Vitalhub Corp.

O'Brien Goffenberg. After our prepared remarks, we will open up the line to questions from analysts. Please press star 1 or use the raise hand function to indicate that you would like to ask a question. 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'll hand the call over to Brian to go over financial highlights for the quarter. Over to you, Brian.

Thank you, Christian. Good morning, everyone, and thank you for joining the call today. We are pleased to report the results for the second quarter of 2026. Vitalab reached a new milestone this quarter, exceeding $100 million of annual recurring revenue. We closed June at $101.5 million, representing 10% organic growth over the prior year. Adjusted EBITDA margin continued to increase sequentially at 26% in the second quarter. Some of the key financial highlights for the quarter are as follows. We report a total revenue of $31.7 million, an increase of 33% year over year. Recurring revenue or term license maintenance and support segment was $24.5 million or 77% of total revenue. Virtual care term license revenue was $2.3 million. Perpetual license revenue was $800,000. Services, hardware, and other revenue was $4.1 million compared to $2.7 million in the prior year period. Our gross margin was 79% of revenue compared to 81% in the prior year period. Adjusted EBITDA for the quarter was $8.2 million. Thank you for joining us. We had strong cash conversion this quarter. Our cash balance increased by over $15 million this quarter, benefiting from collection activity and continued platform integration. Subsequent to quarter end, we completed the acquisition of Buddy Healthcare. And post the transaction, we continue to have over $120 million of cash that we're ready to deploy on our M&A strategy. as well with the addition of Buddy Healthcare pro forma ARR as of June 30th, 2026 would have been approximately $106 million. With that, I'd like to have the call over to Dan for an update on the business.

Thanks everyone. Welcome today. Just on reflecting back, it's exciting to see us get over $100 million of recurring. And I know our people and our staff, we're really excited about that. I think when we started this eight, nine years ago, that was a goal and it's achieved. So just take another one off of the bucket list and we continue to move forward. Just a little bit about the buddy acquisition just before I get into some of the other things. We're really excited about that. It's an organization that we've been speaking to for four years. The technology is really strong. They're a group that has entered into the UK with it, but it gives us a really strong digital backdoor solution. So we already have A very good digital front door solution with Zesty that is moving through our markets. And our customers have been asking us to say, that's good that you can get us into the hospital, into the setting, but what about after we leave? We want to continue to communicate with you. Our plans will be to integrate that with that backdoor solution. It also fits in nice with the Strata solution, which does the discharge process. And now we've got a way to communicate with the patients as we go through that discharge. So we expect, you know, once we get the technology all integrated and so forth, that that will be a good addition into our cross-cell methodology. So it's good people, great technologies, and we're excited about that. to add that piece onto it. In respect to the quarter, in terms of numbers, you see the recurring, recognized recurring growth. Services revenue a little bit, you know, a little bit behind in previous quarters, but it still reflects that. Services revenue is always tough to, you know, nail at 100%. I think we had a $5 million quarter a couple quarters ago, and down here it comes and adds and flows. Just based on revenue recognition and how that gets delivered to the customer. So we're happy with that. And we were happy with the way the virtual care renewal process came through. About 85 to 90% of that anywhere renewal process comes at the end of March. And as you can see that they are held up pretty hard for that so we're we're contribution came from really all of our products but mainly from the Zesty and the Q2 care coordination products the Strata and Novari product we're starting to of course Novari continues to move through Canada but what we're really excited about is um the momentum that's starting to get a little bit in our UK marketplaces and a little bit in other markets. But it's a unique solution and we're excited and think it has great opportunity to do that. The revenue number was offset by still some challenges with our product and the FCC, that's the system control centers with the ICPs. and the FTP and the Palantir based solutions along with the mergers and acquisitions. So we had some customers that I'm going to say suspended use during the quarter waiting for the outcome of what's happening with the FTP and Palantir situation just to refresh people. The NHS has a national contract for Palantir, but there's a break clause in that contract in Q1 of 2027 and it's right up at the parliamentary level and indications are suggesting that that product will be getting removed and hopefully that will continue that momentum for us on that Shrewd product through the UK marketplaces. In addition to that, we still have renewals coming through. So it's just some of our cases. In other cases, they are renewing. It just depends on the ICB and the approach. So it's a little bit just up in the flux, and we keep working on it. But even with that, we see a really good pipeline of all of our other solutions and still expect to continue with our organic growth profile. You know, we've introduced AI products into the marketplaces. There's two. We have the protocoling solution that started in Avari product. We're starting to move that into other products and we're starting to see some revenue streams from that. and we're really excited about our transcription solutions for our community services. We've been working on that for about a couple of quarters that is now in the hands of customers to get ratification on that and we expect that to start hitting the revenue streams hopefully end of this year, but definitely going into next year, we expect that to continue on that place. You know, we're getting close to the complete integration of the Navarre and the induction transaction. And as you can see, our thesis for both of those two large acquisitions have come to fruition. Our adjusted is back to 26%. We're generating some pretty good cash flow, I think. and many more. We've managed to integrate them. They're producing new organic revenue and they're adding to the bottom line pretty nicely. So we're excited about what our accomplishment was on that and we continue to still work on it. But it's getting towards the visibility in terms of trying to get that number back up to the high 20s, which we're at. I also just want to talk about the NCIB. I know as we go through and have met investors, people have asked about that. We have put it in place. We do think our financial results will continue to improve the stock to some degree, you know, staying still. We think it is a good value for us to, with lots of cash, to start looking at buying back our own stock. So we decided to put that in place and We continue to work on M&A deals. We have some large things that we're looking at and some small things. But the activity still seems to be there in that marketplace. And we continue to go and we do expect to do more M&A through 2026. And and more. But yeah, we're happy where we are as a company. We're making money. We're growing. We're adding customers. We've got lots of cash to remedy and we think we're in a good position. And I think we can continue to prove our business model and we're happy with what we've accomplished here. Any questions?

