Healwell AI Inc. ($AIDX)

Thank you for standing by. My name is Carly and I will be your conference operator today. At this time, I would like to welcome everyone to the Healwell AI Q1 2026 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to [ Hasun Sunny, ] Head of Investor Relations. Please go ahead.

Hello, and thank you, operator. Joining me on the call today are James Lee, CEO of Healwell. Dr. Alexander Dobranowski President of Healwell and Anthony Lam, Healwell CFO. I trust that I'm going to receive a copy of our financial results press release that was issued yesterday. Listeners are also encourages a downline copy of our quarterly financial statements and management discussion of [indiscernible] found in SEDAR+. Please note questions of today's call on [indiscernible] performance include statements of forward-looking information within the meaning of applicable securities laws. These statements are made in the safe harbor provisions of those laws. Please refer to yesterday's press release and term management discussion [indiscernible] in more details on the company's risks and forward-looking statements. We provide forward-looking statements so as for the purpose of providing information about management's current expectations and plans relating to the future. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based, except if those required by law. We use terms as gross margin and adjusted EBITDA on this conference call, which are non-IFRS and non-GAAP measures. For more information on how we define these times, please refer to the definition set out in our management discussion analysis. There will be a question and answer in the call, which will be limited to Analyst only [Operator Instructions] And with that, I go to turn the call over to Healwell's CEO, James Lee.

Thank you, Heather, and thank you for joining us today. Let me start by grounding this why he will exists. Here all is focused on the come, the primary enabler of preventative care by making healthy data usable, actionable and scalable. We now have access to over 150 million patient lives across our network, and we're putting that scale work. The challenge we're addressing is not a new one, but rather a structural one. Health care systems today are largely designed to treat illness [indiscernible] As a result, a disproportion amount of spending is concentrated on patients with advanced disease, where interventions are more complex, more expensive and often less effective. At the same time, many of these conditions deliver -- drive this burden of [indiscernible] identified earlier. So the issue is not whether prevention works is that prevention has not been made and made implemented at scale within a real world health care systems. And that's the core problem with methodically approaching in solar. Now the scale of this problem is significant and the data makes a stack. [indiscernible] of health care data is unstructured and untapped embedded in the clinical notes, reports and disparate systems, and they were never designed to be analyzed at population scale. This is not a marginal efficiency. That means the vast majority of available clinical intelligence and visible to the people and the systems that could act on it. And now at the same time, 74% of global deaths are caused by conditions that are preventable or reversible detected early enough. Healwell addresses these key issues by commenting the spar and complex health care information siting meaningful clinical insights to implement those insights in real-world environments. We do to sound some of the biggest partners across the world, both clinical, health care systems and with life science partners. So that's a really exciting time for us as a science exist, the tools exist in the data exists and we have the ability to bring this all together. Now Solventis requires more than a single capability they require solving 4 interconnected problems. The first is infrastructure health care systems cannot act on data they can see. The foundational requirement is the ability to connect to spirits data sources and surface them in a way that is meaningful with population scale. The second is clinical grade tolls data align is insufficient. Clinicians in tools that can enter directly in the workflows, surface the right patients at the right time without adding friction to an already street system. Further science of the evidence prevention must be grounded in validated signs, not simply assumed. That means peer-reviewed research, real-world validation partnerships with life science organizations that set the standard for both clinical treatments and clinical evidence. And the final one is economic incentives. Even when the science is clear, health care systems will not change behavior without the live incentives. Health care moves when it centers line. The financial case of prevention needs to be quantified and make compelling equipping insurers and reinsurers to price the value of [indiscernible] and build models that reward prevention, not treatment. Now these 4 problems exist independently across health care system. What has been missing is the ability to integrate those problems. Now each of those problems match directly on to what Healwell has built and is building and we are making tangible progress across all 4. On the infrastructure side, the Orion acquisition has been the defining move that gave us global distribution scale. Now a year on the integration is behind us, and the results are starting to come through. Our Armada platform now connects over 150 million patient lives, unlocking longitude multi-source data at the foundation of every preventative model we built. And critically, it gives us the distribution layer so we can scale our entire offering globally. On clinical tilts, our strategic lines are well health allowed us to prove that AI can be embedded into real-world clinical environment at scale. Darwin and Well decision support are now live, embedding algorithms and IP directly to clinical worksites, serving high-risk patients and shifting care from reactive to proactive. This is no longer a theoretical capability is working today across our network. On Sincere, were the foundation that's genuinely difficult to replicate with 47 peer-reviewed publications and partnerships with leading life science organizations. That trust takes years to build and increasingly recognized across the industry has been a meaningful competitive mode. And the final one, economic centers, translating population level inside sustainable financial performance of the final step -- the insurance industry represents our next significant opportunity, and we're actively building towards it. Now each step has been deliberate. The pillars are in place and the strategy is now fully emerged. Now let me speak to what we've delivered in Q1 '26 and what you should expect from us for the balance of the year. Q1 was another strong revenue quarter, and we maintained positive adjusted EBITDA. In [indiscernible] we are growing with discipline. Commercially and operationally. It was also afford meaningful progress with new contract wins and platform milestones walk through shortly. Q1 gives us confidence what lies ahead. the pipeline is building, the platform is scaling and the commercial momentum is real. While health care systems are considered with long sales cycles, the foundational growth signs are exciting. We're seeing strong growth in physicians using our products increased patients being identified new life science partners and the U.S. market is the most ectasis been for a long time. As we look across second half, we will be accelerating enterprise pipeline development across the U.S., Australia and the Middle East, we continue to deepen our life science partnerships, leveraging our validated AI models and regulatory-grade real-world data for clinical trauma drug discovery, and we'll continue to expand Darwin across additionally our toes and population platforms. By year-end, our targets are clear, activate our global network across life sciences, increased enterprise AI sales and achieve approximately 10% ex run rate for adjusted EBITDA margin. The foundation is built, the strategy is clear and Q1 demonstrates we're executing [indiscernible] Turning to some of our key strategic and operational highs for the quarter. First, we successfully unified Grand Piper into a single DARWEN powered AI engine. Now this is an important milestone in our platform strategy as it enhances integration of our ecosystem enables more effective cross-sell and upsell opportunities. Particularly across the Orion Health and [indiscernible] customer basis. Second, we launched World trust and partnership with WellHealth. This is a consent first AI-powered data governance and patient identification platform that maybes privacy compliant clinical mobilization scale. Importantly, it also improves patient recruitment for clinical research, which remains a critical bottleneck in the life sciences industry. This has already demonstrated significant value to our life science partners. Third, we can continue to build commercial momentum across all parts of the business, including AI contracts and opportunities outside of Canada increased momentum in ANZ and our first RFP response to the genomic partner. This reflects the growing global demand for AI solution and reinforce our expanding international footprint. Overall, these milestones highlight the continued execution of our strategy to win AI data and clinical validation to drive meaningful impact across health care systems and life science organizations. I'd now like to turn the call over to our CFO, Anthony Lam, to walk through Q1 financial results.

