HEALTHCARE TECH/SERVICES Q2/F24 PREVIEW: STRONG RECENT REBOUND COULD CONTINUE
THE TD COWEN INSIGHT
WELL Health (WELL-T; BUY; C$8.00 target price): Our revenue estimate is in line with consensus and implies continued strong growth (~39% y/y), driven by M&A and solid double-digit organic growth.
Our Adjusted EBITDA estimate is slightly above consensus and implies a rebound in margins, which we believe investors will be focused on. Margins have fallen over the last 1.5 years, partly due to revenue mix and little/no margin clinic absorptions (e.g., MCI clinics, Manitoba clinic). With no major acquisitions this year and WELL using its clinic transformation playbook on the MCI, Manitoba, and other acquired clinics (we understand the MCI and Manitoba clinics are now profitable), we expect margins to trend back into the mid-teens in H2/F24.
Another key focus will be on the Wisp/Circle strategic reviews, with a Wisp announcement possibly coming this quarter. We believe this is a key catalyst that will show WELL's intent to refocus on the Canadian market and simplify the story. It should also help provide some price discovery for Circle. The net proceeds would be used to buy back stock and/or repay debt.
Our revenue/Adjusted EBITDA estimates are unchanged, but we have reduced our Adjusted EPS forecasts (see Figure 3) to reflect higher cash-based comp (vs. stock-based) and a decrease in intangible amortization.
dentalcorp (DNTL-T; BUY; C$11.00 target price): Our estimates are in line with consensus and guidance of 7-9% revenue growth (2-3% SPRG) and Adjusted EBITDA margins of ~18.3%. SPRG is below DNTL's medium-term target of >4% due to some patients deferring appointments till they gain CDCP coverage, but it is expected to return to its target level in H2/F24.
We also expect margins to rise in the coming quarters due to reduced cost/wage inflation headwinds and the end of elevated corporate investments. This should help boost FCF and reduce leverage.
LifeSpeak (LSPK-T; HOLD; C$0.60 target price): Our estimates are in line with consensus. We forecast MSD y/y decline and flattish q/q growth in revenue/ARR, with a modest decline in margins. We remain focused on its debt negotiations, with its term loan maturing in ~7 months (~C$67mm; ~6.3x leverage).