Earnings call transcript: Valhi Inc Q4 2024 misses EPS forecast

Valhi Inc reported its earnings for the fourth quarter of 2024, revealing a significant miss on earnings per share (EPS) forecasts. The company posted an EPS of $0.17, falling short of the anticipated $0.60. Despite the earnings miss, the stock price saw a modest increase of 2.49% in after-hours trading, closing at $16.89. Revenue for the quarter was reported at $453 million, contributing to the company’s impressive 9.53% year-over-year revenue growth. According to InvestingPro data, Valhi maintains strong liquidity with a current ratio of 2.26, indicating robust short-term financial health. The stock’s recent trading activity shows a slight decline, with a 0.41% decrease at the latest close.

Key Takeaways

• Valhi’s EPS of $0.17 fell short of the $0.60 forecast.
• After-hours trading saw a 2.49% increase in stock price.
• Q4 revenue reached $453 million, with no comparative forecast available.
• Valhi’s stock price remains near its 52-week low.
• The company emphasizes AI and healthcare IT innovations.

Company Performance

Valhi Inc’s performance in the fourth quarter of 2024 highlighted its ongoing challenges and opportunities in the healthcare IT sector. The company achieved record revenues of $20.6 million for the quarter, marking a 51% increase year-over-year. Annual Recurring Revenue (ARR) reached $71.1 million, a 59% rise compared to the previous year, underscoring strong growth in recurring revenue streams.

Financial Highlights

• Revenue: $20.6 million, up 51% year-over-year
• ARR: $71.1 million, a 59% increase year-over-year
• Adjusted EBITDA: $5 million, representing 25% of total revenue
• Cash on hand: $56.6 million
• Completed $34.5 million in board deal financing post-quarter

Market Reaction

Despite missing EPS forecasts, Valhi’s stock price increased by 2.49% in after-hours trading, reaching $16.89. The stock’s recent performance reflects investor optimism about the company’s strategic direction and market opportunities, particularly in AI and healthcare IT. While the stock remains in the lower range of its 52-week high of $41.75 and low of $14.13, InvestingPro analysis suggests the stock is currently undervalued, with an attractive P/E ratio of 4.54 and a 39-year track record of consistent dividend payments. For more insights on undervalued opportunities, visit our Most Undervalued Stocks list.

Outlook & Guidance

Valhi is targeting organic ARR growth between $0.8 million and $1.5 million. The company plans to continue its merger and acquisition strategy, with $90 million available for strategic acquisitions. With current EBITDA of $277.6 million and a healthy financial position, the company appears well-positioned for its growth initiatives. Future revenue forecasts for FY2025 and FY2026 are set at $2.18 billion and $2.22 billion, respectively. Get access to more detailed financial metrics and 12+ additional ProTips for Valhi through InvestingPro’s comprehensive research reports.

Executive Commentary

CEO Dan Matlow emphasized the company’s commitment to long-term growth, stating, "We believe in our model, and we believe in it for the long term with ups and downs." Matlow also highlighted the importance of comprehensive solutions, noting, "The more solutions we can get, the more comprehensive we can talk to those customers."

Risks and Challenges

• Potential impacts from NHS structural changes.
• Competition from established healthcare IT providers like Epic and Cerner.
• Macroeconomic pressures affecting healthcare budgets.
• Integration challenges with recent acquisitions.
• Maintaining growth momentum in a competitive market.

Q&A

During the earnings call, analysts focused on Valhi’s AI integration and market opportunities in Canada. Questions also addressed the company’s cautious stance on NHS changes and its ongoing acquisition strategy.

Full transcript - Valhi Inc (VHI) Q4 2024:

Christian, Moderator/Operator, VitalHub: Hi, good morning everyone. And thank you for joining us today for our twenty twenty four Fourth Quarter Conference Call. With me on the call today are VitalHub’s CEO, Dan Matlow and CFO, Brian Gothenburg. After our prepared remarks, we will open up the line to questions from analysts. Please press star one or use the raise hand function to indicate that you would like to ask a question.

Before we begin, I will read our cautionary note regarding forward looking information. Certain information to be discussed during this call contains forward looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, please review the forward looking statements disclosure in the earnings press release as well as in our SEDAR filings. As well, our commentary today will include adjusted financial measures, which are non IFRS measures.

These should be considered as a supplement to and not a substitute for IFRS measures. Reconciliations between the two can be found in our SEDAR filings. With that, I’ll hand the call over to our CFO, Brian Gothenburg, to go over financial highlights for the quarter. Over to you, Brian.

Brian Gothenburg, CFO, VitalHub: Thanks, Christian. Good morning, everyone, and thank you for joining the call today. We are pleased to report the results for the fourth quarter and full year of 2024. The fourth quarter was a record for us for the first time achieving over $20,000,000 in revenues, over $5,000,000 in adjusted EBITDA and organic ARR growth of $2,600,000 dollars Our progress over the full year reflects the success of our two pronged growth strategy to deliver organic and acquisition growth. On an organic basis, we grew the annual recurring revenue by 15% in 2024.

