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spk01: participants are in a listen-only mode. We will conduct a question and answer session later in the call, which will be restricted to analysts only. Please note that this conference is being recorded today, November the 10th, 2021, and I would now like to turn the call over to Mr. Pardeep Sangha, Vice President of Investor Relations. Mr. Sangha, please go ahead, sir.
spk04: Thank you, Operator, and welcome everyone to Well Health 2021 Fiscal Third Quarter Financial Results Conference Call. Joining me on the call today are Hamed Shabazi, Chairman and CEO, and Eva Fong, the company's CFO. I trust that everyone has received a copy of our financial results press release that was issued earlier today. Listeners are also encouraged to download a copy of our third quarter financial statements and management discussion analysis from CDAR.com. Portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic, and competitive uncertainties and contingencies. These forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that many of which are outside of wells control that may cause the actual results performance or achievement of well to differ materially from the anticipated results performance or achievement implied by such forward-looking statements. These factors are further outlined in today's press release and in our management discussion and analysis. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future We don't undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions, or circumstances on which any such statement is based, except if it's required by law. We may use terms such as adjusted gross profit, adjusted gross margin, and that's adjusted EBITDA and Shared EBITDA on this conference call today, which are all non-GAAP and non-IFRS measures. For more information on how we define these terms, please refer to the definition set out in today's press release and in our branchment discussion and analysis. The company believes that adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations which the company can use to fund working capital requirements, service future interest and principal debt repayments, and fund future growth initiatives. Adjusted EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS. And with that, let me turn the call over to Mr. Hamid Shabazi, Chairman and CEO of WellHealth.
spk07: Thank you, Pardeep, and good day, everyone. We hope that you're all keeping safe and healthy, and we truly appreciate everyone for joining us today. I'll begin with a brief introduction to Well for any newcomers to the call. WellHealth is a technology-enabled healthcare company whose mission it is to positively impact health outcomes and to empower and support healthcare practitioners and their patients globally. Our overarching mission has always been to empower healthcare practitioners. We believe that digital health innovations help practitioners become better providers. It helps them become more efficient, provide better care, and deliver more value. The whole idea of WELL is to participate in the digitization and modernization of diverse and fragmented healthcare sector, which is one of the largest services sector in any economy. Operationally, Well has organized all of its businesses into two lines of business, the first one being omnichannel patient services and the second being virtual services. Omnichannel patient services includes all patient services businesses that have any material exposure to in-person operations, in addition to virtual care and or other business models. Well owns and operates Canada's largest network of outpatient medical clinics nationwide. serving primary and specialized healthcare services, and is a provider of leading multinational, multidisciplinary telehealth offering. Based on our knowledge, we are the market leader in omnichannel patient services in Canada today. And we will look to build on that lead purposefully and ambitiously over the next year. We don't know of any other provider in Canada that has anywhere close to the capacity of delivering both physical, in-person, and telehealth patient services to the same degree as we can. And now with My Health and the Family, our patient care scope includes a substantial specialized care and diagnostic offering. Our second line of business, virtual services, is comprised of businesses that are almost entirely digital in nature, inclusive of SaaS and services. Revenues from the company's practitioner enablement platform or patient services businesses that have little to no exposure to in-person care. Well has built an innovative practitioner enablement platform that is used to power health care practitioners both inside and outside of Well's own omnichannel patient services offering. This platform and its tools, software, products and services is compelling and is rapidly making Well a one stop shop to help support and advance health care practitioners, their medical clinics and of course, their patients. The platform includes practice management and EMR capabilities, telehealth services, billing and revenue cycle management solutions, digital health productivity apps, an extensive array of digital patient engagement features such as online patient booking, waiting room automation, self-service mobile check-in, along with data protection solutions. These two lines of business exemplify Wells Business in a way that is easy to track and understand. Both are profitable and both are growing. Think of omnichannel patient services as being our patient services business that has material exposure to brick and mortar operations, but also has significant technology enablement. This line of business is expected to generate approximately three quarters of our total revenues in Q4 2021 and generates the vast majority of our EBITDA. Whereas our virtual services line of business has very little to no exposure to brick and mortar and is comprised of super scalable digital businesses, which today generate less EBITDA, but are growing at a much higher rate. With Wist and the family, our virtual services business is forecasted to now exceed over $100 million Canadian on a run rate basis, which is an incredibly important milestone for us. So in summary, omni-channel patient services has higher revenue in EBITDA, but grows slower, and virtual services, which should now exceed $100 million in revenue, is growing much faster. Stay tuned, as later in our remarks today, we'll be providing some increased color and outlook on organic growth, which we believe investors will find compelling. I will provide a quick summary of our Q3 financial results as Eva Fong will then provide a more detailed financial analysis later in the call. We're pleased to report another outstanding quarter for the company as a result of the growing success of our Practitioner in the Platform. and strong financial performance from our recent acquisitions. In the third quarter, we increased overall revenue by an impressive 711% to $99.3 million, just shy of the $100 million mark. In addition, we achieved adjusted gross profit of approximately $50 million, which was an increase of almost 10 times the adjusted gross profit from one year ago. And our adjusted gross margin percentage expanded to over 50% for the first time in history. We now have accomplished four quarters in a row of positive adjusted EBITDA, and we achieved record adjusted EBITDA margins of 22%. Both our revenue and adjusted EBITDA for Q3 not only exceeded analysts' mean consensus expectations, but also beat the highest analysts' revenue and adjusted EBITDA estimates on the street. During Q3 2021, 55% of total revenues, or $54.2 million, was generated in the United States, while 45% of total revenues, or $45.1 million, was generated in Canada and other locations. In Canada, we are the leader in the tech-enabled healthcare sector with an end-to-end ecosystem of outpatient clinics providing primary care, allied health, specialized care, and diagnostics. Layered on top of that, we are a top three telehealth network, top three EMR business, and number one provider of digital apps and practitioner-enabled tools in the country. We're building an end-to-end ecosystem that we believe will be Canada's most consequential healthcare network. Comparatively in the United States, our focus is on a few key specialty verticals, such as serving the gastrointestinal market, providing women's health services, and a growing primary care business that has an emphasis on telehealth delivery of longitudinal care and mental health. Now for an update on some of our key assets. I'll start with My Health. During the third quarter, Well's completed its acquisition of My Health, a leading provider of specialized care, telehealth services, and accredited diagnostic health services in the province of Ontario. My Health represents a major acquisition for the company as it boosts Well's free cash flow. It accelerates Well's revenue EBITDA growth profile, and it establishes a strong presence of diagnostic and specialty services in Ontario for the company. This is our first quarter that includes My Health Revenue, so I'd like to provide some additional details on this business. My Health specialist consultations and diagnostic care is focused on four main areas, cardiology, bone and muscle health, women's health, and cancer diagnostics. With the My Health acquisition, we provide a chain of services starting from telemedicine, primary care, specialist consulting, diagnostic care, pharmacy, and health record access. There's a significant effort within My Health to provide a robust continuity of care to the patient and along the patient journey. With this foundational acquisition, Well became the largest owner-operator of outpatient clinics in Canada. Since joining the Well family, My Health has completed the acquisition of Durham Nuclear Imaging, a nuclear medicine clinic east of Toronto in Ontario, bringing the total number of My Health locations to 49. My Health owns more than 90,000 square feet of clinical space, which affords well the opportunity to expand additional services to the market. My Health is certified as a great place to work for the past five years. This certification is obtained through an annual survey of all employees on criteria such as credibility, respect, fairness, pride, camaraderie, and performance. The positive My Health culture is a competitive advantage in today's tight labor market. My Health is the only chain of independent health facilities that have been accredited by Accreditation Canada. This is the same organization that accredits hospitals in Canada. They accredited My Health with commendation, which is a testament to My Health's protocols and patient safety standards. We've already started to connect My Health with other well assets. My Health is already leveraging the Pillway technology from our investee, Simpil, for e-pharmacy delivery, and we're in the process of establishing referral links from our telehealth programs to My Health such that patients can quickly and easily be processed for diagnostic procedures. Furthermore, we'd like to recognize the My Health team for being selected by the Canadian federal government to provide medical examinations and associated diagnostics to newly arrived refugees from Afghanistan. We're very proud of the work that My Health has done in this regard to serve in this humanitarian effort. And now I'll say a few words about CRH Medical. CRH's core business is performing beautifully with strong caseloads and stable per unit economics. We're very pleased with their performance as CRH had another great quarter. In Q3 2021, CRH achieved revenue of approximately 38.6 million U.S., which represents 27% year-over-year growth as compared to Q3 2020 as measured in U.S. dollars. CRH completed a record of almost 123,000 anesthesia cases in this third quarter, a slight increase from the previous record in Q2. CRH also sold over 2,100 O'Regan units in the second quarter. CRH is also making a number of strides towards digitizing legacy processes to improve areas of operation. A key example of this is its revenue cycle management function. Over the past quarter, CRH has been working on implementing tech-enabled revenue cycle management tools and products. We're