WELL Health Technologies Corp.
(WELL-T) C$7.96
Q4/F20 Preview; Expected to Turn EBITDA Positive
Event
Q4/F20 Results: Thursday, March 18, 2021, before market open.
Conference Call: 1:00pm ET; 1-888-664-6383/416-764-8650; Conf. ID: 2090 0288 Impact: NEUTRAL
Strong growth aided by record M&A activity. We are forecasting revenue of $17.3mm (up 76% y/y; up 42% q/q), in-line with consensus ($17.1mm). Q4 revenue will benefit from the acquisitions of Cycura (~1 month), DoctorCare (~2 months), Easy Allied Health (~2 months), Circle Medical (~1.5 months), Insig (~1.5 months), Source 44 (~1 month), and ExcelleMD (~3 weeks).
Adj. EBITDA is expected to turn positive. We are projecting Adj. EBITDA of $0.3mm (consensus at $0.2mm) and expect WELL to remain Adj. EBITDA positive going forward, excluding the pending CRH Medical acquisition which would significantly increase its margins. We are forecasting Adj. EBITDA margins of 6.7% in 2021 and exiting 2021 at ~9% in Q4 (excludes CRH).
CRH reports a better-than-expected Q4/F20; some questions raised. Yesterday, CRH reported Q4 revenue of US$36.8mm (up 21% y/y and q/q) and Adj. EBITDA (to shareholders) of US$11.2mm (total Adj. EBITDA of $16.1mm; 43.8% margin), ahead of consensus at US$34.0mm and US$8.9mm, respectively. Patient cases were 108,681 in Q4, up 15% y/y and 16% q/q. We note that material weaknesses in internal controls over financial reporting were identified (could lead to material misstatements of its financial statements). Remediation measures are being implemented and we look to get more details as to the impact on WELL's pending acquisition, if any.
Looking for updates on its rapidly growing telehealth business. Management has indicated both Insig and Circle Medical are experiencing rapid growth (e.g., last quarter, they indicated Circle Medical's revenues were increasing +10% month-over- month). We look to get more colour on the growth profile and timeline to profitability.
TD Investment Conclusion
We remain bullish on the stock, as we believe WELL can continue generating solid organic growth complemented by acquisitions with an improving margin profile. Peer valuations have recently contracted; we will revisit our forecasts and valuation multiples after WELL reports its results.