Healwell AI (TSX:AIDX) Q2 2026 Earnings Call

0:06 Thank you for joining HealWELL AI's twenty twenty six Second Quarter Financial Results Conference Call. This call is being recorded. There will be a question and answer session at the end of the call, which will be limited to analysts only. I'll now turn the call over to Mr. HealWELL. Hello, and thank you, operator. Joining me on the call today are James Lee, CEO of HealWELL, doctor Alexander Domonoske, president of HealWELL, and Anthony Lam, HealWELL CFO. I trust that everyone received a copy of our financial results press release that was issued yesterday. Listeners are also encouraged to download a copy of our quarterly financial statements and management discussion analysis that was filed on SEER Plus.

0:58 Please note portions of today's call, other than historical performance, include statements of forward looking information within the meaning of applicable securities laws. These statements are made under the Safe Harbor provisions of those laws. Please refer to yesterday's press release and to our management discussion analysis for more details on the company's risk and forward looking statements. We provide forward looking statements solely for the purpose of providing information about management's current expectations and plans related 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 it was required by law.

1:48 We use terms such 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 terms, please refer to the definitions set out in our management discussion analysis. There will be a question and answer session at the end of the call, which will be limited to analysts only. To ask a question, analysts are required to call into the conference call using the dial in number provided in our press release. And with that, let me turn the call over to HealWELL's CEO, James Lee. Thank you, Heathen, and thank you everyone for joining us today. Before Anthony takes you through the numbers, I want to spend a few minutes talking about something equally fundamental. A year ago, we announced our first quarter post the Pivotal Orion acquisition, and embarked on a two year transition to integrate our businesses, embed our AI capability and shift our sales mix to more enterprise healthcare sales from episodic life science sales.

2:48 We knew we had a great opportunity in front of us, and we're excited about the possibilities. But as I sit here today, we are feeling even more confident both of the opportunity, but more importantly about the progress we're making. We are through the difficult part of integration and transition, and we're now seeing the benefit of the enterprise healthcare focus. We've successfully demonstrated an upside to customers with our AI capability. We've integrated our business lines, and we've improved our balance sheet. We've expanded our AI footprint, now we are moving to the exciting phase of delivering on those sales. At the same time, we've expanded our growth channels so that today, we have the strongest pipeline of our potential deals we've seen. Importantly, we have, at the same time, expanded our scientific validation mode, begun investing in infrastructure to improve margin and maintained a positive adjusted EBITDA throughout.

3:39 The market we are building into is changing faster than any other point in the history of our company. And what we have built is we are built to building a business position to meet that need. I'm excited to share this progress today, but more importantly, excited to talk about what we'll be demonstrating in the coming phase. Our mission is to be the primary enabler of preventative care. But what does that mean? So we're going to talk about it in three simple sentences. Firstly, we connect. We take complex, fragmented health care data and turn it into longitudinal patient records that can be used to share across the system. We surface. 80% of clinical data is unstructured, sitting in notes and reports that were never designed to be read at population scale.

4:26 We abstract the clinically relevant information from that data with 95% accuracy and 95% of disease states, and we enable. We give the health care system the ability to implement preventative care cost effectively, not as a pilot, but as an operating model. Now the facts are really well known, so I won't go into them, but I'll give you more about the shape than themselves. So three of the world's largest healthcare systems all face three very different pressures, but they've all faced with the same outcome, which is the money's effectively gone. Whether it's the debt servicing overtaking healthcare spend, or the working age population being too small to carry the load, every one of the major health care systems around the world are running out of room within this decade. Underneath that sits a disease burden that no one's counting, because most of people who have these diseases don't know they have it.

5:18 And here's the point that matters commercially. Each one of these diseases is detectable many years early before the costs horizon. The signal exists that has simply not been read. Four forces are converging, and converging is an important word. Any of these on their own would just be a trend, but all four occurring is a structural shift. Economics are broken. We've talked about that, and that's a well known fact. So systems are having to intervene even earlier to ensure that they can spend less. The regulation is starting to catch up. Prevention is now mandated not just aspirational with data access and interoperability rules that are a direct one way for our platform, and the market is aligned. The payers, providers and pharma are all reaching the same conclusion.

6:06 The opportunity is that these diseases are detectable early, prevention costs a fraction of the treatment, and our platform today connects the data to science into delivery. You will hear us talk a lot today about the transition from episodic to enterprise, because that is the path that we've been focusing on, the path that matters. Whereas last year we were negotiating 6 figure individual engagements, today we're discussing annualized licenses exceed that. The old model was project by project services and patient identifiable reviews. Revenue grew in a linear fashion, one clinic, one study at a time. Delivery was high touch and manual. Revenue was lumpy, nonrecurring and hard to forecast. Our current model we're moving towards is different in every single way. We're going to enterprise licenses, data access, and a productized smart suite. We deploy it once and expand it across our network. We're selling to global pharma, centers of excellences.

