Vitalhub Corp. (VHI) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today for our 2024 fourth quarter conference call. With me on the call today are Vitalhub's CEO, Dan Matlow; and CFO, Brian Goffenberg, after our prepared remarks, we will open up the line to questions from analysts [Operator Instructions]. Before we begin, I'll read our cautionary note regarding forward-looking information. Certain information we 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, as well as in our SEDAR 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 2 can be found in our SEDAR filings. With that, I'll hand the call over to our CFO, Brian Goffenberg, to go over financial highlights for the quarter. Thank you, Brian.

Thanks, Christian. Good morning, everyone, and thank you for joining the call today. We are pleased to report the results for the fourth quarter and full year of 2024. The fourth quarter was a record for us for the first time achieving over $20 million in revenues, over $5 million in adjusted EBITDA and organic ARR growth of $2.6 million. Our progress over the full year reflects the success of our 2-pronged growth strategy to deliver organic and acquisition growth. Organic basis, we grew the annual recurring revenue by 15% in 2024 as well we closed 4 acquisitions in the year. Bringing our annual recurring revenue base to over $70 million. We are well positioned and well capitalized to continue on this growth strategy. In a moment, Dan will provide commentary around the business and the outlook. First, I'm excited to share with you the financial milestones we achieved in the quarter. Detailed full year results and support can be found in our SEDAR filings. For today's call, I will go over the select highlights from our fourth quarter. Our annual recurring revenue was $71.1 million to close the year, an increase of 59% over the prior year. In the fourth quarter, total revenue was $20.6 million, an increase of 51% year-over-year. Recurring revenue or term license maintenance and support segment comprised $17.17 million or 86% of total revenue. This compared to $11.3 million or 83% in the prior year period. Perpetual license revenue was $100,000 in the quarter, a decrease from $300,000 in the prior quarter. Our services, hardware and other revenue was $2.9 million in the quarter, an increase of 42% year-over-year. Our gross margin was 81% of revenue as compared to 83% in the prior period. Moving down the income statement. Net income before taxes was $0.2 million compared to $2 million in the prior year period. With 2 acquisitions closing in the fourth quarter, we recognized $2.6 million of business acquisition, restructuring and integration charges as compared to only $300,000 in the prior year period. Adjusted EBITDA for the quarter was $5 million or 25% of revenue compared to $4 million or 29% in the prior year period. Turning to our balance sheet. As of December 31, '24, we had cash on hand of $56.6 million. Subsequent to year-end, we completed a board deal financing for total gross proceeds of approximately $34.5 million. We have no debt currently and recently expanded our borrowing capacity to $65 million. This is a combination with our strong cash generation, which gives us significant financial flexibility for growth in 2025. With that, I'd like to hand the call over to Dan for an update on the business.

