Q3 2025 Healwell Al Inc Earnings Call
Speaker #3: Good day and welcome everyone to the Healwell Al AI . Third quarter 2020 Financial Results conference call . Today's conference is being recorded .
Speaker #3: All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .
Speaker #3: If you would like to ask a question during this time , simply press the star key , followed by the number one on your telephone keypad .
Speaker #3: If you would like to withdraw your question , press star one again . At this time , I would like to turn the conference over to Heather at Investor Relations .
Speaker #4: Oh thank you . Operator . Joining me on the call today are James Li , CEO of Ohio Doctor Alexander Dombrowski , president of EOL .
Speaker #4: And Anthony Lam , Healwell Al , CFO . I trust that everyone has received a copy of our financial results . Press release that was issued yesterday .
Speaker #4: Listeners are also encouraged to download a copy of our quarterly financial statements and management discussion analysis that was filed on Sedar , plus .
Speaker #4: Please note portions of today's call other than historical performance , include statements are forward looking information within the meaning of applicable securities laws .
Speaker #4: These statements are made under the safe harbor provisions of those laws . Please refer to yesterday's press release and our management discussion and analysis .
Speaker #4: For more details on the company's risk and forward looking statements . We provide for looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future .
Speaker #4: 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 is required by law .
Speaker #4: 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 and Analysis .
Speaker #4: There will be a question and answer at the end of the call , which will be limited to analysts only to ask a question .
Speaker #4: Analysts are required to call in to the conference using the dial in number provided in our press release . And with that , let me turn the call over to James Lee , CEO .
Speaker #5: Thank you . Hayden . Thank you , everyone for joining us today . Look , Q2 was for here a very busy period , both in terms of productivity and change .
Speaker #5: So we're excited to share our progress . Obviously , as you know , in Q2 we completed the acquisition of Orion and we had a major milestone of becoming adjusted EBITDA positive as we enter Q3 .
Speaker #5: We set ourselves two really simple but clear goals. We wanted to simplify the business, focus the business, and maintain growth along with a balance of adjusted EBITDA positivity.
Speaker #5: We announced in Q3, and we've completed this week the simplification of Healwell AI following a major milestone where we've gone from a conglomerate to a pure-play software service and AI business.
Speaker #5: And we've seen the strength of the diverse geographic and product mix , allowing us to maintain a positive adjusted EBITDA during the traditional , slower northern hemisphere summer quarter , which we'll talk about later .
Speaker #5: These milestones are critical events for us. They shape our future as a focus and simplify business with the resources. Now, to succeed on our journey of creating a globally relevant and leading preventative care AI business.
Speaker #5: Now , I'd remiss if we didn't thank everyone like this wouldn't have been possible without the support of our key partner . Well , health and the hard work , both from our board and our broader team members .
Speaker #5: So I want to thank everyone for a really busy and productive Q3 . Now , post Q3 . The business now has a simplified software and AI business , but looking at our Q2 results , Q3 has been another positive step for us in our journey .
Speaker #5: Our continued operations achieved revenue of 30.4 million versus 6.7 million in 2024 , and adjusted EBITDA of 0.7 . While we saw a quieter start to the quarter due to the summer period , we ended the quarter strong and our AI and data division , and we see good momentum for the rest of the year and into 2026 .
Speaker #5: Now in Q3 , we announced that we were integrating our AI platform . Darwin , into our software platform Amadeus . And this combination with in conjunction with our expansion of Healwell Al in the US , has begun to show really promising signs , which we'll talk about shortly .
Speaker #5: We're very early in the adoption cycle of AI tools in healthcare systems , so having the appropriate resources and becoming increasingly efficient with these resources is really important to our goal is to maintain that balance of investment and maintaining adjusted EBITDA positivity .
Speaker #5: You've heard us , and you will continue hear us talk about the word simplify and focus a lot today as we talk about and shift the strategic focus about over the last six months in the quarter .
Speaker #5: But I'd be remiss if we didn't talk about why we've done it . Now . AI is a powerful tool . It's the infancy of its understanding and adoption , but we believe that in healthcare , it's the most valuable use case that AI is currently able to do .
Speaker #5: And its heart is capable of consuming significant amounts of data, looking for signals. But the impact we're seeing in the healthcare system for what we can do today is undeniable.
Speaker #5: Our AI engine , Darwin , can identify hard to find patients using existing clinical data . Now , unlike precision medicine , when you need new data , we can find signal from existing data .