Thank you, James. Before I begin, I'd like to remind everyone that all of the figures I will be discussing today are in Canadian dollars and our financial statements are presented in accordance with IFRS, International Financial Reporting Standards. . Our first quarter 2026 results are as follows: Q1 achieve quarterly revenues of $33.2 million during Q1 2026 compared to $8 million generated in Q1 2025, and an increase of 36%. Revenue growth in the quarter was largely driven by the Orion Health acquisition and organic growth of the company's AI division. During Q1 2026, Q1 reported positive adjusted EBITDA of $0.7 million compared to an adjusted EBITDA loss of $2.3 million in Q1 2025. The representing a year-over-year improvement of 132%. The improvement in adjusted EBITDA is attributable to the Orion Health acquisition and improved performance across the Healwell operating segments. Achieved gross profit of $19.5 million during Q1 2026, an increase of 340% compared to $4.4 million in Q1 2025. The increase is due to higher revenue performance across the business in the quarter. Healwell achieved gross margin percentage up 59% during Q1 2026 compared to 56% in Q1 of the prior year. QOL reported IFRS net loss from continuing operations of $6.8 million in Q1 2026 and this compares to a net loss of $14 million in Q1 2025. QOL ended the quarter on March 31, 2026, with $21.9 million in cash, an increase when you compare this to year-end -- year-end balance of $18.6 million. I would also note that the company holds a strategic investment position in [indiscernible] AI now part of the broader space ecosystem which represents additional balance sheet value beyond our reported cash. As we evaluate the appropriate timing to monetize this position, it provides meaningful optionality to further strengthen our capital base and support the company's growth initiatives. Now looking at our revenue segments. As of November 1, 2025, following the divestiture of the company's clinical research and Patient Services division, Healwell now generates revenue across 2 core segments: one, AI and data science; two, health care software. Our AI and Data Science segment achieved revenue of $2.6 million in Q1 of 2026, marking a 13% year-over-year growth compared to the $2.3 million in Q1 2025. The increase was driven by contributions from the Verosource data as a service offering and our in health systems component with the AI segment. This growth is partially offset by the divestiture of which was completed on November 1, 2025, and continue to revenues in the prior year comparative. Excluding the impact of this divestiture, the company continues to advance its AI data science capabilities through a combination of strategic and organic initiatives. The second revenue stream is health care software which generated $30.6 million in revenue in Q1 2026, an increase of 439% from $5.7 million in Q1 2025. This increase was primarily driven by significant growth in the health care software segment, reflecting the continued contribution of Orion Health, that acquisition happening and organic growth expansion initiatives. With the recent divestiture of noncore assets, Q1 is now fully focused on driving growth, innovation and profitability across its 2 high-margin scalable segments. AI and data science and health care software. This strategic focus positions the company to continue delivering strong financial performance with rapidly growing revenue streams expanding customer adoption and meaningful contributions to overall profitability. With that, I'd now like to turn the call over to our President, Dr. Alexander Dobranowski who will discuss our Canadian and global public sector opportunity, CL's competitive mode and key investment highlights underpinning our strategy.

