Mr. Cherif Habib reports

DIALOGUE HEALTH TECHNOLOGIES REPORTS FIRST QUARTER 2023 RESULTS

Dialogue Health Technologies Inc. has released its financial and operational results for the three months ended March 31, 2023. Please visit Dialogue's investor relations website to view management's commentary and related presentation on first quarter results.

"We started 2023 on a high note with year-over-year growth for [annual recurring and reoccurring revenue] and revenue of 36 per cent and 43 per cent, respectively, in our core digital business. We added more than 100,000 net new members to our platform in the first quarter, and saw solid traction across our direct and partner channels and across a broad spectrum of customers from small businesses to large enterprises," said Cherif Habib, chief executive officer of Dialogue. "Importantly, all our services are contributing to the robust growth. Our mental health service and [employee assistance program] have both surpassed the $15-million ARR milestone, demonstrating the important diversification that we have achieved in our operations. Our customers see great value in our virtual programs and the ability of Dialogue to help them realize positive physical and mental health outcomes, especially as we all navigate a more challenging economic climate. While primary care remains the largest contributor to our growth, we have successfully scaled two additional services since launching our integrated health platform in early 2021, allowing it to quickly become indispensable in a well-rounded employee health benefits package."

Navaid Mansuri, chief financial officer, added: "We delivered against our financial plan once again by striking a good balance between our pursuit of growth opportunities and our desire to drive efficient and profitable operations. We took another step towards our goal to reach adjusted [earnings before interest, taxes, depreciation and amortization] break-even by the end of 2023, and reduced our adjusted EBITDA loss to 8 per cent of revenue in the first quarter, compared to 28 per cent at the same time last year. I am proud of the work our teams, across all functions, have accomplished to become an even more effective organization. With a strong balance sheet and limited capital required to reach cash flow generation, we will have more flexibility to make incremental investments to supplement our growth and to strengthen our platform with new services and [mergers and acquisitions], with the ultimate goal of providing more value to our customers and members."

Q1 2023 financial highlights

(All terms not defined herein shall have the meaning and usefulness ascribed to them in management's discussion and analysis for the three months ended March 31, 2023. Comparison periods in each case are with the three months ended March 31, 2022, unless otherwise stated.)

Results presented herein for the comparable period in 2022 reflect continuing operations only and exclude the occupational health and safety (OHS) segment in Germany, which was divested on Dec. 31, 2022.

• Annual recurring and reoccurring revenue from continuing operations in the first quarter of 2023 grew 23.8 per cent year over year to $106.0-million, driven by new customer wins, by existing customer and partner expansions, by price increases, and by the addition of Tictrac, offset in part by churn at Optima, as disclosed in September, 2022. Dialogue's core digital business in Canada, which represents 85 per cent of total ARR, increased 35.9 per cent year over year.
• New customer wins in the period included a large public school board, a global human relations platform, a leading Canadian seniors living organization and a provincial pension fund manager. It also saw the addition of new services by several existing customers, including a national agrifood company, a leading Canadian tour operator and an international professional service firm.
• Revenue from continuing operations in the first quarter of 2023 increased by 25.6 per cent year over year to $24.5-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 nearly 2. million in the first quarter of 2023, an increase of approximately 735,000 or 35.9 per cent, year over year. Excluding the contribution from Tictrac, members grew 22.7 per cent year over year to more than 2.5 million.
• Attach rate grew to 1.55 in the first quarter of 2023 from 1.51 in the same period last year.
• Member service units (MSUs), which it defines as total members multiplied by the attach rate, rose 39.5 per cent to 4.3 million in the first quarter of 2023 from approximately 3.1 million in the same period last year. Excluding the contribution from Tictrac, MSUs grew 30.8 per cent year over year to more than 4.0 million. This increase demonstrates the success of Dialogue's land and expand strategy, as both existing and new customers continue to leverage its integrated services.
• Sixty-five per cent of new direct customers signed up for two services or more in the first quarter of 2023. Combined with current customer expansions, the cumulative number of direct members with two or more services was 33 per cent at the end of the first quarter of 2023, compared with 22 per cent at the same time last year.
• Average monthly net retention rate (NRR) was 101.3 per cent for the first quarter of 2023, marking another consecutive quarter of NRR greater than 100 per cent. Churn within its direct mid-market and enterprise customer segments was 22,000 members, almost entirely related to the non-renewal by a single-service enterprise customer. This customer did not migrate to a competing offering, and the company maintains a constructive dialogue with key decision makers.
• Gross margin from continuing operations increased to 57.4 per cent in the first quarter of 2023, compared with 41.0 per cent in the same period last year, as it realized efficiencies in its operations, implemented price increases, continued to scale its mental health service and employee assistance program (EAP), and integrated Tictrac's higher-margin wellness service.
• Adjusted EBITDA (1) loss from continuing operations was $1.8-million in the first quarter of 2023 compared with a loss of $5.4-million in the same period last year. The smaller loss was due to higher gross profit and strong cost control, partially offset by annual wage increases across the business and a loss at Tictrac.
• Net loss from continuing operations was $2.7-million in the first quarter of 2023, compared with $6.7-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 expenses compared with the first quarter of 2022.
• During the quarter, it purchased $25.0-million in short-term guaranteed investment certificates. Cash and cash equivalents and short-term investments were $56.4-million as of March 31, 2023, compared with $62.7-million as of Dec. 31, 2022. The decrease in the quarter was mainly due to cash used in operations and for working capital purposes.

