Vitalhub Corp.

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 CDAR 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 CDAR filings. With that, I will hand the call over to our CFO, Brian Gothenburg, to go over financial highlights for the quarter. Over to you, Brian.

Thanks, Christian. Good morning, everyone. Thank you for joining the call today. We are pleased to report results for the first quarter of 2025. For the three months ended March, we added $1.8 million of net new organic annual recurring revenue and delivered adjusted EBITDA margins of 26%. We are happy with these results. We are steadily building scale in terms of revenue and cash generation. Our cash balance at the end of March was $91 million with no debt. I will now provide more detail on our first quarter operating performance. Our annual recurring revenue was $73.7 million 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 $21.7 million, an increase of 42% -over-year. Recurring revenue, or term license maintenance and support statement, was $18.3 million, or 85% of revenues. This compared to $12.5 million, or 82% in the prior year period. Compared to our license revenue was $200,000 in the quarter, an increase from $100,000 in the prior year period. Our services, hardware, and other revenue was $3.1 million in the quarter, an increase of 19% -over-year. Our gross margin was 80% of revenue as compared to 81% in the prior year period. Debt income before taxes was $1.5 million compared to $2 million in the prior year period. Adjusted EBITDA for the quarter was $5.6 million, or 26% of revenues, compared to $4 million, or 27% in the prior year period. Turning to the balance sheet, and as previously mentioned, as of March 31, 2025, we had cash on hand of $91.2 million. We have no debt currently, and have borrowing capacity of up to $65 million. In the first quarter, we completed a board deal financing for a total net proceeds of approximately $32 million. With our stable quarterly cash generation, we continue to build capacity for M&A. With that, I'd like to hand the call over to Dan for an update on the business.

Thanks, Brian. I think we only met five weeks ago, so in terms of changes, we're probably talking about minimal, but we'll talk about the first quarter resides and talk a little bit about induction and an M&A update going forward in terms of what we see in terms of the marketplace. But yeah, we're happy with the quarter results. It's as we anticipated going forward, we hit the mark on our guidance in respect to ARR with $1.8 million, and we're progressively working on synergistic value with both Strata and MedCurrent, and both of those are proceeding, and both of those contributed to the quarter. We are making some progress on our cost rationalization of both those organizations, but still have a fair amount of work to go in respect to that. So we continue to work forward. We're very happy with those acquisitions. Both of those, I think, are in a sweet spot of where healthcare is today with referral management being a very important aspect of where things are going on, and MedCurrent is right in that area of referral management in terms of imaging referrals and how that works in the whole ecosystem. Both of those organizations have footprints internationally, 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 happy with those results. We continue to move forward into the next quarter, and we think we're in a 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 we expect the process to continue to moving. I think we will probably close that transaction in early July or end of June, somewhere in there in the timeframe. I think we gave a little bit of later guidance with that, but I think this is where we're seeing things moving in the proper direction for that. Again, I think we explained the induction acquisition for us is mainly focused on that Zesty solution. It's an entry point into the ecosystem with a patient portal. It's a very key engagement, a key component of a patient engagement platform, and we see synergistic value 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 value in its ecosystem. They have an 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 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 the end of the year. So that's the main ingredient we like about the Zesty product. In terms of M&A, we're really busy. We're seeing some stuff going on both Canada, the UK, and Australia and abroad, and we're working small and some pretty significant acquisitions in the framework. So we expect in the near future, depending on how things are going to be, we'll announce some more transactions and we continue to move on that as our business model would suggest. So we're excited about how things are moving along and we keep going. I will like to turn things over to Christian, see if there's any questions at all.

Perfect. Thanks, Dan. We'll now open up the line to questions from analysts. Again, please press star one or use the raise hand function if you'd like to ask a question. Today's first question comes from Gavin Fairweather of Cormark Securities. Gavin, your line is open.

Oh, hey, thanks for taking my questions and congrats on a strong quarter. Maybe just to start, I noticed the quote in the press release around M&A valuations on smaller deals starting to improve. Maybe, Dan, you could just touch on the deal environment, elaborate on what you're seeing, maybe both on the smaller end and then as well as the bigger transactions.

We're seeing some smaller companies that are in a potential distress mode. There's not much capital roaming around and the owners are looking for alternatives to do that. We're seeing that on some of the bigger deals too where they're not getting much capital and they're making transactions. Yeah, so depending on those environments, I think the valuations would be reflected accordingly. With that being said, we're still seeing for some larger deals that are performing well and got good upside portfolio, it still is attracting the proper buyers and valuations 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 a little bit of on the smaller side, some of those transactions struggling a little bit more and we're in a better position to get them.

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 originally and then also any change in the environment at the NHS?