7:04 Delivery is now product led. Revenue is larger, stickier, and multiyear recurring. And the defensibility of our data activation plus the Darwin platform is a real moat. And importantly, we're now through the trough of that transition. Now that transition has produced four key growth engines, all from the same platform across two key client segments. Firstly, engine one, our HIE and clinical data unlock. Unlocking de identified data across our partner networks creates value for every stakeholder right across the ecosystem. We are seeing active interest from all markets in this capability. Engine two is our smart suite, where it's search summary or ID. It's packaged, it's repeatable, and it's embedded into our platform.

7:52 It's a single sale process, and it's been successfully deployed in North America, sold in The Middle East, and we look forward to giving further progress to us in the second half. Engine three is our global life science enterprise business. We're moving to centralized agreements with pharma AI central excellences, which is a cost saving for them against repeating patient ID and real world evidence studies region by region. And Engine four is our consented data in Canada. We've talked a lot about WellTrust, but activating this key partner network for life sciences, CROs and public health has created a growing consented database with strong demand behind it, which has become a virtuous cycle. The more consents we get, the faster our customers can innovate.

8:38 So a year into this transition, the execution signals are good. They're shown across all of our geographies, products and partners. In 'twenty five, we are predominantly a life science business with episodic revenue. Today, we have activity in all of our key markets with health care systems, and this will grow into a meaningful part of our revenue. Excitingly, the integrated offering of Darwin and Armadayas is commercially compelling, is resonating with all of our customers. World Trust is opening genuine new commercial use cases and moving us towards meaningful enterprise discussions across new revenue streams. SmartSuite now means we sell as a single customer and a single company through one sales process. With an AI land and expands the customer base, these conversations have been transitioned from project work to enterprise deals, and the platforms and businesses are working well behind that.

9:31 Finally, data activation. This brings us close to the customer and reduces duplication because we're helping our customers activate data they already hold. There's no new data assets to build, which shortens the pathway to evidence. Internally, AI data output overtook human output for the first time in May from a base of zero a year ago. So we're seeing significant AI use case internally. Commercially, we've had wins across The Middle East, Canada, and The US, and we're seeing demand from all of our key geographies. These sales we're winning are durable. They take a long time, more than a single quarter, but we're moving to an enterprise license with SaaS fees, and this is a shift that matters. I want to touch briefly on why the validation compounds across segments, because I think that's underappreciated across the market.

10:23 Obviously, we're focused on science first, with 57 peer reviewed publication and pre gallium recognition. But what this means is that health care systems can adapt preventative health care using validated evidence rather than assertations. And every adoption generates more data, which feeds into ARMODAIS and adds to 150,000,000 lives. That scales what comes next, as that allows something that underwriters can price, because we can price that and we can move forward to the underwriter population. This is why we see insurance as the next and largest step in our opportunity, and we'll be talking about in the year to come. Finally, I want to talk about our four key strategic goals for the quarter.

11:10 As you know, our indirect stake in SpaceX is now estimated at approximately CAD23 million as of the 06/30/2026, up from a carrying value of approximately 4,600,000 as at 03/31/2026. Our wholly remains subject to the customer pre IPO lockup period. We continue to commercialize our AI product suite across our carriers network. Our AI solutions include SmartSearch and SmartSummary, and they've been cross sold into the Orion network now. We completed a real world evidence study demonstrating the effectiveness of well AI decision support, identifying patients who may have been undiagnosed or unmanaged diabetes. WADE analyzed patient records and recommended clinical reviews and point of care assistance for high risk patients.

12:01 We completed a multi province pilot evaluating our Darwin Smart summary and search solutions across the health care systems across British Columbia, Ontario, New Brunswick across both OSCAR Pro and Intra Health profile EMR. The results of that pilot were accepted for presentation at the American Medical Informatics Association, which will be taking place in November 2026 in Dallas, Texas. I'd like to hand over the call now to Anthony Lam to walk through our Q2 numbers. Thank you, James. Before I begin, I would like to remind everyone that all of the figures I will be discussing on our call today are expressed in Canadian dollars and our financial statements are presented in accordance with IFRS International Financial Reporting Standard.

12:51 Our second quarter twenty twenty six results as compared to Q2 of twenty twenty five are as follows. HealWELL achieved quarterly revenue from continuing operations of 33,000,000 in Q2 twenty twenty six, in line with the 33,200,000 generated in Q2 of last year. The comparison reflects unusually strong Q2 twenty twenty five, which benefit from elevated project based professional services activity, while our recurring subscription support and maintenance revenue continued to grow year over year, reflecting our continued transition from episodic project based engagements to higher margin recurring enterprise sales. HealWELL reported positive adjusted EBITDA of 1,100,000 in Q2 twenty twenty six compared to adjusted EBITDA of 2,300,000 in Q2 twenty twenty five. Our prior year performance includes Mutual, which was disposed of in Q4 of twenty twenty five, together with a stronger number of life science studies in Q2 twenty twenty five, this accounted for the change in year over year EBITDA.