Good morning, everybody. I'll try to give everyone a little bit of outlook and commentary on the quarter and then turn it over to some questions and hopefully fill some of the gaps that the entire people might have. I just want to recap what our strategy is. I know we're starting to get some newer people starting to look at story and have done some a lot of investigative work. But just as a reminder of our approach, we're a health care IT software company, primarily focused on single payer-based systems, which is outside of Canada, U.K., Australia and the Middle East, this is our primary areas where we market products. And we have a two-pronged approach of acquisitions as well as M&A with a very high powered synergistic-based model that is really geared to organic growth and some really good cost rationalization in the strategy. And really what 2024 was, in my opinion, was just again, more definition and concrete awareness of what the model can do and what the ability of what the model can do. And it was a good proof of what our model was. I think the real important thing for 2024 from my perspective, although the results were great, was really internally within the company, I think the awareness of what the potential of our model do and really the synergistic approach internally of the staff and the excitement of our staff of what our model is and how effective it can be in really the understanding of what this can be from a growth perspective. So that was something exciting, and it's something that may not be visible to the investor approach, but definitely visible internally with the company, and we're excited what that was about. The fourth quarter, yes, it was record ARR and really, it came again from multiple base sources in Canada. The TREAT continues to add customers and the service back -- the services backlog is still really, really high for that product in terms of delivering those solutions to our customer base. The province of Nova Scotia still keeps kicking on in terms of adding users. And we started to see some increase from the Strata based business in the Canadian market. The nice part about Strata is, if it continues to grow as new pathways become available and as new areas of use [indiscernible], we start extending that solution, and that leads to increased ARR, and we're starting to see some synergistic approach of Strata with our TREAT client in terms of doing referrals in the community agencies in the mental health and a lot of our bigger clients have started to approach us using Strata as a solution as opposed to alternative solutions in the marketplace that could be out there such as Ocean, et cetera. So we're excited that we are bringing in some new life into that community agency for the Strata based product that's out there. In the U.K., it continues to move along. SHREWD, definitely continues to add stuff. We're starting to see some impact from the Intouch again. It was a little bit quiet in -- over the last year, it did work, but we're starting to see some increased work in that area and the [indiscernible] continues to add users on a regular basis. And all of this is leading to increased ARR. We continue to work on cost rationalizations. Our Sri Lankan team is up to close to 200 employees. We've started the work in getting the Sri Lankan group primarily working on Strata-based solutions. There's AI initiatives that are in place that we are working through in terms of add-on solutions that we hope to introduce into the product over the next year. And we're hoping that, that starts increasing revenue as well as we continue to grow. We're comfortable in terms of where are our ARR figures, and we continue to move along. Typically, Q1 is somewhat of a strong quarter for us, you never know, but we like some of the activity that continues to work on as government year-ends, keep moving through there. On the acquisition side, we got lots in play. As the awareness keeps approaching, the more acquisitions that start coming to us is starting to increase. And our pipeline is continuing to grow. We do have $90 million that we're sitting on in cash, and we're looking to deploy that as effectively as we can, making the right decisions in terms of solutions that we think, add value and are synergistic to our approach that we can increase our organic growth in terms of a strategy of how these things fit together from a cohesive narrative. We're proud of what we did in 2024. It's already March of 2025, so it's hard to think of that. And we're well into Q2 planning in our company, but it is a good time to reflect on what we have accomplished in 2024, and we look forward to 2025 and continuing to perform in the same way that we have before. And happy to turn it over to any questions that anyone might have.

Thanks, Dan. We'll now open up the line to questions from analysts. [Operator Instructions]. Today's first question comes from Gavin Fairweather of Cormark Securities.

Congrats on the strong numbers. Maybe just to dig a little bit deeper on Strata and MedCurrent. I know a big part of the investment thesis there was kind of plugging those products into your sales team to accelerate growth. Maybe we can discuss where we are in that process and to the extent that you're seeing pipeline increasing post acquisition on those deals?

Still early days. We just guided 3 months ago, but MedCurrent continues to evolve. There's a lot of activity going on in the U.K. from it. It's sort of that team there is just continues to plot along. They were plotting along before. We've had some things that were going through there, and they have added -- they keep adding deals and continue to add deals on a regular basis, and we continue to move forward there. We haven't really done much in terms of technology integration or things like that with the lab yet. It's a pretty tight small group and it's really set up to organically to continue to make money even though without many changes to it. But we are introduced that to our U.K. team, into our Australian teams, and they're getting equipped to build leads with that in the Canadian team as well. So things that we've done. Strata, yes it's definitely more synergistic than MedCurrent is, although MedCurrent is as well, but Strata really hits the bull's eye in terms of what we do. And we're seeing a lot of activity, and we expect a lot of activity in the referral business, not just across all of our geographies, we expect that. That's a big issue with health care in terms of integrating all the disparate patient pathway. So it's an issue that's there and Strata has a really good solution that we think we'll really do better with how we market and how we integrate it to some of our ideas. So we are seeing definitely an uptick in the U.K. pretty extensively, and we are seeing a lot of activity in the Canadian marketplace with our TREAT customers, especially on the large size, which are looking for pathways and referrals into their organizations where they take referrals. So if you can think of all the referrals that get referred into mental health and community agencies in the size of what our installed base fees for TREAT product. And we already started working on it, TREAT integration with Strata before. So that's being polished up, it's ready to go. So that's really what's going on with those 2 products.

