Earnings call transcript: VitalHub Q1 2025 shows strong revenue growth

VitalHub Corp (TICKER:VHI) reported its Q1 2025 earnings, revealing a robust revenue increase and notable market reaction. The company posted a total revenue of $21.7 million, exceeding the forecast of $21.21 million, while its earnings per share (EPS) fell slightly short of expectations at $0.0476 compared to the forecasted $0.0549. Despite the EPS shortfall, the stock price increased by 1.26% to $12.01 in after-hours trading, reflecting investor confidence in the company’s strategic direction and growth potential. According to InvestingPro data, VitalHub maintains a strong financial health score of 2.97 (rated as GOOD), with analysts unanimously recommending the stock as a "Buy."

Key Takeaways

• VitalHub achieved a 42% year-over-year revenue growth in Q1 2025.
• The company missed its EPS forecast but surpassed revenue expectations.
• Stock price rose by 1.26% following the earnings announcement.
• Strategic acquisitions and product innovations continue to drive growth.
• The healthcare IT market shows renewed activity post-COVID.

Company Performance

VitalHub demonstrated strong performance in Q1 2025, with significant year-over-year revenue growth of 42%. The company’s focus on expanding its product ecosystem through strategic acquisitions and innovations in healthcare IT has been a key driver of this growth. With no debt and a substantial cash reserve of $91.2 million, VitalHub is well-positioned to capitalize on emerging opportunities in the healthcare software market. InvestingPro analysis reveals the company maintains a healthy current ratio of 2.67 and trades at an attractive P/E ratio of 4.58, suggesting potential value for investors. For deeper insights into VitalHub’s valuation and growth prospects, subscribers can access the comprehensive Pro Research Report, which provides detailed analysis of the company’s financial health and market position.

Financial Highlights

• Revenue: $21.7 million, a 42% increase year-over-year
• Annual Recurring Revenue (ARR): $73.7 million, up 54% year-over-year
• Adjusted EBITDA: $5.6 million, representing 26% of revenues
• Cash on hand: $91.2 million
• No debt, with a $65 million borrowing capacity

Earnings vs. Forecast

VitalHub’s Q1 2025 earnings report showed a mixed performance against forecasts. The company reported an EPS of $0.0476, which was below the forecasted $0.0549, marking a miss of approximately 13.3%. However, the revenue exceeded expectations, coming in at $21.7 million compared to the forecast of $21.21 million, a positive surprise of about 2.6%.

Market Reaction

Following the earnings release, VitalHub’s stock price increased by 1.26%, closing at $12.01. This rise occurred despite the EPS miss, indicating investor optimism driven by the company’s strong revenue performance and strategic initiatives. The stock is trading closer to its 52-week high of $12.34, reflecting positive sentiment in the market. InvestingPro has identified 14 additional investment tips for VitalHub, including insights on its valuation metrics and growth potential. The company’s market capitalization stands at $504.21 million, with revenue growth of 7.24% in the last twelve months.

Outlook & Guidance

VitalHub is optimistic about its future prospects, with plans to close the acquisition of Induction in June or July and targeting 2-3 additional mergers and acquisitions in 2025. The company anticipates continued growth in ARR and expects services revenue to remain stable between $2.5-3 million quarterly.

Executive Commentary

Brian Goffenburg, CFO, highlighted the company’s financial strength, stating, "We are steadily building scale in terms of revenue and cash generation." CEO Dan emphasized the strategic focus on acquisitions, noting, "We’re seeing some smaller companies that are in a potential distress mode," suggesting potential opportunities for further expansion.

Risks and Challenges

• Potential integration challenges with recent and pending acquisitions.
• The competitive landscape in the healthcare IT sector.
• Economic uncertainties that could impact healthcare spending.
• Regulatory changes in key markets like the UK and Canada.
• Dependence on successful integration of acquired technologies.

VitalHub’s strategic initiatives and strong financial position underscore its competitive edge in the healthcare IT sector, although challenges remain in navigating integration and market dynamics.

Full transcript - Vitalhub Corp (VHI) Q1 2025:

Christian, Moderator/Operator: 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 and 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 will hand the call over to our CFO, Brian Goffenburg, to go over financial highlights for the quarter. Over to you, Brian.