As well, we closed four acquisitions in the year, growing our annual recurring revenue base to over $70,000,000 We are well positioned and well capitalized to continue on this growth strategy. In a moment, Dan will provide commentary around the business and the outlook. First, I’m excited to share with you the financial milestones we achieved in the quarter. Detailed full year results and support can be found in our SEDAR filings. For today’s call, I will go over select highlights from our fourth quarter.

Our annual recurring revenue was $71,100,000 to close the year, an increase of 59% over the prior year. In the fourth quarter, total revenue was $20,600,000 an increase of 51% year over year. Recurring revenue or term license maintenance and support segment comprised $17,170,000 or 86% of total revenue. This compared to $11,300,000 or 83% in the prior year period. Perpetual license revenue was $100,000 in the quarter, a decrease from $300,000 in the prior quarter.

Our services, hardware and other revenue was 2,900,000 in the quarter, an increase of 42% year over year. Our gross margin was 81% of revenue as compared to 83% in the prior period. Moving down the income statement, net income before taxes was $200,000 compared to $2,000,000 in the prior year period. With two acquisitions closing in the fourth quarter, we recognized $2,600,000 of business acquisition restructuring and integration charges as compared to only $300,000 in the prior year period. Adjusted EBITDA for the quarter was $5,000,000 or 25% of revenue compared to $4,000,000 or 29% in the prior year period.

Turning to our balance sheet. As of 12/31/2024, we had cash on hand of $56,600,000 Subsequent to UN, we completed a board deal financing for total gross proceeds of approximately $34,500,000 We have no debt currently and recently expanded our borrowing capacity to $65,000,000 This in combination with our strong cash generation, which gives us significant financial flexibility for growth in 2025. With that, I’d like to hand the call over to Dan for an update on the business.

Dan Matlow, CEO, VitalHub: Good morning, everybody. I’ll try to give everyone a little bit of outlook and commentary on the quarter and then turn it over some questions and and hopefully fill some of the gaps that the entire people might have. I just wanna recap what our strategy is. I know we’re we’re starting to get some newer people starting to look at the story and and have done some lot of investigative work. But just as a reminder of our approach, we’re we’re a health care IT software company, primarily focused on single payer based systems, which is outside of Canada, UK, Australia, and The Mideast are our primary areas where we market products.

And we’re have a two pronged approach of acquisitions, as well as M and A with a very, high powered synergistic based model that is really geared to organic growth and some really good cost rationalization in the strategy. And really what 2024 was in my opinion was just again more definition and concrete awareness of what the model can do and what the ability of what the model can do. And it was a good proof of what our model was. I think the real important thing for 02/2024 from my perspective, although, you know, the results were were great, was really internally within the company. I think the awareness of what the potential of our model do and really the synergistic approach internally of the staff and the excitement of our staff of what our model is and, how effective it it can be and really the understanding of what this can be, from a growth perspective.

So that was something exciting and it’s something that might not be visible to the investor approach, but definitely visible internally with the company and we’re excited what that was about. The fourth quarter, yeah, was record ARR and really, it came again from multiple base sources in Canada. The treat continues to add customers and the service back the services backlog is still really, really high for that product in terms of delivering, those solutions to our customer base. The province in Nova Scotia still keeps kicking on in terms of adding users, and we started to see some increase from the Strata based business in the Canadian market. The nice part about Strata is it it continues to grow.

As new pathways become available and as new new areas of use come built, we start extending that solution and that leads to increased ARR. And we’re starting to see some synergistic approach of Strata with our treat client, in terms of doing referrals in the community agencies and the mental health. And a lot of our bigger clients, have started to approach us as using Strata as their solution as as opposed to alternative solutions in the marketplace that could be out there such as Ocean, etcetera. So we’re excited that we are, you know, bringing in some new life into that community agency for the the strata based product that’s out there. In The UK, it continues to move along.

Shrewd definitely continues to add stuff. We’re starting to see some impact from the InTouch again. It was a little bit quiet over the last year. It did work, but we’re starting to see some increase work in that area. And the Oriel product and the HiComm continues to add users on a regular basis.

And all of this is leading to increased ARR. We continue to work on cost rationalizations. Our Sri Lankan team is up to close to 200 employees. We’ve started the work in getting the Sri Lankan group primarily working on the strata based solutions. There’s AI initiatives that are in place that that we are working through in terms of add on solutions that we hope to introduce into the product, you know, over the next year.

And we’re we’re hoping that that starts increasing revenue as well as we continue to grow. We’re comfortable in terms of where our ARR figures and we continue to move along. Typically, the Q1 is somewhat of a strong quarter for us. You never know, but we like some of the activity that continues to work on as government year ends, keep moving through there. On the acquisition side, we got lots in play.

