Earnings Call Transcript - HWAIF 2026-05-08

Operator

Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the HealWell AI Q1 2026 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Heston Sunny, Head of Investor Relations. Please go ahead.

Heston Sunny, Head of Investor Relations

Hello, and thank you, Operator. Joining me on the call today are James Lee, CEO of Healwell, Dr. Alexander Dominovsky, President of Healwell, and Anthony Lam, Healwell CFO. I trust that everyone has received a copy of a financial results press release that was issued yesterday. Listeners are also encouraged to download a copy of our quarterly financial statements in management discussion analysis thus filed on CDER+. Please note portions of today's call of their historical performance include statements of forward-looking information within the meaning of applicable security laws. These statements are made in the safe harbor provisions of those laws. Please refer to yesterday's press release into 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 relating 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 carved by law. We use terms such as gross margin and adjusted EBIT 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 announced at the end of the call, which will be limited to analysts only. To ask a question, analysts require to call in to the conference call using a dial-in number provided in our press release. And with that, let me turn the call over to Hewell's CEO, James Lee.

James Lee, CEO

Thank you, Heather, and thank you everyone for joining us today. Let me start by grounding this in why Hewell exists. Here all is focused on becoming the primary enabler of preventative care by making healthcare data usable, actionable and scalable. We now have access to over 150 million patient lives across our network and we're putting that to scale of work. The challenge we're addressing is not a new one, but rather a structural one. Healthcare systems today are largely designed to treat illness, not prevent it. As a result, a disproportionate amount of spending is concentrated on patients with advanced disease where interventions are more complex, more expensive, and often less effective. At the same time, many of these conditions that drive this burden are preventable and manageable if identified earlier. So the issue is not where the prevention works. It's a prevention that has not been made and made and implemented at scale within real-world healthcare systems. And that's the core problem we're methodically approaching and solving. Now, the scale of this problem is significant, and the data makes a start. 80% of healthcare data is unstructured and untapped, embedded in the clinical notes, reports, and disparate systems, and they were never designed to be analysed at population scale. This is not a marginal inefficiency. It means the vast majority of available clinical intelligence is invisible to the people in the systems that could act on it. And now at the same time, 74% of global deaths are caused by conditions that are preventable or reversible if detected early enough. Hewell addresses these two issues by connecting disparate and complex healthcare information, serving meaningful clinical insights, and implementing those insights in real-world environments. We do this now in some of the biggest partners across the world, in both clinical, healthcare systems, and with life science partners. Today's a really exciting time for us. As the science exists, the tools exist, and the data exists, and we have the ability to bring this all together. Now, solving this requires more than a single capability. It requires solving four interconnected problems. The first is infrastructure. Healthcare systems cannot act on data they cannot seek. The foundational requirement is the ability to connect disparate data sources and surface them in a way that is meaningful at population scale. The second is clinical-grade tools. Data alone is insufficient. Clinicians need tools that can interact directly in their workflows, surface the right patients at the right time without adding friction to an already stretched system. Third is scientific evidence. Prevention must be grounded in validated science, not simply assumed. That means peer-reviewed research, real-world validation, partnerships with life science organisations that set the standard for both clinical treatments and clinical evidence. And the final one is economic incentives. Even when the science is clear, healthcare systems will not change behaviour without a line of incentives. Healthcare moves when incentives align. The financial case of prevention needs to be quantified and made compelling, equipping insurers and reinsurers to price the value of early intervention and build models that reward prevention, not treatment. Now, these four problems exist independently across the healthcare system. What has been missing is the ability to integrate those problems. Now, each of those problems maps directly onto what Hewell has built and is building, and we're making tangible progress across all four. On the infrastructure side, the Orion acquisition has been the defining move that gave us global distribution scale. Now a year on, the integration is behind us and the results are starting to come through. Our Armadares platform now connects over 150 million patient lives, unlocking longitudinal multi-source data at the foundation of every preventative model we build. And critically, it gives us the distribution layer so we can scale our entire offering globally. On clinical tools, our strategic alliance with Well Health allowed us to prove that AI can be embedded into real-world clinical environments at scale. Darwin and Well Decision support are now live, embedding our algorithms and IP directly into clinical workflows, servicing high-risk patients and shifting care from reactive to proactive. This is no longer a theoretical capability that's working today across our network. On scientific evidence, where the foundation is genuinely difficult to replicate, There are 47 peer-reviewed publications and partnerships with leading life science organisations. That trust takes years to build and increasingly recognised across the industry as being a meaningful competitive moat. And the final one, economic incentives. Translating population level inside sustainable financial performance is the final step. The insurance industry represents our next significant opportunity and we're actively building towards it. Now, each step has been deliberate. The pillars are in place and the strategy is now fully in motion. Now let me speak to what we have delivered in Q1 26 and what you should expect from us for the balance of the year. Q1 was another strong year of new quarter and we maintained positive adjusted EBITDA. In Australia we are growing with discipline, commercially and operationally. It was also a chord of meaningful progress with new contract wins and platform milestones we will walk through shortly. Q1 gives us confidence what lies ahead. The pipeline is building, the platform is scaling, and the commercial momentum is real. While healthcare systems are considered, with long sales cycles, the foundational growth signs are exciting. We're seeing strong growth in physicians using our products, increased patients being identified, new life science partners, and the US market is the most active it's been for a long time. As we look across the second half, we will be accelerating enterprise pipeline development across the US, Australia and the Middle East. We continue to deepen our life science partnerships, leveraging our validated AI models and regulatory-grade real-world data for clinical trial match and drug discovery. And we'll continue to expand Darwin across additional EHRs and population platforms. By year-end, our targets are clear. Activate our global network across life sciences, increase enterprise AI sales, and achieve approximately a 10% exit run rate for just deeper done margin. The foundation is built, the strategy is clear, and Q1 demonstrates we're executing against it. Ten is some of our key strategic and operational highlights of the quarter. First, we successfully unify Q1 and Pentavir into a single Darwin-powered AI engine. Now, this is an important milestone in our platform strategy, as it enhances the integration of our ecosystem, and enables more effective cross-sell and up-sell opportunities, particularly across the Orion Health and Verisource customer doses. Second, we launch WellTrust in partnership with WellHealth. This is a consent-first, AI-powered data governance and patient identification platform that enables privacy, compliant, clinical mobilisation at scale. Importantly, it also improves patient recruitment for clinical research, which remains a critical bottleneck in the life sciences industry. This has already demonstrated significant value to our life science partners. Third, we can continue to build commercial momentum across all parts of the business, including AI contracts and opportunities outside of Canada, increased momentum in AMZ, and our first RFP responsible genomic partner. This reflects the growing global demand for our AI solution and reinforces our expanding international footprint. Overall, these milestones highlight the continued execution of our strategy to combine AI data and clinical validation to drive meaningful impact across healthcare systems and life science organisations. I'd now like to send the call over to our CFO, Anthony Lamb, to walk through Q1 financial results. Thank you, James.