Brian Goffenburg, CFO, VitalHub: Thanks, Christian. Good morning, everyone. Thank you for joining the call today. We are pleased to report results for the first quarter of twenty twenty five. For the three months ended March, we added $1,800,000 of net new organic annual recurring revenue and delivered adjusted EBITDA margins of 26.

We’re happy with these results. We are steadily building scale in terms of revenue and cash generation, and our cash balance at the March was 91,000,000 with no debt. I’ll now provide more detail on our first quarter operating performance. Our annual recurring revenue was 73,700,000.0 to close the quarter, an increase of 54% over the prior year. Over the previous year, organic growth contributed 14%.

In the first quarter, total revenue was 21,700,000.0, an increase of 42% year over year. Recurring revenue or term license maintenance and support segment was 18,300,000.0 or 85% of revenues. This compared to 12,500,000.0 or 82% in the prior peer prior year period. Perpetual licenses license revenue was 200,000 in the quarter, an increase from a hundred thousand in the prior year period. Our services, hardware, and other revenue was 3,100,000.0 in the quarter, an increase of 19% year over year.

Our gross margin was 80% of revenue as compared to 81% in the prior year period. Net income before taxes was 1,500,000.0 compared to 2,000,000 in the prior year period. Adjusted EBITDA for the quarter was 5,600,000.0 or 26% of revenues compared to $4,000,000 or 27% in the prior year period. Turning to the balance sheet and as previously mentioned, as of 03/31/2025, we had cash on hand of $91,200,000 We have no debt currently and have borrowing capacity of up to $65,000,000 In the first quarter, we completed a board deal financing for total net proceeds of approximately $32,000,000 With our stable quarterly cash generation, we continue to build capacity for m and a. With that, I’d like to hand the call over to Dan for an update on the business.

Dan, CEO, VitalHub: Thanks. Thanks, Brian. Yeah. I think we only met five weeks ago. So, you know, in terms of of changes, we’re we’re probably talking about minimal.

But, you know, we’ll talk about the first quarter results and and talk a little bit about induction in in an m and a update, going forward in terms of what we see in in terms of the marketplace. But, yeah, we’re happy with the quarter results. It’s it’s as we anticipated. Going forward. We we hit the mark on our on our guidance in respect to ARR with 1,800,000.0, and we’re progressively working on synergistic value with both Strata and MedCurrent.

And both of those are proceeding, and and both of those contributed, to the quarter. We are making some prod progress on our cost rationalization of both those organizations, but still have a a fair amount of of work to go in respect to that. So we we continue to work for it. We’re very happy with those acquisitions. Both of those, I think, are are in a sweet spot of where, health care is today with referral management being a very important aspect of of where things are going on.

And, you know, MedCurrent is is right in that area of referral management in terms of imaging referrals and and how that works in in the whole ecosystem. Both of those organizations have footprints internationally, and, and we’re integrating it into our UK Sales Group, as effectively as we can, and we’re continuing to work on that. So, yeah, we’re we’re happy with with those results. You know, we we continue to move forward, into the next quarter, and and we think we’re in good position with our cash balance and, in our pipelines and our programs, coming into place. A little bit about induction.

We’re still not in a position, in a regulatory fashion to really give much, information on that. The vote is happening, I think, on Monday for that, and and we expect, you know, the process to continue to moving. I think we will probably close that transaction in early July or June, somewhere in there in the time frame. I think we gave a little bit of later guidance with that, but I think this is where we’re we’re seeing things moving in in the proper direction for that. Again, I think we explained the induction acquisition.

It for us, it’s mainly focused on that Zesty solution. It’s a, entry point into the ecosystem with a patient portal. It’s a a very key engagement of a key component of a patient engagement platform. And we we see synergistic value in in many of our products that do have patients that come into the EHR systems and schedule appointments, but we really don’t have a front end for that. So things like our treat product and our diamond product in the, UK, we see synergistic value with, our MyPathway offering as well as our preoperative based assessment synopsis.

So, there’s there’s value in its ecosystem. They have a, a a OEM deal with Cerner in The UK marketplace. So every new Cerner deal that happens in The UK, uses the Zesty product. So there’s a a significant amount of Cerner implementations that are underway where Zesty has not come in yet, but they will be coming into those implementations, as those implementations get closer to, going live. So, you know, that’s the main ingredient we we like about the Zesty product.

