Dialogue Health Technologies Reports Second Quarter 2022 Results

Strong organic growth, improved gross margin, and solid cost control provide increasing confidence in profitability objectives for 2023

MONTREAL, Aug. 10, 2022 /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 and six months ended June 30, 2022. Financial references are in Canadian dollars unless otherwise indicated.

"Dialogue continued to execute well and delivered solid revenue growth, winning further market share across all our services," said Cherif Habib, Chief Executive Officer of Dialogue. "With the acquisition of Tictrac, we made significant progress on our journey towards becoming a holistic platform, adding prevention to our existing physical and mental health treatment solutions.  We launched an early access version of our new Wellness service, which has been progressing rapidly in Canada and generating much interest from our customers. We also strengthened our two largest partnerships and are well positioned to keep delivering on our growth objectives."

Navaid Mansuri, Chief Financial Officer, added: "In the first half of the year, we took important steps to drive efficiencies in our operations, and this has begun to show in our second quarter performance.  We implemented further pricing increases and are pleased with the low customer churn, a testament to our great value proposition. Thanks to our healthy balance sheet, we are sufficiently capitalized to reach our profitability targets in 2023 while continuing to invest in the growth of our business and innovating for our customers, as well as exploring further M&A opportunities."

Q2 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 for the three and six months ended June 30, 2022. Comparison periods in each case are the three and six months ended June 30, 2021, unless otherwise stated.)

• Annual Recurring and Reoccurring Revenue ("ARR") grew 38.7% year-over-year to $97.1 million, driven largely by new Customer wins and supplemented by a partial quarter of contribution from the acquisition of Tictrac Ltd. ("Tictrac"). New customer wins include a global leader in information management that adopted our Primary Care service, a multinational HR consultancy and a provincial non-profit organization that signed on for our Employee Assistance Program ("EAP"), and a large Canadian financial advisory firm that added our full Integrated Health Platform^TM. We also saw several important program expansions and the addition of new services by existing Customers, including a provincial Crown corporation that added our EAP and Mental Health, and a North American leader in transportation and logistics that added our EAP.

• Revenue in the second quarter of 2022 increased by 38.3% year-over-year to $23.0 million, due to growth in Members, both Direct and from agreements with strategic distribution partners, an increase in the Attach Rate as existing Customers add more services, and the acquisition of Tictrac.

• Members grew to nearly 2.4 million, an increase of approximately 950,000, or 65.1%, year-over-year, and more than 350,000, or 17.3%, compared to the first quarter of 2022. Excluding the contribution from Tictrac, Members grew 46.8% year-over-year to 2.1 million.

• Attach Rate grew to 1.52 from 1.10 in the second quarter last year.

• Member-Service Units ("MSUs"), which we define as total Members multiplied by the Attach Rate, rose 128.1% year-over-year to more than 3.6 million from approximately 1.6 million in the second quarter last year. Excluding the contribution from Tictrac, MSUs grew 110.9% year-over-year to nearly 3.4 million. This meaningful increase demonstrates the success of Dialogue's land & expand strategy, as both existing and new Customers continue to leverage our platform.

• 65% of new direct Members signed up for two services or more in the second quarter of 2022. Combined with current Customer expansions, the cumulative number of direct Members with two or more services was 24% at the end of the second quarter of 2022, compared to 18% at the same time last year and 21% at the end of the fourth quarter of 2021.

• Average Monthly Net Retention Rate ("NRR") was 100.4% for the second quarter of 2022, marking another consecutive quarter of NRR greater than 100%. Churn within our mid-market and enterprise customer segments remained low in the period at approximately 1,500 members.

• Gross Margin increased to 49.7%, compared to 41.5% in the second quarter of 2021, as we realized efficiencies in our operations, implemented pricing increases to eligible Customers, continued to scale our Mental Health service and EAP, migrated additional Customers from Optima to our Dialogue EAP, and integrated Tictrac's higher margin Wellness service.

• Adjusted EBITDA¹ loss was $4.8 million, compared to a loss of $5.7 million in the same period last year. The smaller loss was due to higher gross profit and strong cost control, partially offset by a deficit at Tictrac.