Thank you, Anthony, and thank you, James. I want to start today by discussing an important opportunity that is presented before us. Over the last year or so, you've seen a dramatic and positive shift in global public sector posture towards addressing key pain points in health care, inclusive of data interoperability challenges. Never before have we seen such exciting public sector tailwinds with major funding commitments being announced and being made in key jurisdictions where we operate. We have seen this shift happen not just in Canada but also in other important jurisdictions. For instance, in the U.S.A. with the introduction of the OBBA, this has led to the addition of USD 50 billion to the rural health transformation program, a program that is directly targeting to address health care data access and compatibility issues. In the U.K., we have seen a revitalized commitment to health care investment has echoed in their well-publicized 10-year plan to transform BNHS. And finally, in Canada, I've broken down this opportunity into 2 parts. Part 1, at the federal level, Bill S5, the Connected Care for Canadians Act, currently under review in the Canadian Senate represents a meaningful shift in Canada's health care policy landscape. It mandates interoperability across health IT systems and explicitly prohibits data blocking practices. From an investor standpoint, this effectively establishes a new national baseline for how health care technology must operate in Canada. The implications are significant. First, federal funding and procurement are expected to increasingly favor platforms that are compliant with these interoperability requirements. Second, scale becomes a key advantage, particularly for platforms capable of integrating clinics, EMRs and AI into a single unified workflow. And third, it creates additional pressure on legacy vendors operating closed ecosystems or point solutions, which may face challenges adapting to these new standards. At the same time, provincial procurement trends are also evolving with a clear preference emerging for Canadian-owned sovereign technology platforms. Taken together, these dynamics create a really strong structural tailwind towards vertically integrated Canadian-based health care technology companies. Healwell is fundamentally built around AI and data interoperability and has already demonstrated its ability to deploy large-scale public sector health information systems, including the Health Information Exchange in Saudi Arabia, which is the world's largest implementation of its kind. Together with WellHealth and WellStar, Quell is uniquely positioned to meet the requirements of the Connected Care framework. Collectively, this forms a vertically integrated end-to-end Canadian sovereign stack spanning care delivery, data infrastructure and clinical intelligence fully aligned with both interoperability mandates and sovereignty driven procurement priorities. Now on to the second or part 2 of the public sector opportunity in Canada. On March 19, 2026, the Ontario Minister of Health announced the province is planned to launch a province-wide primary care medical record initiatives aimed at advancing an integrated interoperable electronic medical record system for primary care. This initiative formed parts forms part of the Ontario primary care action plan supported by more than $3.4 billion in funding with the objective of connecting approximately 2 million additional residents to primary care by 2029. The province has indicated they will run an open competitive procurement process and evaluating a multi-vendor approach. Our Chairman, Hamed Shahbazi, noted in yesterday's earnings call that WellHealth strongly support this initiative and intends to actively participate in the forthcoming procurement process led by supply Ontario. Healwell already plays an active role in supporting the province through its 811 service, which provides clinical guidance to over 15 million users as well as through the Ontario patient viewer a digital care record that consolidates patient data across Care Sense. In addition, Healwell award-winning and clinically validated DARWEN AI platform delivers intelligent search and summarization plus clinical decision support capabilities that directly align with Ontario's requirements. The provinces initiative closely aligns with Healwell's core strengths. Qwell intends to support WELL Health and WellStar on their bid for this opportunity, and we are well positioned to help deliver this vision for the province of Ontario. Now I'd like to turn our attention back to Healwell. As the health care AI landscape continues to evolve, we are seeing a clear transition from very early-stage experimentation towards real-world deployment of AI solutions that are delivering measurable clinical and economic outcomes at scale. From a strategic standpoint, we believe the companies that are best positioned to lead in this environment will be those that combine advanced AI capabilities with strong distribution, access to high-quality clinical data and solutions that are embedded directly into care delivery. At Healwell, our first key competitive moat is our clinical validation and scientific credibility. You heard about -- a little bit about this from James. Our DARWEN AI platform has now been supported by 47 