Vitalhub Corp.

Good morning everyone, and thank you for joining us for our 2024 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 the applicable security laws, including, among others, statements concerning the company's 2022 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 MDNA, which is available on cedarplus.com and our website. With that, I will hand over the call to our CFO, Mr. Brian Goffenberg, 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're pleased to present our financial results for the second quarter of 2024. This quarter and indeed the first half of the year reflect the substantial progress we've made across all facets of our business. Our robust performance underscores the successful implementation of our strategic initiatives leading to significant growth and operational efficiency. This success is anchored in the expansion of our healthcare product offerings, deeper integration within healthcare systems, and the broadening of our global presence. Our focused efforts have yielded impressive results, particularly in revenue growth, annual recurring revenue, or ARR, gross profits, net income, and cash generation. Today, I'm excited to share with you the financial milestones we achieved in Q2 and our highlights for the year to date. Revenue for Q2 2024 totaled 16.2 million compared to 13.1 million in Q2-23, an increase of 24% year-over-year. Total revenue for the six months ended June 30th, 2024 was 31.5 million compared to 25.7 million for the same period in 2023, an increase of 23%. Revenue from term licenses, maintenance, and support in Q2-24 was 13 million compared to 10.2 million in Q2-2023. an increase of 28%. Revenue from term licenses, maintenance and support for the first half of 2024 was 25.5 million compared to 20.2 million in the same period in 2023, an increase of 26%. This positive increase reflects the impact of organic revenue growth in the company's suite of products, coupled with revenue derived from acquisitions completed during the year. Term licenses, maintenance and support represent an important strategic source of revenue, given its predictability and recurring nature, and represents 80% of revenues in Q2 2024 compared to 78% in Q2 2023. Revenue from perpetual licenses in Q2 2024 was $22,000 compared to $255,000 in Q2 2023, a decrease of 91%, and revenues from perpetual licenses for the first half of 2024 was $144,000 compared to $565,000 in the same period, 2023, a decrease of 75%. Perpetual software licenses depend on the type of product sold. Revenue from professional services and hardware in Q2 24 totaled 3.2 million compared to 2.6 million in Q2 23, an increase of 21%. Professional services and hardware revenue can vary depending on the timing of hardware deliveries and the progression of customer projects. Revenue from professional services and hardware for the first half of 2024 was $5.8 million compared to $4.9 million for the same period in 2023, an increase of 19%. The increase during this period is primarily attributable to the deployment of ongoing customer projects, deliveries of hardware, and additional service revenue from new subsidiaries. Annual recurring revenue, or ARR, which we formally refer to as annual contract value, totaled $51.3 million as of June 30, 2024, compared to $41 million at June 30, 2023, representing a year-over-year increase of 25%. The increase in ARR was primarily driven by organic growth of 6.2 million, or 16%, and acquisition growth of 3.3 million, or 8%. 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 Q2-24 was 81%, consistent with the same period last year, The gross margin for the first half of 2024 was also 81%, unchanged from the equivalent period in 2023. Operating expenses in Q2 2024 totaled $9.8 million, compared to $8.2 million in Q2 2023, an increase of 20%. And operating expenses for the first half of 2024 totaled $18.6 million, compared to $15.9 million in the same period last year, an increase of 17%. The increase is due to higher sales and marketing expenses for conferences and exhibitions and R&D expenses from acquisitions completed in 2024 and previous years. However, it is important to note that we continue to experience significant reductions in operating expenses as a percentage of revenue, 74.9% of revenue in Q224 versus 77.4% in Q223, demonstrating our ability to achieve operating cost synergies. Net income before income taxes in Q2 24 was $1.4 million, compared to a net income of $742,000 in the equivalent prior period, an increase of 86% year-over-year. Net income before income taxes for the first half of 24 was $3.4 million, compared to $1.5 million in the same period last year, an increase of 183%. The increase for the quarter and the year-to-date period was primarily attributable to the significant increase in revenues from organic growth and acquisitions coupled with ongoing efforts to manage costs and gain operating cost synergies. Net loss after tax in Q2-24 was $335,000 compared to net income of $624,000 in Q2-23, and net income for the first half of 24 was $983,000 compared to $784,000 in the same period in 2023, an increase of 25%. EBITDA in Q2-24 was $1.97 million compared to $1.98 million in Q2 2023. For the first half of 2024, EBITDA was 5.1 million compared to 4 million for the same period in 2023, an increase of 28%. Adjusted EBITDA in Q2 2024 was 4.2 million or 26% of revenue compared to 3 million or 23% of revenue in Q2 2023, an increase of 41%. The increase was primarily attributable to higher recurring revenues and ongoing efforts to manage costs and gain operating cost synergies. For the first half of 2024, adjusted EBITDA was 8.2 million or 26% of revenue compared to 5.9 million or 23% of revenue from the same period of 2023, an increase of 40%. Cash flow from operations before changes in working capital for the first half of 2024 was 5.1 million compared to 4.1 million for the same period last year. Cash on hand as of June 30th, 2024, was 71.6 million compared to 33.5 million at the end of 2023. This increase is primarily due to a board deal offering approximately 37 million in net proceeds, plus cash generated from operations less paid for acquisitions. With that, I'd like to hand the call over to Dan for an update on the business.

