Earnings call transcript: HealWell AI sees revenue surge in Q4 2024

HealWell AI (HWAI) reported a significant increase in its financial performance for the fourth quarter of 2024. The company achieved a 692% year-over-year rise in revenue, amounting to $15.2 million for the quarter. Despite an adjusted EBITDA loss of $16 million for the year, the company improved its gross margin to 44% from 17% in 2023. The stock price of HealWell AI (AIDX) saw a modest increase of 2.5% following the earnings announcement, reflecting positive investor sentiment. According to InvestingPro data, the company’s stock has delivered an impressive 68.42% return over the past year, and analysis suggests the stock is currently undervalued.

Key Takeaways

• HealWell AI’s annual revenue soared by 692% to $39 million in 2024.
• The company developed four new AI co-pilots targeting various diseases.
• Strategic acquisitions and partnerships with major pharmaceutical companies bolstered its market position.
• HealWell AI’s stock increased by 2.5% post-earnings.

Company Performance

HealWell AI demonstrated robust growth in 2024, with annual revenues reaching $39 million, a substantial increase from the previous year. The company’s strategic focus on AI-driven healthcare solutions and partnerships with leading pharmaceutical companies contributed to this growth. The healthcare AI market’s expansion and demand for innovative solutions were key drivers behind HealWell AI’s impressive performance.

Financial Highlights

• Revenue: $39 million in 2024, up 692% from 2023.
• Q4 2024 revenue: $15.2 million, a 692% increase from Q4 2023.
• Gross profit: $17 million in 2024, a 1,317% increase from 2023.
• Gross margin: Improved to 44% from 17% in 2023.
• Adjusted EBITDA loss: $16 million in 2024, compared to $8 million in 2023.

Outlook & Guidance

HealWell AI projects significant growth in 2025, with expectations to double AI & Data Science revenue to approximately $9.2 million. The company also anticipates its Healthcare Software segment to approach $100 million, and Clinical Research to increase by 50% to around $30 million. HealWell AI aims to achieve positive EBITDA in 2025, continuing its disciplined capital allocation and strategic M&A strategy.

Executive Commentary

"We have the necessary building blocks in place to successfully plant our flag as a leader in healthcare AI," stated Dr. Alexander Dobrinowski, CEO. He emphasized the company’s focus on increasing revenue from each Master Service Agreement partner. CFO Anthony Lam added, "We will be generating positive EBITDA for the year," highlighting the company’s financial goals for 2025.

Risks and Challenges

• Integration of acquisitions: Successfully integrating acquisitions like Orion Health is crucial for sustaining growth.
• Market competition: The healthcare AI sector is competitive, requiring continuous innovation to maintain a leading position.
• Economic conditions: Macro-economic factors could impact customer spending and investment in AI solutions.
• Regulatory changes: Changes in healthcare regulations could affect the company’s operations and market access.

Q&A

During the earnings call, analysts inquired about potential revenue synergies with Orion Health and the impact of macroeconomic conditions on customer discussions. The company confirmed no adverse macro impacts and highlighted the growing subscription-based model for its AI services. Additionally, the potential of the "Buy Canadian" healthcare initiative was discussed, emphasizing its importance for HealWell AI’s strategic positioning.

Full transcript - Healwell Al Inc (AIDX) Q4 2024:

Conference Operator: Thank you for joining Huvo AI’s Fourth Quarter and Year End twenty twenty four Financial Results Conference Call. All participants are in listen only mode and the call is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. I will now turn the call over to Mr. Paz Sangha, Investor Relations at Culver.

Please go ahead.

Paz Sangha, Investor Relations, HealWell AI: Thank you, operator. Hello, everyone. Joining me on the call today are Doctor. Alexander Dobrinowski, CEO of ULL and Anthony Lam, the company’s CFO. I trust that everyone has received a copy of our financial results press release that was issued earlier today.

Listeners are also encouraged to download a copy of our quarterly financial statements and MD and A and analysis once they are filed on SEDAR Plus. Please note portions of today’s call other than historical performance include statements of forward looking statement information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws. Please refer to today’s press release and to our management discussion and analysis for more details on the company’s risks and forward looking statements. We provide forward looking statements solely for the purpose of providing information about management’s current expectations and plans relating to the future.

We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward looking statements to reflect any change in our expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based, except if it is required by law. We use terms such as gross margin and adjusted EBITDA on this conference call, which are non IFRS and non GAAP measures. For more information on how we define this term, please refer to the definition set out in our management discussion and analysis. And with that, let me turn the call over to Doctor. Alexander Dobridovsky, CEO.

Dr. Alexander Dobrinowski, CEO, HealWell AI: Thank you, Pav. We truly appreciate everyone for joining us today for our Q4 and year end twenty twenty four conference call. As we close out 2024, it’s incredible to reflect on what a transformative year it’s been for HealWell AI. Just a little over a year since our launch, we have made significant strides in building what is now a leading healthcare software and artificial intelligence company. The progress we’ve achieved in such a short time is truly remarkable.

