Mr. Cherif Habib reports

DIALOGUE HEALTH TECHNOLOGIES REPORTS SECOND QUARTER 2023 RESULTS

Dialogue Health Technologies Inc. has released its financial and operational results for the three and six months ended June 30, 2023.

"We delivered another strong performance during the second quarter and are executing well on our plan to drive profitable growth in the near future. We are well positioned to continue winning market share across our services, signing more than $6.7-million in net new [annual recurring and reoccurring revenue] in our core digital business, including several large enterprise customers," said Cherif Habib, chief executive officer of Dialogue Health. "Importantly, we concluded a notable licensing agreement with Sun Life in the United States, providing us with new growth opportunities and immediate scale in the world's largest addressable health and wellness market. Furthermore, we are excited about the prospects of joining forces with Sun Life, a company with whom we share a common purpose of helping people live healthier lives, and expect to drive continued innovation as we combine the strength of both organizations."

Navaid Mansuri, chief financial officer, added: "We have continued to mature as an organization, transitioning from a growth-at-all-cost mindset to one that focuses on building a sustainable business for long-term success. We realized further efficiencies in our member-facing operations and reduced our operating expenses to 63 per cent of revenue compared to nearly 76 per cent at this time two years ago. As a result, we expanded our gross margin once again and saw a sixth consecutive quarterly improvement in adjusted [earnings before interest, taxes, depreciation and amortization]. We are well within reach of delivering our first quarter of break-even EBITDA by the end of 2023. Getting there has been a key objective for our team and will provide Dialogue with valuable flexibility to keep innovating and to support our growth plans."

Second quarter 2023 financial highlights (comparison periods are with the three and six months ended June 30, 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 second quarter of 2023 grew 18.7 per cent year over year to $109.7-million, driven by new customer wins, by existing customer and partner expansions, by price increases, and by the addition of Tictrac. The increase was offset in part by previously disclosed churn at Optima. Dialogue Health's core digital business in Canada, which represents 88 per cent of total ARR, maintained a strong momentum with growth of 36.7 per cent year over year.
• Revenue from continuing operations in the second quarter of 2023 increased by 17.2 per cent year over year to $25.5-million. The improvement was driven mainly by: (i) organic growth in its core digital services due to a solid increase in members; (ii) an expansion of the attach rate as existing customers added more services; (iii) price increases; and (iv) the full quarter contribution from Tictrac. Overall growth was offset in part by a revenue decline at Optima related to previously disclosed churn.
• Members grew to just under 2.8 million in the second quarter of 2023, an increase of nearly 447,000 or 18.6 per cent, year over year. Excluding the contribution from Tictrac, members grew 20.7 per cent year over year to approximately 2.6 million.
• The attach rate grew to 1.57 in the second quarter of 2023 from 1.52 in the same period last year.
• Member service units (MSUs), which the company defines as total members multiplied by the attach rate, rose 22.5 per cent to 4.5 million in the second quarter of 2023 from approximately 3.6 million in the same period last year. Excluding the contribution from Tictrac, MSUs grew 24.6 per cent year over year to 4.2 million. This increase demonstrates the success of Dialogue Health's land and expand strategy, as both existing and new customers continue to leverage its integrated services.
• Thirty-eight per cent of new direct customers signed up for two services or more in the second quarter of 2023. Combined with current customer expansions, the cumulative number of direct members with two or more services was 34 per cent at the end of the second quarter of 2023, compared with 24 per cent at the same time last year.
• Rolling 12-month net retention rate was 120 per cent for the second quarter of 2023 compared with 118 per cent as of June 30, 2022. The company did not experience any churn within its direct mid-market and enterprise customer segments in the second quarter of 2023, compared with a churn of 782 members in the same period last year.
• Gross margin from continuing operations increased to 59.7 per cent in the second quarter of 2023, compared with 48.7 per cent in the same period last year, as the company realized efficiencies in its operations, implemented price increases, continued to scale its mental health service and employee assistance program, and integrated Tictrac's higher-margin wellness service.
• Adjusted EBITDA loss from continuing operations was $900,000 in the second quarter of 2023 compared with a loss of $4.5-million in the same period last year. The smaller loss was due to higher gross profit and strong cost control, partially offset by inflationary cost increases across the business.
• Net loss from continuing operations was $5.8-million in the second 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 interest income, offset in part by higher operating expenses and a higher deferred income tax expense compared with the second quarter of 2022.
• During the first quarter of 2023, it purchased $25.0-million in short-term guaranteed investment certificates. Cash, cash equivalents and short-term investments were $54.2-million as of June 30, 2023, compared with $62.7-million as of Dec. 31, 2022. The decrease in the first six months of the year was mainly the result of cash used in operations and for working capital purposes, as well as the repayment of long-term debt and lease liabilities.

Q2 2023 key business developments and subsequent events:

• The company launched Dialogue Health's well-being score, a monthly pulse to help members pro-actively manage and improve their health and well-being. The well-being score is seamlessly incorporated into Dialogue Health's integrated health platform, across all programs, enhancing support and directing members toward the right care, at the right time.
• The company developed new nutrition-focused content and features, expanding Dialogue Health's wellness program even further. The new eat well healthy habit collection equips members with carefully curated, clinically vetted advice for building healthy nutrition habits into their existing routine.
• The company hosted Dialogue Health's fifth annual think tank, focused on fostering resilience through employee well-being. The successful event brought together senior leaders from various client organizations and created a space for sharing expert experiences, insights and perspectives.
• For a fourth consecutive year, the company has been certified as a great place to work organization by Great Place to Work Canada. This employee-validated recognition positions Dialogue Health well to get noticed as an employer of choice and attract great talent, while branding Dialogue Health as a company that cares and wins the attention and loyalty of customers.
• On July 26, 2023, Dialogue Health entered into a definitive agreement to be acquired by Sun Life Financial Inc. for $5.15 in cash per common share. For more details about the transaction, please consult the press release. In connection with and subject to closing the transaction, Dialogue Health will apply to have its common shares delisted from the Toronto Stock Exchange and will cease to be a reporting issuer under Canadian securities laws.

Changes to the board of directors

Melissa Kennedy, executive vice-president, chief legal officer and public policy officer at Sun Life, stepped down from Dialogue Health's board of directors. The company does not intend to fill the vacancy left by Ms. Kennedy's departure.

"It was a pleasure serving on Dialogue's board to further their mission of helping Canadians improve their health and well-being," said Ms. Kennedy. "The company's recent announcement regarding the proposed acquisition of Dialogue by Sun Life is an important milestone and an exciting opportunity for both organizations. In light of the upcoming transaction, it was an appropriate time for me to step down from the board. Thank you to our chair, fellow board members and management team."

Notice of conference call

As a result of the announcement on July 26, 2023, that Dialogue Health had entered into a definitive agreement to be acquired by Sun Life, the company will not host a conference call with analysts.

About Dialogue Health Technologies Inc.

Incorporated in 2016, Dialogue Health 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 Health 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.