I appreciate that color. And one thing that stands out in your 2024 results is just how efficient you are in turning your sales and marketing spending into ARR organic growth. Curious if you're seeing any opportunities across your regions to add a bit more sales investments and generate even higher ARR bookings?

Yes. We're adding a few new people into it and really a focus of 2025 is to beef up the operational expertise of our sales team. As you could appreciate, we're a bunch of small companies that have it salespeople and have used approaches before that -- have made them successful. We feel that we can get ourselves and our customer success people to the next level by increasing a little bit more structure and investing in tools to automate those processes and really trying to put our sales force system on steroids and/or other marketing systems on higher value prop. So we're going to have an emphasis in terms of what we can do from productivity tools to really get our sales force out there. There could be some capital expenditures that go with that or some of our operational costs as we invest in those tools. But I don't anticipate it's a large increase in headcount. It's more efficiencies and how do we mine these accounts more effectively in a scientific process. So that's a little bit of emphasis that's going to start going into 2025 into the organization.

Got it. And then lastly for me, in the U.K., you saw the news recently that the NHS England is kind of folding into the Department of Health. Curious for your take on how that could influence ARR bookings in the near term or the longer term, if you're seeing anything in Q1, and how the team feels about that structural shift over the next little while?

Yes. It's concerning in a little bit of ways and exciting in other ways. And I really think the concerning part really comes from the unknown factor of where this is going to sit. We haven't seen any impact of it yet. And we're not sure we will see any impact negatively or positively, but it's the unknown debt that's really there. What we do know is our systems are used and they're happy and there is interest from all levels of government to digitize their -- the NHS in a more efficient manner. And we're right at the center of it. And when we speak to our customers and we speak to the people, they keep stressing that message across to us. And they keep saying, hey, it's they don't think that this part is going to be impacted. But yes, we really don't know that answer as of yet of where it goes, and you always get concerned when there's change going on. But we think overall, that change will be positive in terms of the focus of this how digitization works and so forth. But it will take time for that change to work through the system, and we expect them to be still investing in systems during that process, but no one is 100% sure how this will all go, and we'll just have to keep monitoring it and keep going from our organization. The good part is we've got a huge installed base and most of our big chunk of our sales are add-on sales to those particular groups. And it's not new initiatives, and it's usually a lot of the time. So we expect those add-on sales to continue for sure.

Next question comes from Doug Taylor with Canaccord Genuity.

Congratulations on a strong finish to Q4 into 2024. It sounds like top line synergies from the Strata and MedCurrent, Strata at least are already starting to show through the margins also for the business overall held in pretty well despite the 2 acquisitions in that quarter being to my knowledge, at least starting below Vitalhub's corporate average. So maybe I'll get you speak to the integration steps and stages you're in now with the benefit of a couple more months behind you and the considerations we try to map the linearity of any margin compression and then the subsequent expansion that was anticipated for the year?

Yes, we knew exactly what we were going to do with MedCurrent and Strata, and we moved pretty quickly to get some changes and the 2 organizations came in with pipeline already that we knew was looking to close so. We knew that when we did it, and those deals did happen from what they said what happened. So that was a good part of why we did some good ARR for the quarter and will that continue? I don't know. But both those organizations have solutions that are in demand and they continue to add value. We still had work on the cost rationalization to do in the company outside of strata and that continued to happen and still continues to happen. We looked at the organization and have done some more combinations, especially in the U.K. to get some cost effectiveness going, and we continue to move stuff into Sri Lanka. So that's really where that's going. We haven't done much cost synergistic stuff on both Strata and MedCurrent. There's some stuff that has happened for sure. And you can see that in the restructuring and so forth, that was put to that quarter. So yes, I don't know if that helps to answer your question. I think we were 25% in Q4 versus 28%, but 25% of a bigger number is a bigger number, and it's still pretty good. I think we can get this thing back to 28% again, and that's what we're trying to do there.