Speaker #5: As we've begun to expand , Darwin across the global footprint , we've seen the sheer size of the opportunity expand materially . So to achieve our stated goals , which I mentioned before of investing while maintaining and improving operating margin required us to have a really disciplined and focused business .
Speaker #5: Now that led us to taking the hard decision to simplify our business and product offering , which you've seen us execute this quarter .
Speaker #5: We've integrate our AI business . We we acquired the balance of Penta via . We've begun aligning our software businesses . We've expanded in the US , and we've simplified our business lines and added some resources .
Speaker #5: So going into the final quarter and the first quarter of 2026 , we have two primary areas of focus in Q4 , our goal is to complete the integration plans to maximize efficiency and flexibility , allowing us to maintain improved operating margins year on year while investing .
Speaker #5: And in Q1 next year . Our goal is to demonstrate commercial validation of AI platform and healthcare systems outside of life sciences , maintaining and keeping focused on a well defined set of goals in the immediate future allows us to remain disciplined so we can demonstrate both value to our customers and to our shareholders .
Speaker #5: Finally , I'd like to give a little bit of context about the opportunity in front of us in AI . Now . I think it's a well known fact that the earlier you identify treatment path , ensure the correct path is identified , the better both the patient outcome and the cost of the system will be .
Speaker #5: Our AI platform, Darwin, is uniquely placed to help extract meaningful insights from existing unstructured clinical data, allowing us scalable improvements to both.
Speaker #5: We've already begun a number of proof points , and what we call proof of values through multiple healthcare systems right across North America .
Speaker #5: With the ability of identifying at risk patients . Our priority is obviously , as we mentioned , is to take is take advantage of the leadership of our field , demonstrate commercial value to the healthcare systems and to our shareholders .
Speaker #5: Through Q&A , will talk a little bit about the opportunity . And we're we're looking to deploy and how many of our algorithms .
Speaker #5: But for now , it's on behalf of the team , I want to thank you all for your continued support . We look forward to sharing progress over the coming quarters .
Speaker #5: Anthony , I'll hand it over to for the financial results in more detail .
Speaker #6: Thank you . James . Before I begin , I'd like to remind everyone that all of the figures I will be discussing today are in Canadian dollars and our financial statements are presented in accordance with IFRS International Financial Reporting Standards .
Speaker #6: Our third quarter 2020 results are as follows . He will achieve quarterly revenues of 30.4 million during Q3 2025 . This compares to 6.7 million generated during Q3 2020 for an increase of 354% .
Speaker #6: Revenue growth in the quarter was primarily driven by the Acquisition and integration of Orion Health , along with both our organic and inorganic initiatives .
Speaker #6: He will achieve gross profit of 16.5 million during Q3 2025 , an increase of 330% compared to 3.8 million in Q3 of 2024 .
Speaker #6: This increase was tied directly to higher revenues in the quarter . Healwell Al achieved gross margin percentage of 54% during Q3 2025 . This compares to 57% in Q3 2024 .
Speaker #6: During Q3 2025 , Healwell Al reported positive adjusted EBITDA of 0.7 million compared to an adjusted EBITDA loss of 2.8 million in Q3 of 2024 .
Speaker #6: This marks the company's second consecutive quarter of positive adjusted EBITDA , highlighting continued execution improvements and stronger financial performance . Hero reported an IFRS net loss from continuing operations of 16 million for Q3 of 2025 .
Speaker #6: This compares to a net loss of 8.7 million in Q3 of 2020 . For . Healwell Al ended the quarter on September 30th with 15.6 million in cash and increase when compared to 9.4 million at the end of Q4 2024 .
Speaker #6: Looking at our revenue segments as of November 1st , 2025 , following the vestiture of the company's clinical research and patient Services division , QOL now generates revenue across two core segments first , AI and data Science .
Speaker #6: Second , healthcare software . Our AI and data science segment achieved revenue of 2 million in Q3 2025 , marking a 79% year over year growth compared to Q3 of 2024 .
Speaker #6: The commercial adoption across all of our offerings , including cure and Tenofovir technology , drove stronger organic growth in the quarter , reflecting increasing demand for Healwell Al AI powered disease identification and clinical insight tools .
Speaker #6: The second revenue stream is healthcare software, which generated $28.4 million in revenue in Q3 2025, an increase of 408% from $5.6 million in the same quarter last year.
Speaker #6: The acquisitions of Orion Health and versus have been the primary drivers of growth in this segment . With the recent divestiture of non-core assets , Healwell Al is now fully focused on driving growth , innovation and profitability across its two high margin , scalable segments AI , data science and healthcare software .