In terms of m and a, we’re really busy. We’re we’re seeing some stuff going on, both Canada, The UK, and Australia and abroad, and we’re working small and some some pretty significant, acquisitions in in the framework. So, we expect, you know, in in the near future, depending on how things going to be able to announce some more transactions, and we continue to to move on on that as as our business model would suggest. So, we’re excited about how things are moving along, and, and we keep on. I will like to turn things over, you know, to Christian, see if there’s any questions at all.

Christian, Moderator/Operator: Perfect. Thanks, Dan. We’ll now open up the line to questions from analysts. Again, please press Today’s first question comes from Gavin Fairweather of Cormark Securities. Congrats

Gavin Fairweather, Analyst, Cormark Securities: on the strong quarter. Maybe just to start, I noticed the quote in the press release around m and a valuations on smaller deals starting to improve. Maybe, Dan, you could just touch on the deal environment, elaborate on on what you’re seeing, maybe both on on the smaller end and then as well as the bigger transactions.

Dan, CEO, VitalHub: We’re seeing some smaller companies that are in a potential distress mode. There’s not much capital roaming around and, you know, the the owners are looking for alternatives to do that. We’re, you know, we’re seeing that on some of the the bigger deals too where they’re not getting much capital, and and they’re they’re making transactions. Yeah. So, you know, depending on those environments, I think the the valuations would be reflected accordingly.

With that being said, we’re, you know, we’re still seeing, you know, for some larger deals that are performing well and got good upside portfolio, it it still is attracting, you know, the proper buyers and valuations, you know, in a competitive process still sometimes, get bid up. So there’s no real rule again to Gavin. Nothing’s really changed. But I do sort of sense say a little bit of, on the smaller side, some of transactions struggling a little bit more, and we’re in a better position to get some.

Gavin Fairweather, Analyst, Cormark Securities: That’s great. Maybe just on the bookings that you saw in the first quarter, can you just describe kind of the mix or any trends in terms of products which were quite popular and had a lot of sales in the quarter or anything that you saw regionally? And then also, what any change in the environment at the at the NHS?

Dan, CEO, VitalHub: Yeah. I said, you know, we I think in the quarter, we had, you know, we continue to see increase in the user accounts on both the, the OREO platform on HiCom on the workforce management system as well as the the treat platform, in Nova Scotia. So quarter over quarter, the the the user accounts continue to to grow in both those quarters. So we we continue to see, value that that gets corresponded with the with those two products. We did see some some deals on the transforming side, and we did see a little bit of treat work, although treat didn’t contribute to the quarter as as it has in the past.

I don’t think that’s any indication of stuff. It’s just the the way things are are moving, and there’s still some there’s still a significant amount of treat deals in in the pipeline that that that we’re working on. We did see some really good contribution from MedCurrent in the quarter. So we we did see, I don’t know, a bunch of transactions in the NHS that that did correspond with that. So, know, it’s really the the mix.

And, again, we, you know, we do see the middle stuff from other, from all the other platforms are contributing in in, in some ways. We, you know, we in terms of the NHS, that’s still early days of what’s going on. We we do anticipate changes going there. We know that the ICBs are gonna be reduced and and going into a regional base group. We think that could potentially help us because, you know, as a we we got footprints in most of the ICBs.

And then when they integrate into a regional group, there could be some ICBs that don’t have treat I mean, shrewd, and and there could be some growth from that perspective. With that being said, when there’s change, there you know, people are still wondering what’s going on, and they’re you know, they could be sitting on their hands and so forth. So our concern really isn’t that budgets aren’t gonna be available. Our our concern is just the mix up of the, of the new structure and how it’s all gonna work and, you know, delays that could come from procurement that get associated with that. So far, we haven’t seen that.

There’s still a a demand for the products, and there’s, you know, there’s still people finding ways to to get things done. But, you know, it is we are in a a little bit of a cautionary mode in terms of what that what that impact will be in a temporary basis. And if anything happens, we do think it will be temporary, because at the end of the day, they’re they’re still looking for these solutions, and and we’re in the mix of it.

Gavin Fairweather, Analyst, Cormark Securities: I appreciate that color. And then just lastly for me, you know, I know the vote for induction is on Monday, but let’s just assume that, you know, that that comes into the fold, I guess, late in q two or, like, q three. You’re gonna be pushing up on a big bit over a hundred million dollar company. Maybe you could just discuss kind of the organizational structure as as it is now, how you’re thinking about evolving it further over time given the bigger breadth of the company, any any tweaks that you need to make, and then and whether you have, you know, enough resources, you know, looking at m and a and and governance, those types of things.

