Vitalhub (TSX:VHI) reported second-quarter financial results on Friday. The transcript from the company’s second-quarter earnings call has been provided below.
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Summary
Vitalhub Corp reported $31.7 million in total revenue for Q2 2026, a 33% increase year-over-year, with $24.5 million attributed to recurring revenue.
The company achieved over $100 million in annual recurring revenue and maintained a 26% adjusted EBITDA margin, aided by synergies from acquisitions.
Vitalhub closed the quarter with $136.5 million in cash and no debt, and completed the acquisition of Buddy Healthcare, anticipating further M&A activities.
The integration of acquired companies Induction and Novari is nearing completion, contributing positively to both revenue and EBITDA.
Vitalhub is expanding its AI offerings, particularly in protocol and transcription solutions, and sees growth opportunities in the UK and Nordic markets.
The introduction of an NCIB indicates potential stock buybacks as part of capital allocation, alongside continued focus on M&A.
Challenges in the UK market due to ongoing issues with the NHS Palantir contract are affecting some product deployments.
Full Transcript
Christian Sgro, Head of IR and M&A Specialist
After our prepared remarks, we will open up the line to questions from analysts. Please press star one 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 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 two can be found in our SEDAR filings. With that, I’ll hand the call over to Brian to go over financial highlights for the quarter.
Over to you, Brian.
Brian Goffenberg
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. Vitalhub 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 total revenue of $31.7 million, an increase of 33% year over year. Recurring revenue, our 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, or 26% of revenues, as we continue to gain synergies from the acquisitions of Induction and Novari, compared to $6.3 million or 26% of revenue in the prior year period. We closed the quarter with $136.5 million of cash and investments and no debt. 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 30, 2026 would have been approximately $106 million. With that, I’d like to hand the call over to Dan for an update on the business.
Dan Matlow, President and CEO
Thanks everyone. Welcome. Today, just on reflecting back, it’s exciting to see us get over $100 million of recurring. Our people and our staff were 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. So 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 once we get the technology all integrated and so forth that that will be a good addition into our cross-sell methodology. So it’s good people, great technologies and we’re excited to add that piece onto it.
In respect to the quarter in terms of numbers, you see the recognized recurring growth. Services revenue a little bit behind in previous quarters, but still reflects that services revenue is always tough to nail it 100%. I think we had a $5 million quarter a couple quarters ago and down here it comes in ebbs 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 Attend Anywhere renewal process comes at the end of March and as you can see that they are held up pretty hard for that. Contribution came from really all of our products, but mainly from the Zesty and the care coordination products, the Strata and Novari product. Novari continues to move through Canada, but what we’re really excited about is the momentum that’s starting to get a little bit in our UK marketplaces and a little in other markets.
But it’s a unique solution and we’re excited and think it has great opportunity. The revenue number was offset by still some challenges with our product and the SCCs — that’s the system control centers with the ICSs and the FDP and the Palantir-based solutions — along with the mergers and acquisitions. So we had some customers that suspended use during the quarter waiting for the outcome of what’s happening with the FDP 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. 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. In 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 in 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. We’ve introduced AI products into the marketplaces. There’s two: you have the protocoling solution that started in the Novari 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-based work. We’ve been working on that for about a couple 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. We’re getting close to the complete integration of the Novari and the Induction transactions, and as you can see, our thesis for both of those two large acquisitions has come to fruition.
Our adjusted EBITDA is back to 26%. We were pretty good cash flow, I think $5 million adjusted EBITDA, and we’re up over $8 million, and our goal is to continue to get that to grow. That’s always been the thesis of the company. So I know there were a lot of question marks by people saying, hey, can you? We did those two acquisitions — both of those were losing money at the time — and 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, stays.
We think it is a good value for us, with lots of cash, to start looking at buying back our own stock. So we decided to put that in place and we expect to use it as we see how the stock is reflected and so forth. So we do have it in place and we’re working to do that. 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 forward.
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, revenue, and we think we’re in a good position. I think we continue to prove our business model and we’re happy with what we’ve accomplished here. Are there any questions? Go ahead.
Christian Sgro, Head of IR and M&A Specialist
Great. Thanks, Dan. We’ll now open up the line to questions from analysts. Please press star one or use the raise hand function if you’d like to ask a question. Today’s first question comes from Gavin Fairweather with ATB.
Gavin, your line is open.
