WELL Health Technologies Corp.
(WELL-T) C$6.87
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.