peer-viewed publications and was recognized with the 2024 Pre-Galleon USA Award, one of the most respected honors in the life sciences industry. Importantly, our AI platform can generate regulatory-grade real-world evidence, which we believe is a highly differentiated capability on a global scale. We continue to collaborate with leading hospital systems, cancer centers and pharmaceutical companies. And today, we have active commercial relationships with 8 of the top 10 largest global pharma companies. The second core advantage is our global distribution infrastructure through Orion Health. This provides us with enterprise access that is both broad and difficult to replicate. Through Orion, we maintain relationships with more than 70 large health care customers across 11 countries. This is a very unique and special customer base. We also recently secured our first major public sector AI deployments in the Middle East, marking an important step in expanding our AI products beyond Western markets. Looking forward, we see a strong and growing pipeline across Canada, the United States, the United Kingdom, Australia, New Zealand and the Middle East which positions us well to scale our solutions globally. Our third competitive advantage, we believe are -- we believe we benefit from meaningful embedded switching costs and a continuously expanding clinical data network. Our solutions are integrated directly into electronic health record systems and clinical workflows, which supports strong customer retention and long-term partnerships. On top of this, we currently have approximately 35 master service agreements with pharmaceutical companies, including, as mentioned, many of the largest global players. Each additional deployment enhances our proprietary data sets and contributes to ongoing improvements in model performance. And finally, our proprietary DARWEN AI platform serves as the technological foundation of our business. Over the past year, we've successfully unified the capabilities of Pure Health and [indiscernible] into a single integrated platform powered by DARWEN. This includes now our product set of smart identify, Smart Search and smart summary artificial intelligence solutions, which are designed to automate complex clinical data analysis and patient identification across large-scale data sets. Taken together, we believe these factors as scientific validation, global distribution, unified AI platform and deep workflow integration from a strong competitive moat and position Healwell to capture significant opportunities as health care AI adoption continues to accelerate. Now turning some attention to our investment highlights. At a high level, Healwell is a health care AI company that is mission-driven to move the needle to preventative care. How we do this is through our focus on early disease detection. Now to add a little bit of color to this over the last 6 months, our team and incredible technology has helped identify over 160,000 patients that are at high risk for rare, ultra rare, chronic and complex conditions. We believe we are uniquely positioned at this intersection of clinical data and AI to deliver outsized results and value for our shareholders. Now starting on the top left of this slide, as mentioned, we are already generating revenue from 8 of the top 10 largest global pharma companies. This is a real strong validation of both our technology and our commercial model and it reflects the trust that large pharma organizations are placing in our platform. Next, we are operating what we believe is a multibillion-dollar market opportunity. As health care systems increasingly adopt AI to improve outcomes and reduce costs, we see significant long-term demand for solutions like ours that can operate at scale. In fact, we believe that those companies that are best positioned to unlock true value in preventative care have a shot at being one of the first trillion-dollar businesses in health care. The addressable market opportunity is that immense. Importantly, through our platform and partnerships, we now have access to over 150 million patient lives. This scale of data access is a key competitive advantage, enabling us to deliver more accurate insights and continuously improve our AI models. From a growth perspective, to date, we have completed 6 material acquisitions, and we continue to see a strong pipeline of opportunities, and we believe we are well positioned to deploy capital strategically to drive further expansion. We are also supported by an experienced Board and a talented management team with deep expertise across health care, technology and capital markets. And finally, our relationship with WellHealth remains a key strategic advantage. It continues to accelerate our growth expand our multinational footprint and provide us with direct access to clinical environments where our AI solutions are being deployed and scaled. Taken together, these elements reinforce our position as a differentiated health care AI platform with strong momentum and a clear path for continued growth and profitability. And with that, I'd like to thank everyone for attending this call. I'd like to thank our Board of Directors, our management team, all our hard-working staff. And with that, I will hand it back to the operator and move to the Q&A portion. Thank you.

