Mr. Sachin Aggarwal reports

THINK RESEARCH CORPORATION ANNOUNCES RECORD FOURTH QUARTER AND FULL-YEAR 2022 RESULTS

Think Research Corp. has released fourth quarter and full-year 2022 results. The company's management discussion and analysis (MD&A) along with audited financial statements for Q4 and fiscal year 2022 results are posted to SEDAR and are available for further details.

Sachin Aggarwal, chief executive officer of Think Research, said: "We are excited to report record fourth quarter and full-year results for 2022. The hard work and dedication of the Think team to integrate our recent acquisitions into an essential SaaS [software-as-a-service] data and research platform has culminated in the record revenue performance that we reported for Q4 2022 and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] of $1.6-million. And we are just getting started. Multiyear SaaS contracts signed subsequent to year-end, along with our strong pipeline, position Think for continued growth and improving profitability for the foreseeable future."

Think's software and data solutions are increasingly relied on by acute care and community care doctors, nurses and pharmacists to support their practices. Think solutions now reach more than 320,000 clinicians, an increase of 7 per cent compared with 300,000 reported at the end of fiscal 2021. As Think solutions become increasingly essential to clinicians, the opportunities to convert reach into users are expanding. In certain jurisdiction-wide deployments, Think's platform connects clinicians to the health care networks that employ them, to patients for virtual care and to each other for referrals.

Think currently licenses its solutions to approximately 14,200 facilities with over three million patients and residents annually receiving better care due to the essential data that Think produces, manages and delivers. Facilities under licence increased by 9 per cent compared with 13,000 in the previous year.

Business outlook

Think's primary revenue streams of software and data solutions and clinical research are built on recurring and reoccurring multiyear contracted commitments by government agencies and large enterprise clients such as global pharmaceutical companies. Accordingly, Think's management believes that the company's financial performance should be sufficiently protected in the short-term against uncertain macroeconomic conditions.

Think's software and data solutions are currently solving both challenging and urgent health care service conditions, such as long wait times for care, staff shortages, and limited access to both urgent and primary care. As a result, the FY2023 revenue pipeline is robust, with significant revenue growth potential existing in the Canadian market and internationally.

The company plans to grow revenue and improve margins by becoming an increasingly essential data solutions provider for health care practitioners globally, supporting them to deliver the best outcomes for patients. To fulfill this objective, the focus of operations is twofold:

• Execute licences with new flagship enterprise and government customers for Think's core suite of data and software solutions, including its learning management system (LMS) and digital front door solutions;
• Add more users to current customer agreements by promoting further adoption and daily usage. Currently, more than 320,000 clinicians, including doctors, nurses and pharmacists, can access Think's solutions. As more users are converted, and more users increase usage, Think's solutions become more essential to health systems and customers.

In support of these strategies, the product and business development teams are focused on:

• Strengthening the utility of Think's software and data solutions, through continuing product development, platform integration and content development;
• Expanding Think's solutions footprint via new enterprise and government licences in the countries where Think has market presence.

The company has optimized operations to gain $11.3-million of annualized synergies, which management believes have permanently improved financial performance. As organic revenue expands, this cost optimization has positioned the company for positive adjusted EBITDA and a path to positive cash flow. Management will continue to seek efficiencies in operations for the foreseeable future.

In support of Think's objective to gain more users while positioning the data and software solutions business to become an increasingly essential tool for health care practitioners, government agencies and large enterprises, management will continue to review high-value, potential opportunistic tuck-in acquisitions.

Notable contracts and events during FY2022

Feb. 9, 2022: Selected by the Children and Youth Mental Health lead agency consortium to provide a mental health platform for improving access to services for children, youth and their families across Ontario. The contract has a minimum term of two years through which Think will realize a minimum of $2-million of revenue.

May 19, 2022: Executed a $4.1-million contract with Moderna to deploy education solutions to clinicians. Subsequent to the first announcement, the contract has expanded to approximately $12.6-million, which will continue to be recognized in FY2023, starting in Q1.

June 28, 2022: Contracted by a major United States-based pharmacy to deliver business intelligence and support solutions to more than 1,700 pharmacies servicing 5.5 million patients throughout the United States.

Sept. 20, 2022: Announced that its clinical research organization, BioPharma Services, had signed multiple new contracts in the third quarter worth approximately $12.8-million, spanning several health disciplines.

