Think Research Corporation Announces Record First Quarter 2023 Results

Record Q1 2023 revenue of $21.8M and Adjusted EBITDA of $1.1M

Signed a minimum 5-year SaaS agreement expected to generate a minimum $40M over the term

ARR increased by 53% to $22.0 million as of the end of the quarter

TORONTO, May 29, 2023 /CNW/ - Think Research Corporation (TSXV: THNK) ("Think" or the "Company"), a company focused on transforming healthcare through digital health software solutions, is pleased to announce 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 (SaaS 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, "2023 started off strong with a major SaaS contract for our Software & Data division and continuing strength in our Clinical Research division. Q1 2023 marks the second quarter in a row of positive Adjusted EBITDA, which meets our objective of maintaining persistent positive Adjusted EBITDA for the foreseeable future. Think is in a great position to help constrained healthcare 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 3 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 re-occurring multi-year 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 healthcare 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 healthcare practitioners globally, supporting them to deliver the best outcomes for patients. To fulfill this objective, the focus of operations is twofold:

• Execute licenses 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:

1. Strengthening the utility of Think's software and data solutions through ongoing product development, platform integration, and content development.
2. Expanding Think's solutions footprint via new enterprise and government licenses 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 healthcare practitioners, government agencies and large enterprises, management will continue to review high-value, opportunistic tuck-in acquisitions.

Notable Contracts and Events in 2023

• On February 13, 2023, Think announced the expansion of the original $6.4 million contract with a global pharmaceutical company, announced on September 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 5-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 healthcare access and delivery challenges.
• On March 31, 2023 the Bank of Nova Scotia extended its credit agreement with Think for an additional year to September 10, 2024.

Consolidated Q1 2023 Financial Highlights

• The Company achieved record revenue of $21.8M for Q1 2023, up by $1.6M or 8% compared to $20.2M 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 $0.2M or 1% compared to $21.6M in the three months ended December 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 $22.0M at the end of Q1 2023, up by 53% compared to $14.3M at the end of March 2022 and by 49% compared to $14.8M at December 31, 2022. This growth in ARR stemmed primarily from signing the minimum 5-year SaaS agreement headlined above. ARR is derived exclusively from the Software & Data business line and is defined in the section below titled "Non-IFRS Financial Measures".
  
  
• Generated gross profit of $11.4M in Q1 2023 compared to $9.1M for the same period in the prior year, an increase of 25%. 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% in Q1 2023 compared to 45% 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 $1.1M for Q1 2023 compared to an Adjusted EBITDA loss of $(0.3M) for the same period a year ago. Adjusted EBITDA for Q1 2023 was $0.5M lower compared sequentially to the Adjusted EBITDA of $1.6M in Q4 2022. Adjusted EBITDA Margin was 5% in Q1 of 2023 compared to (1%) 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. Adjusted EBITDA and Adjusted EBITDA Margin are defined in the section below titled "Non-IFRS Financial Measures".
  
  
• Net income (loss) was ($3.6M) for the three months ended March 31, 2023 compared to $(6.2M) for the comparable period in the prior year and to ($5.6M) sequentially when compared to 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 to 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 $1.0M or 11% to $9.5M compared to $8.5M 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 & Data revenue represented 43% of total revenue compared to 42% of total revenue in Q1 of the previous year.

In Q1 2023, on an annual run-rate basis, ARR represented 58% of total Software & Data revenue with the remaining total revenue in the segment primarily being re-occuring revenue.

Clinical Research revenue grew by $1.4M, or 17% to $9.4M in Q1 2023 compared to $8.0M 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 re-occurring in nature.

Clinical Services revenue declined by $0.7M or 19% in Q1 2023 compared to the comparable period in 2022 due to specific operational challenges that have since been addressed. Clinical Services revenue in Q1 2023 was flat compared to the immediately preceding quarter.