[Operator Instructions] Your first question comes from Kevin Christian Roth Scotiabank.

James, you mentioned that the U.S. market is the most active it's been in a while. So I'm just wondering if there's any way you can size that quantify that, whether that's maybe pipeline growth, number of conversations. Just curious to hear what you're seeing there in the U.S.

Yes. Firstly, as it happens, Alex and I have both in the U.S. currently. We've been here for the week seeing clients and customers. So giving you a bit of flavor, is that last year, we saw some new activity. We won a new contract in U.S., which we announced this quarter. But what we're seeing here is that the new activity driven by OBBA, but more particularly the rural health funding bill has meant that what I would say, RFPs in the market at least 2x to 3x more active than they were this time last year. And those are for a wide range of new HIEs in this market. But interestingly, what we're also seeing is that the funding for Rural Health is now pushing into and being extracted out to AI opportunities as well. So we're probably having more AI conversations now in the U.S. than we were having certainly than 3 months ago. Now that's driven by that first round of tubing is now being dished out and people want in how they spend it. But it is a significant portion of money going to this part of the [indiscernible]

Great to hear. Maybe one for Anthony. The health care software line this quarter looked good. I know there's a mix of soft but also deployment in pro services work. So I'm wondering if you could dig in a little bit deeper into that number, was there any sort of things that you call it as 1 time-ish? And then how do we think about the segment as we move into Q2?

Thanks, [indiscernible] That's a great question. We did see in Q1, I would say, a bit of a catch-up in some of our Pro services side of the equation. So I would say that, yes, some of it is maybe a little bit of a catch-up on some opportunities we've been working on at the end of last year that if not caught up this year with some really good revenue recognition with the completion of some key milestones. And so what we saw here is that benefit our margins a little bit as we got into Q1 here. because we had, obviously, some costs related to that, that were incurred in prior periods, but revenue now being recognized. So I would say that there was -- I would this marginal amount of that happening in this quarter that created a little bit of a lift.

Our next question comes from Gianluca Tucci with Haywood Securities.

I think last quarter, I think it was last quarter that you called out over 50% organic growth for AI for this year. I'm just wondering at this point of the year, how you're thinking of organic growth for both AI and software. .

Let me cover that. Obviously, it's early in the year. What I would say is the pipeline still gives us confidence in our previous comments about growth. Revenue recognition is always tricky to get that kind of precision in the survey in the year. So we're not -- we're not at the stage where we can update that. But what I can say is that the pipeline continues nicely [indiscernible] Software development, we'll probably give you an update in the second half. What we are seeing is that there is, as I said, significant uplift in RFP activity turning up to Q2, Q3 this year. But we feel comfortable with the numbers we've given previously.

Okay. And then just following up to the prior question on software and how that impacted gross margin in the quarter. It was up nicely Q-on-Q gross margins. Anthony, like is this kind of a new baseline or because of the one-timers in pro services is we should see kind of a step half down for Q2 in gross margin?