Dan, CEO, VitalHub: Yeah. I think we’ve been progressively adding in terms of our group. So, you know, when we got a security group and we got a pretty good central IT group that’s pretty large now, and we have a a a governance, you know, privacy, team that that’s been put together over time. We have a a a centralized operations group that that manages all the software and manages all the the integrations of the company. So I think we are set up to to do that.

You know, the will we do this as quick as we did before? It depends how we’re we’re backing up the, the transactions and and how we’re doing, but we’re definitely getting quicker at integrating the the companies. Yeah. I think we’re I think we’re in fine shape to do it. Yeah.

Every time we do this, there’s usually a challenge, but we’ve gotten a lot better at it, and and, the the team is is ready to go. We do have an integration plan, ready to go for induction. We’ve had time to build it, and we we we’ve gotta I mean, I think we do got some ideas of the changes that we wanna make, although we need to ratify that once we we get in there and and, you know, see the operations a little bit more in-depth, but we we think we do got a pretty good idea of of some of the of the things that have to happen there.

Gavin Fairweather, Analyst, Cormark Securities: Thanks so much. I’ll pass the line.

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

Doug Taylor, Analyst, Canaccord Genuity: Yeah. Thank you. Good morning. I just wanna maybe push a little further on that last line of questioning regarding induction. I think you did a great job outlining the opportunity in terms of top line synergies and cross sell potential.

But as you say, if you’ve you know, you’ve got a plan about the the integration road map there, you know, given where induction stands right now in terms of profitability, I wonder if I could get you to maybe expand a little bit more on how you expect it to contribute to, you know, profitability as it gets folded into the VitalHub ecosystem in the coming months?

Dan, CEO, VitalHub: Yeah. I think we got a I think we we got some work to do there for sure. And I think if you read the, you know, the the the statements and so forth that we put in for the regulatory work and and that stuff, we we do mention, that, you know, there will be a 15 to 25%, staff reduction in that organization. And, you you know, we are gonna proceed to execute that plan, pretty quickly, in regard to to that plan and and put that in place. So, we do have plans to do that.

It is a public company today, and it won’t be a public company after we’re we’re completed. So a lot, a significant amount of those costs go away with being a public entity. And, but we do think there’s more synergies with respect to g and a and other aspects of the in the technology groups that can be, unlocked with those organizations in in a pretty timely fashion, and and, that’s what our goal is.

Doug Taylor, Analyst, Canaccord Genuity: And so maybe to frame that up differently or maybe ask the question a little differently, you’ve previously talked about the objective with your M and A program of, you know, getting assets to a sort of, you know, a corporate hour average EBITDA margin of 20% over a four to six quarter time frame. Is there anything that you think stands in the way of doing that with with induction as well?

Dan, CEO, VitalHub: I don’t think so, Doug. Like, you never know until you you actually go in there and see, you know, what’s going on and and, you know, how how things are are put together. Although we’ve done a a significant amount of due diligence there on on where it goes, and we we we wouldn’t have completed the transaction if we didn’t think we could do that. So, you know, we’re we’re off and running to execute the plan. You never know till you do it, but, yeah, I don’t think you know, I I I do think we wouldn’t have did it if we didn’t think we couldn’t do it.

Doug Taylor, Analyst, Canaccord Genuity: Okay. And then moving, you know, beyond or, I guess, excluding the induction impact in the coming months, you know, you you say that Strata and MedCurrent integration pace, I mean, that’s been a positive surprise here for the last couple of quarters. You said you still got a fair amount to go with respect to optimizing that cost profile as well. Can I get you to maybe, you know, frame up what you think remains on the table there as we think about the margin ramp by end of q two and the second half of this year, excluding induction?

Dan, CEO, VitalHub: Yeah. I you know? Yeah. It’s hard to say, you know, in terms of of to the what the speed of that will be, but, you know, we we we progressively are doing synergistic value with our salespeople. And, you know, we’re we’re looking at we we are ramping up teams in in Sri Lanka for for both of those organizations.