14:03 Heal achieved gross profit of 17,900,000 during Q2 twenty twenty six compared to 18,700,000 in Q2 twenty twenty five. The decrease is due to a lower margin mix of studies within the data science and AI segment in the current year period. HealWELL achieved a gross margin of 54% during Q2 twenty twenty six compared to 56% in Q2 twenty twenty five. Looking at our first half of twenty twenty six, QOL achieved revenue from continuing operations of $66,200,000 for the six months ended 06/30/2026, an increase of 60% compared to $41,200,000 generated in the six months ended in 06/30/2025.

14:51 The increase was driven primarily by the Orion Health acquisition, which closed on 04/01/2025, and contributed a full six months of revenue in the current period versus a partial period in the prior year. HealWELL reported positive adjusted EBITDA of $1,900,000 for the six months ended 06/30/2026, compared to $100,000 in the prior year period, an increase of approximately 2574%. The increase is primarily attributed to the Orion Health acquisition and improved performance across our operating segments. HealWELL reported positive EBITDA of 1,900,000, sorry, HealWELL achieved gross profit of 37,400,000 during the six months ended 06/30/2026, an increase of 62% compared to 23,200,000 in the prior year period due to higher revenues driven primarily by the Orion Health acquisition.

15:51 Heal achieved a gross margin of 57% for the six months ended 06/30/2026 compared to 56% in the prior year period. A key highlight this quarter is the continued positive trajectory of our operating cash flow. We generated $4,500,000 of positive operating cash flow for the first half of twenty twenty six, a $14,400,000 improvement, approximately 145% compared to cash used in the prior year period, reflecting an underlying strength in increasing efficiency in our combined operations following the Orion Health acquisition. This shift to sustain positive cash generation strengthens our balance sheet and liquidity position. And we remain in compliance with all of our covenants under our credit facilities as of 06/30/2026.

16:43 We continue to prioritize disciplined capital allocation as we build on this cash flow momentum and work towards sustained profitability. With that, I'd like to now turn the call over to our President, Doctor. Alexander Dobernowski. Thank you, Anthony. Thank you, James. I'd like to take a moment to walk through the scale of impact of HealWELL's platforms as we deliver globally. This is really the proof point behind everything James and Anthony have just walked you through. And it's one thing to talk about an integrated platform and another to show you the reach it's actually achieving across patients, clinicians, and the broader healthcare system. Let's start with data. Across our global business units spanning 13 distinct clinical data domains, HealWELL now maintains more than 150,000,000 patient records.

17:37 That breadth of longitudinal data is really the foundation of everything we do. It's what allows our AI models to identify at risk patients earlier and more accurately than a single source system ever could. On the clinical side, more than 770,000 clinicians and physicians are now engaged across our platforms globally. That's a meaningful and growing share of the frontline healthcare workforce actively using HealWELL software and technology in their day to day practice. And that engagement is translating directly into outcomes. In the second quarter alone, our AI co pilots powered by our Darwin AI engine identified over 62,000 high risk patients.

18:26 Patients who in many cases have not otherwise been flagged for early intervention. On the clinical technology side, our DARWELL AI engine now supports and is able to screen for one hundred and twenty three rare complex and chronic diseases reflecting the continued expansion of our clinical validation work and the depth of our disease detection capabilities. From a network perspective, we serve more than 22,000 healthcare service providers across our combined network of platforms and business units, underscoring just how embedded our technology has become across the broader healthcare ecosystem. And finally, on adoption, as of the second quarter, twelve ninety one physicians have been onboarded to our AI co pilots, giving us a strong and growing base of active physician users to build on as we scale.

19:25 Together, these figures reflect the scale and reach of the platform we've built and more importantly, the depth of real world impact we're delivering for patients and providers around the world. This is the kind of scale that we believe differentiates HealWELL and it's a big part of why we remain so confident in the growth opportunity ahead. From an outlook perspective, we remain focused on several key drivers of growth as we continue to build on the momentum we've established this quarter. First, on profitability. Management and the team, we continue to target an approximately 10% adjusted EBITDA margin by the end of the year, reflecting continued operating leverage across the platform as we scale our revenue base and drive further efficiencies across our combined operations.