expecting these improvements will result in significant savings in the coming quarters, which will drive noticeable bottom line improvements. As part of Well's ecosystem now, CRH has been instrumental in unlocking opportunities for Well's other business units. CRH is already working closely with our Source 44 cybersecurity business unit to provide cybersecurity tools to GI practices. Source 44 has already moved past the pilot stage with its first CRH customer and secured a significant contract which will deliver over $30,000 USD in ARR. Well is also working on ramping up patient services using the O'Regan system, its own patented and FDA-approved best-in-class hemorrhoid banding system. We have now initiated our first banding-focused clinic in Canada, a de novo site in the greater Toronto area that is a hemorrhoid banding clinic. as well as started to offer banding patient services in our XLMD Montreal clinic system. As you may remember, CRH owns the Oregan MedTech device, a patented FDA-approved device for banding hemorrhoids. Well believes that the banding patient services opportunity in Canada alone could be a material business and has plans to open several new de novo sites over the next few months. This is an excellent example of a clear and positive synergy between CRH and its new . CRH has the industry's leading band ligator system delivering outstanding patient outcomes. However, historically, CRH had never provided patient services with its own intellectual property. It had generally sold its intellectual property to clinicians who have generated hundreds of millions of dollars with its technology. CRH's business plan did not consider patient services because it didn't have the experience in providing patient services, whereas Well has extensive experience in providing clinical services as Canada's largest owner-operator of outpatient clinics. We look forward to providing updates on our growth in patient services fueled by our O-Rigging device in 2022 as we expect this to emerge into a growing source of revenue for the company. When we acquired CRH, it was a provider of two products and services to the GI channel. It sold O'Regan banding products and provide anesthesia services to GIs for routine colonoscopies. We're proud of the fact that we have now added two new sources of revenue, cybersecurity and banding patient services, which means we are now at four revenue streams. We'd like to add at least one or two more revenue streams in the next few months as we are currently considering a number of new services. When we announced the acquisition of CRH, we also indicated that we were determined to leverage the power of digital enablement to further empower the sales of Oregon devices. We're also pleased to provide an update on our new digital resources to promote our Oregon business. We're making strong progress in this area and expect to roll out a number of new digital business and consumer sites and resources before the end of the year. Also, we've submitted our new B2C digital GI and O'Regan-focused app to Apple and expect to have that operational and commercially deployed within the next few weeks. We believe these digital resources will further accelerate our efforts to drive organic growth across our device sales segment and, as well, allow us to partner and provide our GI partners and well itself with opportunities to grow patient services revenues. The CRH acquisition is working. We're making progress in terms of unlocking new revenue streams in CRH's valuable GI channel, and we're making progress with digitization. As you can see, CRH's core business is healthy and firing on all cylinders. And now on to our Circle Medical business. Our US telehealth efforts with Circle Medical are also gathering steam. is currently on an annualized revenue run rate approaching 24 million U.S. as of the end of October. Monthly revenue for the month of October is expected to have over 300% growth compared with the same period last year. Circle Medical ended October with 152 providers on its platform, an increase of 424% compared to 29 providers in October of last year. Given the growth trajectory that Circle Medical is on, we're continuing to reinvest in the growth of its business. As a rapidly growing telehealth provider, we don't believe Circle Medical is being properly priced into the wealth story currently. For instance, when we announced the deal, Circle was just at $5 million in its revenue run rate. They are now approaching 24 million US just over a year later and continuing to grow and expand rapidly. We believe Circle Medical will continue to grow well into 2022 and be an important asset in the U.S. healthcare IT ecosystem. While Well does have a call option to acquire the balance of Circle's share, Well also has the right to partner with management and potentially launch Circle as a separate IPO. This should be considered in the value of Circle and, by extension, Well Health. And finally, I'd like to talk about our recent acquisition of WISP. WISP is a Silicon Valley company that is a national provider of telehealth and e-pharmacy solutions specializing in women's health, delivering solutions for female reproductive and sexual health ailments to patients across all 50 states in the US. When we announced the WISP acquisition, the company was growing at over 100% year over year and was on a $30 million revenue run rate. WISP is now approaching close to 33 million revenue run rate only a couple months later. WISP has gross margins exceeding 65% with majority recurring subscription revenues and has achieved positive EBITDA over the last few quarters. WISP's business plan is working and the business is growing aggressively. We're in early planning on launching WISP in Canada by integrating WISP with our Investee Pillway, which is an e-pharmacy platform that can programmatically drive all fulfillment of WISP products and services here in Canada. I'd like to turn the call over to our CFO, Eva Fong, who will review the financials for the third quarter. I will then come back and comment on our future outlook. We will then conclude the call with a question and answer session.