I’m pleased to announce that during the fourth quarter, we delivered another record quarter with revenue of $15,200,000 an increase of 692% compared to Q4 last year, and we achieved record gross profit of $7,000,000 an increase of 1179% compared to the same time last year. This outstanding performance is attributable to our acquisitions and the growth in the commercialization activities of our AI and data science solutions. As a reminder, in October 2023, when Hugh Will first debuted, our annual revenue run rate was just over $7,000,000 Thanks to our successful acquisitions, strong business development efforts and strategic partnerships, we grew our revenue to $38,900,000 in the full year for 2024. During 2024, we made four strategic acquisitions IntraHealth, BioPharma, Verisource and Mutuo, And we announced the game changing acquisition of Orion Health in December 2024, which is expected to close on 04/01/2025. We are very excited about the Orion Health acquisition.

Orion Health is a global powerhouse in health data infrastructure and its robust SaaS recurring revenue model and strong profitability is expected to propel HealWell to a new level. Orion Health will significantly boost our revenues generating over $100,000,000 in top line revenue annually and it immediately makes HealWell an EBITDA positive company. Although we have now completed five financings to date and we are closing in on the completion of our sixth acquisition since the launch of HealWell in October 2023, HealWell is now positioned as one of the fastest growing healthcare AI companies globally and we still view this as the beginning stages of our journey. We’re still in the early innings. Every milestone we reach today serves as a foundation for our long term vision of transforming preventative care through the early identification and detection of disease.

A sincere thank you to our partners, investors and most importantly, our team for making this incredible year possible. Before I hand the call over to Anthony, our CFO, I’d like to continue today’s call by providing some commentary on four key topics: one, the Orion Health acquisition two, our capital allocation strategy three, the increasing commercialization activities of our AI solutions and four, the current buy Canadian sentiment. First, I’d like to spend a moment to discuss Orion Health. And as we look ahead, we’re excited to share that we are in the very final stages of completing the acquisition of Orion Health as planned on April 1, just six days away. We feel this acquisition will transform the foundation of HealWell.

Orion Health will significantly enhance our capabilities, accelerate our growth, help us achieve EBITDA profitability and positions us to deliver even greater value to our partners, but now as a company with global operations. Orion Health is an innovative healthcare technology company specializing in advanced data analytics and health data interoperability solutions. Orion’s powerful software offerings, the Amadeus and Virtuoso platforms, are designed to optimize clinical workflows, improve patient outcomes and drive operational efficiencies, making it a valuable partner for healthcare organizations across various sectors. Now, with an impressive over 70 commercial stakeholders worldwide that touch more than 150,000,000 patient lives, Orion Health is a global leader in health data infrastructure. Backed by a robust SaaS recurring revenue model and strong profitability, Orion Health is well positioned to propel HealWell to new heights, driving innovation and efficiency across the healthcare ecosystem.

Plus, as I already highlighted, it immediately makes HealWell an EBITDA positive company. Orion Health has demonstrated strong financial performance with a rapidly growing revenue stream driven by its innovative technology and expanding customer base. The company has consistently shown an upward trajectory in its financials with increasing demand for its analytic driven solutions in the healthcare industry. Orion Health’s robust business model and scalable platform have positioned it for continued growth. In addition, Orion Health has established a strong commercial footprint across multiple healthcare sectors, including stakeholders from both public and private sectors.

The company has a growing presence in key markets, including Canada, The UK, New Zealand and Saudi Arabia to name a few and continues to expand its reach with a solid pipeline of new business opportunities. The acquisition of Orion Health presents numerous synergies for HealWell’s existing operations, namely through combining Orion Health’s strengths in healthcare technology with our expertise in AI driven analytics and advanced clinical decision support. By integrating HealWell’s artificial intelligence capabilities with Orion Health’s comprehensive healthcare solutions, we will create an even more powerful offering that drives efficiencies and improves patient outcomes. The combined entity will be able to deliver data centric solutions positioning HealWell as a leader in preventative care. The synergies between HealWell and Orion will not only enhance our market position, but also accelerate our growth, enabling us to achieve our revenue and profitability objectives.

Our 2025 revenue will be boosted by the Orion Health acquisition, and we expect Orion Health to positively contribute to our financial results starting in Q2 twenty twenty five, adding approximately $25,000,000 in top line revenue per quarter. The second topic I want to discuss is our capital allocation strategy. Our acquisition pipeline remains robust, positioning us for substantial growth in 2025. At HealWell, we are looking at numerous compelling opportunities that fall into two synergistic categories. First, healthcare AI and data science companies that expand our current capabilities and are focused on early disease detection across all clinical domains.

And the second category are mature operating companies with strong financial profiles that would be vertically integrated with our AI technologies to drive incremental revenue. Healthcare software companies, also digital health companies are good examples. I’ll now unpack some of the commercialization activities of our AI solutions. As we continue to expand our AI capabilities at HealWell, we are building a platform that can help screen and identify patients at risk for rare, complex and chronic diseases. This platform will support clinical decision making across all clinical domains, embodying our vision of advanced clinical decision support.

