Vitalhub Corp. (VHI) Earnings Call Transcript

Hello, and good morning to all of you. We appreciate you being with us on this conference call for the second quarter of 2026. Joining me today are Dan Matlow, Vitalhub's CEO, and Brian Goffenberg, our CFO. Once we've finished our prepared comments, the lines will be opened so analysts can ask their questions. <<operator_script>>. Prior to starting, I'll go through our cautionary note about forward-looking information. Some of the information we'll discuss on this call includes forward-looking statements, which carry risks and uncertainties. Outcomes that actually occur could differ materially from what those statements describe. To review these risks and uncertainties, we ask that you look at the forward-looking statements disclosure contained in the earnings press release as well as in our SEDAR filings. In addition, adjusted financial measures, which are non-IFRS measures, will be part of our commentary today. These ought to be viewed as a supplement to IFRS measures, not a replacement for them. You can find reconciliations of the 2 in our SEDAR filings. Having said that, I'll turn things over to Brian, who will walk through the quarter's financial highlights. Brian, the floor is yours.

Thanks, Christian. Morning, everyone, and thanks for being on the call today. We're happy to share our results for the second quarter of 2026. This quarter, Vitalhub hit a fresh milestone by surpassing $100 million in annual recurring revenue. We ended June at $101.5 million, which works out to 10% organic growth compared with the prior year. Our adjusted EBITDA margin kept climbing sequentially, reaching 26% in the second quarter. Here are some of the main financial highlights for the quarter: total revenue came in at $31.7 million, up 33% year-over-year. Recurring revenue — that's our term License Maintenance and Support segment — was $24.5 million, or 77% of total revenue. Virtual Care term license revenue was $2.3 million. Perpetual license revenue was $800,000. Services, Hardware and other revenue was $4.1 million, versus $2.7 million in the same period last year. Gross margin was 79% of revenue, compared with 81% in the prior year period. Adjusted EBITDA for the quarter was $8.2 million, or 26% of revenues, as we keep capturing synergies from the induction and vary acquisitions, compared with $6.3 million, or 26% of revenue, in the prior year period. We finished the quarter with $136.5 million in cash and investments and no debt.

Cash conversion was robust in this quarter. Our cash balance rose by more than $15 million during the quarter, helped by collection activity and ongoing platform integration. After the quarter closed, we finished acquiring Body Healthcare. Following that transaction, we still have more than $120 million of gas available to put toward our M&A strategy. Also, including Buddy Healthcare, pro forma ARR as of June 30, 2026, would have come to roughly $106 million. With that, I'd like to pass the call to Dan for a business update.

Thank you all, and good to be with you today. Reflecting on it, reaching more than $100 million in recurring revenue is genuinely exciting, and I know our team and our staff share that feeling. We're truly thrilled about it. I believe when we launched this 8, 9 years ago, that stood as a goal, and now we've hit it. So that's another item checked off the bucket list, and we'll keep pushing ahead. Just a few words on the Buddy acquisition before I turn to some of the other topics. We're very enthusiastic about it. It's a company we've held conversations with for 4 years. Their technology is quite robust. They're a team that has brought it into the U.K. But it provides us with a really solid digital backdoor solution. So we already have a very strong digital front door offering through SD that is progressing across our markets. And our customers kept telling us it's great that you can get us into the hospital, into the setting, but what happens once we leave — we want to keep communicating with you. So our intention is to integrate that back-end capability with our solution. It also dovetails nicely with the Strata solution, which handles the discharge process.

We can now stay in touch with patients throughout the discharge process. So once the technology is fully integrated and so on, we anticipate that will be a solid enhancement to how we cross-sell. So strong people, excellent technologies, and we're eager to bring that element in. Regarding the quarter, on the numbers, you'll notice recurring recognized recurring growth services revenue is a bit below prior quarters, yet it still shows that. Nailing services revenue at 100% is always difficult. I believe we had a $5 million quarter, a couple of quarters back, and here it arrives in ebbs and flows purely depending on revenue recognition and the way that is delivered to the customer. So we're pleased with that. And we were pleased with how virtual care, our renewal process, came through — roughly 85% to 9% of that Attend Anywhere renewal process lands at the end of March. And as you can see, the AR held up quite firmly for that. So we're pleased with those results. Revenue contribution came from really every one of our products, but mostly from the Care Coordination products, the Strata and the Novare product.

