Vitalhub Corp.

Good morning, everyone, and thank you for joining us this morning for Vital Hubs 2023 second quarter conference call. 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 within the meaning of applicable security laws, including among others, statements concerning the company's 2023 objectives, the company's strategy to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management and is subject to a number of significant risks and uncertainties that could cause actual results to differ materially from those anticipated. Also, our commentary today will include adjusted financial measures, which are non-GAAP measures. These should be considered as a supplement to and not as a substitute for GAAP financial measures. Reconciliations between the two can be found in our MD&A which is available on cdar.com and our website. With that, I will hand over the call to our CFO, Mr. Brian Gothenburg, to go over our financial highlights for the quarter. Please go ahead, Brian.

Good morning, everybody, and thank you for taking the time to join us this morning. We maintain our upward trajectory in the second quarter, steadily and consistently growing our customer portfolio by organic growth and mergers and acquisitions. During this quarter, we've seen a positive trend in both revenue and gross profits, fueled by our commitment to expanding healthcare product offerings and deeper integration into healthcare networks. This has led to a notable increase in stable annual recurring revenue of 31.4% for the first half of 2023. We remain very bullish on the diversified portfolio of product offerings we currently have, at our disposal and will continue to target specific healthcare sectors to strategically scale and grow our business. With that in mind, I'll now proceed to present the financial highlights for this quarter. Total revenue for Q2 23 totaled 13.1 million, compared to 9.5 million in Q2 22, an increase of 38% year over year. Total revenue for the six months ended June 30th, 2023 was 25.7 million, million for the same period in 2022, an increase of 36%. Revenue from term licenses maintenance and support in Q2 23 was 10.2 million compared to 7.2 million in Q2 22, an increase of 41%. Revenue from term license maintenance and support for the six months of 2023 was 20.2 million compared to 13 million for the first six months of 2022, an increase of 56%. This increase affects the impact of continued organic revenue growth in the company's suite of products, coupled with revenue derived from acquisitions completed during the previous quarters and year. Revenue from perpetual licenses in Q2 23 was $255,058 compared to $149,253 in Q2 22, an increase of 71%. Revenue from perpetual license for the first half of 2023 was $565,456 compared to 2.9 million the same period in 2022, a decrease of 81%. The decrease was primarily attributable to the unusual volume of high-margin perpetual license sales of 2.7 million in Q1 2022. Revenue from professional services and hardware in Q2 2023 totaled 2.6 million compared to 2.1 million in Q2 2022, an increase of 25%. Revenue from professional services and hardware for the first half of 2023 was $4.9 million compared to $3.1 million for the same period in 2022, an increase of 63%. The increase is primarily attributable to the deployment of the ongoing customer projects and additional service revenues for the new subsidiaries. Annual recurring revenue, or ARR, of which we formally We formally referred to as annual contract value total 41 million as of June 31, 2023 compared to 31.2 million in June 30, 2022, an increase of 31%. The continued increase in ARR growth is reflective of our strategy to grow the business both organically and through acquisition. Gross margin on total revenue in Q2-23 was 81% compared to 83% for the same period last year. The gross margin on total revenue for the first six months of 2023 was 81% compared to 84% in the same period in 2022. The decrease in both quarterly and year-to-date gross margins were due to the unusual value of a high margin for federal licensed revenue in Q1-22 compared to this year. Operating expenses in Q2-23 Total 8.2 million compared to 6.4 million in operating expenses in the first half of 23, total 15.9 million compared to 11.7 million in the same period last year, a 30% increase. The increase is due to sales and marketing expenses for conferences and exhibitions and R&D expenses for acquisitions completed in 23 and previous years as it takes time for synergies and cost savings to be recognized. Rupert Clayton, NET Income Before Income Taxes in Q2 2023 was $742,516 compared to the net loss of $9,957 in the prior period. Rupert Clayton, NET Income Before Income Taxes for the first half of 2023 was 1.5 million compared to 1.6 million in the same period last year. Rupert Clayton, NET Income In Q2-23, it was 621,000 compared to 74,000 in Q2-22, an increase of 733%. And net income for the first six months was 784,000 compared to 1.5 million in the same period, 22, a decrease of 48%. EBITDA in Q2-23 was 1.98 million compared to 1 million in Q2-22, an increase of 93%. For the first six months of 2023, EBITDA was 3.97 million compared to 3.39 million for the same period in 2022, an increase of 17%. Adjusted EBITDA in Q2 23 was 2.97 million or 23% of revenue compared to 1.87 million or 20% of revenue in Q2 22, an increase of 59%. For the first six months of 2023, adjusted EBITDA was 5.89 million compared to 4.92 million in the same period in 2022, contributing to an increase of 20%. The increase was primarily attributable to the higher recurring revenues of 10.21 million in Q2-23 as compared to 7.23 million in Q2-22. For the first six months of 2023, cash flow from operations before changes to working capital was 4.1 million compared to 3.9 million for the same period last year. Cash on hand at June 30th, 2023 was 22.9 million compared to 17.5 million at the end of 2022. And with that, I'd like to hand the call over to Dan for an update on the business. Thanks Brian.