As we acquire and build out these capabilities, it’s vitally important to build trust with physicians and healthcare providers for the adoption and effective integration of AI clinical support tools. Physicians rely on accurate, dependable information to make life impacting decisions and the success of any AI system in clinical settings depends on its credibility and reliability. Now further to this, our AI technologies have been unlocking tremendous value for the life sciences industry by accelerating their R and D efforts for therapeutic development. Our multi tiered offering includes scientific research, patient identification and recruitment, AI powered data analytics, real world evidence generation and clinical trials orchestration services. On the commercialization front, we’ve been focused on bringing practical high impact solutions to our partners and clients.

We’ve developed and launched four AI co pilots for deployment across our partner clinical networks. These co pilots are the Rare Disease Detection Co pilot, the Chronic Kidney Disease Detection Co pilot, the oncology detection co pilot and the cardiovascular disease detection co pilot. Our co pilots are designed to help healthcare providers detect high risk patients for hundreds of diseases, including complex, chronic and rare conditions and ultimately and most importantly, help to materially improve patient outcomes. In 2024, HealWell’s ’2 artificial intelligence and data science subsidiaries, Pentavir Research and Cure Health, saw significant growth in the number of master service agreements signed, reflecting the increasing demand for their AI driven solutions in the healthcare sector. On a combined basis, both of these two subsidiaries had a total of 30 signed MSAs with life sciences partners at the end of Q4 twenty twenty four, which includes seven of the top 10 largest pharmaceutical companies globally.

This is in comparison to 12 cumulative signed MSAs that were executed by the end of Q4 twenty twenty three. I’m also proud to share that HealWell also generated AI and data science revenue from ’20 ’3 pharmaceutical ’24 compared to eight pharmaceutical or life sciences customers in Q4 twenty twenty three. Last year’s focus was on increasing the number of MSAs signed. In 2025, our focus will be on increasing revenue from each MSA partner. We are also thrilled to once again highlight the exceptional team at Pentavir, led by Aaron Liptag and Steve Aviv for receiving the prestigious Pre Gallion USA ’20 ’20 ’4 Award for Best Digital Health Start Up in recognition of their impactful contributions to artificial intelligence and life sciences.

This honor validates the significant advancements of Pentavir’s Darwin AI platform, making it one of the leading healthcare artificial intelligence platforms globally that ultimately is making healthcare more accessible and personalized for patients. This level of validation establishes HealWell as an industry leader in healthcare AI and is further demonstrated by our recent success in the commercialization of AI driven patient identification solutions and services. This impressive progress achieved in a relatively short timeframe underscores our commitment to driving value for our life sciences customers in artificial intelligence. Now I’d like to quickly spend a few moments to provide some additional color on the Canadian opportunity. We believe the growing momentum behind the Buy Canadian initiative presents a significant opportunity for Heal Wall to expand its role in Canada’s Healthcare ecosystem.

With provinces now prioritizing Canadian suppliers in response to U. S. Tariffs, demand for homegrown healthcare solutions is rising. HEWEL is uniquely positioned to support this shift by providing advanced, made in Canada health technology solutions. Healwell is already integrated into healthcare systems across multiple provinces.

All of our AI and healthcare software solutions are serving healthcare needs across the country, including Pentavir, CureHealth, Mutual, IntraHealth and VeroSource. Healwell’s Canadian presence is further boosted with the addition of Orion Health, who is the leader in provincial health information exchange platforms supporting integrated health information access in a number of provinces and territories across Canada. The company is also at the forefront of the Digital Front Door solutions partnering with the governments of Ontario and Newfoundland and Labrador to enhance care access for 16,500,000 Canadians. As governments seek to strengthen domestic healthcare infrastructure, Healworld’s expertise in health information exchange, AI powered solutions and digital health platforms will play a key role in shaping the future of healthcare delivery across the country. Increased government engagement at both the provincial and federal levels further reinforces HealWell’s strategic position.

Policymakers are actively looking to reduce reliance on foreign healthcare technology, creating new opportunities for public sector partnerships. I’d like to now turn it over to our CFO, Anthony, who will review the financial results for the fourth quarter of twenty twenty four.

Anthony Lam, CFO, HealWell AI: Thank you, Alex. Before I begin, I would like to remind everyone that all of the figures I will be discussing today are in Canadian dollars and our financial statements are presented in accordance with IFRS International Financial Reporting Standards. I will now go over the financial highlights for fiscal twenty twenty four. As Alex has articulated, 2024 was a transformational year for HealWell. It was a year to redefine the company from its clinical roots to a leading healthcare software and artificial intelligence company.

As I go through our results today, I will be making reference to financial figures that have been provided in our press release today. Please note that these results are from our continuing operations, which excludes clinic operations sold to Well and the sale of executive medical concierge with MCI Polyclinic. Heal Well achieved annual revenues of approximately $39,000,000 during fiscal twenty twenty four, compared to $7,300,000 generated during 2023. Revenue from continuing operations was positively impacted by the acquisitions of Pedavir, Interhealth, Verisource, BioPharma and Mutual. In addition, our earliest AI enabled business, CureHealth, saw substantial growth since its debut with HealWell in October 2023.