Yeah. We’ve consolidating our our g and a profiles, and it still hasn’t been completed. So, yeah, there’s still a significant amount of work. I’d I’d hate to put a dollar figure on that, but, you know, we still you know, there’s still work to be done there.

Doug Taylor, Analyst, Canaccord Genuity: Okay. I won’t push it further then. Thank you. I’ll pass the line.

Christian, Moderator/Operator: Thanks, Doug. The next question comes from David Kwan of TD Securities. David, your line is open.

David Kwan, Analyst, TD Securities: Hi, guys. Curious if you’re seeing much impact given what’s going on from a macro perspective, trade wars, concerns of potential recession here impacting what you’re seeing in either the m and a environment, or maybe customer purchasing behavior?

Dan, CEO, VitalHub: Yeah. I don’t don’t believe that trade war we’re talking about a software services business for government funded based health care. There’s there’s no goods in and and we don’t work in The United States, at least minimally. So, all of our trade is in other countries, and it’s all software related. We haven’t seen any impact of that.

No. There’s impact from other things, but there there’s no impact from that.

David Kwan, Analyst, TD Securities: And how about from from an m and a perspective? Are you are you seeing just more, tangentially just the potential impact of a a a slowing economy because of

Dan, CEO, VitalHub: what’s going on? Yeah. I I think we’ve seen this trend since, you know, after the the COVID boom. Right? I I do think the you know, I think induction is an example of of things.

You got an organization there that was built during the the boom, and, it it moved along and raised a significant amount of capital at a high valuation and, had aspirations to to grow in in a pretty serious way and and couldn’t get there to the degree that it it thought it could from an investment perspective and changed hands and so forth. So, you know, you you you get a bit of a a legacy in in terms of your mindset and and how you you work and and you get yourselves into some challenges that go along with it. Right? So, and and you’re you’re, you know, you’re you’re put in a position that, yeah, you have to actually sell at a valuation that you probably didn’t want to, but you you really got no choice. So, know, that it’s an example of, I think, what what what can happen in in, in the tech world.

I don’t think that is insular to the health care tech world. I think we we see that in a lot of the SaaS based products that that maybe overdid it during that boom and and have lasted till now, but are now in a position where they can’t actually go any further and and need to look for a strategic scenario to to keep going.

David Kwan, Analyst, TD Securities: Thanks. Thanks, Dan. And I guess what’s what’s happening with induction maybe somewhat similar to to some the others, opportunities you’re seeing from an m and a standpoint, most of the smaller, players. Are are you seeing more competition because the pricing is getting more attractive, albeit, you know, because these smaller companies maybe are a bit struggling, so there’s more work that needs to be done. But are

Dan, CEO, VitalHub: you Yeah. You know, they’re don’t you know, they I don’t think you I I think when you get scenarios like that, it turns away competition more than it I think competition, you’re gonna see in more of the healthier companies. You know, these other company like, we’re we’re in a unique position to to actually, do transactions with these smaller groups because we got the infrastructure and the teams in place to still operate these companies. I don’t think competitive offerings do have that ability. So, yeah, we get those scenarios for sure.

David Kwan, Analyst, TD Securities: That makes sense. One last question for me. Just in terms of of the bandwidth, know you kinda touched on it in terms of of your team and and adding in in certain parts of it to help it with the integration, I think, particular. But, you know, looking at your pipeline right now, looking at the opportunities that are out there, yeah, how many, you know, how many more deals do you think we could see over the balance of this year? And more specifically, I guess, you know, I think you could probably do a lot of these smaller deals.

But for for a couple of kind of strata type deals, like, many of those could you possibly do this year?

Dan, CEO, VitalHub: We got a mixture of big and small going on, and and some of them are, you know, in our world, like, pretty are significant. Right? So we’re we’re we’re looking at it from both sides. But, yeah, I think we can do two, three, four deals still this year.

David Kwan, Analyst, TD Securities: That’s great. Thank you.

Christian, Moderator/Operator: Thanks, David. Next question comes from Kevin Krishnaratne of Scotia Capital. Kevin, your line is open.

Kevin Krishnaratne, Analyst, Scotia Capital: Hello. Good morning.

Dan, CEO, VitalHub: Hey, Kevin. Awesome.

Kevin Krishnaratne, Analyst, Scotia Capital: Hey, guys. Hey, thanks. Look, congrats on a good quarter. The the ARR looks solid, I think, for q one, one of the higher for for a q one. I’m wondering, you know, if you can talk about what you’re seeing so far in q two.