20:17 Second, on revenue quality, we expect as James reflected a growing mix of enterprise recurring revenue led by subscription, support and maintenance growth, which continues to make our overall revenue base more durable and more predictable quarter to quarter. Third, on deal economics, we now anticipate larger AI deal sizes as SmartSearch and SmartSummary scale across our customer base, reflecting both deeper adoption within existing accounts and the growing maturity of our AI product suite. Fourth, on geographic expansion, we continue to see organic growth in new customer wins across our key geographies and we expect that footprint to keep expanding as our enterprise pipeline matures.

21:07 Fifth and finally on the public sector, we're seeing extremely strong tailwinds supporting continued adoption of our platform as governments and health systems increasingly prioritize preventative data driven care. Beyond these five priorities, we also continue to see meaningful key value and growth alongside Well Health, our strategic partner, across three specific areas of that relationship that James highlighted earlier. First is Well ID, our secure digital identity and single sign on platform across the Well Health Network, which continues to streamline clinician access while strengthening the security and interoperability of our broader platform. The second is WADE's Well AI decision support, our AI powered clinician decision support platform for early disease detection, which continues to generate strong clinical validation and commercial momentum.

22:03 And third is Well Trust, our patient consent and data governance infrastructure that underpin secure data access across our platform. Across all three of these areas, we're looking to expand these capabilities into additional geographies in the periods ahead and we see meaningful runway to deepen this partnership even further. So, taken together, the profitability discipline, the shift towards recurring enterprise revenue, the scaling of our AI products, our geographic expansion and public sector tailwinds and the depth of our partnership with Well Health, these priorities reflect our continued discipline in scaling a connected AI enabled platform. It's a platform that we believe is built to deliver durable, long term value for our shareholders, for the patients we serve and for our healthcare partners around the world.

22:59 In short, 2026 has been a year of focus on margin expansion and improvement with 2027 being a year where we will focus again firmly on growth. And with that, I'll now hand it back to the operator and move to the Q and A portion. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Kevin Krishnaratne from Scotiabank. Please go ahead. Hey, good morning. Congrats on the continued success. I wanted to talk about your mention there of moving from episodic to enterprise. Maybe it's in public health actually.

23:55 Wondering if you talk about the current pipeline of opportunities, what's that looking like on potential HIE RFPs? Maybe you can talk about opportunities by geo. And just curious how the discussions with customers are progressing. Is there any change in the macro or health care budgetary front that we need to be aware of as we think about the timing of potential RFPs and how that would translate to revenue? Kevin, look, great question. You probably asked enough on that question. I could probably spend the next thirty minutes covering it off. So let me try to bring that back and then just maybe ask a follow-up and push me if I could get some of it wrong. But in the like, starting your first point, it's not just with it's not just a software.

24:42 It's just not the health care. We've actually shifted all of our sales to into sorry, all of our focus to enterprise sales. So we're seeing potential deals not with our life science partners partners, with our data unlock partners across HIEs and across our SmartSuite with enterprise sales. The pipeline now would be that we're seeing opportunities in all four areas, but importantly we're seeing it across all geographies. And so it's very hard to sort of isolate it down now. What we've actually seen in the last six months is a shift in approach from the market partly because there's been so many people trying to do small pilots that what they're really looking for is much more enterprise platform outcomes, so not a single point solution. So what we're actually seeing is that the conversations are morphing much more quickly from a little pilot to show us what a proper RFP would look like at scale.

25:44 To give you some context of size, a pilot we've talked about previously might have been 200 or $300,000 What we're seeing now is that an enterprise agreement might be anywhere between 1,000,000 and $3,000,000 depending on the size of the customer. And as I said, it's across all parts of our business. Geography wise, we're seeing a lot of activity in The Middle East, a lot of activity in The U. S. Canada is busy and Europe have got some RFPs coming out towards the end of the year. And importantly for home markets, both Australia and New Zealand are busy at the moment as well. So, like it's quite broad brushed. What we're seeing is it's across all of our product suites and across all of our geographies currently, which is why probably some of the optimism we're seeing currently in our language.

26:37 Did I leave it on the outlook, Kevin? Yes. No, I think you captured it well. Maybe to get Anthony on board here, just as we think about model. Thanks again. Good to see the confidence in the 10% EBITDA margin trajectory. How do we think about your thoughts or any guidance you want to give us on revenue growth by segment on the data science and AI and then the healthcare software for 2026. And maybe it's a bit early, but if you can just talk about the trajectory into 2027 on your growth expectations. Yeah, Kevin. Great question.

27:22 As we look out here and as we talked about it, the shift to more enterprise sales is gonna create an elongation of sales cycle for us. And so while we started the year with a very exuberant sense that we do that 30 to 50 in terms of growth, we're likely to be more on the lower end of that growth range in terms of 2026, but really see 2027 on the heels of the health systems side of the AIDX part of the business, be a big contributor of our growth in 2027. Kim, to your question on AIDX, I think we can see that growth on that profile is probably shifted to the right for us our perspective, given our real focus on enterprise.