HealWell achieved gross profit of $17,000,000 in 2024. This compares to $1,200,000 during 2023, driven largely by the contributions from the business units added in the past year. HeyOL’s gross margin percentage in 2024 was 44% compared to 17% in 2023. Gross margin in the year is reflective of the revenue mix profile that HeyOL has evolved into, with just over 50% of the company’s revenue coming from AI, data science and healthcare software. Revenue mix from these newly acquired businesses business units positively influenced the overall gross margin profile as these carry more higher margin profiles than clinical business units.

During 2024, HealWell reported an adjusted EBITDA loss of $16,000,000 compared to an adjusted EBITDA loss of $8,000,000 in 2023. Much of the increased adjusted EBITDA loss in 2024 is reflective of the investments the company has made in raising investor awareness to Heol and its mission, costs associated with the fundraising activity in the year and transaction costs related to the acquisitions made. Many of these costs are not anticipated to be incurred in the to the same degree as we look forward to 2025. Our fourth quarter twenty twenty four results are as follows. Huwel achieved quarterly revenues of $15,200,000 during Q4 twenty twenty four compared to revenue of $1,920,000 generated during Q4 twenty twenty three, an increase of 692%.

Revenue growth was primarily driven by the acquisitions made in the past year. Here well achieved gross profit of $7,000,000 in Q4 twenty twenty four compared to $500,000 during Q4 twenty twenty three. The increase is mainly driven again by higher revenues from acquisitions. Healwell’s gross margin percentage in Q4 twenty twenty four was approximately 46% compared to 28% in Q4 of twenty twenty three, driven by higher gross margin businesses like InterHealth and Verisource. During Q4 twenty twenty four, Healwell reported an adjusted EBITDA loss of $5,500,000 dollars compared to an adjusted EBITDA loss of $1,500,000 in Q4 twenty twenty three due to expenditures in our AI subsidiaries, investments in scaling the business and higher IR and awareness campaign initiatives.

Kiowa reported $11,810,000 in net loss for Q4 twenty twenty four and this compares to a loss of $6,800,000 in Q4 twenty twenty three. I will now provide an update on our cash and debt position. We ended the quarter on 12/31/2024 with $9,400,000 of cash. Cash declined by $5,800,000 at the end of Q4 twenty twenty four compared to $15,240,000 at the end of Q3 twenty twenty four, largely due to investments made in the business. Subsequent to the quarter end, HELO completed a $25,500,000 bought deal equity financing, a $30,000,000 convertible debt financing and signed a $50,000,000 credit agreement led by Scotiabank and RBC.

While the majority of these funds will be used to close the Orion acquisition, these sources of cash will add valuable liquidity for other parts of the business. I want to spend a few minutes now talking about the revenue segments. The company generates revenue in three distinct segments: one, AI and Data Science two, healthcare software and three, clinical research and patient services. The first is AI and data science, which is anchored in the integration of cutting edge artificial intelligence technologies with the healthcare landscape through technology enabled rare and chronic disease screening from its Pentavir and Cure Health divisions. Leveraging cutting edge AI algorithms and advanced analytics, HealWell analyzes extensive clinical datasets to extract invaluable insights.

These insights are then transformed into actionable recommendations, empowering physicians with early disease detection capabilities. This proactive approach optimizes the patient care pathway ensuring swift and accurate diagnosis and treatment. Our AI and Data Science segment achieved revenue of $1,900,000 in Q4 of twenty twenty four, an impressive 3646% revenue growth in this quarter as compared to Q4 of twenty twenty three. Our AI and Data Science division serves a clientele of life sciences, pharmaceutical, medical device and precision medicine companies. While this revenue segment comprises 12% of our revenue in 2024, it contributed gross margin of just under 60% in the year.

The second revenue segment is healthcare software revenue provided by IntraHealth and enterprise grade EHR platform, Verisource and end to end customizable cloud based healthcare data interoperability platform and soon Orion Health, a scalable AI powered healthcare analytics and automation platform. This segment generated $4,900,000 in revenue in Q4, a significant increase from zero revenue in the same quarter of last year. Our Healthcare Software division serves a clientele of public sector healthcare systems, healthcare providers, hospitals and clinics. Going forward, the Healthcare Software segment is expected to generate gross margins of approximately 55% to 60% and is expected to be over 70% of the company’s total revenue. The third revenue segment of Clinical Research and Patient Services consists of clinical research delivered by biopharma services and Canada Phase onward.

Clinical Research revenues are contract based revenues. This segment operates on a per visit or project basis and has a track record of positive EBITDA. It also caters to diverse clientele including government reimbursement, health insurance reimbursement and life science research sectors. This sector generated $8,400,000 in revenue in Q4 of twenty twenty four, an increase of 351% as compared to 1,900,000 in Q4 of twenty twenty three. This segment comprises under 50% of the company’s total revenue for 2024 with a gross margin profile between 3035%.

