CIBCAs can be seen, this is a flash report and they currently have a $6.50 target. GLTA
EQUITY RESEARCH
June 21, 2022 Flash Research
WELL HEALTH TECHNOLOGIES CORP.
Small Primary Care Acquisition Reflects Strategic Approach
Our Conclusion
WELL Health announced that it is acquiring INLIV, a primary care clinic in the
Greater Calgary region. With WELL spending only ~$1.85 million on the
clinic, the acquisition is relatively immaterial but there are some notable
strategic implications to take away from the deal. The acquisition marks
WELL’s first primary care acquisition in the province of Alberta, and INLIV’s
executive health capabilities drive 85% of revenue from recurring
membership fees. The acquisition follows WELL’s $30 million equity raise on
May 11, and is on strategy with stated plans to target primary care
acquisitions. With WELL paying 0.25x TTM sales and ~2.5x TTM EBITDA,
valuations on primary care clinical assets appear to be quite reasonable,
supporting the strategy of focusing on that market in the current environment.
Key Points
Acquisition In Line With Recent Commentary: After raising $30 million via
a bought deal priced at 52-week lows of $3.70 on May 11, WELL indicated its
plans to play both “offense and defense” with the proceeds and noted that it
would focus acquisitions on the primary space. The INLIV acquisition is in
line with the stated strategy and we expect WELL to continue focusing on
primary care acquisitions in the near term. We see primary care providing an
attractive, economically resilient revenue stream in the face of a potential
impending economic slowdown.
Valuation Makes Primary Care Attractive: With total consideration of
$1.85 million, WELL is paying 0.25x TTM revenue and an estimated 2.5x
TTM adjusted EBITDA if we assume 10% EBITDA margins at INLIV. A focus
on primary care acquisitions makes strategic sense if WELL is able to
continue paying very reasonable acquisition multiples going forward. On its
own, the INLIV acquisition is immaterial (~1% of our 2022E revenue), but if
the entire proceeds of the $30 million bought deal were deployed at 0.25x
sales, it would represent a 22% increase to our 2022E of $526 million. We
note that WELL has the discretion to pay cash, shares or a combination of
the two upon closing.
Expands Geographic Reach And Membership Revenue: INLIV will be
WELL’s first acquisition in the province of Alberta, having previously acquired
clinics in BC, Ontario and Quebec. In addition to primary care, INLIV
provides corporates and other organizations with executive health, employee
wellness, aesthetics, periodical medical exams and other integrative
services. Of INLIV’s revenue, 85% is generated from recurring membership
fees, a business model similar to WELL’s ExecHealth clinic in Ottawa and
ExcelleMD clinics in Montreal.