Revenue Streams	Q1 FY 23	Q1 FY23 % of Revenue	Q1 FY 22	Q1 FY22 % of Revenue
Software and Data Solutions^1	9,439	43.2 %	8,479	42.0 %
Clinical research^2	9,415	43.1 %	8,042	39.8 %
Clinical services^3	2,972	13.6 %	3,683	18.2 %
Total	21,826	100 %	20,204	100 %

Notes:
(1)	"Software and Data solutions" revenue consists of SaaS and related professional services revenue from Think and Pharmapod, and re-occurring revenue from MDBriefCase,
(2)	"Clinical Research" revenue consists of revenue from BioPharma.
(3)	"Clinical Services" revenue consists of revenue from the clinics owned by Think.

Consolidated Expense Details:

In Q1 2023, operating expenses excluding depreciation, amortization and stock-based compensation increased by 20% to $10.3M compared sequentially to $8.6M in Q4 2022. These expenses increased to 47% of revenue in Q1 compared to 40% 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 to Q1 2022, these selected operating expenses increased by 9% or $0.9M up from $9.4M.

General and administration expenses of $6.4M in Q1 2023 were 2% higher compared to $6.2M in Q1 2022 and 3% higher than the $6.2M reported in the immediately preceding quarter.

Research and development expenses increased by 9% to $2.1M in Q1 2023 compared to $1.9M 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% year over year to $2.4M compared to $2.3M in Q1 2022. Think's focus for marketing continues to be on lead generation and related branding activities.

Selected Financial Information

		Q1 2023	Q4 2022	Q3 2022	Q2 2022
(in thousands of Canadian dollars, except per share data)		$	$	$	$
Revenue		21,826	21,587	18,371	18,442
Net Income		(3,594)	(5,602)	(6,459)	(7,484)
EBITDA^1		197	(1,185)	(2,426)	(4,024)
Adjusted EBITDA^1		1,078	1,607	(696)	(1,579)
Adjusted EBITDA margin^2 (% of revenue)		4.9 %	7.4 %	-3.8 %	-8.6 %
Basic and diluted EPS		(0.05)	(0.09)	(0.11)	(0.13)

		Q1 2022	Q4 2021	Q3 2021	Q2 2021
(in thousands of Canadian dollars, except per share data)		$	$	$	$
Revenue		20,204	19,117	10,083	10,224
Net Income		(6,198)	(7,596)	(10,828)	(5,583)
EBITDA^1		(2,399)	(4,187)	(8,290)	(3,814)
Adjusted EBITDA^1		(290)	(189)	(3,403)	(1,349)
Adjusted EBITDA margin^2 (% of revenue)		4.9 %	-1.4 %	-1.0 %	-33.7 %
Basic and diluted EPS		(0.11)	(0.13)	(0.24)	(0.13)

Notes:
1.	"EBITDA" and "Adjusted EBITDA" are non-GAAP financial measures, are not standardized measures under IFRS and may not be comparable to similar financial measures disclosed by other issuers. See "Non-IFRS Financial Measures".
2.	"Adjusted EBITDA Margin" is a non-GAAP ratio, is not a standardized measure under IFRS and may not be comparable to similar financial measures disclosed by other issuers. See "Non-IFRS Financial Measures".

The tables above and below include non-IFRS financial measures and non-IFRS ratios. See the "Cautionary Note Regarding Non-IFRS Financial Measures" section of this press release for the relevant definition of each non-IFRS financial measure and non-IFRS ratio.

	Three months ended March 31,2023	Three months ended March 31,2022
	$	$
Net loss	(3,594)	(6,198)
Depreciation and amortization	3,153	3,636
Finance costs	1,224	1,076
Income tax expense (recovery)	(586)	(913)
EBITDA^1	197	(2,399)
Acquisition, restructuring and other^2	346	1,062
Stock-based compensation^3	535	1,047
Adjusted EBITDA	1,078	(290)

Notes:
(1)	"EBITDA" and "Adjusted EBITDA" are non-GAAP financial measures, are not standardized measures under IFRS and may not be comparable to similar financial measures disclosed by other issuers. See "Non-IFRS Financial Measures".
(2)	"Acquisition, restructuring and other" expenses relate to costs incurred in connection with business combinations, reorganization of the Company's capital structure and workforce, and legal, advisory and banking expenses.
(3)	"Stock-based compensation" relates to expenses recognized for equity awards issued under the Company's Omnibus Equity Incentive Plan.