• Net loss was $8.4 million, compared to $6.7 million in the same period last year. The larger loss was primarily due to higher share-based payments expense year-over-year, to costs related to the Tictrac acquisition, and to a foreign exchange loss of $1.3 million as the Euro and British pound sterling both depreciated meaningfully during the period in relation to the Canadian dollar.

• Cash and Cash Equivalents were $61.1 million as of June 30, 2022, compared to $104.3 million as of December 31, 2021. The decrease was the result of cash used in operations during the first six months of the year as well as the initial cash outlay to close the acquisition of Tictrac.

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¹  Adjusted EBITDA is a Non-IFRS financial measure. Refer to the reconciliation contained in the Non-IFRS Financial Measures section, beginning on page 3 of this earnings release.

Q2 2022 Business Highlights and Subsequent Events

• On April 13, 2022, we acquired London, UK-based Tictrac Ltd. for up to $56 million (£35 million), subject to certain earn-out conditions. Tictrac is a SaaS-based provider of a global health and wellness platform that enables healthier living for everyone. The transaction was closed successfully on April 30, 2022.
• On April 21, 2022, we launched Mental Health+, a program that streamlines our existing mental health services and emphasizes seamless integration of varying levels of intervention across the care continuum.

• On May 16, 2022, Melissa Kennedy was elected to Dialogue's Board of Directors. Mrs. Kennedy is Executive Vice-President, Chief Legal Officer & Public Affairs at Sun Life, where she is responsible for the global legal, compliance, corporate secretarial and public affairs functions. Mrs. Kennedy is also Sun Life's executive sponsor of sustainability.

• Subsequent to quarter end, on July 4, 2022, Sun Life added Dialogue's Mental Health service to their Lumino Health Virtual Care platform, complementing their existing Primary Care, EAP, and iCBT offering. This additional service is available on an opt-in basis and now permits our largest insurance partner to offer Dialogue's full suite of fully integrated services.

• For a third consecutive year, we have been certified as a Great Place to Work^TM organization by Great Place to Work® Canada. This employee-validated recognition positions Dialogue well to get noticed as an employer of choice and attract great talent, while branding Dialogue as a company that cares and wins the attention and loyalty of customers.

• We were recognized by Great Place to Work® in the 2022 Best Workplaces^TM in Canada, 2022 Best Workplaces^TM for Today's Youth, and 2022 Best Workplaces^TM for Giving Back categories.

Upcoming events

• Canaccord Genuity 42^nd Annual Growth Conference in Boston on August 11, 2022.
• CIBC 21^st Annual Eastern Institutional Conference in Montreal on September 21, 2022.

Notice of Conference Call

Dialogue will host a live video webinar on Thursday, August 11, 2022 at 8:00 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 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, change in fair value of contingent consideration, restructuring costs, 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 six months ended June 30, 2022 and 2021:

DIALOGUE HEALTH TECHNOLOGIES INC.
ADJUSTED EBITDA
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 and 2021

(in thousands of CAD)		Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021
		$		$		$		$
Net loss		(8,386)		(6,669)		(15,454)		(237,904)
Net financing (income) expenses		(169)		(126)		(194)		62
Current income tax (expense)		25		—		48		—
Deferred income tax recovery		(166)		(49)		(251)		(155)
EBIT		(8,696)		(6,844)		(15,851)		(237,997)
Depreciation of property and equipment		256		157		404		266
Amortization of intangible assets		504		374		906		704
Amortization of right-of-use assets		201		150		351		298
EBITDA		(7,735)		(6,163)		(14,190)		(236,729)
Share-based payments expense		954		290		1,522		387
Acquisition costs		541		136		634		181
Change in fair value of conversion feature		—		—		—		225,417
Change in fair value of contingent consideration		43		—		134		—
Restructuring costs		15		—		15		—
Foreign exchange loss (gain)		1,334		87		1,334		87
Adjusted EBITDA		(4,848)		(5,650)		(10,551)		(10,657)