Anything kinda popping out? It’s, you know, a little bit over a month here. Do we expect the same sort of seasonality, you know, a a lower, organic, figure in q two? I think that’s normally been the case. Just can you just talk about sort of what you’re what you’re seeing right now?

Dan, CEO, VitalHub: Yeah. You know, our indications suggest that q two should should still be okay in hitting the mark in in in terms of what our our rationale is. So, yeah, we we feel, you know, we we feel okay with that in in respect to into some of the transactions that that are in play, in respect to that. And, you know, from our our perspective, it it’s still, it’s still in play.

Kevin Krishnaratne, Analyst, Scotia Capital: And, you know, outside of, the ARR, your your services revenue line continues to be strong around $3,000,000. May may you just remind us again, you know, what what’s what’s being booked in there and and how you see that that line, you know, sort of trending over the the remainder of the year?

Dan, CEO, VitalHub: I I I still think we should be, like, between the 2 and a half, 3 million mark on a go forward basis. We’re we’re sitting on a, you know, we’re sitting on a significant amount of, services backlog, primarily in the the tree world and in Canada. We continue to get work from Nova Scotia and Solgen, and they continue to look for look for enhancements and and are willing to to pay for that in terms of moving those systems, to what the requirements could be. So, and we expect that trend to continue for for a while, with with those two organizations. And, you know, every time we we close a transaction and, we do get services revenue.

So there is a still a significant backlog of services work. So, yeah, it could dip in in some seasonality, I think, in the summer time frame. Yeah. That seems to be a challenge for us on the services world where we have a lot of holidays. Our our customers have a lot of holidays, and and, you know, it’s hard to get the hours put in on the projects, and they sort of go into a little bit of a rest mode during those periods.

But, yeah, traditionally, q one and q two are good services numbers. For us, q three and q four become a little bit more challenging. So that’s that’s typically how the trends work in in in the seasonality of of that in in our, in our world.

Kevin Krishnaratne, Analyst, Scotia Capital: Got it. Okay. I I have another question, also on the induction. You know, it hasn’t closed yet, maybe you you can’t comment too much. You talked about the the Zesty platform.

There’s another one that that they’ve got as well, you know, that’s sort of been more in decline. Can you can you maybe talk about the plans there? Is it are you gonna run that down? Are you gonna try to do some investment there to keep it going? Just, you know, any high level thoughts you you can give us there.

Dan, CEO, VitalHub: Yeah. I think we’re gonna look at that as a separate platform. We don’t actually view that as software ARR. We’re not gonna put that in our ARR figures. Well, you’ll see that being listed as a separate category called virtual platform virtual services because it is different, from our perspective.

Yeah. They did see you know, they did that product came off of a national project that they got for the NHS during COVID. And and what happened is the NHS said, okay. You guys are on your own now. You need to go by yourself.

And and through that became some they got some, I wouldn’t call it churn. It’s more price reductions. I think they changed from a flat model to a usage model. And when they got into the usage model, the the price points went down, and they had to stay in the usage model to compete. But we are seeing and they were seeing there there is some pressure on those from things like Zoom and and Teams, and and we expect that pressure to continue on the on those things.

However, it does seem to be holding up on its own. It holding up in terms of of what it’s producing and and what it’s doing. But there is you know, again, we we’ve gone into this with our eyes open in respect to that platform, and, and we we know the challenges that that could come with it in terms of growth and sustaining, its ARR. But, yeah, we’re we’re gonna list that as a separate platform and and look at it from its separate world.

Kevin Krishnaratne, Analyst, Scotia Capital: Okay. That that’s super helpful. Maybe just a last small one for for for Brian. The the gross margin kinda dipped, you know, from q four to to q one just slightly. I’m wondering what drove that dynamic.

Is that maybe the full quarter inclusion of of a a Strata MedCurrent or, you know, what what were you seeing there? Anything to note and where do you see gross margin sort of trending out over the year?

Dan, CEO, VitalHub: Not beyond me, Brian.

Brian Goffenburg, CFO, VitalHub: No. I think you’re you’re correct. It is primarily from the from the two acquisitions. We’re still gonna get those costs in line, and we will we wanna get them, obviously, north of that 80% going forward.