As the awareness keeps pushing, the more acquisitions that start coming to us is starting to increase and our pipeline is continuing to grow. We do have $90,000,000 that we’re sitting on in cash and we’re looking to deploy that as effectively as we can, making the right decisions in terms of solutions that we think add value and are synergistic to our approach that we can increase our organic growth in terms of a strategy of how these things fit together from a cohesive narrative. We’re proud of what we did in 02/2024. It’s hard it’s already February, so it’s hard to think of that. And we’re well into q two planning in our company, but it is a good time to reflect on what we have accomplished in 2024.

And we look forward to 2025 and continuing to perform in the same way that we have before. And happy to turn it over to any questions that anyone might have.

Christian, Moderator/Operator, VitalHub: Thanks, Dan. We’ll now open up the line to questions from analysts. Today’s first question comes from Gavin Fairweather of Cormark Securities. Gavin, your line is open.

Gavin Fairweather, Analyst, Cormark Securities: Hey. Good morning. Thanks for taking my questions and congrats on the strong numbers. Maybe just to dig a little bit deeper on kind of Strata and MedCurrent. I know a big part of the investment thesis there was kind of plugging those products into your sales team to accelerate growth.

Maybe we can discuss where we are in in that process and and to the extent that you’re seeing pipeline increasing post acquisition on those deals.

Dan Matlow, CEO, VitalHub: You know, still still early days. We we just got it three months ago, but, midcurrent continues to evolve. There’s, there there’s there’s a lot of activity going on in The UK from it. It’s sort of that team there is just, you know, continues to plot along. They were plotting along before, we’ve had some things that we’re going through there and they’re you know, they’ve added, they keep adding deals and continue to add deals on a regular basis, and we continue to move forward there.

We haven’t really done much in terms of technology integration or things like that with the lab yet. It’s a pretty tight small group, and it’s really, you know, it’s really set up to organically to continue to make money even though without many changes to it. So but we are introduced that to our UK Team, into our Australian teams, and they’re they’re getting equipped to build leads with that in the Canadian team as well. So, you know, things are done. Strata, yeah, we it’s definitely, a lot more synergistic than MedCURRENT is, although MedCURRENT is as well.

But Strata has really hits the bull’s eye in terms of what we do. And, you know, we’re we’re seeing a lot of activity and we expect a lot of activity in the referral business, not just across all of our geographies where we expect that. That’s a big issue, with health care in terms of integrating all the disparate patient pathways. So it’s a it’s an issue that’s there, and and Strata has a really good solution that, we think will really do better with how we market and how we integrate it to some of our ideas. So we are are seeing, you know, definitely an uptake in The UK pretty extensively and and, and we are seeing a lot of activity in the Canadian marketplace with our treat customers, especially on the large size, which are looking for, you know, pathways and referrals into their organizations where they take referrals.

So if you can think of all the referrals that get referred into mental health and community agencies and and the size of what our installed base fees for a treat product. And, we already started working on a treat integration with Strata before. So that’s being polished up and it’s, you know, it’s ready to go. So, you know, that’s really what what’s going on with those two products.

Gavin Fairweather, Analyst, Cormark Securities: Appreciate that color. And one thing that stands out in your 2024 results is just how efficient you are in turning your sales and marketing spending in into ARR organic growth. Curious if you’re seeing any opportunities across your your regions to add a bit more sales investment, and and generate, you know, even higher ARR bookings?

Dan Matlow, CEO, VitalHub: Yeah. We’re, you know, we’re adding, a few new people into it and and really, a focus of 02/2025 is to beef up the operational expertise of our of our sales team. As you can appreciate, we’re we’re a bunch of small companies that have salespeople and have used, approaches before that have made them successful. We we feel that we can get our sales then and our customer success people to the next level by increasing a little bit more structure and investing in in tools to automate those processes and and really, you know, trying to put our Salesforce system on steroids and and or other marketing systems on, on higher, you know, higher value prop. So, we’re gonna have an emphasis in terms of of what we can do from productivity tools to really get our sales force up there.

There could be some capital expenditures that go with that or some operational costs as we invest in those tools. But I don’t anticipate it’s a large increase in in headcount. It’s more efficiencies in in how do we mine these accounts more effectively in a in a scientific process. So that that’s a little bit of emphasis. It’s gonna start going into 02/2025, into the organization.

Gavin Fairweather, Analyst, Cormark Securities: Got it. And then lastly for me in in The UK, saw the news recently that the NHS England is kinda folding into the Department of Health. Curious for your take on, you know, how that could influence ARR bookings in in the near term or the longer term, you know, if you’re seeing anything in in q one and and how the the team feels about that that structural shift, over the next little while.

Dan Matlow, CEO, VitalHub: Yeah. It it’s concerning in in a in a little bit of ways and exciting in in other ways. And I really think the concerning part part it really comes from the unknown factor of where this is gonna sit. We haven’t seen any impact of it yet, and we’re not sure we will see any impact negatively or positively, but it’s the unknown that’s really there. What we do know is our systems are used and and they’re happy and and there’s interest from all levels of government to digitize their or, you know, the NHS in in a more efficient manner, and, we’re right at the center of it.