Yeah, I think in the quarter we had, we continue to see increased in the user counts on both the Oriole platform on HighCom and the workforce management system as well as the TREAT platform in Nova Scotia. So quarter over quarter the user counts continue to grow in both those quarters. So we continue to see value that gets corresponded with those two products. We did see 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 it has in the past. I don't think that's any indication of stuff. It's just the way things are moving and there's still a significant amount of TREAT deals in the pipeline that we're working on. We did see some really good contribution from MedCurrent in the quarter. So we did see a bunch of transactions in the NHS that did correspond with that. So it's really the mix. And again, we did see a little stuff from all the other platforms are contributing in some ways. We, you know, we in terms of the NHS, that's still early days of what's going on. We do anticipate changes going there. We know that the ICBs are going to be reduced and going into a regional based group. We think that could potentially help us because, you know, as 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 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 going to be available. Our concern is just the mix up of the of the new structure and how it's all going to 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 demand for the products and there's, you know, there's still people finding ways to get things done. But, you know, we are in 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 the end of the day, they're still looking for these solutions and we're in the mix of it.

I appreciate that, Kaller. 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 comes into the fold, I guess, late in Q2 or Q3. You're going to be pushing up on being a bit over $100 million company. Maybe you can just discuss kind of the organizational structure as it is now, how you're thinking about evolving it further over time, given the bigger breadth of the company and any tweaks that you need to make. And then whether you have enough resources, you know, looking at M&A and governance, those types of things.

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 governance, you know, privacy team that's been put together over time. We have a centralized operations group that manages all the software and manages all the integrations of the company. So I think we are set up to do that. You know, will we do this as quick as we did before? It depends how we're backing up the transactions and how we're doing, but we're definitely getting quicker at integrating the companies. Yeah, 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 the team is ready to go. We do have an integration plan ready to go for induction. We've had time to build it and we've got to, I think we do got some ideas of the changes that we want to make. Although we need to ratify that once we get in there and, you know, see the operations a little bit more in depth, but we think we do got a pretty good idea of some of the things that have to happen there.

Thanks so much, I'll pass the line.

Thanks, Gavin. The next question today comes from Doug Taylor of Canaccord Genuity. Doug, your line is open.

Yeah, thank you. Good morning. I just want to 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 got a plan about the integration roadmap there, 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 profitability as it gets folded into the Vital Hub ecosystem in the coming months.

Yeah, I think we got some work to do there for sure. And I think if you read the statements and so forth that we put in for the regulatory work and that stuff, we do mention that there will be a 15 to 25% staff reduction in the organization. And we are going to proceed to execute that plan pretty quickly in regard to that plan 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 completed. So a significant amount of those costs go away with being a public entity. But we do think there's more synergies with respect to G&A and other aspects in the technology groups that can be unlocked with those organizations in a pretty timely fashion. And that's what our goal is.

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&A program of getting assets to a corporate 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 induction as well?

I

don't think so,

Doug. You never know until you actually go in there and see what's going on and how things are put together. Although we've done a significant amount of due diligence there on where it goes. And we would have completed the transaction if we didn't think we could do that. So we're off and running to execute the plan. You never know until you do it. But I do think we wouldn't have did it

if we didn't think we couldn't do it.

Okay.

And then moving beyond or I guess excluding the induction impact in the coming months, you say that strata and MedCurrent integration pace, I mean that's been a positive surprise here for the last couple 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 frame up what you think remains on the table there as we think about the margin ramp into Q2 and the second half of this year excluding induction?

Yeah,

you know, it's hard to say in terms of what the speed of that will be. But we progressively are doing synergies, just to value with our salespeople. And we're looking at, we are ramping up teams in Sri Lanka for both of those organizations. And we're consolidating our GNA profiles and it still hasn't been completed. So yeah, there's still a significant amount of work. I'd hate to put a dollar figure on that. But there's still work to be done there. Okay, I won't push it further then.

Thank you. I'll pass the line.

Thanks Doug. The next question comes from David Kwan of TD Securities. David, your line is open.

Hi guys. I'm curious if you're seeing much impact given what's going on from an aqua perspective trade wars, considering the potential recession here, impacting what you're seeing in either the M&A environments, or maybe customer purchasing behavior?

Yeah, I don't believe that trade war. We're talking about software services business for government funded base healthcare. There's no goods insert 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's no impact from that.

And how about from an M&A perspective? Are you seeing just more tangentially just the potential impact of a slowing economy because of what's going on? Yeah, I

think we've seen this trend since after the COVID boom, right? I do think the induction is an example of things. You got an organization there that was built during the boom and it moved along and raised a significant amount of capital at a high valuation and had aspirations to grow. And in a pretty serious way and couldn't get there to the degree that it thought it could from an investment perspective and changed hands and so forth. So you get a bit of a legacy in terms of your mindset and how you work and you get yourself into some challenges that go along with it. And you're put in a position that you have to actually sell that evaluation that you probably didn't want to, but you really got no choice. So, you know, it's an example of I think what can happen in the tech world. I don't think that is insular to the healthcare tech world. I think we see that in a lot of the SaaS based products that maybe overdid it during that boom and have lasted till now, but are now in a position where they can't actually go any further and need to look for a strategic scenario to keep going.