In the near term, we are expecting clinical research and patient services revenue to be softer in the first half of twenty twenty five with a return to growth in the back half of the year. With the Orion Health acquisition, healthcare software will become the largest segment representing close to 70% of our full year revenue. And in addition, we are expecting the transition from early stage clinical research to more profitable later stage clinical research opportunities. Biopharma will be undertaking the strategic initiative to launching and managing late stage clinical trial sites with well health clinic locations across Canada. Late stage clinical trial capabilities and revenue will provide a higher gross margin profile that aligns with our vision for a more profitable and impactful business model.

We anticipate the business expanding from generating revenue from primarily through early stage and bioequivalence trials to adding more later stage patient trials capabilities across our partner network with GOL Health. We believe that these strategic changes will lead to a more robust and profitable biopharma business over the long run. In summary, I’m pleased to report that HealWell’s outlook is bright. It’s in a strong financial position and has capital to fund future acquisitions and execute on organic growth initiatives. I will now turn the call back over to Alex.

Dr. Alexander Dobrinowski, CEO, HealWell AI: Thank you, Anthony. I’d like to share some insights on our goals now for the year 2025. Now, we are seeing unprecedented opportunities in healthcare data science and artificial intelligence and our advanced AI co pilot technology is really at the forefront of this evolution. Our commitment to enhancing healthcare delivery through innovative technology remains unwavering, and we are poised to capitalize on these opportunities to drive substantial value for our stakeholders. Our goals for 2025 are as follows: one, integration of Orion Health with the rest of the HealWell business two, continue to execute on our M and A strategy.

The company’s growth is underpinned by our continued focus on accretive and disciplined capital allocation three, accelerating organic growth by ramping up physician adoption of the HealWell platform four, deepening our integration and broadening our reach within the Well Health ecosystem and five, leverage our Canadian footprint to take advantage of buy Canadian opportunities in healthcare. Overall, our focus is firmly on sustainable growth and delivering impactful results for our stakeholders, patients and the broader healthcare community. We have an extremely positive outlook based on our organic growth profile and our M and A strategy. Now in closing, I want to reiterate that HealWell is a healthcare artificial intelligence company that has proven results, signed MSAs from 30 life sciences companies, including seven of the top 10 pharma companies largest pharma companies globally. The pending Orion Health acquisition, which is expected to close on April 1, boosts HealWell’s revenue by approximately $25,000,000 per quarter and turns the company into an EBITDA positive business.

The WellHealth relationship accelerates our growth with exclusive access to providers across North America. M and A will continue to play a significant role at Huvo going forward, including Orion Health we will have completed to date six key transactions. We believe that we have the necessary building blocks in place to successfully plant our flag as a leader in healthcare AI, not just in Canada, but also from a global perspective. Finally, I’d like to thank the entire team at HealWell, our executive team, our BU business unit leaders, whose hard work continues to elevate the company to higher levels. I’d like to thank our investment banking partners.

I’d like to thank our Chairman, Hamid Shebazi and the leadership team at Well Health. Plus, I would like to thank my Board of Directors. And also, I’d like to thank you all for joining today on the call and I look forward to providing an update next quarter. I’ll now hand it back to the operator. Thank you.

Conference Operator: We will now begin the analyst question and answer session. First question comes from Gianluca Tucci with Tableau Securities. Please go ahead.

Gianluca Tucci, Analyst, Tableau Securities: Hi, good afternoon guys. Congrats on all the recent progress. Alex, maybe I’ll start off on the AI data science bucket, good sequential growth in that business line. I think you mentioned ’29 pharma customers in the fourth quarter. Could you walk us through what the blue sky opportunity is within your existing pharma customer base on the AI side of things?

It sounds like there’s a lot of low hanging fruit there.

Dr. Alexander Dobrinowski, CEO, HealWell AI: Yes. Gianluca, thank you so much. Thanks for the question. Particularly with the life sciences industry, I think we’ve started now to develop a pedigree and some credibility of being able to deliver value and what they’re looking for. So I think one of our first indicators that we were sharing is, okay, we’re able to actually start signing up these companies to become commercial partners.

And as we mentioned, right, we have a total of 30 right now MSAs in place with our pharma partners. And then the next phase here is to deliver on these initiating commercial partnerships within the expectation that they’ll increase in quantum and size as our relationship strengthens with each individual pharma customer. So that’s kind of how you can think of the stages of growth here as we deliver in this particular segment of our business.

Gianluca Tucci, Analyst, Tableau Securities: That’s great color. Thanks, Alex. And then just secondly on Orion, very exciting time for you guys. Can you speak to the organic revenue synergies that you identified thus far in your work together and your time together and some things we could look forward to from a growth perspective this year on the whole as a combined entity?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Yes, sure. So, Gianluca, I think one of the driving strategic points of rationale to embark on this acquisition of Orion Health is what can we really do in combination when we actually combine the technology we have, right? So as we’ve highlighted under our AI and data science banner, particularly under Pentavir II, we have globally validated AI capabilities. And Orion Health has now built a global platform of being able to work with large public and private healthcare stakeholders and use their software from a data interoperability perspective to unlock massive amounts of insights. So now we’re thinking, well, if we put these together, what can we do going forward?