Anthony Lam, CFO

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. Our first quarter 2026 results are as follows. You will achieve quarterly revenues of 33.2 million during Q1 2026 compared to 8 million generated in Q1 2025, an increase of 316%. Revenue growth in the quarter was largely driven by the Orion Health acquisition and organic growth of the company's AI division. During Q1 2026, QL reported positive adjusted EBITDA of 0.7 million compared to an adjusted EBITDA loss of 2.3 million in Q1 2025, representing a year-over-year improvement of 132%. The improvement in adjusted EBITDA is attributable to the Orion Health acquisition and improved performance across QoL operating segments. QoL achieved gross profit of 19.5 million during Q1 2026, an increase of 340% compared to 4.4 million in Q1 2025. The increase is due to higher revenue performance across the business in the quarter. QoL achieved gross margin percentage of 59% during Q1 2026 compared to 56% in Q1 of the prior year. QOL reported IFRS net loss from continuing operations of $6.8 million in Q1 2026, and this compares to a net loss of $14 million in Q1 2025. QOL ended the quarter on March 31, 2026 with $21.9 million in cash, an increase when you compare this to year-end our U.N. balance of $18.6 million. I'd also note that the company holds a strategic investment position in XAI, now part of the broader SpaceX ecosystem, which represents additional balance sheet value beyond our reported cash. As we evaluate the appropriate timing to monetize this position, it provides meaningful optionality to further strengthen our capital base and support the company's growth initiatives. Now I'm looking at our revenue segments. As of November 1, 2025, following the rest of the company's Clinical Research and Patient Services Division, QoL now generates revenue across two core segments. One, AI and Data Science. Two, Healthcare Software. Our AI and Data Science segment achieved revenue of $2.6 million in Q1 of 2026, marking a 13% year-over-year growth compared to the $2.3 million in Q1 2025. The increase was given by contributions from the Verisource Data-as-a-Service offering and Orion Health Systems component with the AI segment. This growth is partially offset by the vesture of Mutual, which was completed on November 1, 2025, and continued to revenues in the prior year comparative. Excluding the impact of this divestiture, the company continues to advance its AI data science capabilities to a combination of strategic and organic initiatives. The second revenue stream is healthcare software, which generated $30.6 million in revenue in Q1 2026, an increase of 439% from $5.7 million in Q1 2025. This increase was primarily driven by significant growth in the healthcare software segment, reflecting the continued contribution of Orion Health, that acquisition happening, and organic growth expansion initiatives. With the recent investiture of non-core assets, QL is now fully focused on driving growth, innovation, and profitability across its two high-margin scalable segments, AI and data science, and healthcare software. This strategic focus positions the company to continue delivering strong financial performance with rapidly growing revenue streams, expanding customer adoption, and meaningful contributions to overall profitability.

