Vitalhub Q2 Earnings Call Highlights

Vitalhub (TSE:VHI) reported second-quarter 2026 revenue of CAD 31.7 million, up 33% from the prior-year period, while annual recurring revenue surpassed CAD 100 million for the first time.

Chief Financial Officer Brian Goffenberg said the company ended June with CAD 101.5 million in annual recurring revenue, representing 10% organic growth year over year. Pro forma annual recurring revenue would have been about CAD 106 million as of June 30 after including the subsequent acquisition of Buddy Healthcare.

Recurring revenue, including term licenses, maintenance and support, totaled CAD 24.5 million and accounted for 77% of quarterly revenue. Virtual-care term-license revenue was CAD 2.3 million, perpetual-license revenue was CAD 800,000, and services, hardware and other revenue was CAD 4.1 million, compared with CAD 2.7 million a year earlier.

Profitability and Cash Position

Gross margin was 79%, compared with 81% in the prior-year quarter. Adjusted EBITDA totaled CAD 8.2 million, or 26% of revenue, compared with CAD 6.3 million, also 26% of revenue, a year earlier.

Goffenberg attributed the margin performance in part to synergies from the Induction and Novari acquisitions. He said the company generated strong cash conversion during the quarter, with cash and investments increasing by more than CAD 15 million to CAD 136.5 million at quarter-end. Vitalhub had no debt.

Following the Buddy Healthcare transaction, the company still held more than CAD 120 million in cash available for its acquisition strategy, Goffenberg said.

In response to an analyst question about gross margin, Goffenberg said he expects margins to remain around the 80% range. He and Chief Executive Officer Dan Matlow noted that the timing of services revenue recognition can affect quarterly margins because expenses may be incurred before related revenue milestones are recognized.

Buddy Acquisition Expands Patient Engagement Offering

Matlow said Vitalhub had discussed a potential transaction with Buddy Healthcare for four years before completing the acquisition after quarter-end. He described Buddy's technology as a “digital backdoor” solution designed to support communication with patients after they leave a care setting.

The offering is expected to complement Vitalhub's Zesty digital front-door product and Strata discharge solution. Matlow said the company plans to integrate the technologies and eventually use the combined offering in its cross-selling strategy.

He said Vitalhub sees particular opportunities for Buddy's patient-engagement platform in Canada and the United Kingdom, where he said digital backdoor solutions remain less developed. The company also sees possible opportunities to sell referral and Intouch products in Finland and other Scandinavian markets, while Buddy has completed some work in Germany.

Matlow added that gaining a presence in the Nordic region may also improve Vitalhub's visibility into potential acquisition opportunities in that market.

U.K. Growth Offset by SHREWD Uncertainty

Vitalhub said quarterly revenue contributions came from several products, including Zesty and the Strata and Novari care-coordination platforms. Matlow said Novari continues to expand in Canada and is beginning to gain momentum in the U.K. and other markets.

However, he said the company experienced some challenges involving its SHREWD product, used in system control centers, as certain U.K. customers suspended use while awaiting clarity around the National Health Service's Federated Data Platform and Palantir-based solutions.

Matlow said the NHS contract with Palantir has a break clause in the first quarter of 2027 and remains under parliamentary scrutiny. Some integrated care boards have suspended renewals temporarily while assessing funding and the potential role of the Federated Data Platform, while others have continued to renew contracts.

“We definitely took some ARR reduction in the quarter with some of the SHREWD work,” Matlow said, adding that the impact was offset by other products in the U.K. market. He said the company hopes for greater resolution over the next couple of quarters and believes it can sustain organic growth in the range reported during the quarter despite the uncertainty.

The company also reported progress with U.K. electronic-referral opportunities. Matlow said Vitalhub's first deal in that market went live about six to eight months ago, and neighboring regions have expressed interest as referrals often cross regional boundaries. He said the company has identified available funding for the product and considers its business case straightforward.

Cross-Selling, AI and U.S. Opportunity

Matlow said Vitalhub is increasingly organizing its sales efforts around regional teams selling broader suites of products rather than individual point solutions. The company is combining products including Zesty, Strata, MedCurrent and Intouch into a patient care-coordination platform, while adding artificial-intelligence capabilities across its applications.

He said AI-based protocoling features developed initially for Novari have helped secure two deals and are being introduced as add-on capabilities in other products. Vitalhub is also developing a transcription or scribing solution for its case-management products, with customers currently reviewing the offering. Matlow said the company expects potential revenue from that product by the end of 2026 or in 2027.

He said Vitalhub is developing AI products with input from multiple customers, although adoption is affected by privacy, security, compliance and regulatory considerations. The transcription application represents what he described as the company’s lowest-hanging AI revenue opportunity.

Vitalhub is also seeing early interest in the U.S. for Strata's referral-management capabilities. Matlow said the company is exploring a combined Strata and Buddy offering that could connect referral workflows with patient and family engagement after discharge, including for hospice and home-care settings.

M and Capital Allocation

Matlow said integration of the Novari and Induction acquisitions is nearing completion, though further efficiency work remains. He said additional recurring revenue should contribute to adjusted EBITDA if costs do not rise proportionately.

The company has established a normal course issuer bid, with Matlow saying the board believes the shares may represent value at current levels. He said Vitalhub expects acquisitions to remain its primary capital-allocation focus but believes it can pursue both M and share repurchases given its cash position.

Matlow said the company continues to evaluate both small and larger transactions, including opportunities that could be meaningfully larger than Novari. He said the M market includes companies whose investors may be seeking exits after funding has slowed, alongside founder-led businesses considering sales.

About Vitalhub (TSE:VHI)

VitalHub is a leading software company dedicated to empowering health and human services providers globally. VitalHub's comprehensive product suite includes electronic health records, operational intelligence, and workforce automation solutions that serve over 1,300 clients across the UK, Canada, and other geographies. The Company has a robust two-pronged growth strategy, targeting organic opportunities within its product suite and pursuing an aggressive M plan. VitalHub is headquartered in Toronto with over 700 employees globally, across key regions and the VitalHub Innovations Lab in Sri Lanka.

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