And what’s interesting, Gianluca, is the commercial stakeholders that Orion Health works with today, they’re looking now for additional innovation, additional capabilities, right, to level up the insights that Orion is able to produce. So some of the initiating synergies we’re working on is embedding the Pentavir, the CureHealth technology in their Orion Health footprint and being able to bring their current customers a more robust offering. So that’s where you’ll see quite a bit of focus, Gianluca, going forward in the coming quarters.

Paz Sangha, Investor Relations, HealWell AI: Very

Gianluca Tucci, Analyst, Tableau Securities: exciting, Alex. And just one final question for Anthony. As you integrate Orion, I’m assuming that your gross margin profile will strengthen. Could you provide some targets or either like run rate target on the gross margin side as a combined entity that we could point to down the road?

Anthony Lam, CFO, HealWell AI: Yes, it’s a great question Gianluca. I think we finished the year really strong with 46% in the last quarter, 44% for the full year. I think with Orion in the mix on a full year basis, as we look at 2025, I think you can expect us to be in that 50% range on a combined entity basis.

Gianluca Tucci, Analyst, Tableau Securities: Okay. Thank you guys. Congrats again.

Dr. Alexander Dobrinowski, CEO, HealWell AI: Yes. Thanks Gianluca.

Conference Operator: The next question comes from Alan Clay with Maxim Group. Please go ahead.

Alan Clay, Analyst, Maxim Group: Yes. Hi. Could you just give us what the current share count is and pro form a cash and debt taking into account everything related to Orion? Thank you.

Dr. Alexander Dobrinowski, CEO, HealWell AI: Thanks, Alan. Alan, if we may, we’ll circle back with those precise numbers for you.

Alan Clay, Analyst, Maxim Group: Okay. And then on the can you talk a little more on your on the clinical trial business of how you’re progressing towards moving towards later stage trials?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Sure. Alan, would love to. And this is an important strategic initiative for the company. So one of the rationale of us acquiring BioPharma, which is inherently and by reputation and pedigree, a very early stage oriented contract research organization is to use it as an anchor to then over time to be able to unlock value from the CRO space in general, but more focused from also pairing the capabilities of biopharma with the well health footprint and what we can do from a clinical research perspective together. So over time, Alan, what we’re doing is we’re going to be reorienting biopharma.

And as we’ve press released recently, right, we went through some optimization efforts. We’re going to be reorienting biopharma to be focused not just on bioequivalency and Phase one trials, but also over time late phase trials as we partner and build that partnership with the Well Health Clinic ecosystem. So you’ll see us communicate progress here in the coming quarters.

Alan Clay, Analyst, Maxim Group: Okay. Thank you very

Dr. Alexander Dobrinowski, CEO, HealWell AI: much. Thank you, Alan.

Conference Operator: The next question comes from Michael Freeman with Raymond James. Please go ahead.

Michael Freeman, Analyst, Raymond James: Hey, good afternoon, Alex, Anthony, Pava. Congratulations on a big year and very glad to be covering you guys. So my first question is probably for Anthony. I guess everyone’s wondering about what the company is going to look like after the close of the Orion deal. I’ve heard in previous quarters you described organic growth rate expectations for each segment.

And I wonder if you could take a crack at providing those for the organization pro form a Orion?

Anthony Lam, CFO, HealWell AI: Yes, absolutely. And thanks for the question. I think, yes, if we look at our three business revenue segments here, I think we’re very excited about what we’re seeing in our AN Data Science group, finished with $4,600,000 on the year. You can expect that number to double in 2025. It might even do a little bit better than that.

From a healthcare software perspective, we surpassed $15,000,000 dollars with the addition of Orion. I think we’re going to be approaching $100,000,000 We’ve got three, four quarters of their contribution with the existing contribution we have there. I think we can expect us to be approaching $100,000,000 level from that segment. And then from our clinical research and patient services, we finished just under $20,000,000 this year and I think a 50% increase in that number is something that we could expect to see in 2025. Excellent.

Thanks. Is that helpful? Yes.

Michael Freeman, Analyst, Raymond James: That was super helpful. That’s very precise. I wonder now thinking about operating expenses, how are you thinking about G and A, S and M and R and D margins pro form a

Anthony Lam, CFO, HealWell AI: Orion? Yes. No, it’s another great question. As I touched on earlier, I think our gross profit margins, you can expect us to be approaching a 50% level on a blended full company basis for the full year. And I think the best way to think about our expense structure moving ahead is to look at our footprint in Q4 of this year and that’s a bit of a proxy of what our baseline business will run.

I think if you take Adel Ryan at a very similar kind of mix, I think that would be something that you could use as a guideline for our cost structure for next year.

Michael Freeman, Analyst, Raymond James: Okay. So the margin, the margins of each is are unlikely to change while the dollar amounts will?

Anthony Lam, CFO, HealWell AI: That’s correct. I think the one thing to highlight here though, and part of the quite a bit of money on our IR awareness programs last year. We spent north of $6,500,000 I think that you can expect that to curtail quite a bit. We’re going to probably only spend the 15% of that in the current year. We spent a bunch of cash on fundraising.