28:12 And then as we look at healthcare software, I think, you know, growth rates that we've been talking about, to now, I think you can expect to see continue in that, you know, high single digits, kind of range, is really as we look at that business as our steady state kind of really stable core revenue stream. Great. Those are helpful goalposts. Thanks again. I'll pass the line. Thank you. Your next question comes from Gianluca Tucci from Haywood Securities. Please go ahead. Hi, good morning guys. I guess firstly at a high level, can you speak to cross sell attach rates so far for selling into the Orion legacy customer base? How is that tracking?

29:05 Yes. So our goal was to get 10% done this year. I think as we sit there now, we have line of sight as at halfway through the year for that. So feeling really comfortable with our current target that we'll achieve our cross sell. We've got another big push coming second half to go a bit wider, but realistically, we're probably towards capacity of what we want to get done that first year to make sure we do it well. Obviously, the enterprise sales cycle is probably more like six to nine months, not one to three. So, we're seeing that in the way towards the second half. Great. Thanks, James. And then just perhaps a follow-up on the adjusted EBITDA margin target of 10%.

29:55 That would imply a strong second half. Can you bridge that for us? What kind of cost actions or like revenue combination helps get you there by the end of the year? Yes, there's three things you should see there. Obviously, one is the enterprise sales starting to kick in, in healthcare and AIDs. So we'll start seeing that occur in Q3 and Q4, Given that they were small numbers in the first half, that will shift that division materially in terms of margin profile. Then cost actions we've seen taken in the first half flowing through in second half in the software business. And then finally, some continued growth in our software business items.

30:43 There's obviously some timing issues between first half and second half within costs. So first half costs might have been slightly higher than second half. But effectively, those three things bridge that gap. Okay, that's helpful. Thank you, guys. I'll pass the line. Congrats. Next question comes from Michael Freeman from Raymond James. Please go ahead. Hey, good morning, James, Anthony, Alex. Congrats on the quarter and the progress. I wonder if we can double click on your pursuit of the insurance opportunity. I wonder if you could frame that again and sort of update your view on it from when you introduced it, the pursuit of that last quarter.

31:36 Yeah, sure. I guess when you look at the framing of it, the best way to think about insurance is the route in The US obviously insurance replaces where the role of public health does in Commonwealth countries, I. E. The fundamental payer. One of the things we're finding in The US is that the insurance market has a secondary use of risk I. E. So looking for where there are gaps in care where they might get sued. And so what we've seen in The US is there's two different lenses. It's not only cost savings from an insurance point of view, but it's also risk mitigation. And so it's got a really different driver in that market. And what we're also seeing in The US in particular with the insurance side is that they are tied to the provider network. So we're also seeing that we're talking to providers in The US that they've actually got connectivity to their payer markets, And so we see those sales as much more intertwined.

32:37 What I would say is they are larger but slower burn sales, so we won't be expecting to make any of those in 2026. But the sheer size of that market is what we're excited about Michael. Okay, all right, great. I appreciate you framing that. Now, I wonder if you could touch on the balance sheet and how are you feeling about its profile and how you can anticipate it evolving in the second half of the year? Yeah, I'll open that, then maybe Anthony, you can close it out. But I think the best way we think about our balance sheet, Michael, is that in terms of our short term liabilities post the disposal of SpaceX, we'll see net liabilities in the short term of circa one times adjusted EBITDA.

33:29 Our long term debt 30 odd million dollars is a convertible instrument as you know with four more years to go. So we look at the balance sheet now as being a really stable part of the business to serve the needs we have today. But Anthony, is there anything you want to add to that? Yeah, look, great question on that because I think the big thing that James highlighted on call was that with our investment in SpaceX, I think, again, the intention is clearly to liquidate that position. We will actually have a good source of capital there for our immediate needs. And so the balance sheet actually for us is we feel very good about because while we approach cash flow neutrality and generation towards the end of the year, we're now in a very solid position from a liquidity standpoint with that asset being one that we will be liquidating to, we feel very comfortable that we have all the resources we need to meet the expectations that we've been setting for ourselves, not only for this year, but also for next year.

34:38 Okay. Well, thank you very much. I'm gonna pass it on now. Your next question comes from Brian Kistelinger from Alliance Global Partners. Please go ahead. Great. Thanks so much. So I appreciate your changing approach to get away from episodic demand and the opportunity as it relates to preventative care is clearly large. But subscriptions for AI technology are almost half what they were two quarters ago, and this is the part I'm focused on, not the services piece. So first, what's driving this reduction? Next, what's the biggest impediment you're seeing right now to growth? And lastly, what gives you the confidence that the ramp is imminent as we've been talking about it for a bit? Anthony, do you want to start on the first one? Because obviously when I look at our services subscription revenue and AIDX, I'm not seeing it down.