So maybe to put a finer point on that, you said you're expecting typically strong seasonality in Q1 as it relates to ARR build, and we're only a couple of days from the end of the quarter. And based on what you just said, I mean, should we be expecting as we get MedCurrent and Strata for a full quarter here in Q1 for there to be any EBITDA margin compression from the 25% level? Or I mean, do you see that as a good place to start the run rate with these acquisitions in the fold?

That's probably a good place to start. You always get some additional costs with any acquisition. There's IT things as we move over some infrastructure costs and adjustments to compensation and stuff like that. And then as we get more synergies, you'll start seeing the margin, I think, compressing as we go forward throughout the year.

Expanding. I think you mean -- well, I mean, you've been able to move quickly. That's great to see. One last question for me. You're pretty explicit in both the press release and your comments you've made here so far. But your ability to keep up the pace of M&A after closing last year with a couple of medium-sized deals, you say there's a lot of play. I mean have valuation expectations shifted in your favor here as well? Or is there something else that's giving you confidence to make the statement that you're going to be able to keep up this pace?

I just think it's the deal flow, right? There's, yes there are some deals that are value compression that are a little -- that are distressed out there that are somewhat attractive to us just based on the ARR and the ability to take those companies and potentially turn them around. Scenarios that are out there and on the bigger side, I don't think -- yes, there's some reduction probably than the past, but it all just depends on the asset and the competitive nature of the bid really that drives that. So I think on the bigger acquisitions, there's not as much reduction. We're not seeing it -- a good asset is a good asset. But on the smaller side, there's some struggling companies out there where we're seeing that we can take things over. And it might be some work in progress, but at the end result, we can make some good money at those things. So we're seeing it on both sides.

The next question comes from Salman Rana of TD Securities.

Congrats on the strong Q4 numbers. Salman on behalf of David. So first of all, my question is on how much activity Dan, do you think has moved to Sri Lanka with respect to the Strata and MedCurrent acquisitions? And what do you think is still planned or in the works there?

It takes time to move things over there. And we had -- we've started to ramp up people in Sri Lanka for Strata and there was -- the Strata team was over to Sri Lanka in Q1. And I think they've got projects that are kicking off there, and we're starting to kick off projects to get move things and get expertise to move over there. So yes, that's all started to happen. The MedCurrent already runs a very small development group. The IP in that company isn't the tech -- although the tech is very good, and it is still pretty comprehensive, but it's really in the clinical aspect of that product that is the driver to that solution. And it's already a very cost-effective based organization that just needed to get its sales up and get that 80% margin ARR into the business to start getting the returns that we want. So in that group, we're just being patient and waiting for that pipeline, which seems to continue to add. And is getting closer to our Rule of 40. So all -- when we get our companies and we do that, we always look at what is it going to take to get it to the Rule of 40, and put a plan in place to get it, and we start executing on it. It doesn't necessarily happen day 1, but we look for an approach to get it there within 3 to 4 quarters for sure. And we're on our way with those 2 organizations.

Understood. So earlier on in your commentary, you talked about Strata and bigger clients starting to take a look at that. I'm just wondering like what do you think is differentiating Strata versus other solutions out there versus OceanMD?

They cross paths in some places, but really, they got their own separate roles. Ocean is a physician referral system. So it goes from a physician out. Strata is more of an enterprise based system where it works from the acute care from the hospital out to the community. So it goes inward out, where something like Ocean would go outward into the acute care or they also go clinician to clinician. I think clinician to clinician is really where their sweet spot is. And we're really more geared to a larger enterprise based system. So they do interfere in some places. But yes, I think the -- they got their own lanes that they run it.

Understood. And have you seen any material changes in the sales environment lately because of like due to the ongoing macro challenges like the potential headwinds we could see from the tariff/trade war. Are you seeing any sales cycles lengthening?

I don't -- the tariffs don't affect our industry at all, right? You're talking about health care, and I don't think government -- I don't think there's anything the U.S. can really do to affect our internal health care systems in U.K., Canada or Australia or the Mid East and none of that affects us at all.

Okay. Just one last question for me. So given your sequential organic ARR growth was again really solid. It's been in the $1 million to $2.6 million range for the last 2 years. Do you think your target of adding $0.8 million to $1.5 million is pretty conservative at this stage now?

