depression symptoms to remission using industry-leading, proven techniques. Several clients have already signed up to use the program.
• Subsequent to quarter end, we launched an enhanced iCBT option with guidance from a coach, allowing clients and members to select their desired level of support and autonomy to treat mental health.
• We added a meaningful number of new customers in non-traditional segments, such as students, first responders, municipal employees, and union members. We also expanded the coverage of several existing customers in those segments.
• We hosted our 2nd Annual Humanizing Healthcare Conference, with an agenda that featured a keynote address from Chris Hadfield, Astronaut and First Canadian Commander of the International Space Station, and that touched on mental health strategies, diversity and inclusion perspectives, and much more. The event was sponsored by some of our most important strategic partners.
• We have been recognized as a 2021 Best Workplace^TM for Today's Youth by Great Place to Work®.
• We have been ranked #9 on the 2021 Report on Business list of Canada's Top Growing Companies with a three-year revenue growth of 4,215%.

Upcoming events

• TD Virtual Technology Conference on November 16, 2021.
• Benefits Canada Mental Health Summit on November 24, 2021.
• Desjardins Digital Healthcare Conference on November 30, 2021.

Notice of Conference Call

Dialogue will host a live video webinar on Tuesday, November 9, 2021 at 9:00 a.m. ET to discuss its financial results. Cherif Habib, CEO, and Navaid Mansuri, CFO, will co-chair the call. All interested parties can join the event at the following link, which is also available in the Events and Presentations section of the Company's website. The presentation will be accompanied by slides, which will be available on the screen view and will be made available prior to the start of the webinar on  the Company'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-International Financial Reporting Standards ("IFRS") Financial Measures

This press release makes reference to certain non-IFRS measures, such as "EBIT" represents net profit or loss before net financing (income) expenses and income taxes,  "EBITDA" (which stands for net profit or loss before 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 adjusted net profit or loss before net financing (income) expenses, income taxes, depreciation of property and equipment, amortization of intangible assets, amortization of right-of-use assets, transaction costs, acquisition costs, change in fair value of conversion feature, share-based payments expense and foreign exchange gain or loss). These measures 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. Management also believes 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 and nine months ended September 30, 2021 and 2020:

DIALOGUE HEALTH TECHNOLOGIES INC.
ADJUSTED EBITDA
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020

(in thousands of CAD)		Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020
		$		$		$		$
Net loss		(6,305)		(6,248)		(244,211)		(14,341)
Net financing (income) expenses		(217)		229		(155)		495
Income taxes		(90)		—		(244)		—
EBIT		(6,612)		(6,019)		(244,610)		(13,846)
Depreciation of property and		81		181		347		536
equipment
Amortization of intangible assets		421		109		1,125		293
Amortization of right-of-use		150		125		448		371
assets
EBITDA		(5,960)		(5,604)		(242,689)		(12,647)
Share-based payments expense		997		414		1,384		584
Acquisition costs		49		—		230		240
Change in fair value of		—		(105)		225,417		(277)
conversion feature
Foreign exchange loss (gain)		—		—		87		—
Adjusted EBITDA		(4,914)		(5,295)		(15,572)		(12,100)

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.

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.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF NET LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
	$		$		$		$
Revenue	17,235,012		7,846,750		49,133,038		22,351,202
Cost of services	9,890,881		5,281,178		28,549,554		12,633,974
Gross profit	7,344,131		2,565,572		20,583,484		9,717,228
Operating expenses
General and administrative	7,954,742		5,174,156		23,787,537		13,399,070
Sales and marketing	2,940,293		2,377,948		8,336,827		6,573,146
Product and development	2,064,055		723,832		6,267,196		3,284,318
Share-based payments expense	997,052		414,191		1,383,895		583,505
	13,956,142		8,690,127		39,775,455		23,840,039
Operating loss	(6,612,011)		(6,124,555)		(19,191,971)		(14,122,811)
Other expenses
Change in fair value of conversion	—		(105,000)		225,416,590		(276,916)
feature
Net financing (income) expenses	(217,135)		229,000		(155,053)		494,679
	(217,135)		124,000		225,261,537		217,763
Net loss before income taxes	(6,394,876)		(6,248,555)		(244,453,508)		(14,340,574)
Net income tax recovery	89,672		—		243,817		—
Net loss	(6,305,204)		(6,248,555)		(244,209,691)		(14,340,574)
Other comprehensive (loss) income
Items that may be reclassified
subsequently to net loss
Foreign currency translation (loss)	(94,315)		(93,870)		534,528		(281,610)
gain
Total comprehensive loss	(6,399,519)		(6,342,425)		(243,675,163)		(14,622,184)
Loss per share - basic and diluted	(0.10)		(0.56)		(4.62)		(1.27)