Thanks, thanks, Dan. And I guess what's happened with induction maybe is somewhat similar to some of the other opportunities you're seeing from an M&A standpoint, much to the smaller players. 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. Yeah, you know,

I don't think you, I think when you get scenarios like that, it turns away competition more than it. I think competition you're going to see in more of the healthier companies. You know, these other companies, like we're, we're in a unique position 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.

That makes sense. One last question for me. Just in terms of the bandwidth, I know you kind of touched on in terms of your team and adding in certain parts of it to help it with the integration, I think in 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 a couple of kind of strata type deals, like how many of those could you possibly do this year?

We've got to make sure big and small going on and some of them are, you know, in our world, like pretty are significant, right? So we're, we're looking at it from both sides. But yeah, I think we can do two, three, four deals still this year.

That's great. Thank you.

Thanks, David. Next question comes from Kevin Krishnarathne of Scotia Capital. Kevin, your line is open.

Hello, good morning. Hey guys, hey, thanks. Look, congrats on a good quarter. The ARR looks solid, I think, for a Q1, one of the higher marks for a Q1. I'm wondering, you know, if you can talk about what you're seeing so far. In Q2, anything kind of popping out, it's, you know, a little bit over a month here. Do we expect the same sort of seasonality, you know, a lower organic figure in Q2? I think that's normally been the case. Just can you just talk about sort of what you're seeing right now?

Yeah,

you know, our, our indications suggest that Q2 should, should still be okay and hitting the mark and in terms of what our rationale is. So, yeah, we, we feel, you know, we feel okay with that in respect to, into some of the transactions that are in play in respect to that. And, you know, from our perspective, it's still, it's still in play.

And, you know, outside of the ARR, your services revenue line continues to be strong around 3 million bucks. You need to just remind us again, you know, what's, what's being booked in there and how you see that, that line, you know, sort of trending over the remainder of the year.

I still think we should be like between the two and a half, three million mark on a go for our basis. We're sitting on a, you know, we're sitting on a significant amount of services backlog, primarily in the, the treat world and in Canada. We continue to get work from Nova Scotia and Solgen and they continue to look for, look for enhancements and are willing 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 a while with those two organizations. And, you know, every time we close a transaction and we do get services revenue. So there is a still significant backlog of services work. So yeah, it could dip in, in some seasonality, I think in the, the summer timeframe. Yeah, that seems to be a challenge for us on the services world where we have a lot of holidays or our customers have a lot of holidays 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 Q1 and Q2 are good services numbers. For us Q3 and Q4 become a little bit more challenging. So that's typically how the trends work and in the seasonality of that in our, in our world.

Got it. Okay. I another question also on the induction. You know, it hasn't closed yet. So maybe you can't comment too much. You talked about 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 going to run that down? Are you going to try to do some investment there to keep it going? Just, you know, any high level thoughts you can give us there?

Yeah, I think we're going to look at that as a separate platform. We don't actually view that as software ARR. We're not going to 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 what happened is the NHS said, okay, you guys are on your own now. You need to go by yourself. 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 price points went down and they had to stay in a usage model to compete. But we are seeing, and they were seeing that there is some pressure on those from things like Zoom and in Teams, and we expect that pressure to continue on those things. However, it does seem to be holding up on its own, holding up in terms of what it's producing and what it's doing. But there is, you know, again, we've gone into this with our eyes open in respect to that platform. And, and we know the challenges that that could come with it in terms of growth and sustaining its ARR. But yeah, we're going to list that as a separate platform and look at it from its separate world.

Okay, that's super helpful. Maybe just the last small one for Brian. The gross margin kind of dipped, you know, from Q4 to Q1 just slightly. I'm wondering what drove that dynamic? Is that maybe the full quarter inclusion of strata and med current? Or, you know, what were you seeing there? Anything to note? And where do you see gross margins sort of trending out over the year?

No, beyond me, Brian.

No, I think you're correct. It is primarily from the from the two acquisitions. We still got to get those costs in line. And we will we want to get them obviously north of that 80% going forward. Cool.

Thanks a lot. I'll pass the line. Thank you,

guys. The next question comes from Michael Freeman of Raymond James. Michael, your line is open. Good

morning, everyone. Have you got me? Hey, Michael, how are you? Things are good. Thanks for taking my question. Congrats on a strong quarter. I'm going to ask you about a few things about induction as well. You sort of alluded to this that, you know, how you are going to be separating revenue within induction between ARR and not. So based on you mentioning that the AttendAnywhere platform, you're not viewing as ARR, you know, should we be 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 revenue should be considered ARR?