Great, thanks Dan. We'll now open up the line to questions from analysts. Please press star 1 or use the raise hand function if you'd like to ask a question. Today's first question comes from Gavin Fairweather, ATV Cormark. Gavin, your line is open.

Oh, hey, good morning. Thanks for taking my questions. Maybe just on e-referral in the UK, Dan, you mentioned it. I think you've had some marquee wins in the UK market, which is great. Curious if you've been able to uncover any funding envelopes for e-referral or if this is coming out of general budgets. Do you see the potential for this to become a more strategic priority at the NHS level with some bigger funding attached?

Yeah, I do think the NHS is definitely, like other organizations, is looking to integrate and do a lot of different things. I think if you looked at a lot of the parliamentary-based approaches and things, the NHS is integrating into social care and integrating into aftercare and rehab facilities as well. Thank you for having me. We know by looking at other markets around the world that e-referral is a needed aspect of it. And we know that the NHS in the UK is behind relative to other places in the world, Canada included, in those particular markets. And we can see the reaction the solution does and how it can automate some of those things. Thank you for joining us. in the NHS for those referral-based products. And our sales force is pretty focused on referral about marketplace. And we are seeing available money for this. The business case is very easily justified for it.

That's great. I appreciate that. And then just on Buddy, I've seen Finland healthcare described as pretty digitally mature. I'm curious what products you think have maybe greenfield opportunities in Finland where there isn't a big amount of competition.

Yeah, I think they have a similar structure to regional-based groups, and they've connected regions pretty nicely. We think there's opportunity for the referral-based products within the Scandinavian-based marketplaces. We also see opportunities for the in-touch-based suite of products in those marketplaces. Those would be the ones that we would primarily focus on. But yeah, similar markets, and our group has some pretty good connections to that. The buddy problem, and they've done some work in that marketplace. Again, the biggest area where we see buddy really having opportunities would be the Canadian and the UK marketplaces. Those are the areas that we focused on. Canada still is lagging behind on the digital backdoor. Thank you for joining us.

