Mr. Sachin Aggarwal reports

THINK RESEARCH CORPORATION ANNOUNCES RECORD SECOND QUARTER 2023 RESULTS

Think Research Corp. has released its second quarter 2023 results. The company's management's discussion and analysis (MD&A), along with its unaudited consolidated interim financial statements for Q2 2023 are available on SEDAR and on Think's website.

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

Sachin Aggarwal, chief executive officer of Think Research, said: "With record revenue and positive adjusted EBITDA [earnings before interest, taxes, depreciation and amortization], the second quarter continued the strong performance trend set in the last two quarters. Strong 67-per-cent annual recurring revenue growth was driven by SaaS licensing in our software and data division, and reached $25-million at the end of the quarter. 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 upon by acute care and community care doctors, nurses, and pharmacists to support their practices. Think solutions now reach more than 326,000 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 16,000 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 from governmental agencies, and large enterprise clients such as global pharmaceutical companies. Accordingly, Think's management believes that the company's performance should be adequately protected in the short term against uncertain macroeconomic conditions.

Moreover, Think's software and data solutions business is currently solving urgent short-term health care service conditions, as well as looming long-term demographic challenges for health systems in Canada and abroad, including:

• Rapid changes in medical research and treatment options;
• Limited access to primary care and critically long wait times in emergency rooms;
• Increasing demand for health care services as populations age and people live longer, with increasing health complexity;
• A long-term shortage of health care workers, including doctors, nurses and pharmacists, and a flight of these critical health care workers to higher paying urban jurisdictions.

As a result, Think's sales pipeline for its SaaS solutions shows significant revenue growth potential in the Canadian market and internationally.

The company plans to grow predictable and recurring revenue with improving margins by becoming an essential data solutions provider for health care systems globally, so they can deliver the best outcomes for patients. Think's digital front door (DFD) solution can provide additional capacity for health care systems through third party care providers, such as doctors, nurses and care navigators from outside the client's network.

To fulfill this objective, Think's focus is to:

• Execute long-term agreements with new flagship enterprise and government customers for Think's core suite of software and data solutions, including its digital front door, learning management system (LMS) and Pharmapod solutions;
• Add more users to current customer agreements by promoting further adoption and usage. Currently, more than 326,000 clinicians, including doctors, nurses and pharmacists, can access Think's solutions;
• Extend the functionality of Think's platform through internal development, and through partnerships with care and technology providers. As more users, care providers and functionality are added, Think's solutions become more essential to health systems and customers;
• Continue to manage costs to ensure sustainable profitability.

Think's rapid improvements in financial performance, including three sequential quarters of positive adjusted EBITDA is helping to offset higher financing charges related to Think's floating interest rate associated with its long-term debt. Although Think has yet to consistently achieve sufficient positive cash flow from operations to cover all non-operating expenses, Think is actively managing costs, while demonstrating improvements in revenue growth.

Notable contracts and events in Q2 2023:

• On June 1, 2023, June 21, 2023, and July 18, 2023, Think announced that its Pharmapod system was selected by an Ontario long-term care chain, an expansion of a long-term care implementation into New Brunswick and a pharmacy chain with approximately 300 locations across Canada to help them manage medication incidents.
• On June 12, 2023, Think raised a non-convertible loan from Beedie Capital amounting to $1.8-million, the proceeds of which were used to pay down the deferred and contingent consideration for prior-year acquisitions to avoid dilution to shareholders.

Q2 2023 financial highlights:

