Vitalhub Corp. (VHI) Earnings Call Transcript & Summary

Good morning, everyone, and thanks for being with us on our conference call for the first quarter of 2026. Joining me today are VitalHub's CEO, Dan Matlow, and Brian Goffenberg, our CFO. Once we've finished our prepared remarks, we'll open the lines so analysts can ask questions. To signal that you'd like to ask something, please press star one or use the raise hand function. Before we start, I'll go through our cautionary note about forward-looking information. Some of the information discussed on this call includes forward-looking statements, and those carry risks and uncertainties. Actual results could differ materially from what those statements set forth. If you'd like a discussion of these risks and uncertainties, please review the forward-looking statements disclosure in the earnings press release and in our SEDAR filings. Our commentary today will include adjusted financial measures, which are non-IFRS measures. These should be viewed as a supplement to IFRS measures, not a substitute for them. Reconciliations between the two can be found in our SEDAR filings. With that, I'll turn the call over to Brian to go over the financial highlights for the quarter. Over to you, Brian.

Good morning, everyone, and thanks for being on the call today. We're glad to share our results for the first quarter of 2026. We ended the quarter at CAD 99.1 million in ARR, reflecting 11% organic growth compared with the prior year. Our Adjusted EBITDA margin rose sequentially, reaching 25%, up from 23.6% in the prior quarter. We're pleased to be delivering according to plan on both of those fronts. Here are some of the key financial highlights for the quarter. Total revenue came in at CAD 31.9 million, up 47% year-over-year. Recurring revenue — that's our term license, maintenance and support segment — was CAD 23.9 million, or 75% of total revenue. Virtual care license revenue was CAD 2.4 million. Perpetual license revenue was CAD 1 million, which is an increase of CAD 200,000 over the prior period. Services, hardware, and other revenue was CAD 4.6 million, versus CAD 3.2 million in the prior year period. Our gross margin was 82% of revenue, compared with 80% in the prior year period. Adjusted EBITDA for the quarter was CAD 8 million, or 25% of revenue, compared with CAD 5.6 million, or 26% of revenue, in the prior year period. We finished the quarter with CAD 121.3 million of cash and investments and no debt.

Having said that, I'd now like to pass things along to Dan so he can give us a business update.

Thanks, Brian. Welcome, everyone. Thanks for joining us. I think hopefully one of these days the weather is gonna pick up, but it's been one of those May. I think it was just a typical VitalHub quarter. It was a steady quarter and we're happy with where we are. I think we're well ahead of our budgets and our plans, and we're excited to just keep moving in the same direction. Growth in the ARR in the quarter was led by Novari, but we did see contributions from, you know, other areas as it continued to grow there, and we're happy with how that is trending. We still see some, you know, significant things coming on the Novari side over the next, you know, two years as they keep growing their footprint across Canada, and we're seeing some really nice activity cooking in the U.K. We were helped out in the quarter by some good perpetual growth. We typically see that once in a while from our Induction and Intouch group, and they had a healthy quarter. That product continues to sell pretty nicely in Australia and in U.K., and we are seeing contributions grow in our Australian markets where we've seen some pretty nice implementations, some creative implementations of that product.

Services revenue keeps holding up well. Over the past two to three quarters, it has remained solid. A fairly sizable backlog is still visible to us, and we anticipate that will carry forward. Regarding expenses, we're still focused on them. As you know, we've reached 25% Adjusted EBITDA. Given that, you know, we bought 30% of our revenue toward the end of last year — and both of those acquisitions ranged from break even to losing money — we're beginning to recover that, and the contributions are starting to show. We're back at 25% Adjusted EBITDA, and we keep working at it. That work goes on through ongoing streamlining of operations. We're also beginning to see our new ARR, our new revenue, convert into profits as we keep adding it into our revenue mix. We want to keep adding that ARR without raising costs and keep working on those costs to try to move that into that area. I just want to touch on something — I know there have been some comments about our accounts receivable base balance. We're somewhat excited about it. Q1 is a very large billing quarter for us at the end of March, since it's our government year-end, and a big, large amount of our contracts get renewed then, particularly the two new acquisitions we made.