How would you describe how ramped up you are on ARR versus the initial scope on that DLX?

I think it's adding somewhere between 500,000 to a million on a quarterly basis, and we expect that to continue on a ramp up over the next couple of years type of thing.

Thanks so much. I'll pass the line.

Thank you, Gavin. The next question comes from Doug Taylor with National Bank. Doug, your line is open.

Yeah, thank you. Good morning. I wanted to drill down a little bit more on the UK market. Obviously, the growth there has been flat with some puts and takes. So, you know, the question is with the impact to Shrewd, some of the pause that you're talking about, is that something that is reflected in, you know, the net ARR growth and you've outgrown it through some other cross-selling and perhaps you could help us understand

Quantify that so we can... Yeah, we definitely took some AR reduction in the quarter with some of the shrewd work. But that's been offset by other products in that particular marketplace. So we're, you know, the net is the number that we've gotten here. I don't have the exact numbers on my fingertips here, Doug.

So is the idea here that if you get some sort of resolution on the situation as it relates to Palantir, some of that might rebound and impact your finances next year?

That's what we're hoping. Each customer has, we've really got two different scenarios that are cooking here. One is we've got these new ICBs that have come together in form, so there's all new people in these particular groups, and then funding isn't really set up in some of these appropriately, so they're going like, whoa. Hang on, there's a renewal here. What's going on here? We've got FTP. We're just going to hold here for a couple quarters here until we see what's going on and then reconvene this thing. It's not like they're putting FTP in these places, all of them. They're just saying we've got to suspend this while in other cases they're just going on as business as usual and they're renewing. for their contract. So we hope within the next couple, if the contracts are new, we still think there's an opportunity to continue. And if it's not renewed, we're really excited about that because we continue to grow. But that's the scenario we're facing right now.

Okay, that's helpful. Next question. I mean, you described the integration process. for induction Novari as being substantially completer or approaching completion. And you can see the EBITDA margins here at 26%. As you say, that's been well executed. So the question is, given that EBITDA margins have been higher in the past, I mean, is there something about the way the portfolio sits now or structurally that would prevent you from continuing to march the EBITDA higher from here?

Well, every million dollars of ARR theoretically adds, if we don't add more costs, adds a point of adjusted EBITDA, right? And we're still not completed on the other side of some reductions. There's still some work that's continued to move it, right? So the natural increase of... of New Deals, but not only does it increase New Deals, it comes to the bottom line as well. So we continue to march on both of those fronts to fine-tune those things.

So summarizing cost, you know, transformation work largely done, but, you know, further efficiencies of scale.

There's still work to be done, but, you know, we've taken a big chunk out of the apple.

Okay, thank you.

Thank you, Doug. The next question comes from Paul Treiber with RBC Securities. Paul, your line is open.

Yeah, thanks and good morning. Dan, now that the company's passed $100 million in ARR, how do you look at the cadence and the drivers of organic growth from here? And what I mean is, does it become less about point solutions, individual point solutions and their growth and more about perhaps like the broader platform and cross-selling and how are you sort of shifting the organization to sell, to sustain the organic growth as a larger company?

Yeah, I think a good point, Paul. I think we are the patient care coordination platform as we would describe it, which is really the combination of Zesty, Strata, Medcurrent, InTouch, and Medcurrent. We've done work on integrating those products across different worlds. And we're also adding AI injection into a lot of those base products. We are working on moving our sales force into a regional-based sales force and giving them those suite of products and merging them together in comprehensive solutions. We're already seeing that in the field. Customers asking for these things to be and many more. The bigger ticket items and the more complicated ones, being the Strat and Novare-based implementations, we're starting to see some really nice proposals going out for those products with high ticket and high numbers that get associated with the stuff. We expect those core products to really be most of our engine for our organic growth. We're still seeing work on our treat-based products, our community services products. We've successfully moved that Caseworks products into Australia, and we're having really good success with that product in those marketplaces as well. We continue to work on those approaches, but essentially that's how we're seeing it.

