WELL Health Technologies Corp T.WELL

RBC

[retiredcf]

Their upside scenario target is $8.50. GLTA

June 18, 2024

Outperform

TSX: WELL; CAD 4.22

Price Target CAD 5.50

WELL Health Technologies Corp.

Investor Day Takeaways: Underscoring the long-term growth opportunity

Our view: WELL held its first analyst/investor day yesterday which provided a very good overview of its key businesses and showcased its investment in HealWell AI, now worth >$1/sh. The opportunity for long-term growth remains impressive and the moat likely created with the help of available AI-supported administrative tools will be difficult to replicate in the short to mid-term, in our view. We reiterate our Outperform rating and continue to believe the market under-appreciates the long-term value creation opportunity in transforming CDN primary/ Dx care by leveraging tech/AI.

Key points:

2024 guidance maintained. WELL reiterated its 2024 revenue guidance of $960-980MM (+24-26% y/y). Our forecast remains $969.2MM with consensus at $970.9MM. The company continues to expect annual adj. EBITDA to be at the “upper-end” of the $125-130MM (+10-15% y/y) guidance range vs. RBCe at $125.9MM and consensus of $127.7M. FCF available to shareholders guidance was also unchanged at more than $55MM vs. RBCe ($59MM). Management underscored that revenue/ patient is now increasing at CRH and that WELL earn-outs are declining materially and should act as a helpful tailwind, especially for 2025 FCF metrics.

Primary care, Dx and SaaS/tech opportunity remains significant. Once again, management called out that a potential 8-10% primary care market share (>$1B in revenue) is possible within a five-year window versus the 1-2% we estimate today ($189MM in 2024 revenue) and noted the gating factor remains internal on-boarding capabilities. CEO, Hamed Shahbazi, highlighted the benefits of various AI tools including Voice, Decision Support and Inbox Administration in accelerating the number of MDs/ clinics approaching the company to be absorbed, noting 2-3/hrs day of administrative time savings and a resultant 20% increase in billings.

Updates on strategic alternatives for Circle Medical and Wisp. The company noted that its strategic review process remains on track for Circle Medical (~58% ownership) and Wisp (~53% ownership) and continues to expect an update by about year-end. News related to Wisp may occur earlier as a payor study is likely required for Circle prior to a sale. Separately, the Circle CEO hopes the business will generate US$1B in sales within 5 years versus ~US$95MM presently. Recall, WELL has options on Circle and Wisp that expire in Q4/24. Under these options, the company has several alternatives including a) call options on the outstanding shares that are currently not owned by WELL, b) a right to take Circle and Wisp public, c) bring in PE players to take minority ownership, d) engineer an outright sale.

Value of HealWell AI position climbs to >$1/sh. It was noted that Well's fully diluted interest in HealWell AI stands at ~94MM shares, or $266MM, representing ~$1.08/sh to a Well shareholder.