Vitalhub Corp. (VHI) Earnings Call Transcript

Joining us on today’s call are Vitalhub CEO Dan Matlow and CFO Brian Goffenberg. Once we’ve finished our prepared remarks, we’ll open the line so analysts can ask questions. To signal that you’d like to pose a question, please press star one or use the raise hand feature. Now, prior to starting, I’ll go through our cautionary note about forward-looking information. Some of the information that will be discussed on this call includes forward-looking statements, which carry risks and uncertainties. Actual results could differ materially from what those statements set forth. To review these risks and uncertainties, please see the forward-looking statements disclosure in the earnings press release and in our CDR filings. In addition, today’s commentary will include adjusted financial measures, which are non-IFRS measures. These ought to be viewed as a supplement to IFRS measures, not a replacement for them. Reconciliations between the two appear in our CDR filings. With that said, I’ll turn the call over to our CFO, Brian Goffenberg, who will cover the quarter’s financial highlights. Over to you, Brian.

Good morning, everyone, and thanks for being on the call today. We're happy to share our results for the third quarter of 2025. I'll give you a rundown of the quarter's financial highlights, and then I'll turn things over to Dan for a business update. As of the end of September, annual recurring revenue stood at CAD 93.7 million. Organic growth came in at 15% compared with the prior year, while total growth reached 75%, which includes acquisitions and foreign exchange. Total revenue for the quarter was CAD 32 million, up 94% year over year. Recurring revenue — that's our term license maintenance support segment — came to CAD 23.6 million, representing 74% of total revenue. Virtual care term license revenue was CAD 2.5 million. That marked the first full quarter of contribution from the virtual care segment. Petrol license revenue was CAD 500,000 for the quarter, up from CAD 300,000 in the same period last year. Services, hardware, and other revenue totaled CAD 5.5 million in the quarter, versus CAD 2.3 million in the prior year period. Our services and other non-recurring revenues came in above expectations, driven by the timing of project delivery and revenue recognition. We anticipate that our recurring revenue mix will climb steadily back to historical levels.

Gross margin came in at 81% of revenue, matching what we saw in the same period last year. For the quarter, adjusted EBITDA reached CAD 7.2 million, which works out to 22% of revenue, versus CAD 4.6 million, or 28%, in the prior year period. We ended the quarter holding CAD 123.8 million in cash with no debt on the books. After quarter end, we completed a small asset purchase in the U.K. for CAD 140,000, and aside from that we're generating cash and continuing to build on this balance. With that said, I'll turn the call over to Dan for a business update.

Thanks, Brian. I’ll keep my comments short. I realize there are plenty of analysts who may be on the line and eager to pose questions. Between what I plan to cover and those questions, you should end up with a full view of the quarter. We’re pleased with these results, simply because we closed the two big acquisitions that now account for 30% of revenue. Neither business arrived matching the profile we seek under the rule of 40, though we are addressing that. We stand at nearly CAD 94 million in ARR. I’ve often wondered, “Could we push this to CAD 100 million?” We are essentially right at the threshold of becoming a CAD 100 million ARR company. Services gave us meaningful help this quarter for a couple of reasons. Zesty and Novari each bring a substantial services component through their implementations. They contributed to that. TREAT has consistently kept adding from a services standpoint. Certain services milestones were achieved, which let us recognize some services.

Services are a distinct piece of our game now that the new company is here. Having that in our revenue mix going forward is something we're excited about. On ARR, again, contributions came in from every product that was entering the calculation, and none truly stood out compared with the others. We're encountering a bit of headwinds for the SHREWD-based products in the NHS, and not because of anything other than the fact that they're overhauling all their structures around ICSs and ICBs. During that transition, my sense is they won't be making many purchases, though we continue to sell that product in other areas of it. That was always a big part. It will settle down at some point in 2026. We do expect that to begin opening up again and to start seeing that, start seeing that contribute. As for the integration, it's going great. We're beginning to see it all coming together. We really got some great people with those acquisitions. Last week we held a planning session where 50 people from the management team gathered for planning. It was just really nice to see how all these different groups are coming together. We're excited about the synergistic aspects of how we'll be able to integrate products and integrate sales campaigns and how these products fit together in really a cohesive fashion.