I don't have much to say today. I'll look for some questions from everyone that's out there just to have some clarity, but just a few comments to make. I think as you can see over the last quarters, Q2 is just steady as we go. As I mentioned in our Q1 call, I think we've got ourselves into a stage where we are starting to be a little bit of a compounder here and things are starting to work. I still think we got work to do. I think a little more size would help in terms of our organizations. But as you can see, we're moving the needle on most of our key indicators on a quarterly basis. And we expect to continue to do that. Our ARR is growing above our expense level at this stage in the game. And we still think we got room on the expense side to do some things. So it's steady as we go. We're still seeing demand for our products. We're still, I don't know how many quarters it's been now, but we're doing between 800 and 1.5 million in the last two quarters of being closer to the higher end of that set. And it's really split amongst our products in terms of number of deals and deals that are there. Of note on our product set, our treat product set in the Canadian marketplace is seeing some really good momentum in the last little while. And we're I'm excited of what we're doing in the Canadian opportunity. It is turning into a Canadian standard for larger based initiatives where community and mental health agencies are combining or looking to get to the next level. And we've consistently been winning some tenders in that space. The Transform product in the UK continues to steadily produce and the Oriel product, the education platform of the Hynix acquisition continues to add users on a quarterly basis. And we're also starting to see impact from the CDS company in Australia as well. We are seeing a little bit of a slower turn on our InTouch product sets. It's still producing, but that quarter that we had in 2022 is long gone at this stage in the game, but we're still seeing impact from there. We're making great progress on our cost side. Innovation Lab, really proud of what that group's done. It's not just QA and development anymore. We got IT operations support. They're doing implementations, consulting, new versions of product updates and so forth. They're all starting to go through there. So we're there. We still think there's room to expand across geographies. We're starting to see some work in that realm, especially in the Canadian marketplace with some of the in-touch product sets. and we're still seeing growth on our products across the board. So we're happy with the way that's going. Traditionally Q3 is a slower quarter for us, mainly because it's hard to get services over the finish line. I think we're doing okay so far, but it is pretty hard to get government agencies to do the work in the quarter. So we always worry about this quarter, but we're continuing to progress it. On the acquisitions side, We're still seeing deal flow. We've been cautious in that regard. There were a couple of scenarios that we didn't do because we didn't like the way they turned out, but we do have stuff in the works and we continue to work those areas. We're still sitting on a significant amount of cash. I think we saw our balance go close to 23 million in the quarter. Note the accounts receivable amount in our balance sheet. We expect that number to continue to go up as we continue to progress through through our deals and through our business model. So we're happy with what we're doing. I think if you take cash and look at our evaluation, I think we're at like a 90 million enterprise value based company right now. And we expect to continue to add cash and AR and continue to grow on those lines. So we're going to just keep executing the plan and keep doing what we're doing. And we're open for any questions.