And, you know, when we speak to our customers and we speak to the people, they keep stressing that message across to us, and, and they keep saying, hey. It’s they don’t think that this part is is gonna be impacted. But, yeah, we really don’t know that answer as of the ad of where it goes, and you always get concerned when there’s change going on. But, we think overall that change will be positive, in terms of the focus of this, of how digitization works and so forth. But, it will take time for that change to work through the system, and we expect them to be still investing in systems, you know, during that process.

But, you know, no one’s a % sure how this will all go, and we’ll just have to keep monitoring it and and and keep going from our organization. You know, the good part is we got a huge install base and and most of a big chunk of our sales are add on sales to those particular groups, and it’s not new initiatives and it’s usually a lot of the time. So, we expect those add ons add on sales to continue for sure.

Gavin Fairweather, Analyst, Cormark Securities: Appreciate it. Thanks a lot. I’ll pass the line.

Christian, Moderator/Operator, VitalHub: Thanks, Gavin. The next question comes from Doug Taylor with Canaccord Genuity. Doug, your line is open.

Doug Taylor, Analyst, Canaccord Genuity: Yeah, thanks. Good morning. And I’ll echo the congratulations on a strong finish to Q4 and to 2024. It sounds like top line synergies from La Strata and MedCURRENT, or La Strata at least, are already starting to show through. The margins also for the business overall held in pretty well despite, you know, the two acquisitions in that quarter being to my knowledge, at least starting below VitalHub’s corporate average.

So, you know, maybe I’ll get you to speak to the integration steps and stage you’re in now with the benefit of a couple, you know, more months behind you and the considerations as we try to map the linearity of any margin compression and then the subsequent expansion that was anticipated for the year?

Dan Matlow, CEO, VitalHub: Yeah. We knew exactly what we were going to do with MedCord and Strat and we moved pretty quickly to get some changes. And the two organizations came in with pipeline already that we knew was looking to close. So, you know, we knew that when we did it and those deals did happen from, you know, what they said would happen. So, you know, that was you know, a good part of why we we did some, you know, good ARR for the quarter.

And, you know, will that continue? I don’t know. But, you know, both those organizations have solutions that are in demand and, you know, they they continue to add value. You know, we we still had worked on the cost rationalization to do in in the company outside of Strata, and and, you know, that continued to happen and still continues to happen. You know, we’ve, we we’ve looked at the organization and have done some, more combinations, especially in The UK, to get some cost effective effectiveness going, and and we continue to move stuff into, into, you know, Sri Lanka.

So, you know, that’s that’s really where where that’s going. We haven’t done, you know, much cost synergistic stuff on both Strata and Midgarth. There’s some stuff that has happened for sure, and, you can see that in the restructuring and and so forth that that was put to that quarter. So, yeah, I don’t know if that helps to answer your question. I think, you know, we were we were 25%, in Q4 versus ’28, but 25% of a bigger number is a bigger number and it’s still pretty good.

I think we can get this thing back to 28% again, and that’s what we’re trying to do here.

Doug Taylor, Analyst, Canaccord Genuity: So let me maybe to put a a finer point on that, you you said you’re expecting typically strong seasonality in Q1 as it relates to ARR build, and, you know, we’re only a couple days from the end of the quarter. And based on what you you just said, I mean, should we be expecting as you as we get MedCURRENT and STRATA for a full quarter here in Q1 for there to be any EBITDA margin compression from the 25% level? Or do you I mean, do you see that as a as a good place to start the run rate with these acquisitions in the fold?

Brian Gothenburg, CFO, VitalHub: Probably a good place to start, I think.

Dan Matlow, CEO, VitalHub: What’s that, Brian?

Brian Gothenburg, CFO, VitalHub: So probably a good place to start. You always get some additional costs with any acquisition. There’s IT things as we move over, some infrastructure costs and adjustments to compensation and stuff like that. And then as we get more synergies, you’ll start seeing the margin, I think, compressing as we go forward throughout the year.

Doug Taylor, Analyst, Canaccord Genuity: Expanding. Yeah. I think you mean. Yeah.

Brian Gothenburg, CFO, VitalHub: Okay. Yeah.

Doug Taylor, Analyst, Canaccord Genuity: Well, I mean, you’ve been able to move quickly. That’s that’s great to see. One last question, you know, for me. You’re you’re pretty explicit in, you know, both the press release and your comments you’ve made here so far about the your ability to keep up the pace of M and A after closing last year with a couple of, you know, medium sized deals. You say there’s a lot at play.

I mean, have valuation expectations shifted in your favor here as well? Or is there something else that’s giving you confidence to make the statement that you’re gonna be able to keep up this pace?

Dan Matlow, CEO, VitalHub: I just think it’s a deal flow. Right? You know, there’s, yeah, there’s some deals that are value compression that are a little that are distressed out there that are somewhat attractive to us just based on the ARR and and the ability to to take those companies and potentially turn them around, scenarios that that are out there. And, you know, on the bigger side, I don’t think there, you know, there yeah, there’s some reduction probably than the past, but it all just depends on the asset and the competitive nature of the bid really, Doug, that drives us. I think on the bigger acquisitions, there’s, not as much, you know, reduction.