Conference Call Details:

CEO Sachin Aggarwal and CFO John Hayes with host a conference call to discuss the results, with a Q&A session to follow.

TIME: 8:30AM EST, Tuesday May 30th, 2023
Conference Call Participant Details: To join the conference call without operator assistance, you may register and enter your phone number HERE 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
Webinar URL: https://app.webinar.net/qBYZ3lEXxMG

Conference Replay
Local: 416-764-8677
North American Toll Free: 1-888-390-0541
Replay Entry Code: 318592 #
Expiration Date: 06/06/2023

About Think Research Corporation

Think Research Corporation 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 healthcare 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 includes enterprise clients, hospitals, health regions, healthcare 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 3 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 September 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. Visit: www.thinkresearch.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

Non-IFRS Financial Measures

This MD&A makes reference to certain non-GAAP financial measures and non-GAAP ratios. These measures and ratios are not recognized measures under International Financial Reporting Standards ("IFRS"), do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures and ratios are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Non-IFRS measures and ratios have limitations as analytical tools and should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS and should be read in conjunction with the consolidated financial statements for the periods indicated. The Company uses non-IFRS financial measures and ratios, including "ARR", "EBITDA", "Adjusted EBITDA" and "Adjusted EBITDA Margin" to provide investors with supplemental measures of its operating performance and to eliminate items that have less bearing on operating performance or operating conditions and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. Specifically, the Company believes that Adjusted EBITDA and Adjusted EBITDA Margin, when viewed with the Company's results under IFRS and the accompanying reconciliations, provides useful information about the Company's business by removing potential distortions that may arise from transactions that are not operational in nature. By eliminating potential differences in results of operations between periods caused by factors such as restructuring, transaction, impairment and other charges, the Company believes that Adjusted EBITDA and Adjusted EBITDA Margin can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated. The Company's agreements with lenders include certain financial performance covenants which include EBITDA (as defined in the Company's credit agreement with its lenders) as a component of the covenant calculations and require the Company to maintain certain levels of EBITDA on a consolidated basis. ARR is used by some investors and analysts as a predictor of future revenues because it reflects new sales, renewals and lost customers. The Company believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures and ratios in the evaluation of issuers. The Company's management also uses non-IFRS financial measures and ratios in order to facilitate operating performance comparisons from period to period.

Non-GAAP financial measures and non-GAAP ratios used by the Company include:

Annual Recurring Revenue ("ARR"), means revenue associated with software and services contracts that are expected to have a duration of more than one year, normalized to a one-year period.

"EBITDA" means net income (loss) before amortization and depreciation expenses, finance and interest costs, and provision for income taxes.

"Adjusted EBITDA" adjusts EBITDA for non-cash stock-based compensation expense, gains or losses arising from redemption of securities issued by the Company, asset impairment charges, gains or losses from disposals of property and equipment, foreign exchange gains or losses, impairment charges on property and equipment, business acquisition costs, and restructuring charges.

"Adjusted EBITDA Margin" means Adjusted EBITDA divided by revenue of the Company for the applicable period.

A reconciliation of EBITDA and Adjusted EBITDA to IFRS net income (loss) is presented under "Select Information and Reconciliation of Non-IFRS Measures" in the Company's MD&A filed on SEDAR.

For more information: https://www.thinkresearch.com/ca/investors/

SOURCE Think Research Corporation

Mark Sakamoto, Executive Vice President, Think Research, 416.388.7119, [email protected]