35:37 So do you want to maybe comment what number you're talking about? Sure. I did $531,000 in the June quarter for subscriptions. And just two quarters ago, you were at about $1,000,000 and it's come down each of the last two quarters. Anthony, again, I'm looking at a very different number. I see our numbers $4.79 in MD and A. Brian, if I could just point out You're looking year over year. In our prior period numbers, if you're looking at prior period numbers up until the beginning of the first quarter last year, we had a business called Mutual that we have divested. Those numbers stay in our comparatives because we you know, it was sold, but, they they they were 100% subscription and that's probably what's throwing off some of your your numbers there. I would say otherwise, our subscription numbers have been pretty steady for every other part of our business. And so I think that might be the skew for you in terms of what you're seeing in Okay, terms of the subscription let me ask differently.

36:44 Last quarter when that business was not in the numbers, you did about $828,000 So we're down 36% sequentially. So it speaks to the same trend. Again, I'm curious, what's the biggest impediment growth? What's leading to the churn? And what gives you confidence that imminently we'll be growing this? So Brian, I don't look, I'm happy to take this up with you. We we didn't have any churn in the quarter. So the changes that we've had in our in any of our business is really the around our episodic revenue or maybe a little bit on our professional services, but our our subscription business remains pretty robust.

37:32 We can take that piece back up, Auglai. But in terms of what's giving us confidence in the second half is revenue recognition is effectively the key issue there. And so when you're delivering on enterprise licenses, the revenue recognition is very different from the sales that we've made. So we've announced sales in The Middle East, in Canada, in The U. S, and we're in the process of delivering those. So we'll be able to recognize revenue against those as those delivery milestones are made in the third and fourth quarter. Does that Sure. I mean, we can take it offline. That's good, but the numbers are down. But in a previous question Anthony responded to, he said you'll probably be at the low end of the 30 to 50% growth for the AI segment.

38:22 First of all, what number does that suggest for 2025 AI data science? Because what was reported was $10,000,000 And I'm sure that doesn't include the divested piece. I'm just kind of curious what that suggests for the second half of the year. Yes, Brian, we did start with the comparable for 2025 is that $10,000,000 mark. And as I mentioned, we're gonna be on the lower end of the growth scale on that in terms of year over year growth for '26. And so that would that would suggest that we're in that, you know, closer to that 13,000,000 for the full year. So that would suggest almost $9,000,000 in second half revenue for AI and data science from $4,000,000 change in the first half of the year.

39:14 I guess maybe you can talk about some bookings that get you there already. Brian, in our first half You gave $4,600,000 That's correct. We anticipate that we have a healthy pipeline that has us on track to hit that of the 30% growth rate year over year. Right. So just to be clear, that's about $8,500,000 $9,000,000 almost. Just doing simple math of 30% on $10,000,000 right? Your math is right.

40:01 Revenue recognition is a key component of that. So obviously, there's a bunch of work that's been done in the first half. We haven't been able to recognize revenue until the projects meet milestones in Q3 and Q4, so you shouldn't think that in a straight line. And where we land as a percentage will really determine our revenue recognition. So the sales pipeline for our healthcare, health software AI business is on track. The revenue recognition in the first half was behind because of its enterprise nature. And then we've got plenty of activity in the life sciences business, which again we hope to recognize in the second half. Okay. Thanks. Your next question comes from Firis Yakyev from TD Cowen. Please go ahead.

40:50 Good morning. Thank you for taking our questions. My first question is on the multi province pilot that you recently completed for SmartSummary and SmartSearch. Now we know you have the presentation coming up in November, but in addition to that, do you see any sales traction with the listed provinces as a result of these trials? Excellent question. So the reality of those pilots now lead to what we would call the second stage. So we've now done a pilot in those regions and now we're now looking to deploy it further to go back and get further funding on those on all three regions. We expect to go live this quarter in another region. And to be honest, I think we're going to see quite good activity from that product late twenty six and into 2027.

41:44 Thank you. That's great color. And a follow-up to the previous balance sheet question. So as SpaceX lockups are starting to expire, do you have an expected timeline for monetizing your investment, and how soon after are you planning to deploy it on debt extinguishments? We'll we'll get notifications shortly on our lockup expiry, because we obviously hold our stock indirectly in a fund. So we should be able to update you in the next month or so on that. Our anticipation is that we are not a VC investor, and we will be looking to liquidate as practical and sensibly as we can. Great. And on debt extinguishments, if you were planning to improve your balance sheet as well?