Speaker #6: With that , I'll turn the call over to our president , Alexander Dobrowski , for an update on progress that we've made with regards to our AI division .
Speaker #4: Thank you .
Speaker #7: Anthony , and thank you , James . I'd like to take a few minutes to highlight some of our progress we have made in Q3 with regards to our AI division , most notably in Q3 , we achieved full ownership of Pentaverate , enabling deeper integration of Darwin AI with Cure Health for early disease detection and clinical insight generation .
Speaker #7: In addition , we launched Amadeus AI , integrating Darwin into Orion Health's Amadeus platform , extending Healwell Al AI capabilities across global healthcare systems from a peer reviewed validation perspective .
Speaker #7: Our teams , under the leadership of our Chief Medical Officer , Doctor Chris Pettengill , and the co-founders of Pentaverate , Aaron Liptak and Steve Aviv , have now published over 40 peer reviewed scientific publications , underscoring Healwell Al leadership in validated and clinically proven AI solutions .
Speaker #7: Subsequent to the quarter , as James and Anthony mentioned , we recently announced a 50 over 50 joint venture with Well Health to build an AI driven clinical research platform by Actioning .
Speaker #7: This , we have transitioned heal well into a pure play AI and SaaS healthcare company focused on preventative care and early disease detection .
Speaker #7: Our AI platform powers this JV automating patient recruitment trial execution , and real time data insights . Ultimately , now our strength and balance sheet and focused operations enable global expansion of Healwell Al AI commercialization strategy from an outlook perspective , we are currently demonstrating continued expansion of proof of value AI projects with healthcare systems across North America .
Speaker #7: Our ongoing and progressing discussions with global pharmaceutical and research organizations to extend AI driven , real world evidence and clinical data programs continues to progress , and we are now commercially active with eight of the top ten world's largest pharmaceutical companies .
Speaker #7: And this roster continues to grow . We also recently announced one of the world's first examples of using AI to generate regulatory grade , real world data for supporting patient access and advancing the pharmaceutical industry .
Speaker #7: These types of capabilities are key differentiators of Healwell Al and our artificial intelligence engine , highlighting us as leaders in this section . A key focus for us in 2026 is scaling Darwin AI commercialization and demonstrating measurable clinical and economic outcomes .
Speaker #7: And with that , I'd like to thank everybody for attending this call . And I'll now hand it back to the operator and move to the Q&A portion .
Speaker #7: Thank you .
Speaker #3: Thank you . We will now begin the question and answer session . If you have dialed in and would like to ask a question , please press star One on your telephone keypad to raise your hand and join the queue .
Speaker #3: If you would like to withdraw your question , simply press star one again . We'll take our first question from Alan Kelly at Maxim Group .
Speaker #8: Yes . Hi . Nice to hear from you guys . Just on what you're doing with Orian and cross-selling opportunities with the rest of your business .
Speaker #8: And how are you thinking about how that can all expand your total addressable market and opportunities? Thank you.
Speaker #5: Look , and if I've understood the question correctly , what you've asked is how we look and expand the overall market as we integrate through the Orion network .
Speaker #5: I think what you're seeing there is that it's not just the existing customers , there are network that we're spanning over what we've actually found is the broader footprint Orion has and reputation is significantly enhanced .
Speaker #5: The size of that market . So while we thought the original proposition was we would cater to existing customers , actually the brand recognition in different regions has been really , really favorable .
Speaker #5: But if you think about the market opportunity, what it's led us to do is go from just being at the governmental and integration layer levels right down now to the hospital level.
Speaker #5: We are seeing that the market size from where we can add value is like a make up a number , but 10 to 15 x larger .
Speaker #8: Thank you . And then just last question on with your AI business and with the what are the main areas that you're kind of you're working on proof of concept , but just in general in terms of commercializing the business more .
Speaker #8: Can you talk about what the main initiatives are? Thank you.
Speaker #5: Sure . And just for vernacular , we'll use proof of value because I think the concept and an important distinction , there's the concept clearly being proven .
Speaker #5: What we're demonstrating now is that our deployments are providing value to a healthcare system . So look , as we look across the opportunity , set , the best way to think about it is that , you know , if we just take a small subject to get the numbers relevant , if you took the top 100 healthcare systems in the US , you know , and that what you'd have there is a patient identification of where just a hundred disease states would mean up to 2 million patients are being either misdiagnosed or underdiagnosed .
Speaker #5: And so for us , the opportunity set there is to take just a small subset . So to prove that value that if we could take ten most relevant whether that's from heart valves or through oncology , what we're trying to do is take a very small subject to prove value before we take the wider array of products out .