spk00: Thank you, Hamid. I'm pleased to report that we have very strong quarterly results for the third quarter and the September 30th, 2021. Our third quarter results were as follows. well-achieved record quarterly revenue of $99.3 million during Q3 2021 compared to revenue of $12.2 million generated during Q3 2020, an increase of 711% driven primarily by the acquisitions of CLH and My Health. CLH accounted for revenue of $48.7 million during the third quarter, while My Health accounted for revenue of $19.2 million. Wealth virtual services revenues increased to $18 million in Q3 2021, representing a 597% year-over-year growth as compared to virtual services revenue of $2.6 million in Q3 2020. Wealth achieved record adjusted gross profit of $50 million in Q3 2021. representing an 890% year-over-year growth as compared to adjusted gross profits of $5 million in Q3 of last year. Well-achieved record adjusted gross margin percentage of 50.3% during Q3 2021 compared to adjusted gross margin percentage of 41.2% in Q3 of last year. The increase in adjusted gross margin was due to the addition of higher margin CLH, My Health, and virtual services revenue in the quarter. Adjusted EBITDA was $22.3 million for Q3 2021 compared to adjusted EBITDA loss of $153,000 for Q3 2020. Adjusted EBITDA was positively impacted primarily by the addition of CLH and My Health during the quarter. Our adjusted EBITDA margin for Q3 2021 was a healthy 22.4%. Net loss attributable to well shareholders was $12.3 million, or an earning per share loss of $0.06 per share for the three months ended September 30th, 2021, compared to net loss attributable to well shareholders of $3.7 million, or an earning per share loss of $0.03 per share for the three months ended September 30th of last year. Well ended Q3 with a very strong balance sheet. As of September 30, 2021, WELL had cash and cash equivalents of $38.7 million plus restricted cash of $32.7 million, the majority of which is allocated for the acquisition of WITS, which was completed on October 1, 2021. As of September 30, 2021, the total drawn amount under both the CLH and My Health credit facilities is approximately $282 million in Canadian dollars. As of today, Well continues to have approximately $280 million in Canadian dollars of undrawn credit facilities available to fund future acquisitions in addition to the cash on its balance sheet. I'm also pleased to report that the company is compliant with all covenants related to its credit facilities. Our headcount has increased substantially over the past year with the acquisition of CLH and My Health. As of September 30th, 2021, Our total headcount of non-clinical employees and consultants across all the business units was approximately 660. And we had over 2,000 healthcare providers and clinical staff across the entire organization. In terms of our share capitalization, recently as of November 9th, 2021, well had 222,280,381 fully diluted securities issued and outstanding. Please keep in mind that wealth revenue per share went from $0.08 in Q3 2020 to $0.48 in Q3 2021 on an undiluted basis. This reflects a 469% increase in this all-important metric, demonstrating that wealth capital allocation and organic growth program is delivering real value to shareholders. Our M&A program continues to successfully execute and follows a disciplined capital allocation strategy. During the third quarter, we completed the following transactions. On July 15, Well completed the 100% acquisition of My Health, a leading provider of specialized care and diagnostic health services. The company's CLH subsidiary completed two majority stake acquisitions during the quarter. On August 2nd, CLH completed a 51% acquisition of Greater Washington Anesthesia Associates, a provider of GI-related anesthesia services at two locations in North Virginia, U.S. And on August 30th, CLH completed a 70% majority stake acquisition of Destin Anesthesia located in the state of Florida. Also on August 31st, the company's My Health subsidiary completed the acquisition of Durham Nuclear Imaging, a nuclear medicine clinic east of Toronto in Ontario, Canada. Subsequent to the end of the quarter, we completed the following additional acquisitions and strategic investments, which will have an immediate positive impact on our Q4 results. On October 1st, the company completed its acquisition of WIPS, a leading national provider of telehealth and e-pharmacy solutions specializing in women's health. We acquired a majority stake position of approximately 53% in WIPS for a total transaction value of approximately US $41.3 million. On October 7, CLH completed a majority stake acquisition of 51% of Pinellas County Anesthesia Associates. which is an anesthesia service provider in the state of Florida. On October 21st, Well Ventures made a strategic investment of $600,000 in Toronto-based Hazu Behavioral Health to help increase the demand for mental health services in Canada. On November 1st, the company completed the acquisition of AwareMD and an enterprise class EMR provider with a focus on cardiology, in addition to other disease specialties. On the same day, Well acquired Uptown Health Center, which is comprised of two medical clinics and one allied health clinic in the greater Toronto area. That is my financial update, and I turn the call back over to Hamid.
spk07: Thank you, Eva. I will now review our overall patient visits in the quarter. I'm pleased to report that we exceeded 2.3 million total omni-channel patient visits on an annualized run rate basis in the third quarter. Total omnichannel patient visits in Q3 2021 were 582,958, representing a year-over-year increase of 139% from 243,729 in Q3 2020. On a quarter-over-quarter basis, total omnichannel patient visits increased 4% compared to 559,008. total omni-channel patient visits in Q2 2021. During the third quarter, in-person patient visits at our clinics and businesses accounted for 49% of the total visits, while telehealth patient visits, which include both telephone visits and virtual care patient visits, represented 51% of the total visits. In-person patient visits at our clinics and businesses accounted for 215%. 