Gavin Fairweather, Analyst
Oh, hey, good morning. Thanks for taking my questions. Maybe just on eReferral 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 eReferral, or if this is coming out of general budgets, and do you see the potential for this to become a more strategic priority at the NHS level with some bigger funding attached?
Dan Matlow, President and CEO
Yeah, I do think the NHS is definitely, like other organizations, 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, NHS’s integrating into social care and integrating into aftercare and rehab facilities has become a big issue, and we’re expecting that to help with the Strata-based solutions to do that. We know by looking at other markets around the world that eReferral is a needed aspect of it, and we know that the NHS and UK is behind relative to other places of the world, Canada included, in those particular markets.
And we can see the reality of what the solution does and how we can automate some of those things. So it’s like anything else in our market: it’s trying to get momentum, and we closed our first deal about six, eight months ago and that’s gone live. And the natural process is referrals don’t necessarily stay in one region; they cross other regions. So of course the two regions next to this region have seen what this one region is doing. So it only makes sense that those other two regions are now interested, and we’re looking at closing some business with those regions.
So we’re starting to see the behavior that we want in the NHS for those referral-based products, and our sales force is pretty focused on referral in that marketplace, and we are seeing available money for this. The business case is very easily justified for it.
Gavin Fairweather, Analyst
It’s great, appreciate that. And then just on Buddy — I’ve seen Finland healthcare described as pretty digitally mature. I’m curious what products you think of maybe greenfield opportunities in Finland, where there isn’t a big amount of competition.
Dan Matlow, President and CEO
Yeah, I think they have a similar structure to regional-based groups and they’ve connected regions pretty nice. Again, we think there’s opportunity for the referral-based products within the Scandinavian marketplaces. We also see opportunities for the touch-based suite of products in those marketplaces. So 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, 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, and those are the areas that we focused on. Canada still is lagging behind on the digital backdoor solutions, and this is a pretty comprehensive one, and the UK is definitely lagging behind on the digital backdoor solutions. They’ve really focused on the front door. So we think we got a solution to help fill that gap and we’ll continue to.
Gavin Fairweather, Analyst
Great.
And then just lastly for me on the Ontario Health deal, can you just discuss the contribution this quarter to ARR growth, and how would you describe how ramped up you are on ARR versus the initial scope on that deal?
Dan Matlow, President and CEO
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.
Gavin Fairweather, Analyst
Thanks so much. I’ll pass on.
OPERATOR
Thank you, Gavin. The next question comes from Doug Taylor with National Bank. Doug, your line is open.
Doug Taylor, Analyst at National Bank
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 the question is, with the impact to Shrewd, some of the pause that you’re talking about, is that something that is reflected in the net ARR growth and you’ve outgrown it through some other cross-selling? And perhaps you could help us quantify that.
Dan Matlow, President and CEO
We definitely took some ARR reduction in the quarter with some of the Shrewd work, but that’s been offset by other products in that particular marketplace. So the net is the number that we’ve gotten here. I don’t have the exact numbers at my fingertips here, Doug, but yeah, there’s something.
Doug Taylor, Analyst at National Bank
And 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?
Dan Matlow, President and CEO
That’s what we’re hoping. Each customer has really got two different scenarios that are cooking here. One is we got these new ICBs that have come together and formed. 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 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 got to suspend this. While in other cases they’re just going on as business as usual and they’re renewing their contract. So we hope within the next couple the contracts are new. We still think there’s opportunities 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.
Doug Taylor, Analyst at National Bank
That’s helpful. Next question: you described the integration process for Induction Novari as being substantially completed or approaching completion, and you can see the EBITDA margins here at 20.6%. As you say, that’s been well executed. So the question is, given that EBITDA margins have been higher in the past, 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?
Dan Matlow, President and CEO
Well, every million dollars of ARR theoretically adds, if we don’t add more cost, a point of adjusted EBITDA. And we’re still not completed on the other side of some reductions. There’s still some work that’s continuing to move it. So the natural increase of new deals — 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.
Doug Taylor, Analyst at National Bank
But so summarizing, cost transformation work largely done, but further…
Dan Matlow, President and CEO
Yeah, there’s still work to be done, but we’ve taken a big chunk out of the apple.
Doug Taylor, Analyst at National Bank
Okay, thank you.
OPERATOR
Thank you, Doug. The next question comes from Paul Treiber with RBC Securities. Paul, your line is open.
Paul Treiber, Analyst at RBC Securities
Yeah, thanks and good morning. Dan, now that the company’s past 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 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?