Dr. Alexander Dominovsky, Analyst — Other

With that, I'd now like to turn the call over to our President, Dr. Alexander Dovrnowski, who will discuss our Canadian and global public sector opportunity, Keywell's competitive the most and key investment highlights underpinning our strategy thank you Anthony and thank you James I want to start today by discussing an important opportunity that is presented before us over the last year or so we have seen a dramatic and positive shift in global public sector posture towards addressing key pain points in healthcare inclusive of data interoperability challenges Never before have we seen such exciting public sector tailwinds, with major funding commitments being announced and being made in key jurisdictions where we operate. We have seen this shift happen not just in Canada, but also in other important jurisdictions. For instance, in the USA with the introduction of the OBBA, this has led to the addition of $50 billion U.S. to the Rural Health Transformation Program, a program that is directly targeting to address healthcare data access and compatibility issues. In the U.K., we have seen revitalized commitment to healthcare investment as echoed in their well-publicized 10-year plan to transform the NHS. And finally, in Canada, I've broken down this opportunity into two parts. Part 1. At the federal level, Bill S-5, the Connected Care for Canadians Act, currently under review in the Canadian Senate, represents a meaningful shift in Canada's health care policy landscape. It mandates interoperability across health IT systems and explicitly prohibits data-blocking practices. From an investor's standpoint, this effectively establishes a new national baseline for how health care technology must operate in Canada. The implications are significant. First, federal funding and procurement are expected to increasingly favor platforms that are compliant with these interoperability requirements. Second, scale becomes a key advantage, particularly for platforms capable of integrating clinics, EMRs, and AI into a single unified workflow. And third, it creates additional pressure on legacy vendors operating closed ecosystems or point solutions which may face challenges adapting to these new standards. At the same time, provincial procurement trends are also evolving with a clear preference emerging for Canadian-owned sovereign technology platforms. Taken together, these dynamics create a really strong structural tailwind towards vertically integrated Canadian-based healthcare technology companies. HealWell is fundamentally built around AI and data interoperability and has already demonstrated its ability to deploy large-scale public sector health information systems, including the Health Information Exchange in Saudi Arabia, which is the world's largest implementation of its kind. Together with WellHealth and WellStar, HealWell is uniquely positioned to meet the requirements of the Connected Care Framework. Collectively, this forms a vertically integrated end-to-end Canadian sovereign stack spanning care delivery, data infrastructure, and clinical intelligence, fully aligned with both interoperability mandates and sovereignty-driven procurement priorities. Now, on to the second, or part two, of the public sector opportunity in Canada. On March 19, 2026, the Ontario Minister of Health announced the province's plan to launch a province-wide primary care medical record initiative aimed at advancing an integrated, interoperable electronic medical record system for primary care. This initiative forms part of the Ontario Primary Care Action Plan, supported by more than $3.4 billion in funding, with the objective of connecting approximately 2 million additional residents to primary care by 2029. The province has indicated it will run an open, competitive procurement process and is valuating a multi-vendor approach. Our chairman, Hamid Shabazi, noted in yesterday's earning call that Well Health strongly supports this initiative and intends to actively participate in the forthcoming procurement process led by Supply Ontario. Healwell already plays an active role in supporting the province through its 811 service, which provides clinical guidance to over 15 million users, as well as through the Ontario Patient Viewer, a digital care record that consolidates patient data across care settings. In addition, Healwell's award-winning and clinically validated Darwin AI platform delivers intelligent search and summarization plus clinical decision support capabilities that directly align with Ontario's requirements. The province's initiative closely aligns with HealWell's core strengths. HealWell intends to support WellHealth and WellStar on their bid for this opportunity, and we are well positioned to help deliver this vision for the province of Ontario. Now I'd like to turn our attention back to HealWell. As the healthcare AI landscape continues to evolve, we are seeing a clear transition from very early stage experimentation towards real-world deployment of AI solutions that are delivering measurable clinical and economic outcomes at scale. From a strategic standpoint, we believe the companies that are best positioned to lead in this environment will be those that combine advanced AI capabilities with strong distribution, access to high-quality clinical data, and solutions that are embedded directly into care delivery. At HealWell, our first key competitive moat is our clinical