Speaker #5: But in general , we can we can find 105 different disease states , and we think just the top ten would cover about a third of the opportunity .
Speaker #5: So we're trying to remain disciplined and focused with the smaller subset so we can prove scale first in the North America .
Speaker #8: Thank you .
Speaker #3: We'll move next to Michael Freeman at Raymond James .
Speaker #9: Hey good morning James Anthony Alex , congratulations on the quarter . And all the action . I wonder if you can . First , congratulations on the launch of a of Amadeus AI .
Speaker #9: I'm glad to see this being deployed through the Orion network . I wonder if you could describe some of the some of the traction you're seeing , some of the reasons why your customers might be adopting this .
Speaker #9: And then I wonder if you could describe , I guess , preview for us a product roadmap of where you're going to further leverage your internal AI capabilities through the organization .
Speaker #5: Yeah . Great question . I guess let's start with the reasons . So we'll just use one example . And so the example we like to use as we go through it .
Speaker #5: So we've got 105 disease states . What does that actually mean . The one that we try and use is the cardiovascular . So I'll get Alex .
Speaker #5: Do you want to give a rundown? Obviously, we've presented that recently of what the one project we're running through in the U.S. right now.
Speaker #7: Yeah , sure . We'd love to . And Michael , thanks very much for the question . So so I think one one capability that of course we we kind of anchor around the mission of the company .
Speaker #7: Right . Is early disease detection . Okay . So and what does that mean now practically deployed right within a health system or a public sector partner .
Speaker #7: Well , one example is our capability to be able to screen patient populations and find these at risk patients . And effectively produce a list that then physicians can go and take action on .
Speaker #7: And one particular example , we're working on is there's a number of patients that have worsening heart disease , and they're great candidates for having a heart valve to be replaced .
Speaker #7: So we're able to identify these patients that are fully reimbursable . That should be on track to have this intervention . They're effectively patients that have fallen to the wayside .
Speaker #7: And we're able to identify them , get those lists to the physician . The physicians can then take action , and then it leads to a number of interesting outcomes .
Speaker #7: Number one , of course , the patient is on the right . And appropriate care pathway . But number two , this is also a revenue generating initiative for the hospital system .
Speaker #7: So that's kind of one clear example of us working very focused in one area , which is in cardiology . And then there's of course a host of other areas and domains where we have expertise to be able to execute against this in .
Speaker #5: Thanks , Alex . Okay . And I think it's that definition the US , the American market sees it as a revenue opportunity as opposed to a health come outcome .
Speaker #5: You're see in Commonwealth countries , which has been both not surprising but really encouraging about the adoption rate in the US .
Speaker #9: Okay . Thank you very much for that . And I wonder in that cardiology example , you know , it appears that the , you know , the healthcare system is your customer where , you know , there might , you know , they're also may be an opportunity with , you .
Speaker #9: The specific heart valve companies like working with an Edwards and which is which resembles the approach perhaps that you were taking with the life sciences companies linking up with , with , with cure Health .
Speaker #9: Can you can you describe the reason ? I guess the rationale for pursuing healthcare systems versus working directly with life sciences companies in this way ?
Speaker #5: Yeah . Look , I guess there's a bunch of stuff . Matt , I start from the basis . They're not mutually exclusive .
Speaker #5: So we can do both . It's the same data with the same signal . The thing I'd say is that it depends where the data source is .
Speaker #5: Right . And so if you're using a hospital's data rather than our data , you know , the hospital is using the componentry of what they already have for their own benefit .
Speaker #5: And we're enabling that . And giving them insight they may not wish other people that to have that access to that data , but more importantly , we think about it as two flywheels .
Speaker #5: And so what I mean by that is that the flywheel we have in Canada have identifying patients and working with life sciences creates more opportunities and more disease states of knowledge to then go to a healthcare system and say , well , there are other ways we can use this data and what we find is you can do both .
Speaker #5: So yes , we maintain our work with our life science customers . But in different regions , the healthcare system , what you've got to remember is the core component of what we put together .
Speaker #5: Why are Orion and Hywel made so much sense ? Because their business is healthcare systems as opposed to life sciences businesses . But like the adoption of AI within healthcare systems will be at a different rate than it will be in life sciences .
Speaker #5: So we see them as not mutually exclusive, but we actually see them as complementary. Michael.
Speaker #9: Okay . All right . Thanks very much for that . And last very quickly , we just from last quarter to this quarter , we saw healthcare software revenue get down , step down marginally .