That's great to hear. Second question, just on Buddy Healthcare, with the management team on board and a footprint in the region, does that open you up and give you more insight into other acquisitions in the Nordics region? And then how do you describe the M&A opportunity in the Nordics compared to other regions?

We've done some work on that. There's a couple other scenarios that we know of. The CEO just told me about one other one yesterday. So yeah, your question is very much done. Again, our acquisition targets have really, in a lot of cases, are companies that we're well aware of because we work in the same markets and we would compete with them or complement them in many different situations. So every time we enter a new marketplace, we get expertise on that market. and how that ecosystem works and what the gaps are in respect to that and those organizations that fill those gaps. We'll definitely explore the Nordics marketplace. It's a pretty interesting marketplace. It's very similar to our other government-funded Thank you for joining us. We continue to work with it, and you see who's come over from Buddy. Very excited about the opportunity. He wanted to roll over stock into our organization, and he has, and he's excited to help us in those Nordics regions, and that's a good thing.

Okay, thanks for taking the questions.

Thank you, Paul. The next question comes from Michael Freeman with Freeman James. Michael, your line is open.

Good morning, everybody, and congrats on the results. First question is, I wonder if you could tell us a bit about what you're seeing in the M&A environment right now and the sort of competitive dynamics you're seeing in bids and also, I guess, the pricing environment as you're poking around.

Yeah, it's... It continues to be all over the map as it always has, Michael, and it's hard to predict in terms of everyone is a different world. It all depends on who the founder is and how the thing is structured and what they are continuing to do. We are seeing... More and more organizations that have had investments of some sort where the cash is no longer going and the company is in a little bit of a stagnant, standstill state in investors starting to think they want to get their money back. and then the challenge becomes that they prepare to take a haircut on their money because the valuations that they went into were higher to a degree so we continue to see some of those come to market but we still see founders in other situations come to market as well so it's all over the map relative to it but probably we are seeing companies that didn't manage to take on investors potentially going to the market to see what their exits are because there's no more cash to be had in those particular companies. So we're starting to see that.

Okay. All right. Thanks, Dan. And for my next question, I wonder if you could touch on your AI roadmap and what you're working up with your R&D team and with your customers. I'm happy to hear that some of these have been deployed. Curious if you could just give us the layup.

We're really happy with some of the AI progressions we've built in our team. Part of Part of sometimes on these acquisitions is you impair some technical debt and we've had some projects that have helped us get out of some technical debt by using AI, which has streamlined some processes. It's helped us in our internal development group and we continue to embrace it and it's starting to move in and we've seen some benefits. We do have capital projects groups that we're building in there. We built a protocoling form-based system, which is used to understand forms and give you AI descriptions on forms. And we look at, it started evolving in the Novari product. I think it's been responsible for and many more. We can add substantial revenue as we've taken on the journey of building our own scribing solution for our case management solutions. And we have a fair amount of users. We've got four or five products in that suite that would be clinicians or caseworkers that would meet with patients all the time that are not using scribing at this point. So we are... Thank you for joining us. on the bottom line. And we've been investing in AI continuously and still supporting that number. So we're happy with what's going on in that group.

That's helpful to understand. Last question for me. Are there any, perhaps outside of the UK, are there any material RFPs that are coming down the pipeline or that you're preparing to respond to now?