We’re not seeing it a good a good asset is a good asset. But on the smaller side, there’s some struggling, there’s some struggling companies out there where we’re we’re seeing that we can, you know, we we can, take things over, and it might, you know, and it might be some work in progress, but at the end result, you know, we can make some good money at those things. So, we’re seeing it on both sides.

Doug Taylor, Analyst, Canaccord Genuity: Okay. I’ll pass the line. Thanks.

Christian, Moderator/Operator, VitalHub: Thanks, Doug. The next question comes from Simon Rana of TD Securities. Simon, your line is now open.

Simon Rana, Analyst, TD Securities: Good morning, Antwan. Congrats on the strong Q4 numbers. So, first of all, my question is on how much activity, Dan, do you think has moved to Sri Lanka with respect to the Strata and Medcrant acquisitions? And what do you think is still planned or in the works there?

Dan Matlow, CEO, VitalHub: It takes time to move things over there. And and, you know, we we had, we we’ve started to ramp up people in, in Sri Lanka for Strata, and there was, the Strata team was over, to Sri Lanka in q one. And and I think they’ve got projects that are are kicking off there. And, you know, we’re we’re starting to kick off projects to get move things and get expertise moved over there. So, yeah, that’s that’s all started to happen.

You know, MedCern already runs a very, small development group. The IP in that company isn’t the tech, although the tech is very good. And it is it is still pretty comprehensive, but, it’s really in the, the clinical aspect of that product that, is the driver to that solution. And, you know, the it it’s already a very cost effective based organization that just needed to get its sales up and and get that 80% margin, ARR, into the business to start getting the the returns that we want. So in that group, we’re just we’re just being patient and waiting for that pipeline, which it seems to continue to add and is getting closer to our rule of 40.

So when we get our our companies and we do that, we we always look at what is it gonna take to get it to the rule of 40 and and put a plan in place to get it, and we start executing on it. It doesn’t necessarily happen, day one, but we look for an approach to get it there within, you know, three to four quarters for sure. And we’re we’re on our way with those two organizations.

Simon Rana, Analyst, TD Securities: Understood. So earlier on in your commentary, you you talked about Strata and, and bigger clients starting to take a look at that. I’m just wondering, like, what do you think is differentiating Strata versus other solutions out there versus OceanMD?

Dan Matlow, CEO, VitalHub: They cross paths in some places, but really, they got their own separate rails. Ocean is a physician referral system, so it goes from a physician out. Strata is is more of an enterprise based system where it works from the acute care from the hospital out to the community. So it goes inward out where, you know, something like ocean would go, you know, outward in to the acute care or or they also go, you know, clinician to clinician. I think clinician to clinician is really where their sweet spot is.

And we’re really more geared to a larger enterprise based system. So they do interfere in some places. But, yeah, I think they’re, they got their own lanes that they they run-in.

Simon Rana, Analyst, TD Securities: Understood. And, have you seen any material changes in the sales environment lately because of, like, due to the ongoing macro challenges, like, the potential headwinds we could see from the tariff slash trade war, are you seeing any sales cycles lengthening?

Dan Matlow, CEO, VitalHub: I don’t the tariffs don’t affect our industry at all. Right? You’re talking about health care, and I don’t think government you know, I don’t think there’s anything The US can really do to affect our internal health care systems in UK, Canada, Australia or The Mideast, and we’re none of that affects us at all.

Simon Rana, Analyst, TD Securities: Okay. Just one last question for me. So given your sequential organic ARR growth was again really solid, it’s been in the $1,000,000 to $2,600,000 range for the last two years. Do you think your target of adding 0.8 to 1,500,000.0 is pretty conservative at this stage now?

Dan Matlow, CEO, VitalHub: Yeah. It’s probably conservative. You know, we could probably take that up to, like, you know, one one to one seven, one eight type of thing. I’m still, you know, I’ve been in this industry for thirty something years, and I understand government health care, and I understand, feast and famine and and and really approaches. And I still also understand that the way our products work, right, there there’s opportunity to really have a lousy quarter.

And Aaron, there’s opportunities to have an amazing quarter. I think we are starting to get enough products in our suite that one will pick up for the other to really get some consistency in there. But, you know, I don’t see I I don’t have visibility into, like, oh, wow. We can the pipeline is strong and we can do things, but I don’t have visibility into, like, you know, this is this is gonna be record all the time. Right?

So I’m conservative by nature and and, you know, I’m I’m gonna be there because I don’t wanna be on the other side of this, you know, this phone someday. But, we continue to strive to build as much ARR as we can, and we’re pretty bullish that we can. But at the same time, you know, I want to be conservative.

Simon Rana, Analyst, TD Securities: Thank you. That was great color.