Speaker #9: Can you can you explain this this step down . And perhaps let us give us your thinking on when we expect that segment revenue to to turn around and begin growth .
Speaker #5: Yeah . Good question . I think like professional services , there are two things going there . Obviously it's not a straight line .
Speaker #5: It's a lumpy business . So you'll have one quarter will be up , one quarter will be down depending on deliverables . What I would say is that the growth comes in is not a linear line .
Speaker #5: It'll come in like every time a new customer comes significant , but it's not one a week . And so professional services quarter by quarter will be lumpy .
Speaker #5: You know , this quarter we were working through obviously North American summer . So customers being ready to take product . There's a core component of professional service revenue .
Speaker #5: And having key milestones . So I don't want to give the impression that it's a straight line . Professional services . There will be some quarters .
Speaker #5: Obviously Q2 was a positive quarter . It was above expectations in terms of growth . You know , you should expect that some years that business will grow .
Speaker #5: You know , five and the other years it'll grow much higher rate than depending on whether when new customers land , because when you when a new customer professional services revenue comes in before recurring .
Speaker #5: And it can be a one year lag by before , you know , we implement or into the recurring from professional service revenue .
Speaker #5: So our focus in 26 is clearly driving our AI and data science revenue , which is probably more linear .
Speaker #9: All right . Thank you very much . I'll pass it on .
Speaker #3: We'll go next to Farooq at Canaccord Genuity .
Speaker #9: Good morning . Congratulations on the quarter . And announced divestment .
Speaker #10: So my first question is on the Middle East partnership that you recently announced through an MOU with Lean Business Services . Would you be able to tell us more about your plans in this region and what this opportunity entails ?
Speaker #5: Yeah . Look , it's lean has been a wonderful partner for the business as it is before . Like , I think what we see with lean is that they've built real capability in the region .
Speaker #5: And over the top of our existing products . So the opportunity set for us is taking what they've already built across our platform globally .
Speaker #5: And then for within the region for them to be a reseller of what we what we've built in their environment . You know , they'll open up materially new markets that we don't have access to in the sales capacity within the Gulf .
Speaker #5: And our global footprint of taking some of their products as material as well . So we see it as one of the few win wins you can have in healthcare , where it's non-competitive .
Speaker #5: We we look at the region in the relationships , expertise they have to expand . And we obviously have the global reach within our network .
Speaker #10: And it sounds pretty exciting . And then maybe a follow up on Healwell Al appetite for additional M&A . So following your recent meetings with several potential targets from the UK , as you mentioned , and what is your pipeline look like ?
Speaker #10: And given the recent divestments, do you think you're in a better position to resume M&A activity?
Speaker #5: Look , my activity has been a core component being good allocators of capital for Healwell Al . We're maintaining a deep pipe , various stages across all parts of the market .
Speaker #5: You know , the reality is that we're looking currently at Tuqans , as we said , the key focus for us in the next six months has remained disciplined and focused , but not give up the pipeline .
Speaker #5: So what I mean by that is the deals that we're looking at will take longer than three months to consummate , but we don't want to distract the team from what the opportunity set is .
Speaker #5: Improving value . I'm sure everyone on this call is looking forward to when we can show the clinical validation and commercial validation across the Orion network , and we're very , very focused on demonstrating that .
Speaker #5: So what I think you can expect is that M&A will be a core component of the business . But for the next quarter or two , we need to demonstrate that , you know , the organic and commercial validation of what we're doing , not just the clinical validation .
Speaker #10: That's great . Certainly , I'm looking forward to hearing more good news from you guys . Thank you .
Speaker #3: We'll take our next question from Rob Goff at Bentham.
Speaker #11: Good morning and thank you for taking my question . Congrats on all the efforts and successes within the quarter . Thanks .
Speaker #5: Rob . It's been a busy quarter for the teams really really well . So . definitely exciting to be here . .
Speaker #11: Very good in looking forward. Can you discuss the current POVs? Outstanding. And how would you measure the success or performance of expanding that pipeline of POVs in the first quarter?
Speaker #5: Well, I think Alex did a great job of explaining one of those POVs. You know, what we're doing is... but I'll talk about sort of how it works.
Speaker #5: We take a small portion of their data to prove the value that we're talking about . So rather than give them a list on all of their all of their patients , we give them a list of what they can deal with in the next quarter .
Speaker #5: And so it's what we've what we're building in the particularly in the US , is a rinse . Rinse and repeat model so we can go in , take the same algorithm to a different non competitive healthcare system .
Speaker #5: And so given the sheer size of the US , what we're trying to do is focus on small set of subsets of of our capability , demonstrate it at scale and then land and expand .