Dan Matlow, President and CEO
Yeah, I think — 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, 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 products. We are working on moving our salesforce into a regional-based salesforce and giving them those suite of products and merging them together in comprehensive solutions.
And we’re already seeing that in the field — customers asking for these things to be integrated. So already having two or three of those solutions, they’ve asked to, hey, let’s get these working together. So we work with them in the field, we get it integrated, and then we start integrating into other places, and then we continuously add on other products. So we are moving in that direction on our patient flow suite of solutions, and we’re starting to see it work in the field.
The bigger ticket items are the more complicated ones, being the Strata- and Novari-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 them. So 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 product sets or community services product sets. We’ve successfully moved that Caseworks product into Australia, and we’re having really good success with that product in those marketplaces as well.
And we continue to work on those approaches. But essentially that’s how we’re seeing it.
Paul Treiber, Analyst at RBC Securities
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?
Dan Matlow, President and CEO
We’ve done some work on that. There’s a couple other scenarios that we know of, and 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, been 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 is a pretty interesting marketplace. It’s very similar to our other government-funded groups between Scandinavian countries. So we’ll continue to explore it and we’ll continue to look at it. But yeah, that is a byproduct you get by entering into another region — intelligence on that region and how the healthcare ecosystems are and who the players are in those areas. So 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.
Paul Treiber, Analyst at RBC Securities
Okay, thanks.
OPERATOR
Thank you, Paul. The next question comes from Michael Freeman with Freeman James. Michael, your line is open.
Michael Freeman, Analyst at Freeman James
Hey, 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.
Dan Matlow, President and CEO
You know, it continues to be all over the map, as it always has, Michael. And it’s hard to predict in terms of everyone — it’s 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, and investors starting to think they want to get their money back.
And then the challenge becomes that they’re prepared 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 companies come to market, but we still see founders in other situations coming to market as well. So it’s all over the map relative to it. But probably we are seeing companies that did 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 start to see that.
Michael Freeman, Analyst at Freeman James
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.
Dan Matlow, President and CEO
Yeah, we’re really happy with some of the AI progressions we’ve built in our team. You know, part of sometimes on these acquisitions is you inherit 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 starting to move it, and we’ve seen some benefits. We do have capital projects groups that we’re building in there.
We built a protocol-informed based system which is used to understand forms and give you AI descriptions on forms, and we look at it as we start evolving the Novari product. I think it’s responsible for getting two deals that I know of over the finish line with Novari, where radiologists have just loved that feature. So we continue to do that and we continue to upsell it to the rest of our Novari base. But now we’ve added it to other products as an add-on feature.
And the other area which we think we can add substantial revenue is 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 between our four or five products in that suite that would be clinicians or caseworkers that meet with patients all the time that are not using scribing at this point. So we are building our own scribing and we’re integrating it into our own product sets, and we expect to get uptake on that product in 2027 with it.
So we are adding AI products into the market and we continue to build that. We’re investing in it and I think it’s interesting to note that we are up to the 26% level on the bottom line and we’ve been investing in AI continuously and still supporting. We’re happy with what’s going on in that group.
Michael Freeman, Analyst at Freeman James
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?
Dan Matlow, President and CEO
You know what, we’re starting to see some interest in the US 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. So we do have a US group in Strata with the search business. We decided to move the core referral management product into the US marketplace and, you know, early indications are that we got something that’s a little unique in certain scenarios.
So we could continue to move on that front to explore what we can do to build that. But that would open up an interesting marketplace that we could, if we could start getting some references.
Michael Freeman, Analyst at Freeman James
Does that provide an opening for other products to be introduced into the US, or is this very Strata-specific?
Dan Matlow, President and CEO
You got to be really careful. I think you can start with—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 is to refer to another area, the patient can be in the stream of the discharge to do that. So we’ve been integrating those into one-way product. An example: the patient gets referred out of a hospital to a hospice, and most of hospice is home care right now.
So the referral goes into hospice. We take the patient and the family 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 to, 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 upsell 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.
Michael Freeman, Analyst at Freeman James
All right, thank you, Dan. I’ll pass it on.
OPERATOR
Thank you, Michael. Next question comes from Kevin Krishna at Scotia Capital. Kevin, your line’s open. You may be on mute. Kevin? Hey Kevin, I hear you now.
Richard, Analyst at Scotia Capital
Yep, 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. I know that you’ve currently been running in the 10 to 11% range this year and was just curious on where that goes.