Novare is beginning to make its way across Canada. What has us genuinely enthusiastic, though, is the traction it's starting to build somewhat in our U.K. marketplaces—and a bit in other markets too. It's a distinctive offering, and we're eager about it and believe there's a strong chance for it to succeed in that regard. That revenue figure was offset by ongoing difficulties with our share product and the FCC—meaning the system control centers—together with the FDP and the Palantir-based solutions, as well as the mergers and acquisitions. So some customers, I'd say, paused their usage during the quarter while awaiting how the FDP and Palantir situation plays out—just to bring everyone up to speed. The NHS holds a national contract for Palantir. However, that contract contains a break clause in Q1 of 2027, and it sits right at the parliamentary level, and the signals indicate that product is going to be removed. And hopefully that keeps the momentum going for us on that food product through the U.K. marketplaces. On top of that, we still have renewals coming in. So those are just a few of our cases. In other cases, customers are renewing.

It really hinges on the ICD and which approach you take. So things are somewhat in flux right now, and we're continuing to work on it. Even so, we're seeing a very solid pipeline across the rest of our solutions and we still anticipate carrying on with our organic growth profile. We've brought AI products into the marketplaces. There's the protocoling solution — it began within the Novare product, and we're now starting to extend it into other products, and we're beginning to see some revenue streams come from that. And we're quite excited about our transcription solutions for our community services base work. We've been at that for roughly a couple of quarters, and it's now in customers' hands for ratification, and we expect it to begin contributing to revenue streams, hopefully by the end of this year, but certainly as we go into next year. We expect that to keep moving forward on that path. We're getting near to fully integrating Novare into the induction transaction. And as you can see, our thesis for both of those 2 large acquisitions has come to fruition — our adjusted EBIT is back to 26%. And we're generating some pretty good cash flow.

Looking back roughly six quarters, I believe we were producing around $5 million in adjusted EBITDA, and now we're above $8 million, with our aim being to keep that growing. That has always been the core thesis for this company. So I realize many people have questions, saying, "Hey, can you —" referring to when we made those two acquisitions. At the time of each, both were losing money, and we've been able to integrate them. They're generating new organic revenue and contributing to the bottom line quite well. So we're pleased with what we achieved there, and we're still working at it, but it's moving toward visibility as we try to bring that figure back up to the high 20s, where we are now. I'd also like to discuss the NCIB. I know that as we've gone through and met with investors, people have raised that topic. We have implemented it. We do believe our financial results keep getting better. The stock, to some extent, has remained flat. We think it represents good value for us to — with plenty of cash — begin considering repurchasing our own shares.

So we made the decision to provide support to get that in place, and we expect to use it as we watch how the stock is reflected and so on. So we do have it in place, and we're working to do that. We keep working on M&A deals. There are some large things we're looking at and some small things, but activity still seems to be there in that marketplace. And we continue to go, and we do expect to do more M&A through 2026 and forward. But yes, we're happy where we are as a company. We're making money. We're growing. We're adding customers. We've got lots of cash for M&A, and we think we're in a good position. And I think we continue to improve our business model, and we're happy with what we've accomplished here. And any questions?

<<operator_script>>. Our initial question today is from Gavin Fairweather at ATB Cormark.

Perhaps just following up on your U.K. referral point, Dan—I believe you said there have been some notable marquee wins over there in that market, which is excellent. I'm curious whether you've managed to identify any referral funding envelopes, or whether this is instead being drawn from general budgets. Do you see a chance for this to turn into a more strategic priority at the NHS level, with some larger funding attached to it?