Yes, it's probably conservative. We could probably take that up to like $1.1 million to $1.7 million, $1.8 million type of thing. I'm still -- I've been in this industry for 30-something years, and I understand government health care, and I understand feast and famine, and really approaches. I still also understand that the way our products work, right? There's opportunity to really have a lousy quarter in here, and there's opportunities to have an amazing quarter. I think we are starting to get enough products in our suite that one will pick up for the other to really get some consistency in there. But I don't have visibility until like, oh, wow, we can -- the pipeline is strong and we can do things, but I don't have visibility until like this is going to be record all the time, right? So I'm conservative by nature and I'm going to be there because I don't want to be on the other side of this [indiscernible] someday, but we continue to strive to build as much ARR as we can, and we're pretty bullish that we can. But at the same time, I want to be conservative.

The next question comes from Richard Chu from Scotia Capital.

Congrats on another strong quarter. So I was wondering, can you provide further color on the composition of ARR added in this quarter? I know it was very balanced between the 2 markets, but were there any particular products that did better or any big wins that you had?

As I said in my narrative, it really was spread across. I think we had a couple of deals in there. Nova Scotia continued to add users. We had some Strata expansions in there. We had some MedCurrent deals that got live and started recognizing revenue in the quarter. Our services was pretty good for the quarter so that added to it. We had -- CVS was a contributor in Australia that quarter and TREAT continued to add new deals and continue to do that. And we started to see some an impact from the [CaseWorks in Coyote] products as well in the Canadian marketplace on the smaller government agency. So it really was spread across, and there's nothing that really stands out, there was no million-dollar ARR deal. So if that does anything, I think there was a lot of transactions that happened in the quarter and a lot of smaller ones.

Okay. And I know you mentioned you're not seeing any tariff specific headwinds, but are you able to offer any additional color on ARR trends in Q1 so far, given we're almost through the quarter?

Yes. I'm not comfortable in terms of doing that, like 2.6 is a pretty high goal post to get to. And we knew we were coming into some deals from Strata and MedCurrent that were in the works when we got this accomplished, and we were excited to get those over the finish line. We still got a pipeline. It is Q1, 2.6 could be hard to get to. But we've got things in the works, and we continue to do it. But yes, I'm not prepared to put any guidance at this point. It's sometimes challenging to get bookings into recognized revenue. Although we see things, it doesn't mean from a rev rec perspective, that's going to come through. So just not comfortable at this stage.

The next question comes from Michael Freeman of Raymond James.

Dan, Brian, Christian, congratulations on closing on a great year and I'm the new guy, so happy to be [indiscernible]. I'm curious if you could describe some of your areas of your toughest, most direct competition in winning new customers. You mentioned Ocean a few times during this call. I wonder if you could highlight a few other areas?

There's other data platforms in the NHS as a company called Radar, which we compete with in the NHS on the SHREWD. In touch, there's some -- I'm sorry, with trade, there are smaller players. We sometimes get into the TELUS competing and sometimes into the AlayaCare, sometimes we're competing with the big EHRs, depending on what's going on there. So it's hard to say where that is, there's a bunch of small players that we're competing there. In touch, we start competing -- Epic has its own kiosk-based strategy and sometimes they use it and sometimes they don't. And Cerner has other partners that they've done kiosk work with in the U.S. that start seeing floating around once in a while in U.K. bids. And so they come from different angles depending on the solutions. This space is really service by just a lot of smaller base vendors that are there. I think MedCurrent doesn't really have any competition, but the some group out of Ireland came through the other day with attempting to try to do where it is, and they haven't seen it before. So yes, that's sort of the way this landscape is, Michael.

Okay. That's super helpful. I appreciate all that color. I'm curious now you mentioned the deployment, at least the preparation of AI by your Sri Lankan team to extend some of your products. So I wonder if you could describe more sort of how you intend to leverage AI into your businesses and just like your overall AI poster?

