CIRCLE MEDICAL SURPASSES US$100MM REVENUE RUN-RATE WITH 65% ORGANIC GROWTH
THE TD COWEN INSIGHT
Organic growth at Circle is sharply re-accelerating, as it continues to gain market share profitably. The very strong performance in July indicates the business is tracking well ahead of our forecasts, better positioning WELL to deliver better-than-expected Q2 results tomorrow (continuing its >4-year streak), and it should help bolster its potential value to WELL with a possible sale soon.
Impact: SLIGHTLY POSITIVE
Exceeds $100mm revenue run-rate as growth is rapidly re-accelerating. Based on its July revenue run-rate of $8.87mm, Circle has now surpassed the $100mm annualized revenue run-rate mark for the first time, up dramatically from ~$5mm in ARR <4 years ago when WELL bought its majority stake.
Organic growth in July was 65% y/y, well above the 39% pace in F2023. Assuming no further m/m growth in Q3/F24 (unlikely in our view), the current run-rate is ~14% above our Q3/F24 revenue forecast for Circle and represents ~2% upside to our current Q3/F24 revenue forecast for WELL.
Strategic review continues. WELL continues to work with advisors to assess strategic alternatives for Circle to help unlock value for shareholders. As communicated by management last quarter (link), WELL believes it could make a related announcement on the strategic process (e.g., a potential sale) in late F2024/early F2025, with WELL possibly making a similar announcement for Wisp this quarter.
Key AI partnerships and management hires. Circle also announced it is investing heavily in AI-powered solutions, including AI-powered scribes for documentation and compliance tools for clinical reviews. We believe it could help leverage WELL's AI solutions and investments.
The company also recently appointed Miguel Jette as its first Head of AI to lead its AI strategy, with Mr. Jette possessing over 20 years of experience in the field.
Circle also welcomed back one of its co-founders, Brent LaRue, as VP of Product and Patient Experience, who will focus on product design and enhance patient engagement and satisfaction. We note that Circle already maintains a 99% patient satisfaction rating based on industry CSAT surveys.