We're eager to do that. Right after the acquisition, we began implementing programs to cut costs. That work is underway. There's certainly a bit of it reflected in the quarter. Really, it would only have applied for the final month of that quarter. We're carrying that process forward. It will extend into 2026 before we've worked it through the entire system. Over the coming few quarters, we expect to steadily begin seeing the results of both new revenue coming in and cost reductions, which will get us to the profile we're proud of and always aim to reach. We do have acquisitions in play. We keep looking at acquisitions. Recently, over roughly the last month, we've noticed much more heated activity in the smaller-based stuff. We continuously examine and explore the larger acquisitions that exist out there and keep working through them. It remains a big part of our program. We keep working through that every day. We're reaching the point where we believe we can digest some small ones and keep working through that. We're working through our 2026 budgets right now.

We feel great about the possibilities in front of us. That's exactly where we stand. Following those two acquisitions, this was genuinely a transitional quarter. We're enthusiastic about the way we're managing that transition. I believe it came in stronger than many had anticipated. That's something we're pleased about. I'll now open things up for any questions anyone might have.

Great, thank you, Dan. At this point we'll open the lines so analysts can ask questions. If you'd like to pose a question, please press star one or make use of the raise hand feature. Our first question today comes from Gavin Fairweather at Cormark Securities. Gavin, your line is now open.

Oh, hi there — is my voice coming through okay?

Correct.

Thanks a lot. Congratulations on the strong quarter. Dan, maybe to begin with, the company has reached a pretty meaningful size now, getting close to CAD 100 million in ARR. That clearly brings some cash flow advantages. I’m wondering whether this is creating additional opportunities for you to be more strategic with your customers, to organize or operate things in a different way, or to invest. Do you have any thoughts on what this new scale makes possible for the business?

Yeah, I think that planning session was exciting, where we're beginning to reach the point of seeing tenders and seeing situations where multiple products can be brought into the equation to pursue a more comprehensive solution. We're also starting to be able to link things together for offerings that are more strategy-based, particularly on the patient flow and patient journey side, the patient engagement-based side. There are customers who have agreed to use multiple products and have agreed to integrate those products. From my perspective, that's exciting. That was always the vision and so forth. That's also coming together with the Canadian products and the U.K. products. The Novari opportunity, I think, opens up a lot of opportunities for the U.K. products in Canada, a lot more effectively. Our U.K. team is definitely in a position to get Novari into the U.K. market a lot more effectively. They did close their first U.K. deal, and it got a lot of press in the U.K. It really is a pretty strategic deal over there for us in the mental health-based world, which they do a lot of in Canada, but we do not see very much in the U.K.

Our expectation is that Novari can gain considerable traction in the U.K. — at minimum, that's what we're hoping for.

That's helpful. And then just a second one from me — I saw in the notes to the financials that you acquired Definition Health out of bankruptcy for a fairly nominal amount. It seems the company digitized the surgical pathway. Could you talk a bit about the customer base there, whether it can be integrated with my pathway, and whether you believe you can grow it?

The real reason we acquired it was for technology-oriented use cases, and it isn’t the complete offering. What it provides is a pre-operative assessment. Their work on content for patients ahead of arriving at a care facility is genuinely strong, even though only a small number of what I’d describe as partially implemented solutions in the market were actually using the solution itself, correct? It was simply a team building some technology. It hadn’t advanced much at all, yet that piece was something we wanted inside our Synopsis product. Adding it there was genuinely a technology-driven choice.

Thanks, that's helpful. And my last one is just about Attend Anywhere. Last quarter we discussed how you saw that as a more mature asset, and this quarter the revenue came in above what I expected. I'm curious whether, now that you know that asset better, your thinking on its outlook has become any more refined.