(1) Adjusted EBITDA is a non-international financial reporting standard measure.

First quarter 2023 key business developments and subsequent events:

• On March 1, 2023, it was awarded a bronze medal by EcoVadis, a highly trusted global provider of business sustainability ratings. This result places Dialogue among the top 50 per cent of companies assessed by EcoVadis and represents an important step on its sustainability journey.
• On March 8, 2023, it launched a pregnancy and new parents content category within its wellness service in partnership with Koble, the leading Canadian content provider in this space.
• On March 27, 2023, it launched a weekly active minutes feature within its wellness service that enables members to reach 150 minutes of weekly physical activity as recommended by Health Canada and the World Health Organization.
• On March 31, 2023, it rolled out the Dialogue platform to all customers in the United Kingdom and other international markets, making available its complete wellness service and its Internet-based cognitive behavioural therapy (iCBT).
• On March 31, 2023, it launched substance use and workplace referrals, two new added-value services within its employee assistance program.
• Advancing on its objective to build a diverse and inclusive team, it increased the representation of non-males in leadership roles to 44 per cent, bringing Dialogue closer to its goal of 50 per cent by the end of 2026.
• Subsequent to quarter-end, on May 1, 2023, it appointed Darryl Campbell as chief information security officer (CISO). Mr. Campbell, who previously worked at National Bank of Canada and in the government of Canada's Canadian Centre for Cyber Security, will report directly to Alexis Smirnov, chief technology officer. He will play a crucial role in ensuring the highest level of security and data protection for its clients and partners. As its CISO, Mr. Campbell will oversee and manage all aspects of the cybersecurity program within Dialogue. His extensive experience will be invaluable in safeguarding the sensitive information of its members and ensuring the continued growth and innovation of its integrated health platform.

Financial outlook

Dialogue is providing an outlook based on current market conditions and expectations. For the second quarter of 2023, it expects:

• Revenue to be in the range of $25.5-million to $26.2-million;
• Gross profit margin to be in the range of 55.0 per cent to 56.5 per cent;
• Adjusted EBITDA to be in the range of ($1.7-million) to ($1.3-million).

Coming events:

• Canaccord Genuity Quebec Growth Conference in Toronto on May 16, 2023;
• CIBC Technology and Innovation Conference 11.0 in Toronto on May 24, 2023;
• Scotiabank Wellness Conference in Toronto on May 31, 2023.

Notice of conference call

It is maintaining the changes to its format that was introduced last quarter. Management's prepared remarks on the company's quarterly performance and accompanying slides have been published concurrently with this press release. This allows more time during the conference call with analysts and investors to answer questions and discuss the state of its business. Mr. Habib and Mr. Mansuri will host the live video webinar on Wednesday, May 10, 2023, at 8:30 a.m. ET. All interested parties can join the event, 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 who prefer to dial in by phone may do so. The dial-in details will be provided by e-mail upon registration.

About Dialogue Health Technologies Inc.

Incorporated in 2016, Dialogue is Canada's premier virtual health care and wellness platform, providing affordable, on-demand access to quality care. Through its team of health professionals, it serves employers and organizations which have an interest in the health and well-being of their employees, members and their families. Its integrated health platform is a one-stop health care hub that centralizes all of its programs in a single, user-friendly application, providing access to services 24 hours per day, 365 days per year from the convenience of a smart phone, 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.

We seek Safe Harbor.