Utilizing its Sri Lanka-based Innovation Hub, which has ~180 employees
As detailed in our initiation report (link), Vitalhub has generated consistent 20-30%+ y/y revenue growth, including 15-20%+ y/y organic growth, complemented by solid Adjusted EBITDA margins, now in the high 20% range. CEO Dan Matlow stated that he sees further margin improvements ahead as organic growth eventually begins to moderate, with its target Rule of 40 performances likely to shift toward ~10% organic growth and ~30% Adjusted EBITDA margins in the coming years.
Executing well in the U.K. Mr. Matlow also went into detail on the particularly lucrative U.K. healthcare market, where Vitalhub currently generates approximately two-thirds of its revenue. He stated that the growth opportunity in that region is ~3x vs. that in Canada. Mr. Matlow also noted that larger healthcare technology players, including leading EHR vendors Epic and Oracle Health (fka Cerner), tend to have much smaller install bases (vs. North America) and there is a lack of PE/VC-funded competitors, which is seen more so in the U.S. market (given its vastly different healthcare system).
Mr. Matlow cited the success of its SHREWD, Oriel, and Intouch products in particular, largely through which Vitalhub now has a presence in ~35-40% of NHS's system. The success of several key solutions in the U.K. and its strong partnership with NHS England is also opening new growth opportunities in other regions such as Australia, Canada, and the Middle East.
Mr. Matlow believes that having multiple solutions all under one umbrella has been a critical factor in Vitalhub winning business from publicly funded healthcare establishments such as the NHS, which often prefer vendors who have comprehensive offerings.
Following a disciplined M&A strategy. Vitalhub's M&A strategy continues to pay dividends for the company, both in terms of share price appreciation (particularly this year) and expanding its product suite and geographical footprint. Mr. Matlow stated that management has a robust, data-oriented methodology in place led by experienced personnel to ensure the post-integration process runs smoothly. This has, in turn, allowed the company to meet and even exceed its target of increasing margins by ~2,000bps post-acquisition, usually within the first 12 months, including for recently acquired Strata Health and Medcurrent, who are both breakeven/slightly profitable.
Mr. Matlow also mentioned that while smaller deals remain its bread and butter, given its solid balance sheet and FCF generation capabilities, it also continues to look at larger deals as it heads into F2025. Its current near-term focus remains on integrating the Strata Health and MedCurrent acquisitions.