CIBCEQUITY RESEARCH
March 21, 2023 Flash Research
WELL HEALTH TECHNOLOGIES CORP.
Q4/22 First Look
Our Conclusion
Neutral. WELL reported an in-line Q4, highlighted by 19% organic growth in
the quarter. Over the course of 2022, WELL averaged 18% organic growth
on the strength of sustained momentum in its U.S.-based virtual services
businesses. With its Q4 results, WELL provided revenue and adjusted
EBITDA guidance that included revenue growth of 17%–20% and adjusted
EBITDA growth of “more than 10%”. The ~17% adjusted EBITDA margin
implied by the guide points to a Y/Y margin contraction of ~130 bps, but
would still see WELL comfortably hit its ‘Rule of 30’ target of adjusted
EBITDA margin and organic growth totalling to at least 30%. WELL is hosting
a conference call at 1PM ET this afternoon and we will be looking for more
details on capital allocation, the 2023 outlook, and the potential impact of
regulatory changes on the business.
Key Points
Q4 Results: WELL reported Q4/22 revenue of $157MM, slightly above
consensus and our estimate ($154MM/$154MM). WELL continued its strong
organic growth performance, with 19% organic growth in the quarter, up 100
bps from the prior quarter. The business saw strength in its virtual services
businesses, which were up 74% Y/Y on an organic basis. Gross margin (ex-
D&A) of 51.3% was down from 54.9% in the prior year. Adjusted operating
EBITDA of $27.2MM fell between consensus and our estimate
($26.7MM/$27.7MM) as margin of 17.4% was in line with consensus and 60
bps below our estimate (18.0%).
2023 Outlook: WELL updated its 2023 guidance, which had previously
expected revenue to exit 2023 at a $700 million run-rate, implying Q4/23
revenue of $175 million. WELL provided more specific revenue guidance,
expecting $665 million–$685 million in revenue, 1% above CIBCe at the
midpoint and 3.5% above consensus. Adjusted EBITDA is expected increase
by “more than 10%” over 2022, implying at least $115 million in adjusted
EBITDA at a 17% margin. Those levels compare to CIBCe’s forecast of $121
million (18.3% margin) and consensus of $119 million (18.1% margin).
Segmented Results: Omnichannel patient revenue (Primary, MyHealth &
CRH) of $102 million was up 21% Y/Y, above our estimate of $96 million.
Virtual services revenue of $55 million was up 74% Y/Y, compared to our
estimate of $58 million. More detailed segmented performance will be
available once WELL’s full financial statements are released later in the day.