WELL Health Technologies Corp.
(WELL-T) C$4.29
Announces CarePlus Acquisition; Increases F2023 Revenue Guidance
Event
This morning, WELL announced the completion of the acquisition of CarePlus Management (through CRH Medical) and raised its F2023 revenue guidance.
Impact: SLIGHTLY POSITIVE
Growing its U.S. presence. Founded in 2010 and headquartered in Atlanta, CarePlus provides anesthesia management and related services to ambulatory surgery centers (ASCs), office-based practices, and hospitals. Its three primary businesses are:
RADAR Healthcare Providers - Full-service recruitment business providing staffing and locum tenens (substituting unavailable clinicians) services, focused on anesthesia providers. Leveraging >70k+ anesthesia providers, RADAR has served >150 clients across 29 states. CRH intends to expand RADAR's presence to include physician specialists, primary care, and nursing professionals. RADAR generates the majority of CarePlus' revenues, and we assume modest margins.
-
Anesthesia services - Operates in 18 ASCs across nine states, including five states where CRH did not have a presence (South Carolina, Mississippi, Alabama, South Dakota, Illinois). CRH now operates in 142 ASCs across 23 states. We assume this business generates lower organic growth but very high margins, similar to CRH.
-
Premier Choice - A growing billing, revenue cycle management (RCM), and collection services business. CRH can readily leverage these services within its business to drive further digitization. We believe PC could be a key growth driver but may not be profitable yet.
Deal terms undisclosed. The purchase price was not disclosed but the transaction was funded by CRH's cash and credit facilities. Its private equity investors included Fulcrum Equity Partners and Level Capital Partners, who were involved in CarePlus' recapitalization in September 2016.
Revenue guidance increased. With the acquisition, WELL increased its F2023 revenue guidance to $740mm-$760mm (was $690mm-$710mm), implying ~ $100mm in annualized revenues from CarePlus. Although CarePlus is profitable, WELL maintained its Adjusted EBITDA guidance of >10% y/y growth, suggesting CarePlus' profitability was relatively low.
Based on its track record with other acquisitions with little/no profits (e.g., clinics), we believe WELL could get Adjusted EBITDA margins to the ~10% level in a year, which could add almost $10mm in run-rate Adjusted EBITDA in mid-2024. WELL plans to leverage CarePlus' staffing and RCM services to its existing (U.S.) business, which could provide additional margin upside.