Speaker #5: Now what we've seen is that there are multiple different uses . So we're not looking at just like hospital systems . We're looking across medtech businesses , government entities , regulators , you know , pharmacies .
Speaker #5: So what we're trying to do is demonstrate the breadth of different healthcare systems that we can integrate with , not just , you know , use healthcare systems as vernacular to anything outside life sciences .
Speaker #5: But the core component is the insight that we can get from that clinical data , whether that's used by healthcare systems , life sciences , hospitals , insurers as the same insight .
Speaker #5: It's just got multiple use cases .
Speaker #11: In simplistic but in terms of tracking , is it something where you could say you currently have , you know , five proof of values and you're looking to add another five in the first quarter or anything to track the momentum there ?
Speaker #5: Yeah , no , in first quarter will demonstrate will come through with how we think about those numbers . But I think the numbers you have there , we're doing more than those .
Speaker #5: What we're trying to do is be very disciplined this quarter to ensure there's success. Then we'll start tracking both the scale of where we're going and the different markets.
Speaker #5: But our initial approach is to try and have one in each region and one in each product . And so there's , you know , well , north of five , but you'll see us talk about those numbers in early 2026 .
Speaker #11: Very good . Thank you . And one last question , if I may , could you discuss your RFP pipeline . Is it an active market at this time ?
Speaker #5: Look , yes , the RFP pipeline is is actually quite active . What we're finding is that there's , multiple RFPs for all of our products in most regions , AI enabled platforms are now becoming part of the RFP process .
Speaker #5: We're starting to see in Europe . And particular the RFPs , including other kind of use cases , including how we integrate with life sciences .
Speaker #5: I think healthcare systems are becoming a lot more open to what they do with their own data , and so our experience of working with life sciences in North America is a real value outside that the rest of the world , you know , 2025 , we saw an election cycle both in Canada and the UK , which slowed down adoption .
Speaker #5: But what we're seeing now is that the RFP is are back on right across the business . In fact , every part of our business has got a significant pipeline of RFP .
Speaker #5: Obviously , what I would say in healthcare systems , they are long dated , big processes . The big dollar values .
Speaker #6: Okay .
Speaker #11: Thank you very much . Good luck .
Speaker #12: Thank you .
Speaker #3: Our next question comes from Brian Kislinger at Alliance Global Partners .
Speaker #13: Hi . Thanks so much for taking my question . Hey , how are you ? Good . So as a as a adoption of your AI increases and I know you're targeting 50% plus annual growth or more , how should we think about the mix of professional services versus subscriptions in that one segment ?
Speaker #5: Look , that's a really good interesting question . And something you'll see us define more clearly and and forward quarters I think professional services and our AI business probably looks more reoccurring .
Speaker #5: And so it's not as professional services like it is in software . And so often we find in life sciences that it is a multi-year relationship , not a one off PSG .
Speaker #5: So I think we're going to we've obviously taken the feedback on that from the investor and analyst community that we need to do a better job at describing that .
Speaker #5: What is PSG and software is not PSG and AI and data science .
Speaker #13: And the sequential reduction in professional services . That was a one off project . Yes . Excluding the divestiture .
Speaker #5: Are we talking now about AI and data science?
Speaker #13: We are . Yeah .
Speaker #5: Yeah . No . So northern hemisphere quarter the summer you are going to see seasonality . We definitely see in life sciences holidays being taken , you know , and that's why we saw the ramp up in September .
Speaker #5: Significant ramp-up to September versus July and August.
Speaker #13: It's helpful . My last question is as we look at the subscriptions revenue piece of AI , I know pharma and life sciences makes up the majority of that .
Speaker #13: Are there any hospital systems or or clinics or anyone else taking outside of life sciences that are paying for subscriptions yet ?
Speaker #5: But we do work with all of them . I think the reality is that they they're de minimis in the scheme of things .
Speaker #5: Currently , the life sciences , the bulk of them that you'll start to see that revenue be recognized and grow materially as we go into 2026 .
Speaker #13: Okay . Thanks so much .
Speaker #3: We'll go next to Daniel Rosenberg at Paradigm .
Speaker #5: Hi , Daniel .
Speaker #4: Hi , James .
Speaker #14: Hi , Alex . Thanks for taking my question . My first one just comes around the proof of value that you spoke of .
Speaker #14: I was just curious how easy or hard is it to go to market with these proof of value concepts ? Do you find it's early adopters , or is it more broadly than that ?
Speaker #14: People are curious to explore the capabilities of AI .
