Vitalhub Corp.

Good morning, everyone, and thank you for joining Vital Hub's 2023 third 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 are 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 and our website. With that, I will hand over the call to our CFO, Mr. Brian Gothenberg, to go over our financial highlights for the quarter. Please go ahead, Brian.

Thank you both. Good morning, everybody, and thank you for taking the time to join us this morning. Our well-established business foundation remains a strong driver of robust financial performance. In Q3, Vital Hub delivered another impressive quarter, demonstrating consistent growth in revenues, gross profits, net income, and cash generation. This success can be attributed to our unwavering commitment to expanding our healthcare product portfolio. further integrating into healthcare networks and broadening our geographical reach. As a result, we achieved a significant increase in our annual recurring revenue, marking 38% growth compared to the same period last year. We are very pleased with our strong presence in the market as our products consistently provide significant value to our customers. The future of our company holds tremendous promise and we are very excited about the opportunities we see in our space. With that in mind, I will now proceed to present the financial highlights for this quarter. Total revenue for Q3 23 was 13.2 million compared to 9.8 million in Q3 22, an increase of 35% year over year. Total revenue for the nine months ended September 30th 23 was 38.9 million compared to 28.7 million for the same period in 2022, an increase of 36%. Revenue from term licenses maintenance and support in Q3-23 was 10.8 million compared to 7.7 million in Q3-22, an increase of 41%. Revenue from term license maintenance and support for the nine months of 2023 was 31 million compared to 20.6 million for the first nine months of 2022, an increase of 50%. This increase reflects the impact of continued organic revenue growth in the company's suite of products, coupled with the revenue derived from acquisitions completed during the first quarter of 23 and previous years. Revenue from perpetual licenses in Q3 23 was 57,858 compared to 204,233 in Q3 22, a decrease of 72%. Revenue from perpetual licenses for the first nine months of 2023 was 623,314 compared to 3.1 million in the same period of 2022, a decrease of 80%. Decrease is primarily attributable to the timing of deliveries of the company's in-touch products. In addition to the unusual volume of high-margin perpetual license sales of over 2.7 million in the first quarter of 2022. As a reminder, perpetual software licenses are dependent on the type of product sold. Revenue from professional services and hardware in 2023 totaled $2.3 million compared to $1.9 million in 2023, an increase of 22%. Revenue from professional services and hardware for the first nine months of 2023 was $7.3 million compared to $4.9 million for the same period in 2022, an increase of 47%. The increase is primarily attributable to deployment of the ongoing customer projects and additional services revenues from new subsidiaries. Annual recurring revenue, or ARR, of which we formally refer to as annual contract value, totaled $42.6 million as of September 30, 2023, compared to $31 million at September 30, 2022, an increase of 38%. 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 Q3 23 was 82% compared to 80% for the same period last year. The increase in gross margin in Q3 23 was primarily due due to an increase in high maintenance and support revenues in the quarter, coupled with an ongoing effort to reduce costs and gain operating synergies. Gross margin on total revenue for the first nine months of 2023 was 81% compared to 82% in the same period of 2022. Decrease in the year-to-date gross margins were due to the unusual volume of high margin perpetual license revenue in Q1 2022 compared to this year, primarily. Operating expenses in Q3 2023 totaled $7.9 million compared to $6.1 million in Q3 2022, an increase of 29%. Operating expenses for the first nine months of 2023 totaled $23.7 million compared to $17.8 million the same period last year, an increase of 33%. The increase is due to high sales and marketing expenses for conferences and exhibitions and R&D expenses for acquisitions completed in 2023 and previous years. However, it is important to note that we continue to experience significant reductions in operating expenses as a percentage of revenue as a result of increasing operating cost synergies, 59.5% in Q3 2022 compared to 62.4% in Q3 2022. Net income before taxes in Q3 2023 was 1.8 million compared to a net income of 409,498,000 in the prior period, an increase of 78% year over year. Net income before income taxes for the first nine months of 2023 was 3.3 million compared to 2 million in the same period last year, an increase of 41% year over year. Net income after tax in Q3 23 was 2.8 million compared to 41,000 in Q3 22, an increase of 6,833%. Excluding a one-time tax reversal, Q3 23 net income was 1.8 million, representing 4 cents fully diluted per share. Net income for the first nine months was 3.6 million compared to 1.6 million in the same period in 2022, an increase of 133%. EBITDA in Q3-23 was 2.9 million compared to 1.4 million in Q3-22, an increase of 111%. For the first nine months of 2023, the EBITDA was 6.9 million compared to 4.8 million for the same period in 2022, an increase of 44%. Adjusted EBITDA in Q3-23 was 3.4 million, or 26% of revenues. compared to 2.1 million or 22% of revenues in Q3 2022, an increase of 59%. The increase was primarily attributable to the high recurring revenues of 10.8 million in Q3 2023, as compared to 7.6 million in Q3 2022, coupled with an ongoing effort to reduce costs and gain operating cost synergies. For the first nine months of 2023, adjusted EBITDA was 9.3 million or 24% of revenues, compared to 7.1 million or 25% of revenues for the same period in 2022, an increase of 32%. The increase was primarily attributable to the high recurring revenues of 31 million for the nine months ended September 30th, 2023, as compared to 20.6 million in the equivalent period in prior year, coupled with ongoing efforts to reduce costs and gain operating synergies. Cash flow from operations before changes in working capital for the first nine months of 2023 was 7.6 million, 8.6 million compared to 5.3 million for the same period last year. Cash provided by operating activities for the first nine months of 2023 was 15.7 million compared to 8 million for the same period last year. Cash on hand at September 30th, 2023 was 29.8 million compared to 17.4 million at the end of 22. In comparison to Q2 23, cash on hand increased by 6.9 million. With that, I'd like to hand the call over to Dan for an update on the business.