Think completed three financings in 2022:

• May 10, 2022: Closed an initial advance of $10-million from Beedie Investments Ltd. under a convertible term loan facility with a total principal amount of up to $25-million;
• Nov. 21, 2022: Drew down an additional $3-million under the convertible term loan facility with Beedie Capital;
• Dec. 19, 2022: Raised $2.5-million through a non-brokered private placement of its common shares.

Events subsequent to Dec. 31, 2022:

• On March 7, 2023, Think announced a minimum five-year SaaS and services agreement that is expected to total more than $40-million of revenue over its term. Through this agreement, Think will provide its digital front door and LMS solutions to help the client address its urgent health care access and delivery challenges.
• On April 4, 2023, Think announced the extension of its existing credit agreement with the Bank of Nova Scotia for an additional year to Sept. 10, 2024.

Consolidated financial highlights:

• The company achieved record revenue of $21.6-million and $78.6-million for the three months ended Dec. 31, 2022, and FY2022 compared with $19.1-million for the three months ended Dec. 31, 2021, and $47.8-million for FY2021. Revenue for the three months ended Dec. 31, 2022, increased by 13 per cent compared with the three months ended Dec. 31, 2021, due primarily to organic growth. Revenue for Q4 of FY2022 increased by $3.2-million or 18 per cent compared with the prior quarter due to stronger performance in Think's clinical research and software and data solutions business lines, which was partially offset by a decline in clinical services revenue.
• Think's gross profit grew by $13-million to $37.4-million, or 53 per cent year-over-year, reflecting revenue growth derived from a full year of operations of companies acquired in 2021 combined with continued organic growth. During the three months ended Dec. 31, 2022, the company generated gross profit of $10.2-million compared with $9.1-million for the same period in the prior year, an increase of 11 per cent, reflecting higher revenue in Q4 FY2022. The company's gross profit in Q4 of FY2022 was $10.2-million, a 17-per-cent increase over the prior quarter due primarily to higher revenue.
• Adjusted EBITDA, a non-IFRS (international financial reporting standard) financial measure, increased to a record $1.6-million and $(1-million) for Q4 and FY2022 respectively, compared with $(200,000) in Q4 of the previous year and $(6.6-million) in FY2021. Sequentially, adjusted EBITDA in Q4 of FY2022 increased by $2.3-million compared with adjusted EBITDA of $(700,000) in Q3 2022. Adjusted EBITDA margin was 7 per cent in Q4 of 2022 compared with (4 per cent) in Q3 2022. This improvement in operating results was driven primarily by revenue growth in Think's software and data solutions and clinical research business lines paired with cost and operational synergies realized during the period.
• Net loss was $(5.6-million) and $(25.7-million) for Q4 and FY2022, respectively, compared with $(7.6-million) for Q4 2021 and $(29-million) for FY2021. The decrease in net loss for Q4 of FY2022 is primarily due to an increase in revenue combined with reduced operating expenses due to realized operating synergies in FY2022. Net loss for Q4 of FY2022 decreased by $900,000 compared with Q3 of FY2022 due to higher revenue and lower operating costs in Q4 of FY2022 being offset by an additional $1.6-million of acquisition, restructuring and other charges booked in Q4 of FY2022.

Revenue performance highlights by line of business:

• Software and data solutions revenue grew by 22 per cent and 18 per cent compared with the fourth quarter of FY2021 and the third quarter of FY2022, respectively, reflecting overall growth in recurring and reoccurring revenue, partially offset by the variability of the timing of milestones associated with professional services revenue. Annual recurring revenue grew from $13.5-million on Dec. 31, 2021, to $14.8-million on Dec. 31, 2022, due to organic growth in Think's SaaS solutions.
• Clinical research operations revenue grew by 22 per cent in Q4 of FY2022 compared with Q4 of FY2021 and by 27 per cent compared with Q3 of FY2022. Revenue in the comparable periods was depressed due to the operational impacts of COVID-19, which were only fully resolved in late Q3 of FY2022.
• Clinical services revenue declined by 24 per cent in Q4 of FY2022 compared with the comparable period in FY2021 due to specific operational challenges that have since been addressed. Clinical services revenue in Q4 of FY2022 was 9 per cent below the immediately preceding quarter due primarily to the seasonal impacts of fewer surgeries in December.