Yes, those like the EHR products like the treats in those things like scribing is a big one, right? In that world, and there's a lot of progress notes. And things that are coordinating it, and we are the electronic record for these organizations. So adding that functionality makes a ton of sense, and it's an easy win. And an easy upsell into that base. So that one we're definitely focused on and then things that are predictive like our MCAP product, which is the clinical criteria based product, it makes sense to as opposed to data entries to extract those information out of the EHR and apply it into our criteria to get the results as opposed to having the frontline caregiver, enter that data into that product. So that's another one that is visible to us in terms of what we can create out there. Those are 2 examples. MedCurrent already has AI initiatives that they've started and already have some of the stuff approached in their product in terms of predictability and should patients go through imaging or not go through imaging as a predictive analysis. So it's a light version, but they continue to work on that. So those are examples of 3, and there's some other work going on in the SHREWD side and the predictive side there as well. So some evidence of some things that we're trying to do.

Okay. And if I could shoot one more in here. You mentioned basically as your portfolio expands, you might be able to smooth out the way you describe it, like the potential for you to have a tough quarter in organic ARR growth. So as you think about the acquisitions of new businesses, are you -- what kind of businesses are you seeing out there that would best complement your portfolio? Are you thinking about broadening your capabilities or going deeper into a customer set?

Yes. I think broadening our capabilities and going deeper in our customer set is the same thing. The more solution we can get, the more comprehensive we can talk to those customers and the more narratives we can have of, okay, you got this one product, here's some ideas of how to extend this into others. And what our approaches are and what we can do for you as an organization. So we looked at all the pathways of patients and how they move through the health care system. And all the different ideas that people have come up with in terms of streamlining that approach be it from an analytical perspective or from an end user's perspective or how they can streamline those processes and make it better. And we look for evidence that those solutions have been rolled out at customers and customers are actually getting the benefits of those systems, and it's comprehensive enough for us to continue to grow those solutions out there. So yes, the pathways are really big, has lots of different ideas and approaches on how we can get patients moving more effectively through the health care system on the patient flow side, and we're looking for solutions all the time on how that can help. And on the EHR system, we're just -- on the EHR front, we're just looking for similar systems that might be a little lighter weight that we'll eventually upgrade to a higher value-based system such as trade and trying to get that installed base and see what we can do to lift that. We've been successful in doing that in Canada, and we're looking for acquisitions where we continue to do that.

Okay. Terrific. Thanks very much, guys. I hope looking forward to great 2025 and very happy to be up on the name. Take care.

Next question comes from Gabriel Leung of Beacon Securities.

I wanted to ask about the your Canadian business. Obviously, that's bulked up with the recent acquisitions and given the buy Canada sentiment, I imagine your hit rate can only improve at this point. Also a lot of tailwinds for Canada. Dan, can you just talk about what you're seeing in terms of the pipeline here in Canada, maybe the size or some of the opportunities you're working on and timing for some of these opportunities?

Yes. I never thought it would. In Canada, we do get a little bit more influence in the U.S. solutions coming into the marketplace. And our sales team did tell me the other day that they spoke to some organizations that I won't mention that yes, we're looking at this, but they've actually told me to remove that from the buying process, and we're just going to look at you guys from that perspective. So I never thought I would hear it, but we did hear that in a couple of different places. So it's a good question, Gabe.

Anything you can talk about in terms of the quantum of opportunities you're seeing or expect to?

It's still early days, like this just started, right? So you don't see a ton of U.S. like you see the bigger solutions in the Epic and the Cerner's of this world. Will that sentiment change? That could be interesting. If it does, I don't expect -- like it could, if this continues to go on, right? Like in my personal belief it should to some degree, there's better answers for those equations. I think on -- just there's no Canadian vendors that can actually do what they do. So I don't think that will change. But yes, in the -- there's a company called MEDITECH, which has started to go into -- it does the smaller hospitals and it does go into the community in the rehab based world to a different degree. And yes, that could see some issues with those guys in that market for sure. You know that you would see. But yes for the most part, the competitors that we see aren't U.S.-based, although you did -- you are giving me an idea there is one competitor that we see a fair bit that is owned by U.S. private equity that our sales rep should actually talk about it a little bit more. But I actually didn't think about it much until the question, and just some of the stuff that you're there with.