Christian, Moderator/Operator, VitalHub: Thanks, Saman. The next question comes from Richard Chu of Scotia Capital. Richard, your line is open.

Richard Chu, Analyst, Scotia Capital: Morning. Thanks for taking my questions and congrats on another strong quarter. So I was wondering, can you provide further color on the composition of ARR added in this quarter? I know it was very well balanced between the two markets, but were there any particular products that did better or any big wins that you had?

Dan Matlow, CEO, VitalHub: You know, as I said in my narrative, it really was spread across. I think we had a couple shrew deals in there. Nova Scotia continued to add users. We had some strata, expansions in there. We had some MedCURRENT deals that got live and and started recognizing revenue in in in the quarter.

Our services was pretty good for the quarter, so that, you know, that added to it. You know, we we had some CBS was a contributor in Australia that quarter, and and treat continued to add, you know, new deals and and continue to do that. And we started to see some, an impact from, the case works in coyote products as well in the Canadian marketplace on the smaller, government agencies. So it really was was spread across and there’s nothing that really stands out as, you know, hey. Here was, you know, there was no million dollar ARR deal.

So if that does anything, I think there was there was a lot of transactions that that happened in the quarter and a lot a lot of them a lot of smaller ones.

Richard Chu, Analyst, Scotia Capital: Okay. Thank you. And I know you mentioned you’re not seeing any tariff specific headwinds, but are we able to offer any additional color on ARR trends in q in q one so far given we’re almost through the quarter?

Dan Matlow, CEO, VitalHub: Yeah. I know. You know, they’re, you know, not comfortable in terms of doing that. Like, you know, 2.6 is a pretty high goalpost to to get to, and and, we knew we were coming into some deals from Strata and MedCurrent that were in the works when we got this accomplished, and we were excited to get those over the finish line. We still got a pipeline, it is Q1, ’2 point ’6 could be hard to get to.

But we got things in the works and we continue to do it. But, yeah, I’m not prepared to put any guidance at this point. It’s sometimes challenging to get bookings into recognized revenue. Although we see things, it doesn’t mean from a rev rec perspective that’s going to come through. So just you’re not comfortable at this stage.

Richard Chu, Analyst, Scotia Capital: Got it. Thank you. I’ll pass the line.

Christian, Moderator/Operator, VitalHub: The next question comes from Michael Freeman of Raymond James. Michael, your line is open.

Michael Freeman, Analyst, Raymond James: Hey, good morning, Dan, Brian, Christian. Congratulations on closing on a great year and I’m the new guy, so happy to be the caboose here. I’m curious if you could describe some of your areas of your toughest, most direct competition in in winning new customers. You mentioned Ocean a few times during this call. I wonder if you could highlight a few other areas.

Dan Matlow, CEO, VitalHub: You know, there’s there’s other data platforms in the in the NHS. There’s a company called Radar, which we compete within in the NHS on the on the shrewd side. You know, InTouch, there’s some I’m sorry. With Treat, there’s there’s smaller players. We sometimes get into, you know, the TELUS competing and sometimes into the AlayaCare, and sometimes we’re competing with, you know, the big EHRs depending on what’s going on there.

So it’s hard to say where that sits. There’s a bunch of small players that would compete in there. InTouch, we start competing. Like Epic has its own kiosk based strategy, and sometimes they use it and sometimes they don’t. And Cerner has other partners that they’ve done kiosk work with, in The US that you start seeing floating around once in a while in in UK bids.

And, so, you know, they come from different angles depending on the solutions. And this space is really serviced by just a lot of smaller based vendors that are there. I think MedCurrent doesn’t really have any competition, but some group out of Ireland came through the other day with, attempting to try to do where it is and they haven’t seen it before. So, yeah, that’s sort of the way this landscape is, Michael.

Michael Freeman, Analyst, Raymond James: Okay, that’s super helpful. I appreciate all that color. I’m curious now, you mentioned the deployment or at least the preparation of AI, by your Sri Lankan team to extend some of your products. I wonder if you could describe more sort of how you intend to leverage AI into your businesses and just like your overall AI posture.

Dan Matlow, CEO, VitalHub: Yeah. Those like the EHR products, you know, the, like, the treats and those things, like, you know, scribing is a is a big one, right, in in in that world, and there’s a lot of progress notes and things that are coordinating it, and we are the electronic record for these organizations. So adding that functionality makes a ton of sense, and it’s an easy win and and an easy upsell into that base. So, you know, that’s one that we’re we’re definitely focused on. And then, things that are predictive, like our MCAP product, which is the clinical criteria based product, it makes sense to as opposed to data entries to extract those, that information out of EHR and apply it into our criteria to get the results as opposed to having the frontline caregiver, enter that data into that product.

So that that’s another one that is, is visible to us in terms of, of what we can create out there. You know, those are our two examples. MedCurrency already has AI initiatives that they’ve started and and already have, some of that stuff approached in their in their product in terms of predictability and, should patients go through imaging or not go through imaging as a predictive analysis. So, they it’s a light version, but they continue to work on that. So, you know, those are examples of three, and there there’s some other work going on in the shrewd side and the predictive side there as well.