Speaker #5: Look , I would say the adoption cycle in North America is faster . You know , the it's not just early adopters . I think the reality is that it's a new it's a new segment in the US , you know , helping , burdened .
Speaker #5: And , you know , profit struggling entities , you know , find patients where they can generate revenue and get better patient outcomes is something that hasn't really existed over there .
Speaker #5: So I think what we're actually seeing is that it's not just the early adopters , but actually people with large bases . It means that the conversations are swiftly with .
Speaker #5: CFOs , not just with medical offices . So what I would suggest what we're seeing in the US , because of the profit centric nature of that healthcare system , is that the adoption cycle to get to procurement is faster .
Speaker #5: Now , procurement and legal is still a slow process . You know , it's weeks and months , not days , but , you know , the I would say that we are at the very front line of the AI experimentation has been happening in the US is that .
Speaker #5: A lot of what the workflow tools and our tools are very different to that .
Speaker #14: Thanks for that . And then you mentioned some the time it takes to go through procurement and legal . So how do you think about the sales cycle .
Speaker #14: And then perhaps as you think about competitors trying to go to market , is there an advantage you have there just based on , you know , Orion's history , the research you have out there ?
Speaker #14: You how helpful is that getting you through the door ?
Speaker #12: Oh .
Speaker #5: Look . Immensely helpful . I mean , at the end of the day , you know what you need in any market is cut through .
Speaker #5: So we have an established brand that's been there 20 , 30 years , but not a startup . We have clinically validation , clinical validation on multiple disease states .
Speaker #5: We're not picking on one thing with one department . We can talk across most components of healthcare . And so , you know , we are peer reviewed , published .
Speaker #5: And I think now the number grows every day . But from my understanding it's well over 50 times now . Having 45 , three months ago .
Speaker #5: So we're publishing on a regular basis . New disease states . And I think , you know , even our validation we've got with with life sciences , you know , we work with the largest life sciences companies in the world .
Speaker #5: So I think that validation component and reputation is vastly important because privacy and security is a core competency in the US , you are using healthcare data .
Speaker #5: So as we walk along in a , in a what I would say a sea of AI , I think we we really stand out .
Speaker #5: You know , it's very hard to find anything that's been clinically validated and peer reviewed , published as often as we have . And certainly it's very hard finding with the long term reputation , the Ryans had .
Speaker #5: So going back to the industrial logic of the of the two acquisitions and Orion , like we are seeing market fit and why that works in the US right now .
Speaker #5: And I use us loosely like I think North America is probably is a better phrase than North , than just the US .
Speaker #14: It's good to hear the last one . For me , if I may . It sounds like early disease detection . You know , we're obviously in the very early days of AI , the very early days of proof of concepts and showing commercializing it , but it sounds like it can extend dramatically .
Speaker #14: I'm just wondering , how do you think about that balance of taking one concept , growing it , scaling it , versus expanding into other verticals ?
Speaker #14: And , you know , the cost and resources to do that ?
Speaker #15: Yeah . Look , we've .
Speaker #5: We've taken the approach of crawl , walk , run as Sasha , our CEO , would talk about . So what we've gone into is make sure that the foundations of how we get the data out and how we put it into our algorithms is , is scalable and repeatable .
Speaker #5: And so a lot of the work at the moment , from the team and making sure the technology is deployed on the ground to part of this is going to the US , is the data can't leave the US .
Speaker #5: So we've had to we have to deploy a team there . But once the once we've got the infrastructure right and we know what what disease states it's actually a relatively fast follow on of the next stage .
Speaker #5: Now once the pipes are in , if you think about it , of how we get the data out , we know what to look for and and set Darwin over .
Speaker #5: We just need to tune it so it's the same clinical data we're pulling out and it's just different insights we're drawing from it .
Speaker #5: So if you think about the the model , the model is new healthcare systems as a deployment of getting their data into Darwin .
Speaker #5: But once you're in there then expanding it over one disease day to ten to eventually 105 , that stage is a much faster and easier deployment cycle than a new customer , and so our focus today is to go wide and then go deeper .
Speaker #14: Appreciate that . I'll pass the line .
Speaker #3: We'll move next to Justin Keywood at Stifel .
Speaker #16: Good morning . Thanks for taking my call . Hi . Nice to see the results on the MOU with Lean Business Services in Saudi Arabia announced last week .
Speaker #16: Are we able to quantify that opportunity ? I know historically or Orion has been a very active in the Middle East and and how should we monitor that that opportunity going forward and any indication of the potential Tam or size ?