validation and scientific credibility. You heard a little bit about this from James. Our Darwin AI platform has now been supported by 47 peer-reviewed publications and was recognized with the 2024 Pre-Galleon USA Award, one of the most respected honors in the life sciences industry. Importantly, our AI platform can generate regulatory-grade real-world evidence, which we believe is a highly differentiated capability on a global scale. We continue to collaborate with leading hospital systems, cancer centers, and pharmaceutical companies, and today we have active commercial relationships with eight of the top ten largest global pharma companies. The second core advantage is our global distribution infrastructure through Orion Health. This provides us with enterprise access that is both broad and difficult to replicate. Through Orion, we maintain relationships with more than 70 large healthcare customers across 11 countries. This is a very unique and special customer base. We also recently secured our first major public sector AI deployment in the Middle East, marking an important step in expanding our AI products beyond Western markets. Looking forward, we see a strong and growing pipeline across Canada, the United States, the United Kingdom, Australia, New Zealand, and the Middle East, which positions us well to scale our solutions globally. Our third competitive advantage, we believe we benefit from meaningful embedded switching costs and a continuously expanding clinical data network. Our solutions are integrated directly into electronic health record systems and clinical workflows, which support strong customer retention and long-term partnerships. On top of this, we currently have approximately 35 master service agreements with pharmaceutical companies, including, as mentioned, many of the largest global players. Each additional deployment enhances our proprietary datasets and contributes to ongoing improvements in model performance. And finally, our proprietary Darwin AI platform serves as the technological foundation of our business. Over the past year, we've successfully unified the capabilities of CureHealth and Pentavir into a single integrated platform powered by Darwin. This includes now our product set of smart identify, smart search, and smart summary artificial intelligence solutions, which are designed to automate complex clinical data analysis and patient identification across large-scale data sets. Taking together, we believe these factors of scientific validation, global distribution, a unified AI platform, and deep workflow integration form a strong competitive moat and position HealWell to capture significant opportunities as healthcare AI adoption continues to accelerate. Now turning some attention to our investment highlights. At a high level, HealWell is a healthcare AI company that is mission-driven to move the needle in preventative care. How we do this is through our focus on early disease detection. Now to add a little bit of color to this, over the last six months, our team and incredible technology has helped identify over 160,000 patients that are at high risk for rare, ultra-rare, chronic, and complex conditions. Now, we believe we are uniquely positioned at this intersection of clinical data and AI to deliver outsized results and value for our shareholders. Now, starting in the top left of this slide, as mentioned, we are already generating revenue from eight of the top 10 largest global pharma companies. This is a real strong validation of both our technology and our commercial model, and it reflects the trust that large pharma organizations are placing in our platform. Next, we are operating what we believe is a multi-billion dollar market opportunity. As healthcare systems increasingly adopt AI to improve outcomes and reduce costs, we see significant long-term demand for solutions like ours that can operate at scale. In fact, we believe that those companies that are best positioned to unlock true value in preventative care have a shot at being one of the first trillion-dollar businesses in healthcare. The addressable market opportunity is that immense. Importantly, through our platform and partnerships, we now have access to over 150 million patient lies. This scale of data access is a key competitive advantage, enabling us to deliver more accurate insights and continuously improve our AI models. From a growth perspective to date, we have completed six material acquisitions, and we continue to see a strong pipeline of opportunities, and we believe we are well positioned to deploy capital strategically to drive further expansion. We are also supported by an experienced board and a talented management team with deep expertise across health care, technology, and capital markets. And finally, our relationship with WellHealth remains a key strategic advantage. It continues to accelerate our growth, expand our multinational footprint, and provide us with direct access to clinical environments where our AI solutions are being deployed and scaled. Taken together, these elements reinforce our position as a differentiated health care AI platform with strong momentum and a clear path for continued growth and profitability. And with that, I'd like to thank everyone for attending this call. I'd like to thank our board of directors, our management team, all our hardworking staff. And with that, I will hand it back to the operator and move to the Q&A portion. Thank you.

