TD's Preview Q1/F21 Preview; No Shortage of Growth
Event Q4/F21 Results: Tuesday, May 11, 2021, before market open.
Conference Call: 1:00pm ET; 1-888-664-6383/416-764-8650; Conf. ID: 5652 9388
Impact: NEUTRAL
Active M&A activity is helping drive an ongoing acceleration in growth. We are
forecasting revenue of $24.8mm (up 142% y/y; up 44% q/q), in-line with consensus at
$24.3mm. Q1 revenue will benefit from the very active acquisition activity in Q4/F20
that saw it deploy close to $75mm for acquisitions. Q1/F21 will include a full quarter
of contribution from DoctorCare, Easy Allied Health, Circle Medical, Insig, Source 44,
and ExcelleMD, with Adracare also having a full quarter, as the acquisition closed
at the start of January.
Expecting a second consecutive quarter of positive Adj. EBITDA. We are
forecasting Adj. EBITDA of $0.8mm, modestly higher than consensus at $0.6mm.
We expect Adj. EBITDA to remain flattish q/q, as growth investments at Circle
Medical ramp (funded by WELL's US$5mm treasury investment), offsetting further
profitability gains in its Canadian business.
Looking forward, we are expecting sharp profitability gains starting next quarter
driven by the CRH acquisition and complemented by further margin improvements
in Canada, with Adj. EBITDA margins expected to reach the mid-20% range.
Key near-term catalysts. With the CRH acquisition now closed, we believe WELL
is close to the minimum size threshold to get included in the S&P/TSX Composite
Index (as early as next month), which could lead to material Index-related buying.
As well, it is working towards a U.S. IPO (likely this fall), while it still has plenty of
cash (~$60-$70mm) to pursue (accretive) acquisitions, in addition to funds available
from its new credit facilities.
ExecHealth acquisition closes. This past Monday, WELL closed the $10.7mm
acquisition of ExecHealth. Recall, ExecHealth is WELL's first expansion into the
Ontario clinic market (more details in our April 8th note). Our current forecasts do not
include ExecHealth and they will be updated in conjunction with the Q1/F21 release.
TD Investment Conclusion
We are maintaining our C$10.50 target price, which is based on our sum-of-the-parts
valuation.