86,602 patient visits in Q3 2021, representing a year-over-year increase of 148% compared to 73,586 in-person patient visits in Q3 2020. Telehealth patient visits, which includes both telephone visits and virtual care patient visits, accounted for 296,356 patient visits in Q3 2021, representing a 131% increase from 128,000 telehealth visits last year in Q3 2020. In addition to these patient visits, My Health conducted 127,630 in-person diagnostic visits representing over half a million annualized run rate diagnostic visits. Combined with our 2.3 million omnichannel patient visits gives us a company-wide run rate of over 2.8 million total annualized patient visits. Before I talk about our outlook, I'd like to touch on the launch of our Well Ventures program. During the third quarter, we announced the formation of Well Ventures, a wholly owned subsidiary of Well, whose mandate it is to invest in exceptional leaders, entrepreneurs, and businesses supporting the global digital health ecosystem, with an emphasis on advancing innovative digital health initiatives in Canada. Well Ventures specifically seeks to invest in companies that are genuinely committed to leveraging technology to improve health outcomes and can directly benefit from Well's ecosystem size and scale. Furthermore, Well has assembled a unique and diverse advisory board whose objective it is to help nurture and advise portfolio companies on their journey of growth. The Well Ventures current portfolio of companies consists of strategic investments in emerging digital health companies such as Felix AI, Killway, Twig Fertility, Bright, and most recently, eHASU. Well Ventures is an example of our commitment to invest in and advance digitization and modernization of healthcare in Canada and around the globe. And now our outlook for the rest of this year and for 2022. Well, we're still on track to achieve our goals for 2021, which are to, one, build out and refine our practitioner enablement platform and deploy its services both internally to well health prep. well health practitioners, as well as offered services to healthcare practitioners outside of well. Two, to achieve organic growth across all of our operating units by leveraging our size, scale, and network effects across the enterprise. Three, follow a disciplined acquisition and capital allocation strategy. And four, grow adjusted EBITDA and cash flow from operations throughout the year by pursuing our organic and inorganic growth strategies. Our outlook remains strong for the rest of the year and into 2022, well as expecting to continue its growth trajectory in the fourth quarter driven by healthy organic growth and the addition of WISP. The company expects to exit the year with an annualized revenue run rate approaching $450 million and operating adjusted EBITDA approaching $100 million on a run rate basis. Our view remains very positive across all our business units and for the company as a whole. In Canada, Well is quickly building the most consequential network of non-governmental healthcare assets across the country, with significant operations and interoperability between its outpatient clinics, EMR, diagnostics, and telehealth businesses. Meanwhile, Well's strategy in the U.S. is to focus on these key specialty areas, such as gastroenterology, women's health, and primary care. Well continues to have an active M&A program, The company's M&A program can be characterized by two types of acquisitions, platform acquisitions and tuck-ins. Tuck-in acquisitions are usually much more accretive, low-risk, and easy to diligence and integrate, whereas platform acquisitions take much longer to do due diligence and are usually more expensive due to their more scaled nature. By platform acquisition, we're referring to key business pillars that have the talent, breadth, and experience action and integrate tuck-in acquisitions and build value. Think of these as key acquisition pillars. The company presently has four of these pillars or acquisition platforms as part of its business operations. They are primary care, My Health, TRH, and virtual services. While Well continues to look for acquisitions of new pillars, which could be capable of consolidating a different area of healthcare services However, we're very happy with our current core pillars, and our main focus is to generate continued earnings momentum, continued organic growth, and cash flow generation from these key pillars. We believe that our current pillars will continue to lead us to significant double-digit growth for several years to come. For example, we believe the company's organic growth coupled with its continued focus on tuck-in acquisitions has the potential to catapult the company to approximately half a billion in annual revenue run rate before the end of 2022. Well has grown substantially over the past year. In Q3 of 2020, last year, we did not own a lot of the assets that we own today. We believe calculating organic growth on just the assets we owned in Q3 last year would not be representative of the growth profile going forward. Hence, we calculate organic growth based on the assumption of if we had owned all the assets that were in the family, as of the day after the quarter in both Q3 2021 and Q3 2020, our organic growth for the entire business, inclusive of the four key pillars I just mentioned, would have been approximately 14%. Given that the omnichannel patient services group is experiencing very stable mid-single digit percentage growth, this demonstrates that we are experiencing strong growth in our virtual services business, which we believe is sustainable, and will lead our overall organic growth story in 2022 and beyond. Although we expect continued revenue and EBITDA growth in the coming quarters, we expect our EBITDA margins to hold steady at approximately the current levels as we intend to reinvest any excess cash flows back into driving organic growth in the business. As a general rule of thumb, we're aiming to have the sum of our adjusted EBITDA margin percentage plus our organic growth percentage exceed 30. in the next year. This is sometimes referred to as the rule of 30. We live in interesting times where companies have had concerns about their supply chains and ability to deliver. As it relates to our 2022 outlook, I'm very pleased to say that we don't currently see any material influences or challenges that would impair our ability to deliver on a strong outlook in 2022. We feel that many of the key variables inherent in the execution of our business are firmly in our own grasp and are not dependent on outside matters. We feel we are empowered to deliver strong results, which include above-average organic growth rates across our organization. I think we've demonstrated with our report this quarter that we are a well-diversified, fast-growing digital health and tech-enabled healthcare company delivering on a strong ESG program and building societal value. In closing, I want to thank you all for joining us on this call today and thank all our shareholders and their investors for their tremendous continued support. The capital markets have been very supportive of our vision and have provided us with the funding needed to pursue our goals. I would also like to thank Well's senior management team and all our employees and contractors for their tremendous effort, and especially during the current COVID pandemic. In particular, I'd like to thank our team of doctors and frontline health workers who continue to keep all of our clinics open and provided unbelievable patient care throughout the past couple of years. They're providing outstanding care and remind us every day of why we are here. We're here to support them so they can take care of patients. Thank you. And with that, we'll now open the call to questions. Operator, would you please take the questions?
spk01: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press the star followed by the one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the two. Please stand by for your first question. Your first question comes from David Newman of Desjardins. Please go ahead.
spk06: First of all, congratulations. These are great results.
spk07: Thanks, David. Appreciate that.