So, you know, some evidence of some things that we’re we’re trying to do.

Michael Freeman, Analyst, Raymond James: Okay. Thanks, Dan. And if I could shoehorn one more in here. You mentioned basically as your portfolio expands, you might be able to smooth out, you know, as the way you described it, like the potential for you to have a tough quarter, in organic ARR growth. So as you think about the acquisitions of new businesses, are you, you know, what kind of businesses you’re seeing are you seeing out there that would best complement your portfolio?

Are you thinking about broadening your capabilities or going deeper into a customer set?

Dan Matlow, CEO, VitalHub: Yeah. I think broadening your capabilities and going deeper in our customers, set is the same thing. The more solutions we can get, the more comprehensive we can talk to those customers and the more narratives we can have of, okay, you got this one product. Here’s some ideas of how to extend this in to others and, you know, what our approaches are and and what we can do for you as an organization. So, we look at all the pathways of patients and how they move through the health care system and, all the different ideas that, you know, people have come up with in terms of streamlining that approach, be it from an analytical perspective or or from an end user’s perspective or how they can streamline those processes and and make it better.

And we work. We look for evidence that those solutions have been, rolled out at customers, and and customers are actually getting the benefits of those system. And and it’s comprehensive enough for us to continue to grow those solutions, out there. So there’s yeah. There you know, the pathways are really big.

Right? There’s lots of different, ideas and approaches on how we can get patients moving more effectively through the health care system on the patient flow side, and we’re looking for solutions all the time on on how that, how that can help. And on the EHR system, we are just on the EHR front, we’re just looking for similar systems that might be a little lighter weight that will eventually upgrade to a higher value based system, such as trade and and trying to get that installed base and and see what we can do to lift that. We’ve been successful in doing that in Canada. And we’re looking for acquisitions where we continue to can continue to do that.

Michael Freeman, Analyst, Raymond James: Okay. Terrific. Thanks very much, guys. Looking forward to a great 2025 and very happy to be up on the name. Take care.

Christian, Moderator/Operator, VitalHub: Thank you. Michael, next question comes from Gabriel Young of Beacon Securities. Gabriel, your line is now open.

Gabriel Young, Analyst, Beacon Securities: Good morning and thanks for taking my questions. I wanted to ask about the, your Canadian business. Obviously, that’s bulked up with the recent acquisitions. And given the buy Canada sentiment, I imagine your hit rate can only improve at this point. Also, a lot of tailwinds for for Canada.

Dan, can you just talk about, you know, what you’re seeing in terms of the the pipeline here in Canada, maybe the size of some of the opportunities you’re working on and timing for some of these opportunities?

Dan Matlow, CEO, VitalHub: Yeah. I never thought it it would. In Canada, we do get a little bit more influence of US solutions coming into the marketplace. And and, we our sales team did tell me the other day that, you know, they spoke to some organizations that I won’t mention that, you know, yeah, we’re looking at this, but, they’ve actually told me to remove that from the buying process. And we’re we’re just gonna look at you guys, from that perspective.

So I never thought I would hear it, but we we did hear that in a couple different places. So it’s a good question, Gabe.

Gabriel Young, Analyst, Beacon Securities: Anything you can talk about in terms of, maybe the quantum of optuums you’re seeing or expect to

Dan Matlow, CEO, VitalHub: It’s still early days. Like, you know, this just started. Right? So you don’t see a ton of US, like, you see the bigger solutions in the epic and the centers of this world. You know?

Will that sentiment change? That that could be interesting. If it does, I don’t expect it. Like, it could if this continues to go on. Right?

Like, in my personal belief, it should to some degree. There’s better answers for those equations. I think on on, you know, just there’s no Canadian vendors that can actually do what they do, so I don’t think that will will change. But, yeah, in in the, you know, there’s a company called Meditech, which has, started to, go into, it does the smaller hospitals and it does go into the the community and the rehab based world to to a different degree. And, yeah, I could see some issues with those guys in that market for sure, you know, that that you would see.

But, yeah, for the most part, you know, the competitors that, yeah, theirs that we see, aren’t US based. Although, you know, you did you are giving me an idea there is one competitor that we see a fair bit that is owned by US private equity that, our sales reps should actually talk about a little bit more. But I actually didn’t think about it much till the question and and just some of the the stuff that that you’re there with.

Gabriel Young, Analyst, Beacon Securities: Got you. Brian, just a follow-up question for you. Anything we should be watching out for in terms of additional restructuring charges as you go through the integration over the coming quarter or two and anything unusual about CapEx we should be expecting this year?

Brian Gothenburg, CFO, VitalHub: No. I think we probably will add a little bit more to CapEx as we try and get more systems in place. So but nothing I don’t think anything will be really material. And as far as the restructuring, I think as you go forward there will be some. I don’t think to the level that we had a lot of in last year, there were a lot of external legal fees and valuations and stuff like that which really added to the complexity of the costs.

