Our Takeaways:
1. The WELL story is coming together with a clear focus on being a “physician enablement platform”. What is meant by this is simple, and we believe should help investors pull together the many parts of WELL’s operations. Essentially, the company's offerings can be split into two segments which, while different, are both aimed directly towards one goal: “enabling” practitioners to focus on providing quality care to patients. This is accomplished through (1) fully managed services, where WELL onboards practitioners in its clinics and gives them the tools to treat patients, or (2) through its “ la carte” virtual solutions which provides practitioners with tools to ease the administrative burden that comes with running a clinic (EMR, back-office support, telehealth etc.).
2. Growing scale evident with clear path to $0.5B in revenues this year, and a solid runway post 2022. WELL enters 2022 with revenues exceeding a $450M run-rate, which when factoring in expected organic growth of ~10% and additional tuck-in acquisitions, should put the company “WELL” on track to achieve a top-line of $500M within 2022. Further out, the team sees a path to $1B fueled by a combination of (1) continued tuck-ins within its core clinical segments (~a couple a Q), and (2) adherence to the rule-of-30 (20% EBITDA margins + 10% organic growth).
3. Mix of growth + profitability should drive a re-rate over time. WELL shares are down ~54% from 52-week highs, and to a large degree have traded in-line with growth oriented, cash flow negative stocks over recent months. However, what sets WELL apart from these businesses to a degree is its (1) underlying growth trends, paired with (2) its ability to fund itself through its own cash flows. To put in a different way, WELL can continue to grow and execute on its strategy without a single additional dollar from the equity market. Market backdrop aside, we believe that over time these fundamental points will lead to a re-rate.
4. Inorganic growth has been the story to date, but 2022 will see focus shift towards integration, and smaller sized “business strengthening” tuck-ins. The team feels comfortable with the current business mix, and thus, sees much of its forward acquisition plans geared towards strengthening its MyHealth, CRH and primary care segments with smaller sized tuck-ins.
5. Management continues to look for ways to surface value of US telehealth. As of its last update, WELL noted that its US telehealth franchise (WISP & Circle) were generating ~US$72M in run-rate revenues, with a path to US$100M in ARR within 2022. At current levels, the team believes it is getting little to no value from these businesses reflected in its share price. While the market backdrop likely makes an NT spin-out unlikely, what’s important is that management continues to explore ways to highlight the underlying growth and quality of these segments, which could provide a catalyst to shares.