A significant portion of those billings occurred in March, and we're genuinely beginning to see the cash balance increase quite well as we move through May and into June, and we anticipate that matter will look considerably different when we report our Q2 earnings. There's zero concern on that front. We simply keep going. With government, collection can be difficult at times, yet we always receive it, and a great deal of our billing happens during that month. That explains it. Glad to share on the board front — I believe you noticed through our other press releases that we made a handful of changes during the quarter. Allan Brett, whom those tracking the investment community would recognize quite well, played an essential role in Descartes' growth across recent years, and he has come aboard the board as Chairman. We've been acquainted with Allan for some time. He has assisted us with M&A over recent years to some degree and has been a truly valuable contributor to our organization, and he will step in as Chairman. We also have Andrew Shen, who is joining our board. Andrew has worked side by side with us over the past, you know, many years and brings solid experience in our business, and he is here to join our board.

Francis Shen will formally leave the board, though he isn't going far. He'll remain involved with our M&A deals. He'll still be close at hand, so apart from the formal side of how Francis engages with our company on a routine basis, we don't anticipate much to shift. Allan, you know, is going to contribute some genuinely valuable perspectives as we keep expanding, and we're glad to have him on board. On the AI front, this past quarter was truly remarkable, with strong strides made in AI across every part of our business. We're beginning to see uptake from a wide range of teams, from development through implementation, into our group based in Colombo, Sri Lanka, and across the whole organization. We're quite pleased with certain opportunities now emerging in some of our projects as we work to simplify some of our processes in pursuit of productivity gains. Some fairly intriguing efforts are underway. I believe we're genuinely on par with where things stand. Questions always remain about proving this actually delivers results, but I think our methodologies are solid and we've organized our projects quite methodically to track the productivity gains on that basis.

We now have two products actively being sold in the market. The transcription product we offer will be integrated into our electronic health records. We already have a first adopter who has paid us for it, and we anticipate implementing that adopter during this quarter and getting that moving forward. A large number of customers in our community social services area are waiting for that transcription module, which listens to conversations and completes forms. Adoption is also beginning for our imaging referral protocoling system, a component of our Novari system. We also believe there is an opportunity specifically for that AI component inside our MedCurrent base product set. We keep working on AI and searching for fresh approaches to grow our customer bases in that way. On the M&A side, opportunities do exist for us. That area is genuinely keeping us very busy. We anticipate closing transactions in 2026 without question. We are enthusiastic about the possibilities, including some new geographies that may potentially open up through some of this M&A, along with interesting companies we have known for quite a while and that we believe will make some contribution to us.

And that brings us to the end. As you know, we keep doing what we've always done. We're aiming to keep expanding and to keep innovating to the best of our ability. We're happy with our markets, and we keep pushing ahead. I'm sure my remarks left a few gaps, but our friends with questions can probably help fill them in. We'll hand things over to Christian for some questions.

Appreciate that, Dan. At this point we'll turn the call over to analyst questions. As a reminder, hit star 1 or use the raise-hand feature if you'd like to pose a question. Our first question today is from Gavin Fairweather at ATB Cormark Capital Markets. Gavin, you're live.

Oh, hey there, morning to you. Nice work on those impressive numbers. Perhaps to kick things off, regarding that Ontario Health agreement, could you walk us through what the ramp will look like across, say, 12 or 24 months? I'm curious how you expect that arrangement to develop over what you might call the longer term, and whether you foresee chances for additional pathways or geographies down the road.

Yeah. I think, you know what? Ontario Health has kind of taken a bit of a leap of faith in trying to change how referrals get done across Ontario. We're definitely behind in that area when it comes to digitization. Yeah, they're actively — it's a really high priority. As you can appreciate, it's low-hanging fruit when it comes to the cost-benefit analysis; moving patients around from these disparate organizations, using fax and phones and letters is not really a good way of doing it in 2026. You know, we have our initial pathways. You know, it is the Ontario government. They move, good in tendencies, you know, good in things that they wanna move fast, but, you know, they tend to move at their pace and revenue will continue to go at as they continue to do it. I expect it to be steady and continue to add impact. It could be a little lumpy from quarter-to-quarter, you know, relative to how we get the revenue unlocked. We still think there's plenty more pathways than we've been contracted for that really are, you know, going through the regular pathways to obscure pathways that will get digitized, right?

Basically, any situation involving a patient moving between one organization and another has to become digitized, and we have plenty of offerings that can support that, so we anticipate being active in that area.

That's quite useful. I believe I noticed on LinkedIn that a new sales rep has joined your team in Australia. I'm curious whether you're beginning to see that market warm up, and if there are particular products you're eager to bring into that market. You mentioned Intouch, but I'm wondering whether there are others as well, and just whether, overall, that market might begin to generate more ARR bookings on a quarterly basis.