So that solution was actually built by a development team based in Australia. During due diligence and so on, we didn't really get much exposure to them. We went down right away to meet that group. The industrial character of the product impressed us greatly, and the way it was genuinely built for a clinical setting. We examined how the product is used across its base, and it sees pretty extensive use. That said, we understood when we acquired it that there are headwinds facing it regarding things like Teams and Zoom and similar tools, even though the customers who do use it appear to keep using it. In fact, usage rose during the quarter, which is part of why some of those financials look the way they do for it. Whether that's sustainable or not, we aren't certain. We'll simply keep watching it. We do have ideas for where that product could be added into some of our other offerings. For instance, perhaps it could be added into the TREAT or EHR products, which do have a requirement for telehealth and other areas. We talked about that during our planning session. We're going to explore that over the last little while.

Gavin, it's still early to say where that will end up. We've been open all along that this acquisition carried a bit of a risk profile. We didn't pay a large valuation for that company given the potential risk involved. It was more that we wanted the Zesty product. We were pleasantly surprised by, A, how it did in the quarter, and, B, by the usage of it. We'll just keep watching going forward and see what happens.

Much appreciated. I'll hand things over now.

Thanks, Gavin, and now it's Doug Taylor from Canaccord Genuity with the next question. Doug, go ahead — your line is open.

Yeah, thanks. Good morning. I’d like to continue from that last point regarding Attend Anywhere. Based on how you’re describing it, it sounds as if it could play a bigger role in the future than you might have anticipated when the acquisition happened. You don’t exactly describe it as recurring revenue. It sits in a separate bucket. First, can you confirm that, and perhaps explain how we should think about that and how repeatable this business is on a quarterly basis going forward? Please help us with the modeling for that.

I'll give it a shot, Doug. Right, we don't include it in ARR since it's usage-based. We can't say with full certainty; the model differs greatly from our software-based offerings. It's as much a services solution as anything else. We felt it was better to call it out separately. That ought to make things clearer for both you folks and us regarding how it's doing. Like I told Gavin, let's watch how this performs over the coming couple of quarters when it comes to usage and such. It's difficult to predict. Looking at its history, it's been all over the — I wouldn't say all over the map, but it's definitely been below the range we saw last quarter. On a quarter-by-quarter basis, it's been somewhat above that range, depending on what it's doing. Broadly speaking, the overall trajectory has declined across the last few years, mostly driven by price cuts, rather than primarily from customer losses, since it carried a very high price when it was a national deal sold to the NHS, I believe, 5 years ago or thereabouts. It underwent a huge amount of price reduction to land it in a space that made sense relative to competing with the other free products.

At this point, I believe it's standing on its own. We've come up with fresh concepts regarding where that technology might apply within our business, and realizing those will take some time. Yeah, I think—well, it's difficult to predict. We can get together with you afterward and walk through it. Like I mentioned, it has been lower. It has been somewhat higher. Either one is possible there. It might go—I don't think it will be dramatically different from where it stands now, on a quarter-by-quarter basis, but fluctuations are possible.

All right. So in your statement, you mentioned that results came in stronger than, I think, most people anticipated, on both the top and bottom line. You noted that you'd only just begun realizing cost savings tied to a few of your recent acquisitions — only about a month into any of those savings. And there's plenty more ahead. I just want to confirm there aren't other short-term or one-time benefits that came through this quarter which you'd flag anywhere regarding the margin profile. Any outliers, or is that a fair baseline to begin from now — 22.5% EBITDA margins — and then work from there?

Sure, I'd say that's a reasonable starting point for thinking about where we're headed. More deals are coming, and those will flow through to the bottom line. We'll also continue hunting for cost synergies as we move forward with this, right? Whether it rises in a straight line is uncertain — it may wander somewhat over the course of the next two to three quarters. A plan is in place. We know precisely what we're doing and where those changes will happen. Execution is underway right now. The open question is simply how long it will take and what timelines get tied to it. We do have a plan that gets us to where we believe we'll be. By the middle to end of next year, we do expect to be hitting that profile of where we want to be quite nicely. We have a plan to go do it.

Alright, that's my final question. You mentioned some wins involving initial referrals or the Novari business, with one being in the U.K. There's been talk of certain programs here in Canada seeing some activity. Could you discuss any recent successes with the Novari product here in Canada as well, to match the U.K. success?