Yeah, I really do believe the NHS, much like other organizations, is certainly trying to integrate and accomplish a lot of various things. I think if you were to look at the — many of the parliamentary-based approaches and the things the NHS is integrating into social care as well as into after care and rehab facilities have become a significant issue, and we anticipate that will assist with the state-based solutions for doing so. We understand from observing other markets across the globe that for all is an essential element of this, and we know that the NHS in the U.K. lags behind compared with other parts of the world, Canada being among those particular markets, and we can see the responses to — if we reach the right people about what the solution's power accomplishes and how it can automate some of those tasks. So it's similar to everything else in our market when trying to build momentum, and we closed our first deal roughly 6, 8 months back, and that has gone live, and the natural processes referrals don't necessarily remain in 1 region and across other regions, of course, the 2 regions adjacent to this region have observed what this 1 region is doing.

Naturally, those other two regions have now shown interest, and we're exploring closing some deals with them. So we're beginning to observe the behavior we're after in the test for those referral based products. And our sales force is pretty focused on referral about marketplace. And we are seeing available money for this. The business case is very easily justified for it.

That's excellent, thanks for that. And moving to body, I've come across descriptions of Finnish healthcare as being fairly digitally mature. I'm curious which products you'd point to as possibly having greenfield opportunities there, in places where competition isn't especially heavy?

Yes, I believe their structure resembles that of regional base groups, and once again they've linked regions quite effectively. We see potential for referral-driven project products inside the Scandinavian marketplaces, in our view. Opportunities also exist for the touch-based suite of products in those same marketplaces. So those are the ones we'd mainly concentrate on. That said, yes, similar markets, and Car Group has fairly solid connections there. The Buddy product has done some work in Germany as well, which is interesting, and they've done some work in that marketplace. Again, the largest area where we see real opportunities would be the Canadian and the U.K. marketplaces. So those are the areas we've focused on. Canada still lags behind on digital backdoor-based solutions, and this is a fairly comprehensive one — the U.K. is definitely behind on digital back door solutions. They've really concentrated on the front door. So we believe we have a solution that can help fill that gap and build momentum.

Great. Last thing from me on the Antero Health deal. Could you talk about what it contributed to ARR growth this quarter? And how would you characterize — how far along are you on ARR relative to the original scope of that deal?

I believe it's clear that this is contributing roughly 500,000 to 1 million each quarter, and we anticipate that will keep ramping up over the next couple of years or so.

Our following question is from Doug Taylor at National Bank. Doug, you can go ahead now.

Yes. Thanks. I'd like to dig a bit deeper into the U.K. market. Clearly, growth there has been flat, with some pluses and minuses. So my question is this: given the effect of Shred and some of the pause you mentioned, is that reflected in net ARR growth? And have you grown past it by cross-selling in other areas? And maybe you could help us put a number on that.

Yes, we certainly saw some AR reduction during the quarter related to certain shred work, though other products in that same marketplace have offset it. So the net figure is what we've arrived at here. I don't have the precise numbers right at my fingertips, Doug. But yes, some of that has indeed been happening.

So the thought is that if there's some kind of resolution to the situation involving Palantir, then part of that could bounce back in your financials next year.

That's our hope. Each customer—honestly, we have two distinct situations playing out here. First, we have these new ICDs that have been formed. So these specific groups are filled with entirely new people. And in some of them, funding hasn't been properly arranged. So they're basically saying, hold on, there's a renewal sitting here, what's the story with that. And then we have FTP. We're simply going to pause for a couple of quarters while we figure out what's happening. Then we'll revisit the whole thing—it's not as though they're placing FDP into all of these locations. They're just telling us this one has to be suspended for now. In other cases, they're simply proceeding as business as usual and renewing their contracts. So we're hoping to have that resolved over the next couple of quarters. Even when the contracts are new, we still believe there's an opportunity to keep going. And if it doesn't get renewed, we're genuinely excited about that, because we keep growing—but that's a scenario we're dealing with at the moment.