spk06: And just digging into CIRC a little bit, obviously it has real steam behind it and how you're leveraging that in terms of, I think you said 152 practitioners, maybe just an idea of how many states you're in and then what sort of critical mass do you want to see there until you think about the IPO and timing thereof?
spk07: Yeah, thanks, David. Yeah, you're right. we're really scaling this two-sided marketplace. And when you think of telehealth, you think patient acquisition and practitioner onboarding and this deep technology tools that the company has that really, really, really, you know, brings those two pieces together. And, you know, I think our press release a few weeks ago mentioned that we'll likely be in most of the States of the United States by the end of the year. I believe they they're, they're sort of active, very active in just shy of 10, but have essentially been involved in providing consultations in, in probably, uh, over 30 or 40 States at this point in time.
spk06: Okay. And then, then, then what sort of critical mass you need to see, I think, um, revenue or whatever rollout that you might actually think about IPO in.
spk07: Well, you know, I, I, I threw that into the, into my remarks because I, I think what we're seeing here is really special. And, um, you know, we're obviously working very closely and, and, and with the company and, and in terms of planning and understanding where they're going and it shows no sign of slowing down. And we really believe that circle is going to be, um, you know, a tremendous asset in the healthcare ecosystem in the U S and, and I think in the, I think, you know, originally when we bought it to the company, the idea was to, um, you know, have the opportunity to call the balance of the shares in, uh, in three years after the initial investment. And, you know, we, we do, we were thoughtful enough to, to, to, to put in the idea that, that we could also spin the company out if, if it makes sense to do so. And, you know, with this type of growth, I think it's just, it's just important for shareholders to be aware that, that, that, that, that likely the sum of parts of, of well is not really considering the full value of circle. And, and so, I think if we continue to see these types of growth rates, which I think are very possible over the next year or two, things could happen a lot more quickly than two years from now.
spk06: Okay, very good. My last question before I jump back in the queue is just the margins were quite strong, and you mentioned the rule of 30, and you've got gross margins now above 50%, so congratulations, and then your Avidan margin around 22%. But you also mentioned some sort of investment back in the platform, which I think is skewed towards Circle, if I'm not mistaken. Are these sustainable, I guess, G&A? Are you going to get the G&A leverage out of that? We should be sort of modeling that kind of 22 kind of zone on the EBITDA. And is this a sustainable GM number?
spk07: Yeah, I mean, I think what we're saying here is if there's interplay between the EBITDA margin and the growth, right? And so what we're saying is we think that there are scenarios here where organic growth can be, you know, continue to be very compelling. And if that is the case, you know, and we get a higher percentage of organic growth, it would make sense that potentially some of that would impact the EBITDA margin. But But the combination of both, we think, will continue to be better than 30, which I think is an outstanding result for a company of our quantum and size. And so I think, you know, obviously, we are going to continue to have very strong gross profit margins. And I think the operating margins will be strong. But I think this is part of our way of also saying we're not. We're not a mature company that is just optimizing for EBITDA. We believe we are a growth company outside of M&A, and there's tremendous focus in the company to activate and trigger and develop further organic growth.
spk06: Yeah, for real EBITDA dollars, too. At the end of the day, we care about dollars. That's great. Thanks, Thomas. Appreciate it.
spk01: Thank you. Your next question comes from Rob Goff of Echelon. Please go ahead.
spk10: Congratulations on the quarter. Thanks, Rob. And to follow on David's lead there with perspective circle, I'm interested in terms of optimizing or maximizing the growth of circle. How does it take cash? Is that for development work? Is it for physician procurement work? Do you see partnerships in this model?
spk07: Um, really, I mean, we're more than 95% of, of, of circles businesses coming through telehealth right now. Um, there's a, there's a strong focus on, on mental health. There's a, while it's a primary care focused business, uh, there, there are different verticals, uh, and, and, uh, sort of acquisition on ramps that they're focused on, but they're very strong in kind of what I mentioned before is really scaling this two-sided network. And, So a lot of emphasis and focus right now is on patient acquisition and practitioner onboarding. And so Circle's doing a lot of really special things in both of those areas and really leveraging technology to scale patient acquisition and practitioner recruitment. You know, they've done a fantastic job really mapping out all of the different steps, for example, to onboard a practitioner and really used their tech to tech enable and automate that to the degree possible. which again is a really tough thing to do. Acquiring and onboarding practitioners is tough, tough work. And so to think that they've more than 400% increased their number of practitioners, that's I think a really big key to also their success. I mean, clearly they've demonstrated that they can grow and acquire more patients. And I think they've shown a lot of skill in being able to do that, but to also be able to deliver the supply of practitioners more I think is really special. And we understand how hard that is because we're in multiple telehealth businesses. So I think that's where the focus and the capital allocation would be is to continue to enable that momentum.
spk10: Thank you. And if I may, with respect to your pipeline, could you give us a sense of the complexion of the pipeline? It sounded like it was more in the virtue of tuck-ins, but is it tuck-ins in technology, in patient-facing, or U.S., Canada?