Sure, I think we reached the view that we needed to bring in someone senior with more experience, and that's what we did, to round those pieces out. You know, we've got a presence across a range of products there. We have, for instance, MedCurrent, which has a really strong offering that it's placed into the Alfred Hospital — a pretty, you know, well-regarded and visible hospital in the U.K. Well, in Australia, well-respected. We believe there's a lot going on there. The radiology guidelines group in Australia has given it its endorsement. We think there's a chance to keep growing that, but I think you had to be local to make that happen. Intouch, of course. We do have some Novari — a Novari implementation in Australia that needs to be built out further. We have a BookWise implementation there, in Australia, that needs to be built out further. We have a Strata implementation in New Zealand and a Diamond implementation for our Hicom based in New Zealand, plus a strong MCAP implementation in Tasmania. There are things for him to work on when it comes to expansion. All those customers are doing great work with our products. There are probably about, I don't know, 15 to 18 solid InTouch customers there.

A large number of customers remain in that segment. Our hope is that we'll begin to see some developments there in a more fruitful manner than has been the case up to now.

Great. So last thing from me on M&A — you mentioned there’s a chance you could begin moving into some new regions. I’m curious whether you have a particular profile in mind for being able to go into new regions, whether you use a different framework when you assess those kinds of deals, and how you’d lay that out for us?

You see, we're examining opportunities across Europe, and we're also considering, through that European lens, those kinds of software offerings that have already had some success in the U.K. They've built up a certain level of familiarity there. There are outfits in Scandinavia, Germany, and other regions that we observe have done work and have successfully rolled out products in the U.K. market, and we believe we can assist them in the U.K., and the reverse holds too. They could likely introduce some of our products into their own markets where those products fit. Those are the sorts of ideas we enjoy pursuing. We're not fans of beginning from scratch. What we seek are businesses that are already somewhat warmer, that have already gotten that started, and that tends to be our approach. Some of those opportunities we've been in discussions with for quite a while now appear to be potentially reaching fruition.

Much appreciated. I'll hand things over now.

Appreciate it, Gavin.

Kevin Krishnaratne from Scotia Capital has the next question. Kevin, your line is now live.

Hi there, and thanks for taking my question. Dan, I just want to follow up on the M&A point that Gavin raised. You've been familiar with these companies for some time now. What do you think might be making them more willing to sell — or even to actually go ahead and do a deal? Are they seeking an exit? Are valuations looking more attractive? Any thoughts you could share there.

Sure, I think there are lots of different motivations for founders to sell their businesses, Kevin. You've got backers who've been invested for a while and want to realize part of their stake. Then there are some younger entrepreneurs who want to take a bit of cash off the table, since they launched the company at an early age, and they're aiming to move it into fresh hands and stay involved as it keeps expanding and rolls over into a different entity, with everyone working jointly on that. I believe that's largely what we're observing out there. Within our sector, you find clinicians who work part-time, begin developing a specific project, install management teams, then bring in outside investors and run the operation, but once it reaches a certain stage they recognize that further commercialization requires folding it into a newer entity. Those appear to be the main drivers behind the situations we see. Yes, and I think behind the scenes, with a number of these companies, there are some investors who'd simply prefer to cash out a portion of their holdings.

You know, that's just part of the whole thing.

Understood. Now, on the metrics: we had a strong ARR contribution in Q1. I realize we're just one month into Q2, so could you describe what you're observing and how we should think about modeling ARR for Q2? Given the broader macro uncertainty that has been affecting enterprise software in general, are you noticing any effects on the sales cycle — perhaps in deal counts or deal sizes?

We still see deals out there that we're doing, and the pipeline remains pretty healthy. Getting these things across the finish line can sometimes be challenging, just given the complications that come along with them. We continue to see slowness in our SHREWD product line in the U.K., mainly driven by both the integrations of those markets and the slight pause occurring in some of these initiatives while the FDP situation gets sorted out there with that contract in that marketplace. Those are a bit of headwinds coming at us on that front. Those are somewhat offset by tailwinds we're getting through our referral management systems, primarily Novari, but we're also beginning to see some fairly interesting Strata business in the U.K. marketplace as well. That's kind of heading it off. Overall, the business is positive. It's just that one product line, SHREWD, which gives me angst given the things going through there. Our hope is that it gets offset by the other stuff. Once these ICBs get integrated and hopefully that FDP thing is behind us, I think the opportunity is there for SHREWD to grow again and prosper again.

We’ll simply have to wait and observe how all of that unfolds over the next short period.