All right, that's useful. On to the next question: you walked us through the integration work, and for the induction of Ivaris it's essentially finished or nearly there. You can see EBITDA margins at 26% here, and as you noted, that has been executed well. So my question is this — since EBITDA margins were higher previously, is there anything in how the portfolio is positioned today, or structurally, that would keep you from pushing EBITDA further upward from this point?

Well, theoretically, each $1 million of ARR—provided we don't incur additional costs—translates to a point of adjusted EBITDA, correct? And on the other side, some reductions remain unfinished. There's still work ongoing that keeps pushing it along, right? So the organic growth from new deals—not only does it lift new deals, it also flows through to the bottom line. So we keep advancing on both of those fronts to fine-tune those things, but we keep working our way through it.

To sum up, the cost transformation effort is mostly complete, though additional...

We still have more to do, but we’ve already made a sizable dent.

Thanks, Doug. We’ll take the next question from Paul Treiber at RBC Securities.

Dan, now that the company has crossed $100 million in ARR, how do you view the pace and the forces behind organic growth going forward? What I'm getting at is, does it become less a matter of point solutions—individual point solutions and their growth—and more perhaps about the wider platform and cross-selling? And how are you—how are you kind of repositioning the organization's selling approach to keep organic growth going as a bigger company?

Yes, I believe that's a fair point, Paul. So, the patient care coordination platform, as we'd frame it, is essentially the blend of ZEST strata <<inaudible>> in touch along with MedCer. We've put effort into bringing those products together across separate environments. And on top of that, we're layering AI capability into many of those foundational offerings. That said, we're in the process of shifting our sales organization toward a regional model, equipping it with the fullest product suite and combining everything into holistic solutions. We're already witnessing that out in the market — customers are requesting that these pieces be connected. So simply through osmosis, you land the customer, and that customer already owns 2 or 3 of those solutions. They've come to us saying, "Hey, let's make these work together," so we engage with them in the field. We get it integrated, and from there we begin connecting into additional areas. Then we keep layering on further base products. So we're heading in that direction with our patient flow suite of foundational solutions, and we're beginning to see it pay off in the field. As for the larger ticket items and the more complex ones — the Strata and Novare based implementations — yes, we're starting to see some genuinely strong proposals going out for those products, carrying high ticket values and high numbers attached to them.

So those core products should serve as the primary driver behind our organic growth, in our view. We're still seeing activity around our treat-based product center and the community services product set. That caseworks product has been successfully brought into Australia, and in those marketplaces we're enjoying really strong results with it too. And we keep working on those approaches. But really, that's the way we see it.

Good to hear that. For my second question, on the Healthcare side of the business: now that the management team is in place and you have a footprint in the region, does that give you greater visibility and open up other acquisition possibilities across the Nordics? And how would you characterize the M&A opportunity in the Nordics relative to other regions?

We have put some effort into that area. A few additional scenarios are known to us. And the CEO mentioned one more to me just 1 yesterday. So indeed, your question has largely been addressed. Once again, our acquisition targets, in many instances, are businesses we know quite well, since we operate in the same markets and would either compete with them or complement them across many different situations. Therefore, whenever we move into a new marketplace, we gain expertise about that market, how its ecosystem functions, where the gaps are in relation to it, which organizations fill those gaps, and what those organizations do. So we will certainly explore the Nordics marketplace. It is quite an interesting marketplace. Among the Scandinavian countries, it is very similar to our other government-funded groups. So we will keep exploring, and we will keep examining it. But yes, that is a byproduct of entering another region: intelligence about that region, how its health care ecosystems are structured, and who the players are in those areas. So we continue to work with it, and you see who has come over from Buddy—very excited about the opportunity.

He was interested in bringing his stock over to our company, and he's done that, and he's eager to support us in the Aus Nordics regions, and that's a positive thing.

Michael Freeman from Raymond James has the next question.