Thank you, Brian. I don't have time to say. We'll just highlight a few points and get some questions answered. But I think the financials and Brian's explanation are pretty self-explanatory and speak for themselves. We're proud of the quarter and we're proud of what we've done to date. We're starting to see the fruits of a well thought out business plan that we've been articulating to our investor base over the last five years and that continues to come to fruition. And we just keep thinking the foundation keeps getting stronger and stronger on a quarter over quarter basis. So we're proud of that. And it's all led by our high recurring revenue stream of, you know, gets 42 million. And we continue to add ARR between 800 and 100 and 1.5 million per quarter. We were on the higher end in this quarter, which is typically not what we do in a seasonally quarter in the summer, but it did happen. And we still see velocity in our pipeline, primarily driven by the transfer warm treat solution and the HICOM L'Oreal solution has been, but all of the divisions continue to contribute and we are still seeing, you know, impact from all of them. So we are still seeing growth. We've got visibility into growth still, and we continue to do that. You know, summertime is typically a little bit of a lower spend on sales and marketing, but for the most part, our cost reductions still continues to come in place and We continue to work on using our Colombo software, our Colombo base as effectively as we can. The nice part about the Colombo base, it's really evolved to much more than just an offshore development group. The innovation and the experience of that team continues to grow. I think we're up to 130 people in that group yet. A lot of these people have been with us for a while now, and we're really starting to get some really good IP over there. And we're starting to see that in the products themselves from an innovative perspective. So we're starting to look on new initiatives such as AI, other initiatives, add-on products that we can sell to our customer base. And we're really excited by some of the things that we're doing in there. M&A activity, nothing over the finish line, although we are working on some things and we are finally starting to see some movement from some companies that we've been speaking to for a very long time that are finally getting to that point of going there. So we continue to build our war chest. Our cash is up to 30 million. We continue to add cash on a regular basis. We still have the debt facility available to use. And we do want to do M&A and we expect to be doing M&A in the next little while. So we continue to work there in that belief. We're in the budget process right now. We believe we're well positioned for 2024. The product, the platform is stable in terms of what we do, in terms of our business plan. And it just keeps growing with our recurring revenue stream and our base. We're really excited as we move into 2024. And with that, I'll take some questions.