Kevin Krishnaratne, Analyst, Scotia Capital: Cool. Thanks a lot. I’ll pass the line. Thank you, guys.

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

Michael Freeman, Analyst, Raymond James: Hey. Good morning, everyone. Have you got me?

Dan, CEO, VitalHub: Yep. Hey, Michael. How are you? Hey. Things are good.

Michael Freeman, Analyst, Raymond James: Thanks for taking my question. Congrats on a strong quarter. I’m going to ask about a few things about induction as well. You you sort of alluded to this that know, how you were gonna be separating, revenue in within induction between ARR and and, and not. So based on, you know, you mentioning that the attend anywhere platform, you’re not viewing as ARR.

You know, should we be, you know, doing some rough math on on last year’s numbers? You know, is this does this look like, you know, less than half of, of Induction’s revenue should be considered ARR?

Dan, CEO, VitalHub: Yeah. Probably. Yeah. Based on on where that is for yeah.

Gavin Fairweather, Analyst, Cormark Securities: Okay.

Michael Freeman, Analyst, Raymond James: Alright. Now, on this this OEM deal with, with Cerner in The UK marketplace, You know, I I I wonder if you can can confirm that this relationship will continue while while, induction’s under your roof. And if you view, you know, if you view that as a, you know, a major benefit to this to this transaction, how you how you might plan to leverage it or expand it into the future?

Dan, CEO, VitalHub: Yeah. We you know, it was a big part of the transaction. So, of course, we did our due diligence on that to to ensure that. I I do believe it it will continue. They have a a a significant investment by both parties to get a very, very tight integration of Zessie into Cerner, and Zesty has a a a very good footprint in the Cerner world in in terms of understanding, how that works and and how how that will be integrated into a front end portal.

So there there there’s a a very tight integration that works there that would be very challenging, for Cerner to look for an alternative solution, and and I don’t see any reason why they should. A lot of work has been put in by both Cerner in The UK and and Zesty in terms of doing that. And, there’s a very good footprint of users that use it on the Cerner platform and and are happy with that platform. So, we we expect that to continue. We, you know, we we do believe there’s some opportunity in other markets with with Cerner, or at least we’re hoping there is, although we’re not a % sure.

But, it definitely can hurt to have a a a strong partnership with Cerner in in The UK and and see what can be done to try to expand that in in different ways, in other markets. And we’ll we’ll, for sure, try to to to accomplish that in other markets once the transaction closes.

Michael Freeman, Analyst, Raymond James: Okay. Thanks, Danny. When and when you talk about other markets, are you thinking about other geographies or other sort of software areas?

Dan, CEO, VitalHub: I think it’s a little bit of both. I think what when we integrate Zesty into, you know, our things like, induction in MyPathway, into Cerner accounts. So, you know, we already have, InTouch in MyPathway working in working in Cerner accounts where where Zesty has done some work. So we just need to connect that plumbing up to into those accounts with a with some tighter Cerner integration, and, our hope is that we can be able to grow all those platforms into Cerner accounts even more by connecting more products to our Zesty product that is now connected into Cerner, if that makes any sense to you.

Gavin Fairweather, Analyst, Cormark Securities: Yeah. I think that makes sense.

Dan, CEO, VitalHub: I I was talking to the sales, but yeah.

Michael Freeman, Analyst, Raymond James: No. No. You nailed it. Last last question. The you know, we we it looked like, we sort of had a set a new, high watermark for r and d this quarter.

I wonder if, Brian, if this level should be something we should be thinking about as consistent through the rest of the year, or was this an an irregularly high quarter?

Brian Goffenburg, CFO, VitalHub: I think a little higher. You know, if with any acquisition where we we we take on people, end up with a little bit higher r and d to start with off with, and then we start trying to get that down and we get synergies going forward.

Michael Freeman, Analyst, Raymond James: Okay. Okay. So maybe fourth fourth quarter level would be something we should be looking at going forward?

Brian Goffenburg, CFO, VitalHub: Absolutely. I think it would be a stride for.

Michael Freeman, Analyst, Raymond James: Okay. Thank you. That’s all for me. I’ll pass it along.

Christian, Moderator/Operator: Michael. The next question comes from Gabriel Liang of Beacon Securities. Gabriel, your line is open.