spk07: Yeah, no, great question. So, so you're right. Most of the pipeline is focused on tuck-ins. We, we, we think small is beautiful. We, we, we like the highly accretive nature of tuck-ins. We like the low risk. We like, you know, we're very happy with our key acquisition pillars and platforms. We think that, that, that, you know, we have great talent that is presiding over these tuck-ins and making sure that they're well integrated. And, you know, Most companies that would have done as much as we would have done by now would have likely had challenges, and we really don't as a result of the real purposeful focus of having these key acquisition platforms or pillars that are very skilled at doing these tuck-ins. And so the majority of the acquisitions we've done over the last couple of years, even though we've announced so much stuff, the vast majority of them have been tuck-ins. And so that's why things are working. And so, you know, yes, and they would be both software and patient services focused to answer your question. Great.
spk03: Thank you. Good luck. Thanks, Rob.
spk01: Your next question comes from Christian Skrill of Eight Capital. Please go ahead.
spk02: Hi, Hamid. Congrats on the strong quarter today. My first question today, I wanted to ask about the e-prescription market here in Canada. What's the opportunity you see there for the well business and working through Poway on that opportunity?
spk07: Thanks, Christian. I'm glad you asked. This is another fantastic example of how well is not just buying stuff. We are integrating and we're connecting the dots and creating real So we, since our acquisition of 25% of Pilloway, we have integrated Pilloway into the app stock health ecosystem. We have fully integrated Pilloway into our telehealth assets. So if you use TIA Health, you can actually now have a very seamless handoff to Pilloway to have your script sent to you at home. My Health is using Pilloway now to start to assist patients and giving them a more convenient way of receiving their scripts delivered to their home. And there are other initiatives underway with Pilloway. So we really think that it's been a fantastic event for us to bring Pilloway into the family. Of course, we don't own them on a controlled basis, but we do have a call option to acquire the balance of the shares. I think you're going to see more momentum with them. I talked a little bit about Wisp and launching them in Canada. We think Pilloway is the true pill of Canada. True pill, of course, is the multi-billion dollar private company in the United States, which is a programmatically driven e-pharmacy platform And, you know, we think that Pilloway will emerge to be this key and important asset here in Canada. So, yeah, I think there's a tremendous opportunity here. Pilloway has its own, you know, strong momentum as well outside of its interactions with Well. It's growing, you know, quite well and has a compelling business development lineup.
spk02: That's a helpful call there. And you got right into what will be my second question today. I wanted to ask about WISP. What's the opportunity you see there to take WISP north of the border? Does Pilloway help with some of the infrastructure maybe getting going? Are there any other regulatory obstacles to jump over? And is that still an opportunity you're thinking about and what the timeline would be to WISP expanding within Canada?
spk07: Yeah, no, we're very excited. We agree with you that that's a great opportunity. We are currently working on the regulatory side of things, so the WISP team is presently working with legal counsel to get a better sense of what the preparations are to ensure that we are launching a fully compliant program, best-in-class programs. But we have all the ingredients. WISP is a real leader in the U.S. in this area. There was a recent write-up in Vogue magazine about them, really highlighting them as one of the key players in this area and delivering fantastic net promoter scores. And we believe there's an undersupply of these services in Canada. And so there seems to be a greater supply in in men's sexual health products, but not women's. And so we think that there's a great opportunity to take that proven model and bring it north of the border. And we just feel we have all the key components with Pilloway there as well. So stay tuned. This is something that I think is really top of mind for us. We certainly hope that we'll get some momentum as soon as possible here in 2022.
spk02: That's great, Ahmed. Thanks for taking my questions, and I'll pass the line.
spk03: Thanks, Christian.
spk01: Your next question comes from Colin Healy of Haywood Securities. Please go ahead.
spk08: Hey, guys. I'd reiterate everyone else's comments about the good quarter. Congrats on that. Just talking about the virtual services reaching $100 million in run rate revenue and growing faster than Omnichannel, on the EBITDA, do you have – internal targets for EBITDA margins for the virtual services business. I'm just wondering what the potential margins could be on a combined basis. What kind of scales are going to be needed there to generate significant EBITDA? Or is it really the growth that's the drag on EBITDA and there is positive EBITDA there on a normalized basis?
spk07: Yeah, I mean, great question, Colin. The EBITDA, as I mentioned in my remarks, the you know, virtual services is profitable. It's growing a lot faster. And we think that's really one of the reasons why we think the segmentation makes some sense. It's a very scalable business. And we think that at maturity, this is a business that delivers very strong EBITDA margins. But we do believe that we're a long ways away from that maturity, just given the growth potential there. And so, you know, there we're certainly not looking to optimize for EBITDA right now. So we don't necessarily have a minimum EBITDA threshold today. We just don't have a lot of tolerance for red ink. So I think on a whole, I mean, not every line of business in virtual services right now is profitable, but that's okay, provided that the group overall is profitable. So we really like the positioning of having a super scalable, digital-oriented business that's profitable and very fast-growing, and then our omnichannel services, which is also growing, but not as fast, but extremely profitable. We think we have the perfect compounding engine by redirecting the cash flow from our omni-channel into virtual services.
