TSX:WELL - Post Discussion
Post by
SunsetGrill on Mar 22, 2024 9:07am
Scotia $6.50
Analyst Team
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David Weiss, CFA, MBA, P.Eng.
Associate Analyst | 416-863-2899
Scotia Capital Inc. - Canada
| Valuation: ~14.5x shareholder EV/EBITDA on C2025E |
| Key Risks: Competition risk, contract risk, staffing risk, reimbursement risk, regulatory risk, integration/execution risk, security risk, liquidity risk. |
| Rating | Sector Outperform |
| 1-Yr. Target | C$6.50 |
| WELL-T | C$4.24 |
| 1-Yr. Return | 53.3% |
| Div. (NTM) | C$0.00 |
| Yield (Curr.) | 0.0% |
| ESG Score | 37 |
| Quant Ranking | 4 |
| Capitalization |
| Market Cap. (M) | C$1,062 |
| Net Debt + Pref. (M) | C$299 |
| Enterprise Value (M) | C$1,361 |
| Shares O/S (M) | 251 |
trong End to 2023, 2024 Guide Leaves Multiple Opportunities for Upside
OUR TAKE: Positive. WELL’s Q4 was a beat on revenues at $231.2M versus our $214.8M (Street was $219.3M), with the beat largely driven by better performance in U.S. Patient Services and SaaS & Technology Services. Gross profit of $101M compared to the Street at $103.4M, but gross margin of 43.7% was below consensus at 47.2%, likely driven by the outperformance in U.S. Patient Services which includes contributions from lower margin businesses (Circle Medical, WISP, and CarePlus). Adj. EBITDA was broadly inline with consensus at $30.8M (Street $30.2M). Organic growth for 2023 was disclosed to be 15%. Guidance for F2024 increased to $950M to $970M (prior was “over $900M”) above consensus at $926M. Management introduced Adj. EBITDA guidance of $125M to $130M (Street $128M). As it relates to capital allocation priorities for F2024, the company appears less focused on M&A with a greater emphasis on organic growth and reductions in leverage and interest costs. Shares continue to look attractive at 10.1x CY25 EBITDA. Conference call at 12:30 PM ET dial in #888-664-6383.
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Revenue of $231.2M was above consensus at $219.3M and us at $214.8M. Organic growth for F2023 was 15%. Canadian Patient Services revenue of $67.6M which was better than the $63.8M we were expecting. WELL Health USA Patient Services (CRH + Circle Medical + WISP) of $143.5M was ahead of our $135.4M. SaaS and Technology revenue of $20.2M was above our $15.7M.
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Adj. EBITDA of $30.8M was inline to consensus at $30.2M (us $31.9M), reflecting a margin of 13.3% vs. 17.4% in the prior-year period.
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Guidance for 2024 increased, with the company now expecting revenues of $950M to $970M (prior was “over $900M”) vs us at $909M. Management expects strong performance for 2024, prioritizing profitability/efficiency expecting both organic & inorganic growth in US/Canada. Adj. EBITDA margin guidance is for $125M to $130M vs. our $129M and the Street at $128M (prior guidance was “continued and sustained gains in adj. EBITDA & cash flow”). For 2024 WELL expects less capital allocation and M&A activity, with more emphasis on organic growth and a focus on debt reduction. WELL has implemented a cost optimization program to enhance profitability, including staff/leadership restructuring and other optimization initiatives.
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WELL achieved a total of 1,222,000 patient visits in Q4, which was up ~30% y/y (Canadian Patient Services visits up ~38%, U.S. Patient Services visits up 21%). Canadian patient visits strong growth was driven by the MCI Onehealth acquisition and includes one month of WELL’s first Manitoba clinic. WELL reported 1,867,000 care interactions (e.g. Technology interactions + Billed Provider hours under RADAR Healthcare, under CarePlus) in Q4, up 38% y/y.
| Exhibit 1 - Q4 Results |
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| Source: Company reports; FactSet estimates; Scotiabank GBM estimates. |
| Exhibit 2 - Comparable Company Valuation |
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| Source: Company reports; Scotiabank GBM estimates for WELL-T; FactSet estimates. |
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