Yeah, probably. Yeah, based on on where that is for. Yeah.

OK, all right. Now on this this OEM deal with with Cerner in the UK marketplace, you know, I wonder if you can confirm that this relationship will continue while while induction is under your roof. And if you view, you know, if you view that as a major benefit to this to this transaction, how you how you might plan to leverage it or expand it into the future?

Yeah, we know. It was a big part of the transaction. So, of course, we did our due diligence on that to ensure that I do believe it will continue. They have a significant investment, but both parties to get a very, very tight integration of Zesty into Cerner and Zesty has a very good footprint in the Cerner world in terms of understanding how that works and in how how that will be integrated into a front end portal. So there's a very tight integration that works there that would be very challenging for Cerner to look for an alternative solution. 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 Zesty in terms of doing that. And there's a very good footprint of users that use it on the Cerner platform and are happy with that platform. So we expect that to continue. We, you know, we do believe there's some opportunity in other markets with Cerner, or at least we're hoping there is, although we're not 100% sure, but it definitely can hurt to have a strong partnership with Cerner in the UK and see what can be done to try to expand that in different ways in other markets and we'll for sure try to accomplish that in other markets once the transaction closes.

Okay, thanks, Dan. And when you talk about other markets, are you thinking about other geographies or other sort of software areas?

I think it's a little bit of both. I think what, when we integrate Zesty into, you know, are things like induction in MyPathway into Cerner accounts. So, you know, we already have in touch in MyPathway working in Cerner accounts where Zesty has done some work. So we just need to connect that plumbing up to those accounts 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?

Yeah, I think that makes sense. I thought I was talking in circles, but yeah. No, no, you nailed it. Last question. It looked like we sort of had set a new high watermark for R&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 irregularly high quarter?

I think a little higher, you know, with any acquisition where we take on people, we end up with a little bit higher R&D to start off with and then we start trying to get that down as we get synergies going forward.

Okay, okay. So maybe fourth quarter level would be something we should be looking at going forward?

Absolutely. I think it would be very strifeful.

Okay, thank you. That's all from me. I'll pass it along.

Michael, the next question comes from Gabriel Leung of Beacon Securities. Gabriel, your line is open.

Good morning and thanks for taking my questions. I just want to dig a little bit further into 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 the currency gains. But if I were to normalize for that, it looks like EBITDA margins were down from Q4 and from Q1 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 reflect the larger scale of your business now?

It's primarily due to the timing of the acquisitions, we just closed those acquisitions later in the quarter last year. And then we are, as we go forward, we will add to resources to make sure that the business is scalable.

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 a relation to the Zesty digital front door, is that compatible with the Canadian healthcare system?

When you're talking about IT, are you talking about M&A on the M&A side or just on the sales side?

Organic sales opportunities.

Yeah, I think our tree product that we go to product with is still going. I do think in Ontario and other areas, the market has woken up since post-COVID. We're seeing a lot of initiatives that started prior to COVID, at least Ontario, they set up a group called Ontario Health right at the beginning of, I think, the Ford world and then COVID hit and those guys were so busy with COVID that really there was no new initiatives that were going on in that period. But we are seeing, you know, new initiatives that are moving through that and we are seeing funding that continues to go on in programs that the government is giving to the hospitals and the groups, giving them funding to purchase software. We are still seeing more initiatives that are going through those systems. We're also starting to see some of the early epic and certiorum 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 needed and they're starting to go back to work on looking at peripheral based solutions. So we're still seeing deals flowing in Canada and, you know, it's still moving, but I still like to caution, even, you know, even to our peers. You are talking about Canada, it is segmented by the province, it is still a, it's not the biggest ham in the world. So you still get challenges in terms of your growth in this marketplace and but we do see some increased stuff. In terms of Zesty, we didn't bank 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 CERNR 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 TREAT 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 do see strategic value there.

That's great. Thank you for the feedback and congrats on all the progress.

Yeah. Thank you very much, Gabriel. There are no further questions at this time. I'll hand the call back to you, Dan, for any closing remarks.

Yeah, not, you know, again, we just met five weeks ago. I think the questions were pretty comprehensive. You know, the next time we meet, we'll have induction closed and be able to get better light on those numbers, I think, than we're getting right now, but we are a little bit constrained in respect to that. So we're looking forward to moving on and, you know, time's flying and someone said you're already into Q2, which we are. But we look again to meet with the group, I guess, in the August timeframe. 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 always available to answer questions. And thanks, everyone.

Yes, that's great, Dan. Thank you. This now concludes today's conference call. Thank you all for joining.