Operator

As a reminder, if you would like to ask a question at this time, press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Kevin Crisnarante with Scotiabank.

Kevin Crisnerante, Analyst — Scotiabank

Hey, good morning. James, you had mentioned that the U.S. market's the most active it's been in a while, so I'm just wondering if there's any way you can size that, quantify that, whether that's maybe pipeline growth, number of conversations, just curious to hear what you're seeing there in the U.S.?

James Lee, CEO

Yeah, firstly, good morning, Kevin. Thanks for the question. As it happens, Alex and I are both in the U.S. currently. We've been here for the week seeing clients and customers. So giving you a bit of flavor is that last year we saw some new activity. We won a new contract in the U.S., which we announced first quarter. But what we're seeing here is that the new activity driven by OBBA but more particularly the Rural Health Funding Bill, has meant that, what I would say, RFPs in the market are at least two to three times more active than they were this time last year. And those are for a wide range of new HIEs in this market. But interestingly, what we're also seeing is that that funding for rural health is now pushing into and being extracted out to AI opportunities as well. So we're probably having more AI conversations now in the U.S. than we were having certainly even three months ago. Now, that's driven by that first round of funding is now being dished out and people wondering how they spend it. But it is a significant portion of money going to this part of the world.

Kevin Crisnerante, Analyst — Scotiabank

Great to hear. Maybe one for Anthony. The healthcare software line this quarter looked good. I know there's a mix of software, but also deployments and pro-service work. So I'm wondering, you know, if you could dig in a little bit deeper into that number. Was there any, you know, sort of things that you call it as one-time-ish? And then how do we think about the segment as we move into Q2?

Anthony Lam, CFO

Thanks, Kevin. That's a great question. We did see in Q1, I would say, a bit of a catch-up in some of our pro-services side of the equation. So I would say that, yes, some of it is maybe a little bit of a catch-up on some opportunities that we've been working on at the end of last year that have now caught up this year with some really good, you know, revenue recognition with the completion of some key milestones. And so what we saw here is that benefit our margins a little bit as we, you know, got into Q1 here because we had, obviously, some costs related to that that were incurred in prior period, but the revenue now being recognized. So I would say that, you know, there was obviously just a marginal amount of that happening in this quarter that created a little bit of that lift.

Speaker 12

Great. Thanks for the color, guys. I'm going to pass the line.

Operator

Your next question comes from John Luca Tucci with Haywood Securities.

Speaker 10

Good morning, guys. I think last quarter, I think it was last quarter that you called out over 50% organic growth for AI for this year. I'm just wondering at this point of the year how you're thinking of organic growth for both AI and software.

James Lee, CEO

Why didn't I cover that? Obviously it's early in the year. What I would say is the pipeline still gives us confidence in our previous comments about AI growth. You know, revenue recognition is always tricky to get that kind of precision this early in the year, so we're not at the stage where we can update that. What I can say is that the pipeline continues to build nicely. Software development, we'll probably give you an update in the second half. What we have seen is that there is, as I said, significant uplift in RFP activity turning up in Q2, Q3 this year. But we feel comfortable with the numbers we've given previously.

Speaker 10

Then just following up to the prior question on software and how that impacted gross margin in the quarter. It was up nicely, Q on Q, gross margins. Anthony, like is this kind of a new baseline or because of the one-timers in post-services, is we should see kind of a step half down for Q2 in gross margin?

Anthony Lam, CFO

Yeah, Gianluca, thanks for that. Yeah, definitely you had a great quarter from that perspective, a little bit of a catch-up taking place. We can't expect to see that our margins, you know, will be in that mid-50% range that we've seen historically. I think we had a nice little benefit in this quarter, but I think we'll be in that, you know, mid-50s range for the year as we look ahead.

Speaker 12

Okay. Thanks, guys.

Operator

Your next question comes from Derek Greenberg with Maxim Group. Hey, guys.

Derek Greenberg, Analyst — Maxim Group

Thanks for taking my question. I wanted to just ask, I think on the previous call, you'd also mentioned you had expected 10% year-over-year growth in the subscription support and maintenance segment for healthcare software. I was wondering if there was just any updates on that as well.

Speaker 12

Anthony, do you want to cover that?

Anthony Lam, CFO

Yeah, absolutely. We see continued, you know, on that line, we see the continued similar performance. I think we will – that's a really steady part of our business. I would say it continues to progress at the same level that we've seen historically.

