RE:RE:Maintaining Perspective I really like this wolfofoakville guy. Very fair and balance analysis. Have a read on his breakdown of Well. This is how you know when someone is not paid for his analysis like all the other paid touts like cantech, nick waddell, beacon, stiffel, etc..
basically he is saying what I am saying but way more elaborately. Lol. Anyways good recommendation to his site. Well management is making a killing with these free shares. How can you expect people to keep holding long when management keep selling their FREE shares every chance they get. I have already broken down the holdings of each management previously. Anyways good luck. Be dilligent.
https://wolfofoakville.com/f/well-health-technologies-3-5
Well Health Technologies (3 / 5)
November 15, 2023|2023 Q3
I think we are up to six consecutive 3.5 star reviews for Well, and it feels like I'm always waiting for them to over impress to achieve that elusive four or higher which I reserve for only the very best.
I've held a sizable position in WELL since late last year when it dropped to a level that I could no longer ignore and have been in since $2.80. It quickly more than doubled to nearly $6 and has been a wild roller coaster ride since. Flat since their Q2 FINS as of yesterday, but up 55% since my call out. How does their Q3 stack up?
Balance Sheet:
Current ratio of 1.2, a slight improvement over where they have been in recent quarters. That consists of $45.3M in cash including restricted, $87.8M in receivables, and $27.5M in prepaids and other assets against $137.6M in current liabilities. Long term debt has risen by $33M in the quarter up to $255M, and other long term commitments include $45.3M in convertible debentures and another $21M in deferred acquisition costs.
Cash Flow:
Well has achieved $51.7M in operational cash flow through nine months, a little better than a $4M improvement over where they sat a year ago. YTD, they have scooped up six more companies and spending nearly $62M, spend another $6.2M on other property and equipment and settled another $6.8M on deferred acquisition costs. While in Q2 they decreased their total debt load, now YTD they have incurred $40M more to fund their acquisitions. All of that nets out to a 14% depletion of cash from where they began the year.
Share Capital:
- Just shy of 239M shares outstanding with only about 4% dilution occurring in the last year, much through acquisition costs
- Renewed their NCIB in the spring, but don't be confused by this smoke screen. They've never utilized it to buy back stock and with over a quarter billion of debt, they are not about to start now.
- 2.03M options outstanding, all ITM. More than half will be exercised in the next eight months
- 5.9M RSU's and 3.6M PSU's outstanding with a combined 6.5M granted this year, under a pretty obese SBC plan
- Only recent insider activity includes insider selling and flipping units for cash
Income Statement:
Revenue was up 45% in the quarter to $204.5M and is now up 32% YTD to a total of $544.8M. It appears that is where the good times end however. COGS on their revenue increased by over 63% which took a significant hit to the margin line (which conveniently they do not include LOL). But Wolf has a little thing called a calculator which tells him gross margin dropped by 750 basis points to 46.1% down from Q3 of 2022 of 53.6%. They did get a little bit of conversion on their G&A expenses which rose by 34% on their 45% revenue increase but total operating income decreased by 17.5% on 45% more top line, mainly due to the massive hit on margin. Insiders still rewarded themselves with 50% more in stock based compensation - all via free RSU and PSU's. Due to their ballooning debt, have incurred $24.6M in interest expense YTD, which is 40% more than last year. So after a breakeven performance last year at the Net income line, Well has lost $15.1M in 2023 while achieving $132M more in revenue.
Full disclosure - I exited my position at the bell this morning. I wish I would have reviewed the stock yesterday.
I'm not writing them off here, but I see more near term pain before they will be able to right the ship and make this business profitable. Downgrading to 3 stars. It's only worthy of my watchlist at this point, not investment worthy. One thing is for certain - insiders are going to do just fine, I'm just not sure about the rest of us anymore.