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 SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(in thousands of CAD except share and per share data)	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
	$		$		$		$
Revenue	23,038		16,660		43,724		31,898
Cost of services	11,593		9,751		23,519		18,659
Gross profit	11,445		6,909		20,205		13,239
Operating expenses
General and administrative	13,672		8,249		23,117		15,832
Sales and marketing	3,162		2,998		6,389		5,397
Product and development	2,353		2,216		5,028		4,203
Share-based payments expense	954		290		1,522		387
	20,141		13,753		36,056		25,819
Operating loss	(8,696)		(6,844)		(15,851)		(12,580)
Other expenses
Change in fair value of conversion feature	—		—		—		225,417
Net financing (income) expenses	(169)		(126)		(194)		62
	(169)		(126)		(194)		225,479
Net loss before income taxes	(8,527)		(6,718)		(15,657)		(238,059)
Current income tax (expense)	(25)		—		(48)		—
Deferred income tax recovery	166		49		251		(155)
Net loss	(8,386)		(6,669)		(15,454)		(237,904)
Other comprehensive income
Items that may be reclassified subsequently to net loss
Foreign currency translation gain	254		318		613		629
Total comprehensive loss	(8,132)		(6,351)		(14,841)		(237,275)
Loss per share - basic and diluted	(0.13)		(0.10)		(0.23)		(5.12)

DIALOGUE HEALTH TECHNOLOGIES INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT JUNE 30, 2022 AND DECEMBER 31, 2021

(in thousands of CAD)	June 30,		December 31,
	2022		2021
	$		$
Assets
Current assets
Cash and cash equivalents	61,065		104,296
Trade and other receivables	17,673		13,659
Prepaid expenses	3,801		1,811
	82,539		119,766
Investment	1,004		—
Property and equipment	1,279		1,137
Right-of-use assets	1,768		1,568
Intangible assets	9,616		5,819
Goodwill	30,203		6,963
Deferred income tax asset	3,227		—
	129,636		135,253
Liabilities
Current liabilities
Trade payable and accrued liabilities	9,915		9,534
Unearned revenue	759		68
Current portion of contingent consideration payable	8,171		718
Current portion of long-term debt	400		400
Current portion of lease liabilities	900		541
	20,145		11,261
Non-current portion of lease liabilities	731		911
Non-current portion of long-term debt	874		1,074
Non-current portion of contingent consideration payable	560		1,300
Deferred income tax liability	784		766
	23,094		15,312
Commitments and contingencies
Shareholders' equity
Share capital	459,056		458,962
Equity reserve	4,862		3,514
Cumulative translation adjustment	960		347
Deficit	(358,336)		(342,882)
	106,542		119,941
	129,636		135,253

DIALOGUE HEALTH TECHNOLOGIES INC.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(in thousands of CAD)	Six months ended June 30,
	2022		2021
	$		$
Operating activities
Net loss	(15,454)		(237,904)
Items not affecting cash
Increase (Decrease) on contingent consideration - Optima	—		(358)
Increase (Decrease) on contingent consideration - eHH	134		—
Deferred income tax recovery	(251)		(154)
Change in conversion feature on preferred shares	—		225,417
Depreciation of property and equipment	404		266
Amortization of right-of-use assets	351		298
Net financing (income) expenses	(194)		62
Amortization of intangible assets	906		704
Share-based payments	1,522		387
	(12,582)		(11,282)
Net changes in non-cash operating working capital items
Trade and other receivables	(4,014)		(1,728)
Prepaid expenses	(1,990)		(2,378)
Trade and other payables	381		2,125
Unearned revenue	691		237
Interest paid	(84)		(62)
Interest income	222		250
	(17,376)		(12,838)
Investing activities
Purchase of property and equipment	(419)		(360)
Purchase of intangible assets	(1)		(32)
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)		—
Acquisition of Tictrac Ltd. net of cash acquired	(24,253)		—
	(25,677)		(2,912)
Financing activities
Issuance of shares	—		100,008
Share issue costs	—		(9,371)
Performance share units settled in cash	(172)		—
Options exercised	92		480
Repayment of liability related to asset held for sale	—		(430)
Repayment of long-term debt	(200)		(200)
Repayment of lease liabilities	(511)		(406)
	(791)		90,081
Effect of foreign currency translation	613		629
Net (decrease) increase in cash and cash equivalents	(43,231)		74,960
Cash and cash equivalents, beginning of the period	104,296		42,067
Cash and cash equivalents, end of the period	61,065		117,027

SOURCE Dialogue Health Technologies Inc.

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