42:33 If you look at our debt, our debt is a working capital facility sitting within Orion Healthcare. So if you think about that as an accordion, it can go up and down. So it may be used to pay down debt, but it will be a working capital debt facility. Not we won't be paying the debt facility off. Perfect. Thank you very much for the insights. Your next question comes from Daniel Rosenberg from Paradigm Capital. Please go ahead. Hi, James, Anthony, Alex. Thanks for taking my questions. First one comes just on the enterprise licenses and potentials for 6 figure type revenues.

43:18 I was just wondering if you could speak to kind of how it ramps. I know you touched on a bit of the accounting and timing treatment, but really to understand perhaps an example of, you know, you engage with a client, what that looks like to stand up the solution, and how it flows through to revenue. Thanks. Yep. Excellent question. Maybe we'll take longer than we'll go through here. But what I would say is every region's different. So the first thing when we ramp up into a customer is there'll be a implementation fee. That implementation fee requires us to set the environment, whether that's going to be Azure, Google or AWS, and what I would say is every region has a different component there. What we're finding is that from signing to launch and bound to book implementation fees has probably taken longer than we expected. So while we may have got some started in February to March, we may not be able to recognize revenue until Q3.

44:20 Based on the setup function in each region is new, so once we get through doing it once in each region, it will be much faster. And then reality is within three to four months of implementation, we're moving into SES fees. And so those SES fees will be somewhere between three to four times the implementation fee. So it's different to health care systems where this implementation fee, because it's so much more complex, might be one for one. What we find is implementation fees here are smaller and sales fees are materially larger. I appreciate that. That adds a lot of color and understanding. I guess in going to market and pursuing these opportunities, I was wondering if you could update us on kinda how you're working with partner channels, if you're going direct.

45:13 Just what does the sales process look like, understanding there's a lot of geographies and then customers here, but if you could give us some color there would be helpful. Thank you. Yeah, that might be the most complex question. So there are four different channels and 11 different geographies, but broadly you should think that we partner in life sciences with one of the major five for data unlock, so we would work alongside a life sciences customer and an HIE as a partner network for distribution. You can name a top 10 pharma, pick a geography, and then we partner with one life sciences per region, obviously with one health care system. Within the smart suite product that we're currently focused on our own direct channel, so using our own capacity, open to going further, but we don't have capacity within our deployment to go much more than what we can do already ourselves.

46:17 In Canada, we obviously partner really well with Well as a one Well team to take all of the products and Well's offerings in a complete united front for our customer base. So we work very, very closely with Wellstar within Canada itself. And then we work with SI partners for large projects, you could name a few like Deloitte, Accenture for large scale deployments. And we haven't really talked about that today because we've been focusing a lot on the AI business, which I understand as we think about the overall mix, being a few million dollars slower as Anthony talked about, But obviously, we're seeing on the flip side, the software division being stronger than that than we expected the year.

47:03 We're seeing a lot of opportunity in The Middle East within HIEs, obviously, within UK coming back to market. US is very busy in the HIE space. So what I would say is that the partner network in those markets is far more important. They're much bigger dollar value sales, and we're no longer talking one or two a year RFPs coming up. We're probably talking one or two per region every six months coming up now. So it's a very active market. These processes are long dated, so don't expect 15 to land by the end of the year. But what I would say is that there's a very deep pipe now of HIE business. And the HIE business is great because the first sale is obviously software sale and the second sale is therefore the AI sale. And the AI conversations with our existing customers are going very well. Does that cover your question?

47:57 Yeah. That's fantastic color. Lastly for me, you mentioned a number of kind of engines that are driving demand, clinical data unlock, smart search, partner ID, consent. I was curious how you would kind of rank or, I guess, rank with your customers. What gets people most excited, or is it always kind of this bundled solution that you're talking about in conversations with end customers? And then I'll pass the line. Thank you. Yes. So if you think about a customer segment, it's been broken into health care systems and life sciences. So life sciences, it's the data unlock. It's the ability to partner with a region to effectively help that region utilize their data.

48:49 And you've seen obviously very, very large contracts around the world with people like Tempus and AstraZeneca and different regions doing those data unlocks. That would be what gets our life sciences customers most excited. Within our Canadian life sciences business though, Well Trust, the ability to find patients to get on to clinical trials at the speed at which we can do that from consent to data, that is a unique database and so that has a lot of interest in us currently. The smart suite, summary that has the most impact with big healthcare systems with our providers because obviously the key thing they're looking for is efficiency within their networks.

49:41 So yeah, what I would say is that everyone's got different components. Interestingly though, while we're all talking about the interesting AI exciting stuff, interoperability, and that is such a phenomenal problem in The US, just the single most basic thing of sharing data, creating a longitudinal record. One of the quotes we had from a customer was even in a closed loop customer base where they own the customer's theirs, they still only get between 20% or 30% of a patient's data from their own network. So HIEs are of high value to actually enable AI in The US. So I wouldn't underestimate the value that we're finding just from that, as they would describe it, diamond in the rough. What is a infrastructure type asset is a core component to enable any sort of real I might just squeeze one more in given the answer.