Gabriel Liang, Analyst, Beacon Securities: Good morning, and thanks for taking my questions. Yeah. I just want to dig a little bit further into the to the cost structure and, I guess, margins, Dan or Brian. I noticed that in your EBITDA margins, you did benefit from a I think it’s a 300 basis point tailwind from currency But if I were to normalize for that, it looks like EBITDA margins were down from q four and from q one last year as well. I’m just curious if that’s just the timing of some of the cost rationalization you’re doing or if there’s some permanent resources you’re putting in place to reflect the larger scale of your business now.

Brian Goffenburg, CFO, VitalHub: It’s primarily due to the timing of of the acquisitions. We just closed those acquisitions later in the quarter last year. And then we are as we go forward, we will do we will add to resources to to make sure that the business is scalable.

Gabriel Liang, Analyst, Beacon Securities: Gotcha. No. Thanks for that. And then, Dan, I know there’s obviously, you know, a big focus around your UK business, but, you know, a lot of your peers have talked about a very robust pipeline here in Canada as well in terms of IT opportunities. I’m just curious if you’re seeing similar opportunities and how you’re feeling about growth here in Canada.

And, also, as it relates to the Zesty digital front door, is that compatible with the, Canadian health care system?

Dan, CEO, VitalHub: When you’re talking about IT, you’re talking about m and a on the m and a side or just on the sales side?

Gabriel Liang, Analyst, Beacon Securities: Organic sales opportunities.

Dan, CEO, VitalHub: Yeah. I I think the I think our products are I think our tree product that we go to product with is is still going. I do think, you know, Ontario and other areas, the market has woken up, yeah, since post COVID. We’re we’re seeing a lot of initiatives that we, that started prior to COVID, at least in Ontario with they they set up a group called Ontario Health right at the beginning of, I think, the of the Ford world. And then COVID hit, and and those guys were were so busy with COVID that really there was no new new initiatives that were going on in that period.

But we are seeing, you know, new initiatives that that are moving through that, and we are seeing, funding that continues to, go on in programs that the government is is giving to the hospitals and the groups, giving them funding to to to purchase software. So we are still seeing, more initiatives that that are going through those systems. We’re also starting to see some of the early Epic and Cerner implementations in Canada that, you know, that we’re adopting those solutions starting to notice that those solutions aren’t delivering, all the components that are are needed, and they’re starting to go back to work on on looking at peripheral based solutions. So we’re still seeing deals flowing in Canada, and and, you know, it’s still moving. But I still like to caution, like, even, you know, even to our peers, you are talking about Canada.

It is segmented by the province. It is still, it’s not the biggest TAM in the world. So you still get challenges in terms of your growth in in this marketplace, and, but we do see some increased stuff. In terms of Zesty, we didn’t bank on on our ability to move that to other areas, but we do think I personally do think that there is, some opportunities to explore Zesty, in terms of a portal, especially in the the Cerner world and in other worlds in the Canadian marketplace. We do see an opportunity of adding that to some of our existing products, like our tree product and so forth that, we’re just starting to embark on that portal based world.

So, using third party. So, you know, we’ll save us some costs in terms of putting, Zesty into our own products as well where we require portals. And as we make acquisitions that might not have a strong portal, Zesty, could offer that as a solution on a go forward basis as well. So we we do see strategic value there.

Gabriel Liang, Analyst, Beacon Securities: That’s great. Thank you for the feedback, and, congrats on all the progress.

Dan, CEO, VitalHub: Yeah. Yeah.

Christian, Moderator/Operator: Much. Thanks very much, Gabriel. There are no further questions at this time. I’ll hand the call back to you, Dan, for any closing remarks.

Dan, CEO, VitalHub: Yeah. No. You know, again, we we just met five weeks ago. I think the the questions were were pretty comprehensive. You know, the next time we meet, we’ll have induction closed and and be able to get better light on on those numbers, I think, than we’re giving right now, but we are we are a little bit constrained, in respect to that.

So we’re we’re looking forward to moving on and, you know, time’s flying. And someone said you’re already into q two, which we are. But we we look again to to meet with the the group, I guess, in the August time frame. And in the meantime, I’m sure, many of the analysts and investors will reach out to us in terms of updates, but we’re we’re always available to answer questions. And thanks, everyone.

Christian, Moderator/Operator: Yes. That’s great, Dan. Thank you. This now concludes today’s conference call. Thank you all for joining.

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