• The company achieved record revenue of $22.5-million for the three months ended June 30, 2023, up by $4.1-million, or 22 per cent, compared with $18.4-million for the second quarter of 2022. Year-to-date revenue of $44.3-million was up $5.7-million, or 15 per cent, from $38.6-million in the first half of the prior year. This year-over-year growth reflects the impact of organic growth in software and data solutions, and clinical research that was offset by a decline in clinical services revenue. Sequentially, revenue for Q2 of 2023 increased by $700,000, or 3 per cent, compared with $21.8-million in the three months ended March 31, 2023, reflecting growth in Think's software and data solutions business, primarily as a result of the large SaaS contract announced on March 7, 2023. Revenue in Think's clinical services business declined to $5.9-million in the first half of 2023 compared with $8-million in the six months ended June 30, 2022.
• Annual recurring revenue (ARR) reached $25-million at the end of June, 2023, representing growth of 67 per cent compared with $14.7-million at the end of June, 2022. Quarter-over-quarter growth in ARR was 12 per cent compared with $22-million at the end of March 31, 2023. This growth in ARR stemmed primarily from one large new contract, along with multiple smaller client engagements.
• Gross profit rose to $11.7-million for Q2 2023 and $23.1-million for the year-to-date, up 25 per cent and 25 per cent, respectively, compared with the same periods a year ago. Gross profit was up 3 per cent compared with the immediately preceding quarter. These increases were due to a combination of higher revenues, a higher share of revenue from transactions that carry a higher gross profit margin, and cost efficiencies realized from the company's previously disclosed cost-optimization efforts. Gross margin of 52 per cent in Q2 2023 and 52 per cent in the year-to-date represents an increase from 51 per cent in Q2 2022 and 48 per cent in the first half of 2022.
• Operating expenses declined to $14.2-million in Q2 and $28.2-million in the year-to-date 2023, representing a decrease of 13 per cent, or $2.1-million, and 7 per cent, or $2.2-million, compared with the prior-year periods. As a percentage of revenue, operating expenses declined to 63 per cent and 64 per cent in the three and six months ended June 30, 2023, compared with 89 per cent and 79 per cent in the prior-year periods, due primarily to a cost-optimization program executed by the company.
• Think achieved EBITDA of $1.4-million in the second quarter and $1.6-million in the first half of 2023 compared with a loss of $4-million in Q2 2022 and a loss of $6.4-million in the first six months of 2022.
• Adjusted EBITDA rose to $1.3-million for the three months ended June 30, 2023, compared with an adjusted EBITDA loss of $1.6-million for the same period a year ago. Adjusted EBITDA for the first half of 2023 of $2.4-million was $4.3-million higher compared with an adjusted EBITDA loss of $1.9-million in the six months ended June 30, 2022. These improvements were due primarily to improvements in revenue combined with operating cost reductions. The resulting adjusted EBITDA margin was 6 per cent in Q2 and 6 per cent in the year-to-date 2023, compared with losses of 9 per cent in Q2 2022 and 5 per cent in the first half of the prior year.
• Net loss was $2.3-million for the three months and $5.9-million for the six months ended June 30, 2023, compared with $7.5-million and $13.7-million for the comparable periods in the prior year. The decrease in net loss when compared with 2022 is primarily due to higher revenue, coupled with lower operating costs as a result of Think's cost-optimization program.

Q2 2023 revenue performance highlights by line of business

The company has three primary streams of revenue that include: (1) software and data solutions; (2) clinical research; and (3) clinical services.

Revenue from Think's software and data solutions business grew by $3.5-million, or 50 per cent, from $6.9-million (43 per cent of revenue) in Q2 2022 to $10.4-million (46 per cent of revenue) in Q2 2023, primarily due to organic growth associated with the launch of the new SaaS and services initiative set out in the notable contracts section above.

ARR reached $25-million at the end of June, 2023, representing growth of 67 per cent compared with $14.7-million at the end of June, 2022. Quarter-over-quarter growth in ARR was 12 per cent compared with $22-million at the end of March 31, 2023. Think's net retention rate for ARR was 106 per cent for the 12 months ended June 30, 2023.

Clinical research revenue increased by $2-million, or 27 per cent, in Q2 2023 to $9.2-million compared with $7.3-million in Q2 2022. Revenue in the comparable period was depressed due to the operational impacts of COVID-19, which were only fully resolved in late Q3 of 2022.

Clinical services revenue declined by $1.4-million, or 32 per cent, in Q2 2023 compared with the comparable period in 2022, due to operational challenges in sales and marketing.

Liquidity and capital resources

The company's agreements with its lenders regarding certain covenants become more restrictive at the beginning of each quarter from Jan. 1, 2022, to Jan. 1, 2024. Therefore, despite Think's rapid improvements in financial performance, including three sequential quarters of positive adjusted EBITDA, the company determined that it was not in compliance with the minimum EBITDA covenants as set out in the Bank of Nova Scotia credit facility and under the Beedie convertible facility, and could potentially be in non-compliance with certain covenants set out in the credit facilities in future months in 2023. The company is actively engaging with its lenders and pro-actively addressing this matter. For further details, please see the company's MD&A.

Conference call details

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

Time:  9 a.m. ET, Tuesday, Aug. 29, 2023

Conference call participant details:  To join the conference call without operator assistance, you may register and enter your phone number on-line to receive an instant automated call back.

Participants can also dial direct to be entered to the call by an operator at the following numbers.

Toronto:  416-764-8659

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Conference replay

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Replay entry code:  197171 followed by the pound key

Expiration date:  Sept. 3, 2023

About Think Research Corp.

Think Research is an industry leader in delivering knowledge-based digital health software and data solutions. The company's evidence-based health care solutions support clinical decision-making, improve access to services, enable practitioners to gain better capabilities and knowledge, and help to standardize care to facilitate better health care outcomes. Think Research has gathered a significant amount of data by building its repository of knowledge through its digital solutions platform and group of companies. The company's focused mission is to become an essential platform that helps health care clinicians, institutions and networks to provide the best care and information.

Think licenses its solutions to over 16,000 facilities for over 326,000 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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