Thanks, Brian. It's the summer months. I don't have a ton to say, and hopefully we'll get some questions that we'll be able to flesh out the quarter and give everybody some outlooks in terms of what we're looking for. But we continue to execute on the business model as anticipated. The majority of our revenue is recurring, and we have a huge backlog of services revenue to fill that backlog, which represents the majority of what we do from a revenue perspective. do that. So all of our revenue indicators and most of our financial indicators have all gone in the right direction as anticipated, maybe excluding professional license, which is a little bit by design as we've moved a bunch of those deals into more of the recurring base business model on a gradual basis. So we continue to do that. We continue to get contribution from all of our products. Again, the treat product in Canada, the Shrewd Transforming Solutions product in the UK, and the Oriel project in the UK continue to be the brighter sign. But we are getting contributions from everywhere. Our Nova Scotia project continues to ramp up, and they continue to give us more work, and they're continuing to add users on a continuous basis as well. So all those are there. UK continues to be a prime source of where our revenue is coming from and is where we've done a lot of our acquisitions. We still see pipeline there. We still continue to do things, although there is a new government that is in place. So we wait for new initiatives and new items. So far, everything verbally or what we've been hearing, they plan to continue to invest in the NHS and the digitization efforts. and we think we're positioned there to continue to do that. So we continue to execute on moving our resources to our innovation lab in Fumble. We have some new initiatives now with the BookWise in the premier acquisitions and soon to be the MedCurrent acquisition to do that. So we continue to optimize our cost base. And we continue to really work hard on processes. It's really a big part of what we're trying to do. We're getting close to 470 employees. They're hitting the 500 mark that are spread across. So processes and optimization and data are key elements that we use to run our company. So we invest in those software products and those tools that are helping our organizations in terms of optimization. So we are looking to keep beefing that up as much as possible and adding appropriate outside senior personnel that have had experience scaling up M&A companies before to our senior teams. So we continue to focus on that as much as possible. A little bit about the MedCurrent acquisition. I'm sure there's a lot of questions on that. It won't close until early September and we'll be able to give more fulsome numbers at that point in time when it happens. But we are virtually certain it will close going through those marks. We're very excited about that. It is a unique solution. It's a new area that we're not in, in terms of the imaging world where there's a ton of uh patient flow based initiatives that uh that come out of there so uh patient flow uh is something big it's something unique in terms of it does have an ai component on it uh and it has been proven in multiple international jurisdictions the team's done a good job of getting the footprint and getting the some pretty high profile um healthcare organizations onto the platform that are using it that are showing the results, which should be extremely referenceable. And there are national funding initiatives on several jurisdictions to get broader expansion for those particular products, which is really what that earn out is all about is the ability for this type of product to potentially grow pretty fast and robust. I don't think it moves as quick as everyone thinks in healthcare, so we ask everybody to be patient in that respect with it. The earn out is situated in a way that is very protective of making sure that Vital Hub still hits all its metrics in terms of acquisitions and still hits all its metrics in terms of profitability and organic growth. So it is structured in a way that hopefully a win-win for both organizations, but we're definitely protected on that structure on a go-forward basis. We expect to see some good things with that product, but time will tell after we get it. And that's what I have to talk about today. We'll take any questions.