I think the fundraising activity, while we’ll have we have one here for the Orion deal. At the moment, I would say that we won’t have as many of those transactions in the next year. And the focus this year, I would say, there likely will be the odd acquisition, but there won’t be as many as as we would have had in 2024. So some of those kind of costs that go into G and A won’t be repeating to the same degree. Got it.

Okay. Very helpful. If I could shoehorn one more in here. And speaking of M and A,

Michael Freeman, Analyst, Raymond James: I recall that the relationship with Orion began with a partnership with Well and then concluded with your acquisition of the company. Now I’m looking across KeyOL’s set of investments. I see a few international partners that might be interesting for your platform. I guess, I’m wondering, you described the categories, the buckets of M and A that you typically focus on. I’m curious, I guess, the what the sort of geographies and sort of types of companies you might be hungry for given the current profile of the company going forward?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Yes. So thanks, Michael. And as we’ve discussed and I highlighted right that now the capabilities under HealWell post the acquisition of Orion become really, really both credible globally and extremely strong right to serve the stakeholders that we serve today. And look, this opens up a whole gamut of opportunity. So we’re still going to keep the focus on both developing and acquiring inorganically, right, further capabilities to help bolster our AI patient identification and risk stratification capabilities.

So that’s kind of one bucket we’re going to continue to focus on. And now with the expanded platform and footprint of Orion, we’re looking at additional synergistic potential acquisitions right beneath the footprint of a number of the jurisdictions where Orion Health operates. So there should be some exciting updates we’ll be able to come back to you on. But really, Michael, a big focus of ours is the synergy we have here between the AI capabilities we have today and the Orion Health platform and footprint. So there will be a lot of focus there and we’ll look forward to sharing some excitements as we go forward some exciting news, sorry, as we go forward.

Michael Freeman, Analyst, Raymond James: Terrific. Thanks very much. I’ll pass the call here.

Conference Operator: The next question comes from Gabriel Leung with Beacon Securities. Please go ahead.

Michael Freeman, Analyst, Raymond James: Good afternoon and thanks for taking my questions. Just a couple of things. Honestly, Orion hasn’t closed yet, but Alex, are you able to talk to us a little bit about the sales funnel there? Specifically, are the deals that they’re working on, are they mostly with new or existing customers? Can you talk about size of some of the opportunities they’re working on?

Has any sort of decision making on the customer end been pushed to the right because of what’s been happening from a macro perspective? Any insights you can offer there would be helpful.

Dr. Alexander Dobrinowski, CEO, HealWell AI: Sure. Yes. Gabe, thanks so much for the question. And of course, we’ll come back and highlight some of the points you’re asking for post closing of the acquisition. But Orion Health has had tremendous success in a number of different jurisdictions and geographies.

And as they’ve executed and continued to add strength in terms of depth and features to the platforms that they support, right? They’ve been able to actually continue to win both growth with a current customer base and also new customer wins, right? And some of the expectation and I’m dovetailing from one of the previous answers is that, as we now layer in our artificial intelligence capabilities, that’s just going to accelerate what they’re able to do with both current customers and then of course to acquire new customers. Independently of the HealWell synergies, right, Orion Health has a very robust pipeline. And a lot of the customer base, right, these are public sector customers that are signing on for multi year contracts, right, with very low credit risk and these customers are looking for more, effectively asking what can we do with all the population health data that’s being captured.

So Orion is working hard to kind of answer those questions with adding more value and part of that is with embedding the AI capabilities from HealWell.

Michael Freeman, Analyst, Raymond James: That actually leads to my second question then. So when we think about Orion and Huwalls technology integrated together, does that ultimately increase the ASP on deals that are going through the Orion Health funnel? Or do you anticipate they’ll be more beneficial for you for HealWell’s AI dataset bucket just in terms of the data you’re going to be collecting and to support your pharmaceutical MSAs? I’m just trying to determine what side is going to grow faster from based on the integrated entity?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Gabe, that’s a question where the answer is actually fairly sophisticated, but the simple view is both, right? There’s going to be through the embedding of some of our technology into the Orion Health platform, right, they’re going to be able to go back and serve their current customers, right, with more and thus be able to charge them more. And then the Orion Health platform and footprint is so large, right? Like we’re talking about there’s over 150,000,000 lives that they touch, right? That’s a very exciting opportunity when we look to unlock that clinical footprint right from a data insights perspective.

So you’re going to see growth on both sides, Gabe, and I’ll we’ll come back to you more as we kind of move along on this strategy.

Michael Freeman, Analyst, Raymond James: Got you. And then just as I think about M and A this year and next and beyond, Can you talk a little bit about what sort of leverage ratios you’re comfortable with over the near term in support of the business?

