WELL Health Technologies Corp.
(WELL-T) C$7.54
Q2/F21 Preview: CRH to Drive a Big Jump in Growth and Margins
Event
Q2/F21 Results: Thursday, August 12, 2021, before market open.
Conference Call: 1:00pm ET; 1-888-664-6383/416-764-8650; Conf. ID: 73961229 Impact: NEUTRAL
Q2 is set for a big boost from the CRH Medical acquisition. We are forecasting revenue of $58.4mm (up 452% y/y and 128% q/q), modestly above consensus at $56.1mm. The enormous growth is due to the CRH acquisition, which we assume will contribute ~$30mm in revenue or just over half of our Q2/F21 revenue forecast (despite closing almost a month into the quarter). Smaller contributions will come from the acquisitions of Intrahealth (almost a full quarter), ExecHealth (~2 months), and Doctor Services Group (~1 month) in addition to organic growth.
Sitting at the high end of consensus for Adj. EBITDA. We are forecasting Adj. EBITDA of $11.9mm, up sharply from $0.5mm last quarter and ($0.5mm) last year, again driven by the CRH acquisition.
Our $11.9mm Adj. EBITDA estimate is at the high end of consensus, which sits at $9.4mm and has a wide range ($5.0mm to our $11.9mm). In our view, the significant variance in estimates reflects in part the uncertainty on the trajectory of the post- pandemic recovery for CRH.
As outlined in detail in our writeup in The Outlier Report (published on July 15, 2021), we believe consensus for Adj. EBITDA looks quite achievable, especially in light of CRH's strong performances in Q3/F20 (US$11.8mm in Adj. EBITDA) and Q4/F20 (US$16.1mm in Adj. EBITDA) and factoring in adjustments for some pent up demand (as patients resumed non-emergency medical procedures in Q3 and Q4 last year). Also, CRH has remained active on the M&A front (12 acquisitions and two new JVs since the end of Q2/F20) that has helped boost revenue and Adj. EBITDA.
Potential upcoming U.S. IPO. We could get an update on WELL's plans for a U.S. IPO, which they have targeted for this fall. To help them on this front, they just hired Jamil Nathoo (most recently a Managing Director at a U.S. money center bank) as SVP of Capital Markets to head up its U.S. capital markets expansion.
TD Investment Conclusion
We are maintaining our C$10.50 target price, which is based on our sum-of-the-parts valuation.