Dan Matlow, President and CEO
Yeah, 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 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. The bottom line has come to the other side, so we continue to do that.
Richard, Analyst at Scotia Capital
And do you have any thoughts on capital allocation, particularly the balance between M&A and buybacks given your recently introduced NCIB?
Dan Matlow, President and CEO
Yeah, at the core of what we are, we can only buy up to 5%, right. So we’re still sitting at 100 and, you know, we’re probably getting back up to the $130 million level. Even after the Buddy acquisition bids, we continue to produce cash. But yeah, I think we’re definitely focused on M&A as our biggest thing. I think that’s our best return for our shareholders in the long run. But, you know, I decided at the board meeting.
Richard, Analyst at Scotia Capital
Sounds good. Thanks for taking my questions.
OPERATOR
Thank you, Richard. The next question comes from David Kwan with TD Securities. David, your line’s open.
David Kwan, Analyst at TD Securities
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?
Dan Matlow, President and CEO
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, you know, that could be the world that we go into as we go forward.
David Kwan, Analyst at TD Securities
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.
Dan Matlow, President and CEO
Well, too, David. And that’s sort of the thought process on this thing. With that being said, there’s always larger transactions that are floating around where that might not be enough cash. So it’s just weighing all those into the equation based on what’s going on in our particular world. So we’re constantly exploring it and making the proper decisions, which would be what we think would be right for our shareholders. We 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 if something larger was progressing, then that may change that thought process.
David Kwan, Analyst at TD Securities
No, that’s helpful. Thanks, Dan. And when you talk about the M&A and larger deals, are we talking stuff that could be meaningfully larger than Novari, or are we kind of looking at more Novari-type deals?
Dan Matlow, President and CEO
I think meaningfully larger than Novari to a degree. Not that much larger, but yeah, meaningfully larger, I think.
David Kwan, Analyst at TD Securities
So 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? Like how quickly are they and to what extent customers are kind of 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?
Dan Matlow, President and CEO
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 until 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 area is the transcription side of the business. I think we see that all the way through. We’ve already seen that through the GP world, but there’s lots of other caregivers that are there, and I think in the hospital setting, the big EHRs will do those. But in the community social services area, we are the record that the caregivers use. So they’re looking for us to provide that transcription services.
So we believe that’s our lowest hanging of all of our AI projects to go get revenue. The other stuff is really working between the scenes and its 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 our patient engagement platforms and so forth where AI 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 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.
David Kwan, Analyst at TD Securities
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.
Brian Goffenberg
No, I think it will still continue to be probably the 80% line. If you look at Q2, Q1, we were a little bit higher, and so overall for the six months it’s been the 80% range. You know, as Dan said earlier, some of the services revenue was a little bit lower, and that’s kind of our margin stuff. You’ll probably see that improve as we go forward.
Dan Matlow, President and CEO
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 and the revenue in other quarters, it’s the other way around, right. So sometimes the timing of that just offsets that a little bit. But it’s helpful.
OPERATOR
Thank you, David. The next question comes from Justin Keywood with Stifel. Justin, your line is open.
Justin, Analyst
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-sell 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 sub-segment.
Dan Matlow, President and CEO
Yeah, well, we’re pretty active in the mental health world because we own the predominant area EHRs in that world, right. So both Strata and Novari both have footprints in the mental health referral base, depending on what the different scenarios are. Novari, I think a few years back, did the mental health referral base—this is for CAMH—and that’s where a lot of that expertise was done, and they continue 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 their referral management is something that our customers like, and we continue to do that.
Justin, Analyst
That’s helpful. Maybe just a follow-up. Epic—are they pretty active in the Canadian mental health area, and how do you see that competitor?
Dan Matlow, President and CEO
Yeah, I don’t see Epic has done anything in the Canadian. They just sell to the peer hospital levels. 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 care hospitals, like 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.
Justin, Analyst
Thank you, very helpful.
OPERATOR
Thanks, Justin. There are no further questions at this time. I’ll hand the call back to you, Dan, for any closing remarks.
Dan Matlow, President and CEO
Yeah, I think that, you know, the best thing to look from 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, driving 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 out 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 progress in that space, and we continue to look at M&A. And another quarter is behind us, and we look forward to the next one. So, you know, thanks, everyone, for attending today.
OPERATOR
This now concludes today’s conference call. Thank you all for joining.
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