DIALOGUE HEALTH TECHNOLOGIES INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

	September 30,		December 31,
	2021		2020
	$		$
Assets
Current assets
Cash and cash equivalents	110,879,451		42,067,100
Trade and other receivables	11,828,226		11,358,615
Asset held for sale	—		909,541
Prepaid expenses	2,402,735		745,673
	125,110,412		55,080,929
Property and equipment	1,135,310		1,019,406
Right-of-use assets	1,724,354		1,687,434
Intangible assets	6,782,889		5,472,196
Goodwill	7,262,442		3,114,927
	142,015,407		66,374,892
Liabilities
Current liabilities
Trade payable and accrued liabilities	8,816,687		7,489,083
Unearned revenue	210,262		476,619
Liability related to asset held for sale	—		430,110
Current portion of contingent consideration payable	2,727,645		1,379,501
Current portion of long-term debt	400,020		398,020
Current portion of lease liabilities	661,711		524,618
	12,816,325		10,697,951
Non-current portion of lease liabilities	958,840		1,086,720
Non-current portion of long-term debt	1,200,060		1,459,407
Non-current portion of contingent consideration payable	—		523,499
Redeemable Class B preferred shares	—		82,805,661
Deferred income tax liability	919,761		976,890
Conversion option on redeemable Class B preferred shares	—		92,755
	15,894,986		97,642,883
Commitments and contingencies
Shareholders' equity (deficit)
Share capital	458,889,649		18,890,120
Equity reserve	2,841,953		1,777,908
Cumulative translation adjustment	129,365		(405,163)
Deficit	(335,740,546)		(51,530,855)
	126,120,421		(31,267,990)
	142,015,407		66,374,893

	Nine months ended September 30,
	2021		2020
	$		$
Operating activities
Net loss	(244,209,691)		(14,340,574)
Items not affecting cash
Decrease in contingent consideration	(358,000)		—
Write-off of leasehold improvements	—		157,715
Income tax recovery	(243,817)		—
Change in conversion feature on preferred shares	225,416,590		—
Depreciation of property and equipment	347,396		536,231
Amortization of right-of-use assets	448,266		370,599
Net financing (income) expenses	(155,053)		494,679
Amortization of intangible assets	1,124,959		292,924
Share-based payments	1,383,895		583,505
	(16,245,455)		(11,904,921)
Net changes in non-cash operating working capital items
Trade and other receivables	(469,611)		(9,483,413)
Prepaid expenses	(1,657,062)		(4,921)
Trade and other payables	1,327,604		1,572,966
Unearned revenue	(266,357)		17,775
Interest paid	(113,131)		(48,461)
Interest income	543,657		—
	(16,880,355)		(19,850,975)
Investing activities
Purchase of property and equipment	(472,938)		(339,982)
Purchase of intangible assets	(86,984)		(85,797)
Sale of asset held for sale	909,541		—
Acquisition of Botfront	(291,800)		—
Acquisition of e-Hub Health Pty Ltd., net of cash acquired	(3,137,531)		—
Payment of Optima Global Health Inc. Earnout	(1,500,000)		—
Payment of Botfront Earnout	(198,500)		—
	(4,778,212)		(425,779)
Financing activities
Issuance of shares	100,008,000		43,235,247
Share issue costs	(9,371,189)		—
Options exercised	536,706		—
Repayment of liability related to asset held for sale	(430,110)		—
Repayment of long-term debt	(300,015)		(33,333)
Repayment of lease liabilities	(507,002)		(431,055)
Transaction costs	—		(500,000)
	89,936,390		42,770,859
Effect of foreign currency translation	534,528		(281,610)
Net increase in cash and cash equivalents	68,812,351		21,712,497
Cash and cash equivalents, beginning of the period	42,067,100		24,611,895
Cash and cash equivalents, end of the period	110,879,451		46,324,392

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] / 613-806-0671

Related Links

https://www.dialogue.co/