Speaker #15: Yeah . Look , obviously .
Speaker #5: It's early days and any MOU , but what I would suggest is yes , there has been success in the Middle East , but I think the Middle East is a much bigger market .
Speaker #5: And as healthcare systems grow , the wonderful thing that the Middle East has and why lean is such a great partner is there are regions where we don't have people on the ground .
Speaker #5: And so working with them to deploy some of our platforms and either the Middle East or even if they take it to Africa , regions that we're not focused on currently .
Speaker #5: And so the reality is , what is a wonderful partnership , because what it brings to us is that we focus on our core markets where we've got expertise , people on the ground talking Europe , North America , Asia .
Speaker #5: But in the areas where we don't have capacity , we don't have to give up on those . And so . Lean is a wonderful partner in that thing that it's a cogent , if you like to think about it .
Speaker #5: They bring parts to market that we're not currently servicing . And they . very interesting .
Speaker #16: Absolutely . And then just on the growth in the quarter , obviously a big step up . Is there any indication of the organic expansion .
Speaker #15: Yeah . Look the .
Speaker #5: Short answer is that obviously AI is predominantly organic expansion . And growth . And and I appreciate your comment that you know , much of our software growth is has been the Orion and various acquisitions like the realities from the sector is that between Q two and Q3 , the professional services number was flat to down .
Speaker #5: And so the organic growth was , you know , was therefore very low between the quarters . I think you will continue to see that PSG being volatile .
Speaker #5: As I've said before , and that'll come in a lumpy stage . The nature of the contracts is they are very large but long dated , and so it won't be a straight line quarter by quarter growth .
Speaker #16: Understood . Thank you very much .
Speaker #3: Next we'll move to Gianluca Tucci at Heywood Securities .
Speaker #17: Hi . Good morning guys . Just one question here . Could you perhaps update us on how you're seeing cost synergies play out across the the entities post Orion acquisition .
Speaker #15: And why don't I leave that to you ? Absolutely .
Speaker #6: Absolutely . Great question Gianluca . We since the acquisition we've been , you know , really ramping up our work with the team at Orion and they've got a as you can appreciate a mature , experienced team there .
Speaker #6: And looking at the you know , the best of of all our business units . And we're finding that there's some really good synergies that we will realize it'll take it'll take a little more time for us to see that .
Speaker #6: We'll see that that benefit as we get into the into the 2026 fiscal year . But we're certainly seeing a lot of benefit to to having the large team there that that has the experience .
Speaker #6: We need across the organization . And so those synergies will be realized . It's just it'll be something that we'll see in 2026 .
Speaker #17: Okay . And if I could just ask follow up question on the cycle process as you work through these appeal sees or POVs , James , are you seeing more eagerness from clients who have a better understanding of the technology ?
Speaker #17: It just given the state of AI globally today?
Speaker #15: I'll .
Speaker #5: Sort of paraphrase that a little bit , but look , the particularly in the US , the understanding and willingness to deploy AI is very high .
Speaker #5: Some of our healthcare systems have have got , you know , 50 plus high projects that have been thrown at them in any quarter .
Speaker #5: So there's definitely a understanding that , you know , to improve profitability , they need to use AI a lot . And there are a lot of different products .
Speaker #5: What I would suggest is that most of the workflow products that they're seeing currently , you know , to reduce that burden , you've probably all seen charts that the administrative burden of healthcare is way outstripped the cost of healthcare from a clinical point of view .
Speaker #5: It takes us . So they're trying to solve that burden . And we're we're coming in a different space because of the willingness to look at AI is that we're in a very narrow field of , oh , by the way , we can find revenue .
Speaker #5: You can focus on your costs through the other providers , but we are different type of AI solution for you . And that has real cut through .
Speaker #17: Okay . Thank you guys .
Speaker #3: And that concludes our Q&A session . I will now turn the conference back over to James Li for closing remarks .
Speaker #5: Look , I just want to thank everyone . Really appreciate the engagement . Look , Q3 was a big quarter for us . I think I read a research report saying it was surgical amputation , which I thought was a lovely way to phrase it , that , you know , we've gone through the business , we've looked at what we need to to sharpen our business , you know , going into the end of the year and next year , we're really excited about what we're seeing .
Speaker #5: I think we're looking forward to talking to you early next year about these proof of values and showing commercial validation . But so thank you for everyone's support to the team .
Speaker #5: Thank you for your hard work. I want to look to the board and to our shareholders; we appreciate all the support. All the best.
Speaker #3: And this concludes today's conference call . Thank you for your participation . You may now disconnect .