Q4 results ahead of estimates; 2024 revenue outlook ahead while adj. EBITDA brackets estimates
TSX: WELL | CAD 4.21 | Outperform | Price Target CAD 5.50
Sentiment: Neutral
Our initial view: At first glance, we view WELL's Q4/23 report as neutral to slightly positive for the shares and expects today's share price movement to reflect management's success on the Q4 call, especially given the shares were ~7% stronger yesterday in anticipation of the Q4 results. WELL reported Q4/23 revenues of $231.2MM (+13% q/q; +48% y/y), ~4.7% above RBCe ($220.8MM) and ~5.5% above consensus ($219.3MM). GMs of 43.7% in the quarter declined q/q (46.1% in Q3) and were below RBCe (47.1%) and consensus (47.2%). Q4/23 adj. EBITDA of $30.8MM was ~1.8% ahead of RBCe and consensus (~$30.2MM). Adj. EBITDA to WELL shareholders of $22.6MM (-1.4% q/q; +7.1 % y/y) was ~4.3% below RBCe ($23.6MM). WELL provided updated 2024 revenue guidance of $950-970MM (+22-25% y/y), which was ~3.7% ahead of consensus and RBCe (~$926MM) at the mid-point. Management expects annual adj. EBITDA of $125-130MM that brackets consensus (RBCe $129.7MM and consensus $128.4MM). The company has historically provided conservative guidance, in our view. On the earnings call later today, we expect the focus to be on the integration of the loss making CDN primary care clinics acquired in Q4/23, the timelines of achieving profitability in these clinics, the company's M&A pipeline, reinvestment in the company's high-growth segments (Circle, Wisp) and potential impact from the cybersecurity event at Change Healthcare on the company's US operations, particularly CRH.
WELL reported revenues of $231.2MM ahead of RBCe ($220.8MM) and FactSet consensus ($219.3MM) with outperformance in all groups. WELL reported Q4/23 revenues of $231.2MM (+13% q/q; +48% y/y), ~4.7% above RBCe ($220.8MM) and ~5.5% above consensus ($219.3MM). The revenue strength vs. RBCe was led by better-than-expected performance across all segments. CDN Patient Services revenue of $67.6MM (+31% y/y) was ~0.5% ahead of RBCe ($67.2MM) and ~2.5% ahead of consensus ($66.0MM). USA Patient Services revenue of $143.5MM (+55% y/y) was ~5.6% ahead of RBCe ($135.9MM) and ~6.3% ahead of consensus ($135.1MM). SaaS and Technology revenue of $20.2MM (+60% y/y) was ~14.5% ahead of RBCe ($17.6MM) and ~15.9% ahead of consensus. WELL reported 15% y/y of organic growth (incl. FX impact) for full year 2023 (~16% y/y for 9MCY23).
Adj. EBITDA of $30.8MM was slightly above RBCe and consensus (~$30.2MM). Adj. GMs of 43.7% in the quarter declined q/q (46.1% in Q3/23) and were below RBCe and consensus (~47%). Adj. EBITDA margin of 13.3% was down q/q (13.8% in Q3) and was below RBCe (13.7%) and consensus (13.8%). Adj. EBITDA to shareholders of $22.6MM (-1.4% q/q; +7.1% y/y) was ~4.3% below RBCe ($23.6MM). Adj. EBITDA to WELL shareholders for full year 2023 was $88.4MM (+15% y/y). 2023 adj. FCF was $42.4MM down 13% y/y, mainly due to higher tax and interest payments offsetting the increase in shareholder's EBITDA.
2024 outlook ahead on revenues and brackets consensus adj. EBITDA. WELL provided updated 2024 revenue guidance of $950-970MM (+22-25% y/y) vs. consensus and RBCe (~$926MM) and the prior 2024 revenue guidance of $900MM+ at its Q3 earnings (excluding the acquisitions and divestitures announced since Q3/23 earnings or ~$917MM+ implied revenue guidance after adjusting for the acquisitions and divestitures). The company expects annual adj. EBITDA of $125-130MM (+10-15% y/y) that bracketed consensus estimates but was ~1.7% below RBCe ($129.7MM) and ~0.7% below consensus ($128.4MM) at the mid- point of the guidance range. We believe the company has historically provided conservative guidance and expect it to be tweaked higher over time. Management noted that the 2024 plan features less capital allocation and M&A activity and more emphasis on organic growth given the company's growing attractiveness to care providers across Canada and the US.
Conference call. Today (21-March) at 12:30PM ET. Dial-in: 416-764-8650 (Toronto); 778-383-7413 (Vancouver); +1-888-664-6383 (North American Toll Free); +1-416-764-8650;