Derek Greenberg, Analyst — Maxim Group

Yeah, got it. And then I was wondering if you could maybe just give some color in terms of in the Middle East when you're engaging with government sovereign health entities, just what that process looks like in terms of how the sales cycle progresses and then once live, how long it takes to go from signing a contract to scaling revenue?

James Lee, CEO

It's a really good question. I don't think there's a clean answer. I think what we can say is that every part of the region is different. So what we've seen there, there are some parts where activity can go up in quite quickly, where it's an established market, there's no need for an RFP, we're already embedded, and we can go from an initial discussion to what I would say revenue within six months. Now, obviously what we're seeing with the global conflict in the region, we are seeing some slowdown in sort of initial conversations, progressing into secondary conversations. That conflict has gone longer than we had expected. But equally, we had nothing baked in this year, just to be clear with our numbers and thought processes for the Middle East for new contracts than the numbers were given previously. Now, as we extend slightly beyond the regions that we're currently active in, we are still seeing activity and RFPs come to market. They're probably more, I would say, a nine-month process from beginning to revenue recognition and with a ramp-up. And you've got to remember the implementation phase for us from winning an RFP begins with contracting, which can take anywhere between three to six months from the time we would announce a contract win. And then, because obviously we have to contract with a bunch of secondary parties, including the likes of AWS. And then, you know, the recurring revenue might be a year after that, because new regions can take up to a year of implementation. Does that answer your question?

Derek Greenberg, Analyst — Maxim Group

Yes, definitely.

Speaker 12

That's very helpful.

Derek Greenberg, Analyst — Maxim Group

Thank you.

Speaker 12

I'll pass it along.

Operator

Your next question is from Ryan Kislinger with Alliance Global Partners.

Ryan Kislinger, Analyst — Alliance Global Partners

Great. Thanks so much. In the first quarter, subscription revenue for AI and data science has declined sequentially. It's the first time that's ever happened. Was there a churn or lower usage, or maybe what explains the dip, particularly in that subscriptions piece sequentially?

Speaker 12

Anthony, do you want to cover that or do you want to make it?

Anthony Lam, CFO

No, I've got it. No, it's a great question. We did see a bit of a change there. I would say that as we recalibrate all of our AI business here, we did see that, a small move in it, but I would say it continues to be an area where we're focusing our efforts to grow. As you know, the subscription portion of our AI business is a very small portion, it's less than 10%. The larger component continues to be the elements that we have more episodic revenue. As we build out capabilities and we start seeing the cross-sell opportunities through our carriage network with Hawaiian, we can expect to see that subscription element become a much more important portion. But, you know, healthcare systems are relatively slower moving in decision-making, and I would say that, you know, at this early stage, you know, we're very pleased with the performance, and we continue to see incredible interest, as James and Alex, the pilot, earlier in the call, they're in the U.S. now, having very, very fruitful conversations with a lot of the opportunities there, all of which have an element of the AI component in it.

Ryan Kislinger, Analyst — Alliance Global Partners

Okay, great. And then my second question relates to your statement on a contract, a major government health system in the Middle East and continues expanding enterprise deployments across North America. What's the potential size of some of these opportunities on a run rate basis? What would be considered small when you move to production? What might be considered a large contract? Help us understand so we can see how this might scale.

James Lee, CEO

Just so I get some clarity on that, are you talking about when we're fully in production or what a first stage would look like?

Ryan Kislinger, Analyst — Alliance Global Partners

Well, maybe the life cycle. Maybe talk about what your experience might look like and then how we get to production and how long that might take.

James Lee, CEO

I think that's a nice way to frame it. So what I would say is that within – it's not linear, so I'll just give you a range. So for a small healthcare system, a first stage of implementation might be, call it $250,000 US of revenue for implementation and something similar for ongoing. And then at scale and fully implemented, it might be half a million a year ongoing. For a large system, it's probably four times that. What we're seeing is that the potential for these to come in as platforms into healthcare systems, they're probably more like an HIE sort of contract, one to two million US dollar contract, depending on the scale and size of the opportunity. Again, as the product matures and the number of use cases becomes more apparent, I think the way we're considering the platform in the later years is a deeper embedded platform. And you could see an area here, and we're already having conversations of having embedded resource, which would probably lift that number again. So if I'm thinking about that in the most broad sense, the reality is that the AI deployments are not going to be $100,000 a pop type deployments. What we're seeing is that the interest is not in point solution, but fully embedded platforms. Now, they will take more time, but the margins are materially higher and far more exciting. And so, you know, you'll see our language shift and talk about that in terms of this becoming, I think Anthony made the comment of going from being episodic to being embedded. And those embedded platform conversations are really what's leading through here. What's very clear in this market is that the time and energy to deploy a point solution or a proof of concept is pretty much the same as going fully for an enterprise grade. And so what we've seen has been a real change in the U.S. market from very nascent, almost immature approach to governance to now very strict thought processes on procurement, governance, connectivity, being embedded, scientific validation, all of which plays very, very clearly into our hands. And if we have a little bit of bounce in our voices, it's because we're here at the moment hearing it firsthand from every single party of the realistic answer of where our platform sits in the universe.