Yes. Gianluca, thanks for that Yes, definitely had a great quarter from that perspective, a little bit of a catch-up taking place. We can expect to see that our margins will be in that mid the 50% range that we've seen historically. I think we had a nice little benefit in this quarter, but I think we'll be in that mid-50s range for the year as we get -- as we look ahead.

Your next question comes from Derek Greenberg with Maxim Group.

I wanted to just ask, I think on the previous call, you had also mentioned you had expected 10% year-over-year growth in the subscription support and maintenance segment for health care software. I was wondering if there was just any update on that as well?

Anthony, do you want to cover that?

Yes, absolutely. We see continued -- on that line, we see continued similar performance. I think we will -- that's a really steady part of our business. I would say it continues to progress at the same level that we've seen historically.

Yes. Got it. And then I was wondering if you could maybe just give some color in terms of in the Middle East when you're engaging with government sovereign health entities, just what that process looks like in terms of how the sales cycle progresses? And then once live, how long it takes to go from signing a contract to sailing revenue?

It's a really good question. I don't think there's a clean answer. I think what we can say is that every part of the region is different. So what we've seen there, there are some parts where activity can get them quite quickly. We're it's an established market there's no need for an RFP. We're already embedded and it goes -- we can go from an initial discussion to what I would say, revenue within 6 months. Now obviously, what we've seen with it was the -- I'm trying to -- well, I'd say, the global conflict in the region. We are seeing some slowdown in sort of initial conversations progressing into secondary conversations. That conflict has gone longer than we had expected. But equally, we had nothing baked in this year. Just to be clear with our numbers and full processes for the Middle East for new contracts in the numbers we've given previously. Now there are -- as we extend slightly beyond the regions that we're currently active in, we are still seeing activity and RFPs come to market. They're probably more, I would say, a 9-month process from beginning to revenue recognition and with a ramp-up. And you've got to remember the implementation phase for us from winning an RFP begins with contracting, which can take anywhere between 3 to 6 months from the time we would announce a contract on. And then because obviously, we have the contract with a bunch of secondary parties, including the likes. And then the recurring revenue might be a year after that because new regions can take up to a year of implementation. Does that answer your question?

Yes, definitely. That's very helpful.

Your next question is from Ryan Kiplinger with Alliance Global Partners.

In the first quarter, subscription revenue for AI and data science has declined sequentially for the first time that's ever happened. Was there a churn or lower usage or maybe what explains a dip particularly in that subscription piece sequentially.

Anthony, do you want to cover?

I got it. No, it's a great question. We did see a bit of a change there. I would say that as we recalibrate all of our AI business here, we did see that a small move in it, but I would say it's -- it continues to be an area where we're focusing our efforts to grow. As you know, the subscription portion of our AI business is a very small portion. It's less than 10%. The larger component continues to be the elements that we have more episodic revenue. As we build out capabilities, and we cross -- start seeing the cross-sell opportunities through our carriage network with Orion, we can expect to see that subscription element become a much more important portion. But health care systems or relatively slower moving in decision-making. And I would say that at this early stage, we're very pleased with the performance, and we continue to see incredible interest as James and Alex have highlighted earlier in the call, they're in the U.S. now having very, very fruitful conversations with a lot of the opportunity there, all of which have an element of the AI component in it.

Okay. Great. And then my second question relates to the major -- your statement on a contract a major government health system in the Middle East and continued expanding enterprise deployments across North America. What's the potential size of some of these opportunities on a run rate basis? What would be considered small when you move to production, what might be considered a large contract? Help us understand so we can see how this might scale.

Just some clarity on it. Are you talking about when we're fully in production or what a first stage would look like?

Well, maybe the life cycle, maybe talk about your might look like? And then how we get to production and how long that might take?

