WELL Health Technologies Corp T.WELL

Scotia Analysis - STRONG START TO 23 -OR LISTEN TO BUTTCOCKS

[SunsetGrill]

OUR TAKE: Positive. WELL delivered a strong start to 2023 with a beat across the board, while it’s seeing minimal impacts due to inflationary, recessionary, and supply chain pressures facing many other companies given the diversity and resiliency of its model (95% revenue recurring/re-occurring). We see compelling value at current levels with the stock trading at 12.7x C2024 EBITDA. Multiple upside opportunities exist to WELL’s updated 2023 guidance including better organic growth trends and M&A. Maintain Sector Outperform.

KEY POINTS

Q1 beats across the board on strong organic growth trends. Revenue was up 21% y/y on an organic basis, with strength in both the U.S. (Circle Medical +93% y/y and WISP +56% y/y for +42% of US mix) and in Canada (Canadian Patient Services including MyHealth + Clinics +18% y/y organically). In Canada, Clinics benefited from a one-time stabilization payment from the BC government (~$0.5M) in addition to higher billings from the newly implemented payment model for BC doctors (starting in Feb). MyHealth was helped by the addition of new cardiologists and also saw a higher level of billable hours for diagnostic procedures (2022 was impacted by staff shortages). In the US, CRH Medical was up 10% qoq vs historical seasonal declines, as the unit benefited from a promotional campaign for its O’Regan product (related sales were 40% y/y and q/q) that has since ended. SaaS and Technology beat on Cybersecurity (best quarter ever). Adj. EBITDA was ahead on the revenue beat in addition to Circle Medical & WISP achieving slight profits (we were looking for a slight loss), even as the company accelerated digital ad campaigns to widen the patient funnel. WELL continues to advance its physical presence in the US, opening 18 clinics in Q1 to bring its total count to 23.

2023 guidance raised, more upside likely to come in our view. We see multiple opportunities for WELL to beat its increased outlook (First Take here) on better organic trends, in addition to more M&A, with management noting the current pipeline is among the most compelling it has ever seen. Canadian clinics should see upside through the recruitment of more doctors and as WELL absorbs more clinics. MyHealth and CRH Medical are poised to benefit from a y/y increase in more diagnostic services and anesthesia procedures, respectively. While our 2023 estimates have been raised (revenue $700M vs $677M previously, Adj. EBITDA $115m vs prior $114M), we expect Q2 to look similar to results in Q1. We expect revenue of $169.8M vs $169.5M in Q1 and Adj. EBITDA $27.0M vs. $26.7M. We model typical seasonality from Q1 to Q2 in Canadian clinics (less doctors visits vs winter months) and a lower level of Cybersecurity offset by qoq growth at CRH Medical, MyHealth, and at Circle Medical/WISP. While we expect strong growth at both Circle Medical and WISP, faster growth trends are anticipated in 2H. Adj. EBITDA margins in Q2 are forecast to be essentially flat qoq (15.9% vs 15.8%) and will be impacted by stepped up spending at WISP. Although we don’t include any M&A in our model, management noted opportunities in Canada (smaller clinic networks) and the US (bigger clinic networks), while it is exploring new approaches to acquiring providers (i.e., such as services that provide locums to hospitals and clinics). Leverage is manageable with net debt / shareholder Adj. EBITDA at 2.6x vs. 3.5x in Q1/22.

Exhibit 1 - Variance Table

Source: Company reports; Scotiabank GBM estimates; FactSet.

• Quarterly Financials
• Yearly Financials

Historical price multiple calculations use FYE prices. All values in C$ unless otherwise indicated.
Source: FactSet; company reports; Scotiabank GBM estimates.

Qtly Revenues (M)	Q1	Q2	Q3	Q4	Year	EV/Revenue
2022A	$127	$140	$146	$157	$569	2.8x
2023E	$169A	$170	$177	$184	$700	2.0x
2024E					$775	1.8x

Exhibit 2 - Revisions Table

Source: Company reports; Scotiabank GBM estimates.

Exhibit 3 - Financial Summary

Source: Company reports; Scotiabank GBM estimates.

Exhibit 4 - Comps Table

[BudFoxx2020]

RENT FREE.  First thing Monday morning, this fraud is already thinking about me.  Creepy.  Dance scammer dance....  lolololololol.  Anyways, like I said, take your time and really read through the financials on Sedar.  Reading NRs and paid analyst reports are not due dilligence.  Just read through all the Qs.  Eveything is restated, adjusted, restated

[SunsetGrill]

First thing Monday morning _ feeling the need to read a chat board and RESPOND. Isnt that what retirement is all about?