Vitalhub Corp.

Good morning, everyone, and thank you for joining us today for our 2024 third quarter conference call. With me on the call today are Vital Hub CEO Dan Mallow 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. Now, 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 discussion of these risks and uncertainties, please review the forward-looking statements disclosure in the earnings press release as well as in our CEDAR 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 by FRS financial measures. Reconciliations between the two can be found in our CDAR filings. With that, I'll hand the call over to our CFO, Brian Goffenberg, to go over financial highlights for the quarter. Over to you, Brian.

Good morning, everyone, and thank you for joining the call today. We're pleased to report our third quarter results, which highlight our continued momentum, growing our recurring revenue base and operating margin profile. We are driving positive change for healthcare systems and our scale and reputation make us the platform of choice internationally. We are proud of our portfolio and excited to have completed two acquisitions subsequent to the quarter, which are a natural fit to our patient flow suite. In a moment, Dan will discuss these transactions as well as provide a high-level update of the business and outlook. First, I'm excited to share with you the financial milestones we achieved in this quarter. In Q3 24, Total revenue was $16.5 million, an increase of 25% over the prior year period. Terminal license maintenance and support revenue was $13.9 million, an increase of 28% over the prior year period. This segment comprised 84% of total revenue and represents an important strategic source of revenue given its predictability and recurring nature. Perpetual license revenue was $300,000 in the quarter, an increase of 1.5%. over the prior year period. Our services, hardware, and other revenue was 2.3 million, a decrease of 1% year over year. The slight decrease is primarily attributable to the deployment of new and ongoing customer projects, and the summer quarter is generally slower for services deployment. At the end of Q3 2024, annual recurring revenue was 53.5 million, an increase of 25% over the prior year. On a sequential basis, annual recurring revenue increased 2.2 million, or 4% over June 2024. Organic growth comprised 1.1 million of this increase, or 2%, in line with our expectations and historical trends. In Q3 2024, gross margin was 81% of revenue as compared to 82% in Q3 2023. This is also in line with our expectations and reflective of our model as a software business. Moving down the income statement, net income before taxes was $2.4 million and adjusted EBITDA for the quarter was $4.6 million. We're proud of our Q3 adjusted EBITDA margin of 28%, which is a natural function of our increased recurring software revenue and operating discipline. As at September 30th, 24, we have cash on hand of $81.4 million and no debt. Before passing on the call today, I'll discuss some of the financial metrics associated with with our two acquisitions, which closed post-quarter end. On October the 4th, 2024, we closed the acquisition of Medcurrent for approximately 8.3 million in cash, adding 2.3 million in ARR to our patient flow suite. On October 29, 2024, we closed the acquisition of Strata Health, the largest transaction in our history. Total consideration of 32.3 million included 18.6 million of cash upfront with a balance in shares, This adds $12.3 million of ARR to our patient flow suite. On a pro forma basis, we have over $50 million of cash to deploy and continue to generate cash every quarter. On a pro forma basis, inclusive of the acquisitions of MedCurrent and Strata, our annual recurring revenue is $68 million. This is a substantial base that we're proud of and a key measure of success for us internally at Widener. With that, I'd like to hand the call over to Dan for an update on the business.

Thanks, Brian, and hello, everyone. We're proud of our Q3 or September quarter, and we continue to be busy, and it's done a lot of great things. So scary to say, but we're up over 500 people, and we're closing in on $70 million worth of revenue. We had a great planning session earlier in the month. We had all our UK people, Australia people in town, and We continue to add structure and methods of collaboration more to drive focus and alignment within the acquisition. In terms of growth, our Q results, AR and service work came in as expected, and we feel good heading into the end of the year. Q3 is always an interesting quarter for us, or we're always a little bit worried for it. Government tends to slow down a lot in the Q3 period. but this is two years in a row that we've made it successfully through our Q3, and we're excited that we have enough momentum in the business to be able to support that. Our EHR solutions in Canada continue to be strong. Their deployments in Ontario and Nova Scotia are giving us visibility to recurring revenue. We have a huge backlog of services work from our treat business that will continue all the way through 2025 into 2026. Uh, and we're seeing more, uh, tenders and, and other areas that coming out that we think will be right up the treat, uh, alley in the UK or our patient flow products continue to perform well, especially our shrewd based product. It continues to add into all those areas. And we think those relationships are natural, um, to help promote and upsell the strata and the mid-current businesses as we continue to move. You know, we're seeing regional planning across mental health forms, analytics forms, and cross-selling that creates value and makes our solutions more sticky in those environments. Just a little bit on the acquisitions, and I'm sure we'll get questions afterwards as well, but... The two acquisitions that closed at the end of the quarter, we're excited about. We think they're strategic. And we've really, pardon me, we've really come across some great people as well. There's some exciting, experienced people that we think we're going to add to our team really nicely. Both of these companies we've known for a long time, not just from an M&A perspective, but from a partner perspective and from a professional relationships perspective. So, The integration of this stuff on a personal basis is really going to be easy for us to do. MedCurrent, we announced a lot previously, but it's a great decision support-based, clinical decision support system. And it might take a little bit of time, but we do see a really nice pipeline in that product. And the users that love it on an international basis are liking it. It's a unique solution. It's not competitive, and we're proving viability for it by having sites across an international basis. So we're looking forward to being able to expand that. It's a natural expansion for it. More recently, the strata brings us into the referral management system, a key component of any type of patient flow-based arrangement. we like the strata based solution is being around for a while, but the technology has completely gone through a, uh, uh, rewrite, uh, based scenario over the last four or five years. And it's extremely modern. It's extremely powerful and the users love it. And it does a great job in its marketplace. And it's, um, got great demonstration that it's viable from an international perspective with, uh, implementations in New Zealand, U.S., the U.K., and in Canada. So we like what it does, and we think it's an opportunity for us to open doors for them and for them to open some doors for us. The natural fit in the U.K. marketplace with our patient flow sleeps, and the teams have already worked together previously to now in the field a fair bit, so the natural extension is there to do that. Before I take questions, just a little bit on the financial outlook Brian already mentioned. We still have well over $50 million in cash that's ready to deploy. So as we continue to use our cash, we're generating cash as well. We still have an M&A pipeline that's being active. And we think we're in a great position to be patient, disciplined on our behalf of us and all of our shareholders today. when we add to our platform as much as we can. It's been a fully busy Q4 trying to integrate and working on integrate this. We fully expect that it could take some time to digest these acquisitions. It might be a little bit of a reset on our EBITDA margins, you know, as we continue to move forward over the next few quarters. But, you know, I'd like everyone to know, like, you've seen how we integrate You've seen how we operate. We're happy with these two acquisitions, and we thought they were important to get done, and we're already in action mode to maintain those margins and those growth metrics that everyone's being accustomed to. So we're very cost disciplined. Cash generation is the core of what we do. So we ultimately value free cash flow as an important metric, and we want to keep working forward to scale that up to get ourselves to a self-sustaining M&A strategy that we all have the goal of becoming into this. So we like to think we're getting there. So we're making ourselves a great financial strategic buyer and a choice internationally. And with that, we're happy to take some questions.