Yes. That's a nice way to frame it. So what I would say is that within -- it's not linear. So I'll just give you a range. So for a small health care system, a first stage implementation might be, call it, USD 250,000 of revenue from implementation and something similar for ongoing. And then at scale and fully implemented that might be $0.5 million a year ongoing. For a large system, it's probably 4x that. What we're seeing is that the potential for these to come in as platforms into health care systems, they're probably more like an HIE sort of contract, USD 1 million to USD 2 million type contracts being on the scale and size of the opportunity. Again, as the product matures and the number of use cases becomes more apparent I think the way we're considering the platform in the later years is a deeper embedded platform. And you could see an area here, and we're already having conversations of having embedded resource, which would probably lift that number again. So if I'm thinking about that in the most broad sense, the reality that the AI deployments are not going to be $100,000 of pop type deployments. I think what we are seeing is that the interest is a non-endpoint solution, but fully embedded platforms. Now they will take more time, but the margins are materially higher and far more exciting. And so you'll see our language shift and talk about that in terms of this coming -- I think Anthony the comment going from being emphatic to be embedded. And those embedded platform conversations are really what's leading through here. What's very clear in this market is that the time and energy to deploy a point solution or a proof of concept is pretty much the same as going fully for our enterprise grade. And so what we've seen is he's been a real change in the U.S. market from very nascent, almost immature approach to governance to now very strict or processes on procurement, governance, connectivity being embedded, scientific validation, all of which plays very, very clearly into our hands. And if we have a little bit of bounce in our voices is because we're here at the moment hearing firsthand from every single party of the realistic answer where our platform sits in the universe.

There was a significant step-up in R&D. Can you highlight what these R&D investments are, where they're focused on and directionally, how we should think about R&D expenses for the next few quarters?

Yes. Look, R&D there's 2 key areas, right? We're obviously spending on integrating the platforms and bringing it to new markets, bringing integrating the new Verosource Orion platform into the U.S. is a first time process. So there will be R&D spend on that. We're also at the final stages of delivering digital front door in Ontario. Again, that means is heavy in the R&D cycle and a lot of new product development within the division. What I would suggest is that we're at the tail end of that growth with the platform coming live here in the U.S. in the last quarter. We're at the end of that, I would say, the initial deployment phase and moving now into the more steady state. And there's obviously a bit of what I would say, the integration spend on getting these businesses in line -- the final thing there is that there is a period of what I would say is removing significant tech debt across the organization. And so we have approved a few projects which will be multiyear projects, so call it a couple of years, but a very, very significant ROI projects in terms of reducing costs. So while there is an upfront in the current year, and we saw a bit of that in the last year that will start to tail off. I think what we're seeing and thinking is that we're seeing significant improvement from deploying AI internally with an R&D -- so once we've completed the peak debt and complete some of the current projects, we would expect our R&D as a percentage of revenue to decline and to be fair, probably R&D to a flat line decline in absolutes as well.

Your next question comes from Max Zimelski with Stifel.

Just a few questions. Maybe, Anthony, you could help you on this first. This is Max, by the way, on for Justine [indiscernible] Maybe besides some of the margin improvement lift in Q1. Could you help us understand the cadence of invoicing and revenue recognition in Q1. And should we expect that there is sort of this bolus of collections in this quarter on a seasonal basis from contract work through the year?

Thanks for the question. The cadence of invoicing hasn't really changed. I will say, though, that one of the dynamics that we see with -- now that the -- we've seen a full cycle with Orion and the mix is that they do have a customer base we have a customer base that -- where we do have a handful that we will build annual revenues upfront. And again, close to 2/3 of our revenue there is recurring -- and so we do have -- we will see some benefit from a balance sheet perspective, where we have some cash 12-month build up front as we get into. Right now into Q2, we'll start seeing a bit of a bulge in our cash collections. On those annual build relationships. And then it will be drawn down partially throughout the rest of the year. But I would say it's a smaller portion of our recurring revenue, but definitely a nice little benefit for us from a balance sheet perspective. Other than that, the rest of our business is building on a regular basis, contracts, milestones to build and record it similar to how we've seen in the last few quarters. So not a lot of movement there in that. We just had a fix a small benefit this quarter that was a bit of a catch up.

That's all. Perfect. Great. And maybe more of a broader question. If you could help us understand maybe which types of customers are most amenable to these cross-sell upsell opportunities? Is there a bigger opportunity with, say, HIE or maybe another enterprise context and if there's a meaningful difference between geographies on bringing additional products into a project given the sophistication or how well those systems are resourced or funded.