We're starting to see some interest in the U.S. marketplace with our Strata solution through some groups, and it's still early to tell with that stuff, but we're seeing some pretty interesting responses on that. We do have a U.S. group in Strata with the search business, and we decided to move the Thank you for joining us. I think we are starting to add the patient engagement part of the buddy product onto the other side of the strata. So as you get discharged, which infer to another area, the patient can be in the stream of the discharge to do that. So we've been integrating those into one big product. An example would be A patient gets referred out of a hospital to a hospice, and most of the hospice is home care right now. So the referral goes into hospice, but we take the patient and the family out in an app that they can download all the way through the process. And we allow the patient family to communicate with their caretakers during the whole end of life process. So before, I think we got about... 20 different hospices on the Strata platform that we do referral management based world too. And we came up with that new idea in the UK and we've implemented it now. And now we're rolling that. We're looking to all the other ones to add that feature to it, right? So always on the other side of a referral, there's a whole patient engagement world on it. And that's just an example of one of the platforms that we can add to the marketplace. So as we move into the US with that, maybe there's an opportunity there. Who knows? But it's still early days. Got it.

All right. Thank you, Dan. I'll pass it on.

Thank you, Michael. Next question comes from Kevin Christian Ratnay with Scotia Capital. Kevin, your line is open. You may be on mute, Kevin.

Kevin, I hear you now. Sorry for that. This is Richard on for Kevin. Just a quick question. I know you haven't provided any formal guidance on ARR growth, but I think you've been comfortable with it being in the low double digit range. So I was just wondering if you have any thoughts on near term on where that's heading. And I know that you've currently been running in the 10 to 11% range this year. And I was just curious on where that goes.

it's really the wild card with this FTP stuff that's going on and that's really account by account to do that but we still feel comfortable with the rest of our business that we even with that headwind that we should still be in the range where we were this quarter and above it for sure so we continue to work with that and We continue to work with the cards that we're being dealt on that particular scenario. But even with that scenario, we're still getting 10, 11% organic growth. So we're happy with that. And the bottom line has come to the other side. So we continue to do that.

And do you have any thoughts on capital allocation, particularly the balance between M&A and buybacks given your recently introduced NCIB?

and many more. Thanks for taking my questions.

Thank you, Richard. The next question comes from David Kwan with TD Securities. David, your line is open.

Thanks. Thanks, Kirsten, for that. Just maybe getting back to the last question on the buybacks. Dan, so it sounds like once it gets approved, if the shares are still kind of at these levels, you'll be active with the buyback?

Yeah, I think we discussed that at the board and we'll continue to look at things as they continue to progress. But I don't want to commit to anything, but that could be the world that we go into as we go forward.

Yeah, just wondering in terms of the buyback, even if you kind of max it out, you'd still have a lot of cash left over. So it seems like you could be active on both fronts.

Well, I think we can too, David. And that's sort of the thought process on this thing. and so on. and making the proper decisions, which would be the proper, which we think would be the right for our shareholders. So we'll continue to look at it. And, you know, based on how we're doing now in terms of the level of the acquisitions, that would be the case. But something larger was progressing and that may change that thought process.

that's helpful thanks Dan and when you talk about the M&A and larger deals like are we talking stuff that could be you know meaningfully larger than Navarri are we kind of looking at more Navarri type deals I think meaningful larger than Navarri to a degree not that much larger or but yeah meaningful larger I think That's helpful. Just one or two more questions here. Getting back on the AI, can you talk about to what extent are you seeing customers adopting AI? How quickly are they? And to what extent customers are working with you to help find projects that might be more specific to their use cases, their needs, but maybe that also can be leveraged to other customers?

Yeah, every single one of our AI projects are being done based off of customer input into the equation, and not just one customer, multiple customers, so that we actually get a feel for, does it add value? and what it's going to cost us to deliver and do they got the funding to deliver it. There's definitely a lot of intrigue within our customer base. There's also a fair amount of uncertainty in respect to things like privacy, security, compliance, regulatory based approvals. The one area that definitely is the most Adopted areas, the transcription side of the business. I think we see that all the way through. We've already seen that through the GP pad in the GP world. But there's lots of other caregivers that are there. And I think in the hospital setting, the EHRs will do those. But in the community social services area, we are the record of... that the caregivers use. So they're looking for us to provide that transcription services. So we believe that's our most hanging fruit out of all of our AR projects to go get revenue. The other stuff is really working between the scenes and it's injection into our applications. We see things in our MedCurrent base where AI can help speed up the delivery of that clinical decision support system. We see things in and so forth where I can do some things. So we continue to work with our group. It's not like they're screaming at the door saying, hey, we need this stuff tomorrow. That's not how our markets work. It's a little slow and bureaucratic, which is both a blessing and a curse. But in terms of the transcription side, we definitely think, yeah, as soon as we get that product into the marketplace, we would like to think there's going to be adoption if we can create it properly and price it properly for our base.