50:37 Sounds like a ton of opportunity across the board. I'm just curious if you had the resources or additional resources, whether it be capital or people or, you know, just reach in general, you know, where would you put that towards, you know, what what would you do if you, you know, everything you had to control to implement whatever you wanted in terms of pursuing these opportunities? Yeah. That's a great question, Rob. We sit there in a war room sometimes, so how do we scale up when we need to scale up? But as we sit there today, we are very mindful of both margin and growth and getting the right balance because it's very easy to chase 100 different deals and not deliver on any.

51:27 But what I would say is that the data unlock activation is probably where we'd probably put time and energy right now. And why that is, though, to be really clear, is because that'll take longer than the other stuff, but it's really, really scalable. With the HIE businesses, that's RFP, they'll land, we'll deploy them, we'll scale up the team to deploy more of those, then we can embed AI solutions like the SmartSuite, but the data unlock, that is not a linear sale. Effectively unlocking certain regions will be multi, multi, multi million dollar contracts. What we'd like to do and what we'll do in time is once we show we can do it, we'll try all of our agents together rather than pick them off one by one.

52:18 Great to hear. I'll pass the line. Thanks. Your next question comes from Justin Keywood from Stifel. Please go ahead. Hi, good morning. Thanks for taking my call. Maybe just a follow-up on the capital allocation. Is a share buyback or NCIB part of the strategy? Good question. I saw that Vital did one today. Look, realistically, we haven't discussed that at the board now. I think we'd always be looking at use of capital in the environment. What I would say is that the liquidity in our stock is not great, so I've been announcing a share buyback, probably the stock price of moving wouldn't have been getting any back. But it's a good thought process and probably something we'll discuss late second half, early first half next year.

53:08 Okay, thank you. And then I'm not sure if I missed it, the timing of the SpaceX disposition. When is that anticipated? We'll get notified by our fund in the next month as to the timing of our componentry. But effectively, the lockup was a year from investment. So there should be three tranches between now and February next year. And then just the mechanics of it, it would be a share transfer and then the shares are freely trading to dispose? That is the current expectation, but I'm saying the current expectation will be notified shortly, but theoretically the stock would be transferred into our brokerage account and then we would manage the sale ourselves.

53:56 Thank you very much. Your next question comes from Christopher Pooh from Canaccord. Please go ahead. Hey, guys. Yeah. Thanks for taking my question. I'm on the line here for Tanya. I just have a question regarding the Orion Health, kind of a high level question. I'm wondering if you can, you know, let us know how much integration work is left and if you can quantify perhaps how much of this remaining integration work is more of a top line thing versus like a cost reduction? We're talking specifically now Orion Healthcare. Yes? Yeah. For Orion Healthcare. Yeah.

54:42 No. That's fine. Sorry. Just wanna make sure I got my head straight on the question. So realistically, revenue synergies, we are connecting as much as we can today. Like I don't think there's much more in terms of revenue synergies that we would get by integrating further. What we might find though is we get more efficient on those revenue synergies, they go faster by moving for the teams closer together, but the reality is I would say we've achieved 90% of what we'll achieve in terms of putting the from a revenue synergy point of the go. From a cost synergy point of view though, there's still plenty of room across the organization over the next year and a bit, both from gross margins and both from net margins.

55:31 I think realistically, we're only probably a third of the way through that component. What we're talking about in terms of R and D, retiring tech debt, corporate functions. But we've still got a lot of room to go there as some of the stuff just takes time. I think we've talked previously about removing some of that tech debt to broaden out gross margins both within Intra Health and Orion. Those processes take largely a year and a half to complete, but they're meaningful increases to our gross margin profile. Well, that's great to see some numbers around that.

56:16 My last question is regarding the customer acquisition cost. You have a lot of new jurisdictions that are outside of Canada. I'm wondering how does the CAC compare with your expectations so far? I can't actually answer that today because we haven't won a new customer that hasn't been in an existing region. So of that expansion has been in the regions we're currently already in. But when we move into a new region, we'll be able to quantify that. But currently, we've only really expanded our existing footprint. Okay. Very great. Thanks for taking my question. There are no further questions. I'll turn the call back over to speakers. Well, thanks for joining us today. Looks a really good session, lots of really good questions.

57:10 We're excited on the second half of the year, there's plenty of work still to be done. We feel like we're on the other side of that trough through the transition and so there's still plenty of opportunity both to grow revenue and as we had the last question margin. So enjoy anyone that's having summer holidays. Thank you for joining us today and good luck for rest your day. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.