Anthony Lam, CFO, HealWell AI: Yes. Gabe, I would say the Orion deal was a unique one here for us where we actually took on some debt to get this one done. I think moving ahead, we won’t we would if we were looking at acquisitions, we would likely not add to the debt to the current debt that we have to so really try to focus on really bringing down that leverage ratio from where we are right

Michael Freeman, Analyst, Raymond James: now. And then just one last thing. Now I know you guys talked about some integration or restructuring work, I guess, what you’re doing within HealWell right now to get you that $3,000,000 of incremental EBITDA. But as I think about Orion coming in closing shortly, is there a lot of work that still needs to be done from an integration perspective? Maybe asked another way, do you expect more incremental EBITDA to be generated within Orion during this integration process beyond the 20% EBITDA margins that you’ve talked about?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Yes. So Gabe, there are a few moving parts, right, as we look to optimize both organizations and there are some cost synergies. So look, we’re likely going to be in a position to demonstrate some improvement on the EBITDA guidance that we’ve provided before. But stay tuned to that as we kind of roll up our sleeves and get this work done. Yes.

Maybe to add

Anthony Lam, CFO, HealWell AI: to that, I think the opportunity with Orion actually for us is more on the revenue synergy side. And so any lift on from an EBITDA margin percentage there is more likely to come from the revenue synergies that we’re going to generate more so than the more so than cost synergies.

Michael Freeman, Analyst, Raymond James: Got you. I appreciate that. Thanks a lot for the feedback.

Conference Operator: The next question comes from Justin Keyword with Stifel.

Alan Clay, Analyst, Maxim Group: Just with the current macro backdrop, the tariff uncertainty, is this impacting any of the discussions with customers and your pharmaceutical partners? Or is it relatively sheltered? Or if you have any additional commentary around that?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Yes. So Justin, the answer is no. There’s no impact that we’re seeing or at the moment that we’re concerned about. If anything, it’s driven, as I mentioned, during the earnings call, right, that there’s a sentiment for a more of a focus at the provincial and federal level to be buying Canadian capabilities and tooling. So we’re actually anticipating a benefit actually, Justin.

Alan Clay, Analyst, Maxim Group: And that by Canada, are we able to quantify in any particular way that opportunity, revenue or new customers potentially?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Well, look, the Canadian government, both at the provincial and federal level, right, spends quite a lot on healthcare technologies, etcetera. So as we learn more about this shift in sentiment, right, we’ll probably be able to come back with a little bit more precision of what we think that opportunity is, but we’re anticipating for it to be material.

Alan Clay, Analyst, Maxim Group: Understood. And then finally, just on the pace of M and A, obviously 2024 was very active and there is the digesting of Orion and it sounds like some significant synergies to be had there. But does the pipeline remain active and should we expect additional M and A in 2025?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Yes. So Justin, the pipeline definitely remains active, right? A big strategic initiative of the company has been disciplined capital allocation. And in our space right now, whether you’re looking at healthcare, artificial intelligence or mature operating healthcare software or digital health companies, there’s quite a lot of opportunity. So we’re constantly evaluating those opportunities.

But one thing for certain, right, we’re only going to move forward with those opportunities that are strategically and financially accretive.

Alan Clay, Analyst, Maxim Group: Great. Thanks for taking my call.

Conference Operator: The next question comes from Georges Yilobishev with Clarus Securities.

Paz Sangha, Investor Relations, HealWell AI: With regards to the cost optimization initiatives, if we were to take that $3,000,000 in cost savings that you guys talked about into account, what kind of EBITDA margins are you guys expecting or targeting to achieve this year, including the Ryan Health acquisition?

Anthony Lam, CFO, HealWell AI: Great question, George. I would say, look, we’re going to be generating positive EBITDA for the year. I would say that the margins will be in the single digit level in terms of percentage, but we will be generating positive EBITDA.

Paz Sangha, Investor Relations, HealWell AI: Got it, got it.

Anthony Lam, CFO, HealWell AI: Thanks for

Paz Sangha, Investor Relations, HealWell AI: that, Anthony. And just on the MSA contracts, you guys previously talked about a shift towards a subscription based model for AI services with the life sciences partners. Can you give us a sense of what percentage of your core AI contracts are now structured as recurring revenue versus onetime engagements? And also, is that mainly coming from Pentavir? Or are you seeing some kind of adoption from CURE as well?

Dr. Alexander Dobrinowski, CEO, HealWell AI: Yes. George, thanks for the question. We’re looking at approaching nearly 25% of our pharma relationships, right, which are now active from a subscription perspective. And that is largely under the Pentavir banner. They’ve created a very quite a groundbreaking product that looks like it’s resonating with our pharma partners.

And also under the Care Health banner, right, there is quite a bit of experimentation of seeing, okay, is there an appetite for there certainly is. So stay tuned and we’ll have more of an update there as well.

Paz Sangha, Investor Relations, HealWell AI: Got it. Got it. Okay. That’s it from me. Thanks, Alex.

Dr. Alexander Dobrinowski, CEO, HealWell AI: Thanks, George.

Conference Operator: This concludes the question and answer session. I will now turn the call back over to Doctor. Alexander Droznanowski for closing remarks. Please go ahead.

Dr. Alexander Dobrinowski, CEO, HealWell AI: Thank you, operator. And in closing, I wanted to thank everyone once again for joining our call today. Thank you to the analysts for their questions. Everyone, please stay safe and healthy, and we’re looking forward to providing more updates in the near future. Thank you.

Conference Operator: This brings to close today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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