Got you. Brian, just a follow-up question for you. Anything we should be watching out for in terms of additional restructuring charges as you go through the integration over the coming quarter or 2? And anything unusual about CapEx we should be expecting this year?

No, I think we probably will end a little bit more to CapEx as we try and get more systems in place. But nothing -- I don't think anything will be really material. And as far as the restructuring, I think as you go forward, there will be some. I don't think to the level that we had a lot of -- in last year, there were a lot of external legal fees and valuations and stuff like that, which really added to the complexity and the cost. So I don't think you'll see it to that level. But there will be some, obviously, I think, as we make changes to the businesses.

Got you. I appreciate that. And congrats on the progress.

Your next question comes from Daniel Rosenberg of Paradigm Capital.

My first question was around the sales portion. I was curious if you've seen any changes in the trends of just inbound leads versus your outbound lead generation, how that shifted over time and you expect it to shift as you're kind of getting bigger and bigger scale and more of a presence in the European market?

Yes. This is the type of business that most of the players that buy the stuff know of us to some degree. Some of the products, I think, in different markets could have better -- in Canada were stronger, in some geographies and other geographies and provinces, I mean. So yes, we are seeing definitely more inbound leads overall in the business. If you think about it, the inertia of one product and coming through. And we just got more people on the street every time we do this. And more customers and more ideas and we were being talked about a little bit more and that word of mouth is definitely the better way of things happening. I'm not sure how much people look at their marketing in terms of inbound leads in our space, but presence and ideas are definitely how people buy. So yes, we definitely see more inbound leads.

I'm wondering if there's anything like build out specifically in your products and processes that can trigger kind of that realization for somebody to want to cross-sell. Could you speak to any examples of that? Or is that territory? Like I'm trying to connect that virtuous cycle that you're seeing in your organic growth?

Yes, TREAT is -- TREAT is the electronic medical record that really drives the process of how patients are taken care of some of these large agencies. And these patients come into these organizations because they get referred by a specialist or a hospital or something to go for care or counseling or services based on that, but how does that referral work? And how does that come into those agencies? They don't want that working on 2 different systems. They're going to want that referral to come right into the electronic record and how that connectivity all works, right? So they're definitely -- will they buy the system that we own because we also own the electronic record, I think they would, but that's an idea that we have. And we got a system called Diamond in the U.K., which does all -- has about 60 customers that does all the diabetes base work and it would get a ton of referrals too. So will Strata fit into that base world? And we have SHREWD who's showing you all the visibility of patients within a particular region, would you not like to see those patients that are in transitional services that are in transition as part of that data, 100%, you're going to want to see that data. So those are evidence of how we can talk about, how our products fit together in different ideas that will continue to happen. And we got to get better at teaching our sales reps on that narrative and how that all stuff fits together. But there's a method to our madness and what we buy and how this offers together and different ideas of how that can lead to upsells.

Okay. It sounds like certainly opportunities to explore there. Last question for me, maybe one for Brian. I was just wondering the contingent consideration on the balance sheet seems to have gone down quite a bit. So I'm just wondering how you're booking the earn-outs or potential liabilities from earn-outs for your recent acquisitions to go into any other lines?

No, the -- basically, the valuation does calculate what I think the expectation of the contingent -- payout of the contingent consideration is, and that's what we end up working through in the balance sheet. So you can see the expectation is relatively low.

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

Yes. Just there's a lot of questions. I think everyone's got some visibility into where we are, and what we're doing again, just trying to stress, we believe in our model, and we believe in it for the long term with ups and downs, we just came through an up quarter. So we'll take that in and move on to the next one and hope it's again another up quarter and continue just to move, but we believe in the big picture of this. And I'm just trying to stress to the analysts and to the analysts and to the investors out there. It's -- this is -- we invest in our business as shareholders for what the long-term approach is. And believing in what the business model is, and we like these calls to try to really effectively articulate that. So if you got questions, we're always open to it, and feel free to get in contact with us.

Thanks very much, Dan. This now concludes today's conference call. Thank you all for joining.

Thanks, everyone. Bye-bye.