INVESTOR DAY PREVIEW
THE TD COWEN INSIGHT
WELL will host its first Investor Day on Tuesday, June 18 at the Hilton Toronto Downtown Hotel (register here). The event should help investors better understand and appreciate the attractive opportunities in each of its major business lines. In particular, we think there will be a focus on the Canadian clinic business, given its very favourable operational and M&A tailwinds, in our view.
Impact: NEUTRAL
In addition to an overview of/update on each of its key business units, we believe the Investor Day could also include:
Updates on its M&A pipeline, including its attractive clinic absorption model. WELL
could provide an update on its robust M&A pipeline in Canada, which as of the Q1/F24 release last month had ~40 clinics under an LOI agreement, including ~10 clinic absorption opportunities.
Given the large shortage of family doctors, a limited buyer universe, in our view, and physician burnout, WELL continues to benefit from doctors willing to sell their practices for very little consideration (~0.02x revenue) under its clinic absorption model.
With it being the largest owner/operator of outpatient medical clinics in Canada and having just ~1% market share, we believe WELL has a long growth runway ahead through its capital-efficient and accretive clinic consolidation strategy in the very fragmented market.
Clinic transformation playbook details. Management may provide more colour on how
it has been able to drive significant margin improvement at acquired/absorbed clinics that could help investors better understand how it has been able to succeed where many others have failed. We believe this is important, given the very large clinic consolidation opportunity ahead.
It could also provide updates/disclosure on how various acquired clinic cohorts are performing, similar to its January 2024 update (link).
Wisp/Circle strategic review and business updates. Last quarter, WELL indicated that it had hired advisors to help it with its strategic reviews for both businesses, with "important updates" expected by year-end. Although we do not expect any material update on the ongoing reviews at the Investor Day, given their early stages, WELL could provide some incremental colour on the processes and operational and/or financial updates on both businesses.
No changes in guidance expected. We do not expect any changes in F2024 guidance, given the increase a month ago with the Q1/F24 results. We believe any medium- to long-term projections would be only for the Canadian business, given the potential sale of some/all of its U.S. businesses.