Ryan Kislinger, Analyst — Alliance Global Partners

Thanks for that. I'm going to slip one more in. There was a significant step up in R&D. Can you highlight what these R&D investments are, where they're focused on, and directionally how we should think about R&D expenses for the next few quarters?

James Lee, CEO

Yeah, look, R&D, there's two key areas, right? we're obviously spending on integrating the platforms and bringing it to new markets. Integrating the new Verisource Orion platform into the US is a first-time process, so there will be R&D spend on that. We're also at the final stages of delivering a digital front door in Ontario. Again, that means it's heavy in the R&D cycle and a lot of new product development within the ARA division. What I would suggest is that we're at the tail end of that growth. With the platform coming live here in the US in the last quarter, we're at the end of that, I would say, the initial deployment phase and moving now into the more steady state. Now, and there's obviously a bit of what I would say the integration spend on getting these businesses aligned. The final thing there is that there is a period of what I would say is removing significant tech debt across the organisation, and so we have approved a few projects which will be multi-year projects, they call it a couple of years, but very, very significant ROI projects in terms of reducing costs. So while there is an upfront in the current year, and we saw a bit about them last year, that'll start to tail off. I think what we're seeing and thinking is that we're seeing significant improvements from deploying AI internally with an R&D. So once we've completed the tech debt and completed some of the current projects, we would expect our R&D is a percentage of revenue to decline, and to be fair, probably R&D is a flat-line decline in an absolute sense as well.

Speaker 12

Great. Thanks for all your responses.

Operator

Next question comes from Max Zimwelski with Stifle.

Speaker 7

Just a few questions. Maybe, Anthony, you could help me out on this first. First, this is Max, by the way, on for Justin Keywood at Stiegel. Maybe besides some of the margin improvement left in Q1, could you help us understand the cadence of invoicing and revenue recognition in Q1? Should we expect that there is sort of this bolus of collections in this quarter on a seasonal basis from contract work through the year? Max, thanks for the question.

Anthony Lam, CFO

The cadence of invoicing hasn't really changed. I will say, though, that, you know, one of the dynamics that we see with now with the – we've seen a full cycle with Orion in the mix is that they do have a customer base. We have a customer base that – where we do have a handful that we will build, you know, annual revenues up front. And, you know, again, close to two-thirds of our revenue there is, you know, recurring. And so we do have – we will see some benefit from a balance sheet perspective where we have some cash 12 months build up front. As we get into – right now, into Q2, we'll start seeing a bit of a bulge in our cash collections on those annual build relationships. And then it will be drawn down partially throughout the rest of the year. But I would say it's a smaller portion of our recurring revenue, but definitely a nice little benefit for us from a balance sheet perspective. Other than that, the rest of our business is billing on a regular basis, contracts, milestones, you know, they're billed and recorded, you know, similar to how we've seen in the last few quarters. So not a lot of movement there in that. We just had just a small benefit this quarter that was a bit of a catch-up, that's all.

Speaker 7

Perfect. And maybe more of a broader question, if you could help us understand maybe which types of customers are most amenable to these cross-sell, up-sell opportunities? Is there a bigger opportunity with, say, HIE or maybe another enterprise context? And if there's a meaningful difference between geographies on bringing additional products into a project, given the sophistication or how well those systems are resourced or funded?