Consolidated expense details:

• In the fourth quarter of FY2022, operating expenses excluding depreciation, amortization and stock-based compensation fell to $8.6-million or 40 per cent of revenue compared with $9.3-million or 49 per cent of revenue for the same period of FY2021. The comparative figures for the third quarter of FY2022 were $9.4-million and 51 per cent of revenue.
• Think continued to focus on reducing cash operating expenses through realized cost synergies, which had an annualized value of $11.3-million in FY2022, and which management believes will enable Think to realize significant expense leverage over larger revenue streams going forward.
• General and administration expenses increased to $27-million for FY2022 compared with $21.6-million for the previous year, an increase of 25 per cent or $5.4-million. This increase was driven primarily by including a full year of expenses for the BioPharma acquisition in FY2022, higher vendor costs to support increased revenue and lower government support associated with the COVID-19 pandemic that was unavailable in FY2022. General and administration expenses for Q4 2022 decreased by $600,000 to $6.2-million compared with $6.8-million in Q4 FY2021 due primarily to lower stock-based compensation that was partially offset by higher levels of spending on other items such as information technology and insurance costs. Sequentially, general and administration expenses decreased by $200,000 from $6.6-million in Q3 FY2022. This decrease was primarily attributable to lower stock-based compensation recognized in the fourth quarter compared with the third quarter of FY2022.
• Research and development expenses for FY2022 decreased by $500,000 to $6.8-million compared with $7.3-million in FY2021 driven by a reduction in personnel costs associated with Think's cost synergy plan during the year. Research and development expenses in Q4 FY2022 declined to $800,000 compared with $1.7-million in Q4 FY2021 due primarily to recording annual government support programs in Q4 FY2022, when Think received approval for expenses that included prior periods. Sequentially, research and development expenses declined by 54 per cent from $1.7-million in Q3 of FY2022 to $800,000 in Q4, again due to the recording of government support programs in Q4 FY2022.
• Sales and marketing expenses for FY2022 decreased by 3 per cent to $9.1-million compared with $9.4-million in FY2021, reflecting a reduction in personnel costs associated with Think's cost synergy plans that was partially offset by recording a full year of expense related to acquisitions during the previous year. Sales and marketing costs declined for Q4, 2022 by 27 per cent, or $800,000, to $2.1-million compared with $2.9-million recorded in Q4 FY2021 due primarily to lower personnel costs in FY2022 from realized cost synergies during the first half of FY2022. Sales and marketing expenses of $2.1-million in Q4 of FY2022 were approximately equal to expenses of $2.3-million incurred in Q3 of FY2022 due to the continuation of activities to elevate the Think brand along with lead generation activities to support future sales.

Conference call details

CEO Mr. Aggarwal and chief financial officer John Hayes with host a conference call to discuss the results, with a question-and-answer session to follow.

Time: 8:30 a.m. EST, Monday, May 1, 2023

Conference call participant details:

To join the conference call without operator assistance, you may register and enter your phone number to receive an instant automated call back. Participants can also dial direct to be entered to the call by an operator.

Toronto: 416-764-8659

North America toll-free: 1-888-664-6392

About Think Research Corp.

Think Research is an industry leader in delivering knowledge-based digital health software solutions. The company's focused mission is to organize the world's health knowledge so everyone gets the best care. Its evidence-based health care technology solutions support the clinical decision-making process and standardize care, to facilitate better health care outcomes. The company gathers, develops and delivers knowledge-based solutions globally to customers, which typically include enterprise clients, hospitals, health regions, health care professionals and/or governments. The company has gathered a significant amount of data by building its repository of knowledge through its network and group of companies, including acquired companies.

Think licenses its solutions to over 14,200 facilities for over 320,000 primary care, acute care and long-term care doctors, nurses and pharmacists that rely on the content and data provided by Think to support their practices. Over three million patients and residents annually receive better care due to the essential data that Think produces, manages and delivers.

In addition, the company collects and manages pharmaceutical and clinical trial data via the BioPharma Services entity that Think acquired on Sept. 10, 2021. BioPharma Services is a leading provider of bioequivalence and phase 1 clinical research services to pharmaceutical companies globally. Think's other services include a network of digital-first primary care clinics and medical clinics that provide elective surgery.

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