There's certainly a lot of buzz surrounding Novari right now. Referral management has become a hot subject across many regions at the moment. My sense is that's precisely where health systems are working hard to bring together every part of care and the movement of that patient around. A major piece of that is referral management. Within their specific niches, Novari performs very well on that front. They've been at it for many years across Canada. As we've witnessed elsewhere, you get things underway, and then the government says, "Hey, let's just go for it and get a big chunk of this done." Those opportunities are now coming to fruition. Nothing to report at this stage, for sure, but there are things in play. You're dealing with government. You never know how long these things take or what happens, and whether they ever follow through with these things. We're cautiously optimistic of some things going through next year, for sure.

Thanks for those insights. I'll hand things over now.

Appreciate that, Doug. Our following question is from David Kwan at TD Securities. David, your line is open.

Hey, thanks. I’m curious about the acquisitions you’ve made recently. It sounds like Novari in particular was quite heavy on R&D, especially when you compare that with what was spent on sales and marketing. There seem to be some solid opportunities there to move a good amount of work over to Sri Lanka, which would help lift the margin. I’m wondering if you could elaborate a bit on your plans on that front and on how we should think about margin uplift in Novari.

So our approach is unchanged, correct? The Sri Lankan team now numbers well above 200 people. It keeps getting more mature each year when it comes to executing on a wide range of things. We already have a very large group of Sri Lankans in Kingston working alongside Novari. We've moved ahead on that work. We keep applying that same playbook, and nobody should find that surprising. That's just what we do.

Appreciate that, Dan. Turning to integration, I believe we've now passed the one-year marks for both MedCurrent and Strata. I'd be curious whether you could give us an update on those. Have the margins reached roughly the levels you were aiming for, and are they near where they stood before the acquisitions?

So MedCurrent has rolled out pretty much exactly as we anticipated. It's still performing. It's made its way into our profile, and we're pleased about that. They simply keep on clicking. Strata isn't moving as fast as we'd prefer, though with Novari there's clearly some synergistic value. We're hoping to see improved results. We've made some adjustments at Strata when it comes to salespeople and other areas. We believe that product is 100% very sellable. The customers using it are fans of it. At the extremes, I think it's simply a matter of not being exposed to as many customers as we'd like it to reach. We're seeing more activity for it just because it now sits in our U.K. Salesforce. The Novari Salesforce will be involved with that too when it comes to lead generation, when it comes to coming through to it. We recently added a more senior sales rep from our group onto that product. It hasn't contributed as much as we'd like it to, but there's a really good install base. It makes money for us, and we're fine with it.

We believe there's additional upside still available, and our expectation is that we'll capture it.

No. Thanks, Dan. One final question. On the M&A pipeline, you mentioned there could be more, I suppose, tuck-in deals. From an operational perspective, I'm curious how you feel about the integration work you're doing with Novari and Induction. Do you still believe that a larger, chunkier deal — particularly something the size of a Novari — is probably more of a 2026 timeline?

Look, if a deal like Novari shows up next week and it's the right one, we'd go ahead with it. We won't pass on a deal just because we're unsure we can take it on. Those deals are still in progress, and we would be doing them — I believe we could absorb it and handle our own work, even though getting it done might take somewhat longer. We'd do it, and we'd put in the work. You have to stay opportunistic. When the right situations appear and they fit our profile, we'll move forward on those deals. It could be 2026, 2027, 2028 — or possibly two months from now, nobody knows. If the right scenario presents itself, we'll act on it.

It seems you believe you have sufficient operational capacity. Things could be quite stretched at the moment, yet not so stretched that you would decline.

Honestly, I'd say we've become fairly skilled at this by now. Should the need arise, we'd definitely be able to handle it.

Much appreciated. That’s excellent.

Thanks, David. Our following question is from Richard C at National Bank. Richard, your line is open.

Yes, thanks. I actually had a question tied to the one just before. Clearly, your track record here has been tremendously successful. As you improve with every one of these deals and learn more, is it fair to expect that the speed at which capital gets deployed, looking ahead over the next year or two, ought to pick up?