James Lee, CEO

I'll take that. The short answer is there is no meaningful difference by geography. I think there's a meaningful difference in timing. And so our customer bases, whether HIEs or digital front doors, realistically, they're still government platforms. And so while we are always part of the solution, we're never ever going to be 100% of the technical stack they have. So the conversations we're having doesn't really matter which part of the stack we're in. We're still having those conversations. It's their readiness that is the driving force. And generally, it's the funding cycle. So we're having conversations in all of our major regions. So active conversations in the UK, active conversations in ANZ, US, Canada, Middle East. So we're trying to be really methodical at where we apply our time. What I would say is there's probably more conversations, demand, than we are capable of delivering right now. So we need to scale with that. But as we said, these are long-dated cycles. They're not things that we'll switch on tomorrow. These are conversations that can take three to six months, and then they can take six months to implement. But what we're seeing from, and I think Alex mentioned his presentation, We're seeing governmental support now coming through in Canada, the U.S., the U.K., ANZ, actually behind supporting AI being deployed. And there's really common language, which is the exciting piece of, you know, the U.K. talks about getting people out of hospitals and the community. Well, that requires a shared care record. That requires an HIE. Then there's, you know, conversations about treating people, treating wellness, not sickness. And again, that's the same language they have within the CMS. In fact, the CMS has extended the period of what they want to see people looking after their customers, so in terms of accountable care. So the language, the financing is actually quite global right now, which is exciting, and it matches our footprint nicely. I think what will be an interesting component in 2027 will be as we broaden from regions we're not in, because our capabilities work in any healthcare system, and what we're seeing with the preventative healthcare is that as we begin to show use cases and proof points in what I would say tangential or adjacent revenue streams, what we're finding is there's no real, well, I'll say it in a silly way, that there's no real opportunity that we can't participate in. I think I mentioned before we put in our first RFP with a genomics partner, which was an exciting change of just the range of the things we can apply our AI and platforms to.

Operator

Our next question comes from David Kwan with TD Cowan.

David Kwan, Analyst — TD Cowen

Yeah, good morning. I was wondering, could you talk about some of the conversations that you guys are having with life sciences companies? Because I guess they're in a much stronger position now to help them with their clinical trials, given your AI capabilities and the integration there. And then you got WellTrust, and now, I guess, WellHealth was talking about WellResearch on their call yesterday. So, just curious to see, you know, are you having more inbound interest and also how you're planning to work with Well in terms of going after these opportunities?

Dr. Alexander Dominovsky, Analyst — Other

David, hey, thanks very much for your question. Look, I think our credibility and our relationships with, you know, life sciences companies, which includes, of course, you know, big pharma, you know, med device and biotech, I think it's all been really maturing in an exciting direction. And just to give you a quick snapshot, David, of what we're able to do, right, we started really with this capability of being able to risk stratify patients, right, identify at-risk patients of all sorts of different conditions, including, you know, rare, ultra rare, chronic, and complex conditions. And on top of that, we've been able to offer our life sciences partners a capability of being able to generate regulatory-grade real-world evidence, which could then inform and help generate clinical studies, and that's really key. And then, you know, a third kind of, you know, value proposition is being able to not just screen and identify adverse patients, but identify patients that are also of strong eligibility for clinical trials. And this work is really meaningful, and I think that's what you're touching on with, you know, partnerships and strategic alliance with Well Health and their initiative around Well Trust and Well Research, right? We're able to identify patients, you know, years in advance that then get access to, you know, in some ways is life-saving, you know, clinical trials. So that's a really exciting partnership opportunity, and we encourage you guys to watch that closely, and I'm sure Hamid will share more news on that front in coming quarters.

James Lee, CEO

The only thing I'd add there is that that's already in market. You know, it's not an idea. We're already seeing use cases and RFPs coming in. I think the scale of well-trust at the speed of which has grown surprised us. You know, we're seeing really good consent from people going through the clinics. And so it's an area that we're actually looking at accelerating our spending growth to accelerate the size of the scale of consented patients we have access to.

David Kwan, Analyst — TD Cowen

No, that's great. Do you guys actually have an updated number in terms of how many of Well's patients have given their consent through WellTrust?

James Lee, CEO

I don't have them in front of me. It's changing rapidly week by week. So we're in the early phases of deploying it across all the Well ecosystem. And so it'll be a more meaningful number for me to give you next quarter. But what I can say so far is that it's a week-by-week growth that has surprised us from, let's be clear, from a small start early, but now we're getting to the point where it's enough to be meaningful. We're now using what we have to identify patients for clinical trials and at a commercial break. So not just theoretical, we're actually doing it.

Speaker 12

That's great. That's it.

Operator

Again, if you'd like to ask a question, then press star followed by the number one on your telephone keypad. At this time, there are no further questions. I'll turn the call back over to Mr. James Lee for any closing remarks.

Dr. Alexander Dominovsky, Analyst — Other

Actually, I'll take it. So in closing, I wanna thank everyone once again for joining our call today. Thank you to the analysts for their questions. Everyone, please stay safe and healthy, and we look forward to providing more updates in the future.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.