I'll take that. The short answer is there is no meaningful difference by geography. I think there's a meaningful difference in timing. And so our customer bases, whether HIEs or digital front doors. Realistically, there's still government platforms. And so while we are always part of the solution, we're never going to be 100% calls they have -- so the conversations we're having doesn't really matter which part of the stack we're in. We're still having those conversations. It's their readiness that is the driving force. And generally, it's the funding cycle. So we're having conversations in all of our major regions. So active conversations in the U.K., active conversations in AMD, U.S., Canada, Middle East. So we're trying to be really methodical about where we apply our time. What I would say is there's probably more conversations demand than we are capable of delivering right now. So we need to scale with that. But as we said, these are long-dated cycles. They are not things that will switch on tomorrow. These are conversations that can take 3 to 6 months and then they can take 6 months to [indiscernible] what we're seeing from -- and I think Alex mentioned in his presentation, we're seeing governmental support now coming through in Canada, the U.S., the U.K., ANZ actually behind supporting AI being deployed and this really common language, which is the exciting piece of the U.K. talks about getting people out of hospitals under the community. Well, that requires a shared care report. That requires a HIE then there's conversations about treating people -- treating wellness, not sickness. And again, that's the same language they have within the CMS. In fact, the CMS has ended the period of what they want to see people looking out customers save in terms of accountable care. So the language, the financing is actually quite global right now, which is exciting, and it matches our footprint nicely. I think what will be an interesting component in 2027 will be as we brought in from regions were not done because our capabilities work in any health care system and what we're seeing with the preventative health care is that as we begin to show use cases and proof points and what I would say tangent or adjacent revenue streams, there is -- what we're finding is there's no real I'll say in a city way, but there's no opportunity that we can't participate in. I think I mentioned before, we put in our first with the genomics partner which was an exciting change just a range of the things we can apply our AI and platforms to -- that's great.

Your next question comes from David Kwan with TD Cowen.

I was wondering, could you talk about some of the conversations that you guys are having with life sciences companies that, I guess, you're in a much stronger position now to help them with their clinical trials, given your AI capabilities and the integration there. And then you've got WellTrust and now, I guess, well held was talking about WELL Research on their call yesterday. So just curious to see, are you having more inbound interest? And also how you're planning to work with well with in terms of going after these opportunities?

David, thanks very much for your question. Look, I think our credibility and our relationships with life sciences companies, which includes, of course, big pharma, med device and biotech I think it's all been really maturing in an exciting direction. And just to give you a quick snapshot, David, of what we're able to do, right? We started really with this capability of being able to risk stratify patients or identify at-risk patients of all sorts of different conditions, including rare, ultrarare chronic in complex conditions. And on top of that, we've been able to offer our life sciences partners a capability of being able to generate regulatory-grade real-world evidence, which could then inform and help generate clinical studies. And that's really key. And then a third kind of value proposition is being able to not just screen and identify adverse patients but identify patients that are also of strong eligibility for clinical trials. And in this word is really meaningful. And I think that's what you're touching on with partnerships and strategic alliance with WellHealth and their initiative around well trust and well research, right? We're able to identify patients years in advance that then get access to -- in some ways, it's life-saving clinical trials. So that's a really exciting partnership opportunity, and we encourage you guys to watch that closely. And I'm sure Hamed will share more news on that front in coming quarters.

The only thing I -- the only thing I'd add there is that that's already in market. It's not -- there's not an idea. We're already seeing use cases and RFPs coming in. I think the scale of world Trust at the site, which has grown surprise us. We're seeing really good consent from people going through the clinics. And so it's an area that we're actually looking at accelerating our spending growth to accelerate the size of the scale of consent of patients we have existed.

That's great. Do you guys actually have an updated number in terms of how many wells patients have given their consent through [indiscernible]

Don't have it in front of me. It's changing rapidly week by week. So we're in the early phases of deploying it across all the well ecosystem. And so it will be a more meaningful number for me to give you next quarter. But what I can say so far is that the -- it's a week-by-week growth that has surprised us from -- let's be clear from a small start early, but now we're in the point where it's enough to be meaningful, but we're now using what we have to identify patients for clinical trials and commercial growth. So not theoretical we're actually doing it.

[Operator Instructions] At this time, there are no further questions. I'll turn the call back over to Mr. James Lee for any closing remarks.

Actually, I'll take it. So in closing, I want to thank everyone once again for joining our call today. Thank you to the analysts for their questions. Everyone, please stay safe and healthy, and we look forward to providing more updates in the future. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.