CIBCHave a $7.00 target. GLTA
EQUITY RESEARCH
May 12, 2023 Flash Research
WELL HEALTH TECHNOLOGIES CORP.
Q1/23 First Look: Headline Beat & Modest Guidance Raise
Our Conclusion
WELL reported a Q1 beat, with revenue 6% above consensus and adjusted
EBITDA 7% above consensus. The quarterly beat was driven by continued
strength in organic growth at 21%, vs.~15% a year ago and 19% in the prior
quarter. With Q1 results, WELL provided an updated 2023 outlook,
increasing revenue guidance by 4% and maintaining its target of adjusted
EBITDA growth of “more than 10%.” The mid-point of the increased revenue
guide is roughly 4% above current consensus, with the unchanged EBITDA
outlook implying either management conservativism or some margin
compression amidst cost inflation. WELL is hosting a conference call at
1 p.m. ET today, and we will be looking for more details regarding the 2023
outlook, segmented results, sources of organic growth, and the potential
impact of regulatory changes on the business. Dial-in: 1-888-664-6383.
Key Points
Q4 Results: WELL reported Q1/23 revenue of $169.4MM, above consensus
and our estimate ($160MM). WELL’s strong organic growth performance
continued, with 21% organic growth in the quarter, up 200 bps from the prior
quarter. Revenue from Omni-channel patient services represented 89% of
total revenue from the quarter, compared to 90% a year ago. Omni-channel
patient revenue increased 32% Y/Y, primarily due to clinic acquisitions and
organic growth driven primarily by Circle Medical and Wisp. Gross margin
(ex-D&A) of 50.9% was down from 54.8% a year ago. Adjusted operating
EBITDA of $26.7MM was above consensus and our estimate
($24.9MM/$25.0MM) as margin of 15.8% was 20 bps above our estimate
(15.6%) and consensus (15.6%).
Increased 2023 Outlook: WELL updated its 2023 outlook, raising revenue
guidance by ~3.7% from the prior outlook (based on the mid-point) to
$690MM-$710MM; WELL previously expected revenue of $665MM-$685MM.
WELL reaffirmed its guidance for adjusted EBITDA increasing more than
10% over 2022, implying at least $115MM in adjusted EBITDA at a 16%
margin (based on the mid-point of guidance). Those levels compare to our
2023 forecast of $115MM (16.9% margin) and consensus of $116MM (17.2%
margin). The updated guidance implies ~200 bps of annual margin
compression, which suggests either management conservativism or
continued cost inflation and growth in lower-margin businesses.
Segmented Results: Canadian patient services revenue was $50.9MM, an
increase of 23% Y/Y, while U.S. patient services revenue of $99.2MM
increased 38% Y/Y. SaaS and Technology services revenue was $19.3MM,
an increase of 47% Y/Y