No, that makes sense. And maybe one last question for Brian. Just on the gross margin side, it was a bit weaker than what we were looking at, especially given the revenue mix. So I want to know if there was anything in particular that was worth flagging and how we should be looking at gross margins going forward.

No, I think it will still continue to be the 80% line. If you look at Q1, we were a little bit higher, and so overall for the six months it's been in the 80% range. As Dan said earlier, some of the services revenue was a little bit lower, and that's kind of lower margin stuff. You'll probably see that improve as we go forward.

I think, David, part of timing of services revenue, where you get the revenue to match the expenses is sometimes challenging. So we may incur expense on services revenue, but because we haven't hit a particular milestone, We haven't recognized the revenue accordingly for it yet. So we get the expense of the revenue in other quarters. It's the other way around, right? So sometimes the timing of that sort of just offsets that a little bit, but you should always be in that range.

Thank you, David. The next question comes from Justin Kiewit with Steve Full. Justin, your line is open.

Hey, good morning. Thanks for taking my call. Understand that the cost side of the recent large M&A in 2025 has largely been integrated, but I was hoping to get an update on how the cross-sales opportunity is going with Novari Health, and in particular, the opportunity within the sub-segment of the Canadian mental health institutes, where I understand that Novari has a substantial market share. But some of the competing options are not nearly at the level of functionality, including also just, frankly, some paper-based processes that are still being utilized. So just seeing how that sales opportunity is and what the TAM could be for the subsegment.

Yeah, well, we're pretty active in the mental health world because we own the We've already, I think a few years back, did the mental health referral-based business for CAMH, and that's where a lot of that expertise was done, and it continued to have a footprint in those particular levels. Part of that is being addressed with the provincial-based transaction, and there's other opportunities all across Canada. in the mental health world. The two implementations we've sold in the UK have been in the mental health-based arena as well, and we continue to see. We have added to that expertise by having our own EHRs in that space. So connecting our EHRs to the referral management suite is something that our customers like and we continue to do that.

That's helpful. Maybe just to follow up, Epic, are they pretty active in the Canadian mental health area and how do you see that competitor?

Yeah, I don't see, Epic has not done anything in the community. They just sell to the pure hospital. They probably would cover off a little bit of the mental health beds within hospitals, but they're not focused on community agencies, mental health-based worlds. That's not what they do. Whatever mental health peer hospitals that we have across Canada or across Ontario that do that, Meditech seems to be the vendor that runs those bigger organizations to do that. But on the community and social services side, I think we would be the predominant vendor that would do that work.

Thank you. Very helpful.

Thanks, Justin. There are no further questions at this time. I'll hand the call back to you, Dan, for any closing remarks.

Yeah, I think that the best thing to look for in that quarter is we've always said this, we like organic growth, we want organic growth, and we push organic growth, but at the core of what this business is really is cash flow, striving, and earnings on the other side, and you know as you guys can see we're back executing on that side of the equation as we continuously always will to take our organic growth as it comes to us and adds to the bottom line but yeah we're excited to get our adjusted ended up there we're excited to start seeing cash flow and we're excited about the suite of solutions that we've accumulated and how those are starting to come together as comprehensive solutions so We continue to work and we continue to progress in that space and we continue to look at M&A and another course behind us and we look forward to the next one. So thanks everyone for attending today.

This now concludes today's conference call. Thank you all for joining.

Bye-bye.