So I don’t think you’ll see to that level. But there will be some, obviously, I think, as we make changes to the businesses.

Gabriel Young, Analyst, Beacon Securities: Got you. I appreciate that and congrats on the progress.

Dan Matlow, CEO, VitalHub: Thanks, Gabe.

Christian, Moderator/Operator, VitalHub: Thanks, Gabriel. The next question comes from Daniel Rosenberg of Paradigm Capital. Daniel, your line is open.

Daniel Rosenberg, Analyst, Paradigm Capital: Good morning. My first question was around the sales option. I was curious if you’ve seen any changes in the trends of just inbound leads versus your outbound lead generation. How has that shifted over time? And do you expect it to shift as you’re kind of getting bigger and bigger scale and more of a presence in your within markets?

Dan Matlow, CEO, VitalHub: Yeah. This is the type of business that, you know, most of the most of the players that buy the stuff know of us to to some degree. Some of the products, I think, in different markets could have better in Canada where it’s stronger in some geographies and other geographies and provinces, I mean. So, yeah, we are seeing definitely more inbound leads overall in the business if you think about it. The, the inertia of one product in in coming through and and we just got more people on the street every time we do this and more customers and and more ideas and and, you know, our our we were being talked about a little bit more and that word-of-mouth is definitely the the better way of things happening.

I’m not sure how much people, you know, look at their marketing in terms of inbound leads in in our space, but, you know, presence and, and ideas are definitely how people buy. So, yeah, we definitely see more inbound leads.

Daniel Rosenberg, Analyst, Paradigm Capital: Thanks. And I’m wondering if there’s anything, like, built out specifically in your products and processes that can trigger kind of that realization for somebody to want to cross sell. Could you speak to any examples of that? Or is that untapped territory? Like, I’m trying to, you know, connect that virtuous cycle that you’re seeing in your organic range.

Dan Matlow, CEO, VitalHub: Yeah. Like, you know, treat is, treat is is the electronic medical record that really drives the, the the process of how patients are taken care of, some of these large agencies. And these patients come into these organizations because they get referred by a specialist or a hospital or something to go for care or counseling or or services based on there. But how does that referral work and how does that come in to those agencies? They don’t want that working on two different systems.

They’re gonna want that referral to come right into the electronic record and and how that connectivity all works. Right? So, you know, they’re they’re definitely will they buy the system that, we own because we also own the electronic record? I think they would. But, you know, that’s, that’s that’s an, you know, ideas that we have.

And, we got a system called Diamond in The UK, which does all has about 60 customers that does all the diabetes based work, and it would get a ton of referrals too. So, you know, we’ll strata fit into that base world. And, you know, we have Shrud who’s showing you all the visibility of patients within a particular region. Would you not like to see those patients that are in transitional services that are in transition as part of that data, 100%, you’re gonna wanna see that data. So, those are evidence of how we can talk about how our products fit together and different ideas that will will continue to happen.

And, you know, we gotta get better at teaching our sales reps on that narrative and how that all stuff fits together. But, there is there there’s a method to our madness on what we buy and how this all fits together, different ideas of how that can lead to upsells.

Daniel Rosenberg, Analyst, Paradigm Capital: Okay. Thanks for that color. It sounds like certainly opportunities to explore there. Last question for me, maybe one for Brian. I was just wondering the contingent consideration on the balance sheet seemed to have gone down quite a bit.

So I’m just wondering how you’re booking the earn outs or potential liabilities from earn outs for your recent acquisitions? Did it go into any other lines?

Brian Gothenburg, CFO, VitalHub: No. The value basically, the value doing the valuation does calculates what they think the expectation contingent payout of the contingent consideration is, and that’s what we end up looking through in in the, balance sheet. So, you can see the expectation is relatively low. Great.

Daniel Rosenberg, Analyst, Paradigm Capital: Thanks for taking my questions. I’ll pass the line.

Christian, Moderator/Operator, VitalHub: Daniel, there are no further questions at this time. We’ll hand the call back to you, Dan, for any closing remarks.

Dan Matlow, CEO, VitalHub: Yeah. Just, you know, there’s a lot of questions. I think everyone’s got some visibility into where we are and and what we’re doing. You know, again, just trying to stress, we we believe in our model, and we believe in it for the long term with ups and downs. And we just came through an up quarter, so we’ll take that one and and move on to the next one and hope it’s, again, another up quarter and, continue just to move.

But we believe in the big picture of this. And and, you know, I I’m just trying to stress to the analysts and to the analysts and to the investors out there, it’s you know, this is, you know, we invest in our business as shareholders for what the long term approach is and and believing in what the business model is. And we like these calls to try to really effectively articulate that. So, if you got questions, we’re always open to it and, you know, feel free to get in contact with

Christian, Moderator/Operator, VitalHub: us. Thanks very much. And this now concludes today’s conference call. Thank you all for joining.

Dan Matlow, CEO, VitalHub: Thanks, everyone. Bye bye.

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