Mr. Sachin Aggarwal reports

THINK RESEARCH CORPORATION ANNOUNCES RECORD FIRST QUARTER 2023 RESULTS

Think Research Corp. has released its first quarter 2023 results. The company's management discussion and analysis (MD&A) along with audited financial statements for Q1 2023 results are available on SEDAR and on Think's website.

Think's three core business lines, including software and data solutions (software-as-a-service solutions), clinical research (clinical trial, studies and data services), and clinical services (physical clinics), collectively drive its financial performance and results.

Sachin Aggarwal, chief executive officer of Think Research, said: "Two thousand twenty-three started off strong with a major SaaS contract for our software and data division, and continuing strength in our clinical research division. Q1 2023 marks the second quarter in a row of positive adjusted [earnings before interest, taxes, depreciation and amortization], which meets our objective of maintaining persistent positive adjusted EBITDA for the foreseeable future. Think is in a great position to help constrained health care delivery systems improve access to high-quality health services and best practices where and when they are needed. Our strong and growing pipeline reflects the urgency of this problem."

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. 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.

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 has some protection 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 2023 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 two-fold:

• 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.

As organic revenue expands, recent cost-optimization initiatives have positioned the company for persistent 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, opportunistic tuck-in acquisitions.

Notable contracts and events in 2023:

• On Feb. 13, 2023, Think announced the expansion of the original $6.4-million contract with a global pharmaceutical company, announced on Sept. 8, 2022, by approximately $3.5-million, bringing the total contract value up to approximately $10-million;
• 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 March 31, 2023 the Bank of Nova Scotia extended its credit agreement with Think for an additional year to Sept. 10, 2024.

Consolidated Q1 2023 financial highlights:

• The company achieved record revenue of $21.8-million for Q1 2023, up by $1.6-million or 8 per cent compared with $20.2-million for the first quarter of 2022. This year-over-year growth reflects the impact of organic growth in software and data solutions, and clinical research revenues. Sequentially, revenue for Q1 2023 increased by $200,000 or 1 per cent compared with $21.6-million in the three months ended Dec. 31, 2022, reflecting growth in Think's software and data solutions business, primarily as a result of the large SaaS contract announced on March 17, 2023, offset by declines in the clinical research business;
• Increased annual recurring revenue (ARR) to $22.0-million at the end of Q1 2023, up by 53 per cent compared with $14.3-million at the end of March, 2022, and by 49 per cent compared with $14.8-million at Dec. 31, 2022. This growth in ARR stemmed primarily from signing the minimum five-year SaaS agreement headlined above. ARR is derived exclusively from the software and data business line;
• Generated gross profit of $11.4-million in Q1 2023 compared with $9.1-million for the same period in the prior year, an increase of 25 per cent. The increase in gross profit was primarily related to the increase in revenue combined with the lower cost of sales as a result of Think's implementation of its cost-optimization program. The company generated gross margin of 52 per cent in Q1 2023 compared with 45 per cent for the same period in the prior year. This improvement in gross margin was primarily affected by the change in revenue mix as a result of the higher proportion of software and data solutions revenue in the quarter;
• Realized adjusted EBITDA of $1.1-million for Q1 2023 compared with an adjusted EBITDA loss of $(300,000) for the same period a year ago. Adjusted EBITDA for Q1 2023 was $500,000 lower compared sequentially with the adjusted EBITDA of $1.6-million in Q4 2022. Adjusted EBITDA margin was 5 per cent in Q1 of 2023 compared with (1 per cent) in Q1 of 2022. This improvement in adjusted EBITDA was driven primarily by earnings contributions from organic revenue growth combined with cost optimization and operational synergies realized during the period;
• Net income (loss) was ($3.6-million) for the three months ended March 31, 2023, compared with $(6.2-million) for the comparable period in the prior year and to ($5.6-million) sequentially when compared with Q4 2022. The decrease in net loss over Q1 2022 is primarily due to higher revenue coupled with lower operating costs as a result of Think's cost-optimization plan while lower net loss compared with Q4 2022 is due to multiple factors, including lower acquisition, restructuring and other costs.

Q1 2023 revenue performance highlights by line of business

Software and data solutions business line revenue grew by $1.0-million or 11 per cent to $9.5-million compared with $8.5-million in Q1 2022 primarily due to organic growth associated with the launch of the new digital front door initiative set out in the notable contracts described earlier. In Q1 2023, software and data revenue represented 43 per cent of total revenue compared with 42 per cent of total revenue in Q1 of the previous year.

In Q1 2023, on an annual run-rate basis, ARR represented 58 per cent of total software and data revenue with the remaining total revenue in the segment primarily being reoccuring revenue.

Clinical research revenue grew by $1.4-million or 17 per cent to $9.4-million in Q1 2023 compared with $8.0-million in Q1 of 2022. Revenue in the comparable period last year was depressed due to the operational impacts of COVID-19, which were only fully resolved in late Q3 2022. A significant portion of clinical research revenue is reoccurring in nature.

Clinical services revenue declined by $700,000 or 19 per cent in Q1 2023 compared with the comparable period in 2022 due to specific operational challenges that have since been addressed. Clinical services revenue in q1 2023 was flat compared with the immediately preceding quarter.

Consolidated expense details

In Q1 2023, operating expenses excluding depreciation, amortization and stock-based compensation increased by 20 per cent to $10.3-million compared sequentially to $8.6-million in Q4 2022. These expenses increased to 47 per cent of revenue in Q1 compared with 40 per cent of revenue in Q4 2022. Think recorded certain one-time annual cost adjustments in the fourth quarter of 2022, such that the total operating expenses recorded for that period were below the expected baseline operating expenses in future quarters. Compared with Q1 2022, these selected operating expenses increased by 9 per cent or $900,000, up from $9.4-million.

General and administration expenses of $6.4-million in Q1 2023 were 2 per cent higher compared with $6.2-million in Q1 2022 and 3 per cent higher than the $6.2-million reported in the immediately preceding quarter.

Research and development expenses increased by 9 per cent to $2.1-million in Q1 2023 compared with $1.9-million in Q1 2022 as Think increased investment in its software and data solutions to address future market opportunities for its digital front door and LMS solutions.

Sales and marketing expenses in Q1 2023 grew by 2 per cent year over year to $2.4-million compared with $2.3-million in Q1 2022. Think's focus for marketing continues to be on lead generation and related branding activities.

Conference call details

Chief executive officer Sachin 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, Tuesday, May 30, 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 American toll-free:  1-888-664-6392

Conference replay:

Local:  416-764-8677

North American toll-free:  1-888-390-0541

Replay entry code:  318592 followed by the number sign

Expiration date:  June 6, 2023

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 help to 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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