spk08: Right. Thanks. That's helpful. And just on the $450 million in annualized exit revenue, obviously you closed some transactions in Q4 here, so $113 million for the quarter might be overreaching, but Um, on a monthly run rate basis, that's about 37 and a half. Is that kind of where you expect to be, um, for the, for, for December, um, around 37 and a half million and, uh, um, maybe just some, some color on, on how much of a contribution you're going to see from the closed acquisitions for, for Q4.
spk07: Yeah. So, you know, in Q4, you know, you have, you have, uh, a couple of small tuck-ins, but really the major addition is WISP and we've been very clear about sort of where we're at on the run rate level there. Keep in mind that December, you asked specifically about December, keep in mind that there is some seasonality there given the holidays and patient services doesn't necessarily happen throughout that period. But yeah, I mean, I think in general, your math seems reasonable.
spk08: Okay, thanks. Yeah, just trying to dial in those estimates. I'll step out, but thanks a lot.
spk10: Thanks, Colin.
spk01: Your next question comes from David Kwan of TD Securities. Please go ahead.
spk07: Hi, Colin. How are you? Great.
spk09: Thanks, David. I wanted to ask some questions on CRH. Obviously, nice to see another good solid quarter there. And thanks for the color on kind of some of the stuff that's going on there as it relates to adding new revenue streams and some of the patient case data. The UD agreement, I guess the renewed agreement hit this month here. So there's some revenue headwinds that you're going to see. Is there any color that you can provide on that? And to what extent do you think growth in the rest of that business and potentially contributions from acquisitions can hopefully, mostly if not completely, offset that headwind?
spk07: Yeah, no, for sure. Yeah, you're correct. As of November 1st, UD went from being a full patient services offering to being more of a management contract contract. And so we have retained UD and are pleased to continue to work with them and have had a successful transition. So we are maintaining, you know, a significant portion of that EBITDA with a much higher gross profit margin because, of course, now we're not delivering the full patient services, so we have no cost of goods against that. And so the other thing that, you know, that happened as a result of us disconnecting from patient services there is that really freed us up to explore other revenue cycle management partners because UD had sort of, you know, fixed us in to one partner. And that's a really big game changer for us. So, really, I think ultimately when you start to see the benefits of the revenue cycle management come through, the EBITDA contribution of those revenue cycle management changes and the EBITDA retained will exceed our previous full EBITDA from UD. So while there may be a revenue hit on a contribution perspective to operating EBITDA, we will actually be ahead. So this is why in future quarters, Because of that transition, we may provide growth figures on a UD-adjusted and non-adjusted basis, just to give people a sense of how that factors into our organic growth. And to your point, there are also other areas of growth there, be it the other revenue streams and, of course, the other acquisitions. So we're really set up for a banner year in 2022 for CRH.
spk09: Oh, that's helpful. I appreciate the color, Hamid. And one other question just on the circle, which seems to be a popular topic today. You know, obviously you've seen some pretty spectacular growth over the last year. How sustainable do you see that being, I guess, looking out into 2022? And just to talk about, you know, potentially IPO-ing it, would that be separate from a potential U.S. listing for Well as a whole? Or what are your thoughts on that?
spk07: Yeah, so we do believe that it is sustainable. We do believe that the growth rates can continue to be very, very strong. In terms of just quantum of growth, the business you know, we feel could potentially even double next year. We'll see. You know, we'll continue to provide key color on that. And when I was referring to the IPO, I was specifically referring to a spin-out situation, not related to Well's own IPO. And, of course, Well will have to, you know, work with Circle Management and also do its own planning in terms of assessing, you know, whether or not, you know, we're – you know, we're sort of reflecting the value increase that's coming from this asset. But just given the way it's growing and it really shows no sign of abating, you know, we wanted to really put this on shareholders' radars right now. I mean, there's nothing to be done, I think, for a while here, but it's just really important that people are aware what we've gotten. And frankly, I would say the same about WISP. I mean, that's another one that, that where we have the potential for a spin out and, you know, well, you know, I was covering, well, I think should just be cognizant that, that, that kind of explosive potential exists within the company.
spk09: Yeah. That's, I guess, wondering that you, when you talk about spinning out circle as its own separate IPO, but at the same time, would you also look to do an IPO for, for well as a whole, in addition to that and, And I'm glad you talked about the WISC because I was wondering whether you'd like to do something like that as well with WISC.
spk07: Yeah, yeah. I mean, listen, I think, you know, we obviously commented on, I think, last quarter on the potential to do a U.S. IPO. And as you're likely aware, since it's public information, you know, we have filed our base shelf perspectives and are doing the work to be positioned in such a way where we can act quickly when we believe the right conditions exist. for a successful offering with strong follow-on momentum. Keep in mind there have been some really encouraging signs lately that the U.S. healthcare IT comps are trading better after a pretty rough few months here in 2021. So we're doing the work. We've got that optionality. We're already public, so we don't have to go until we feel like the conditions are absolutely correct. Great.
spk09: Thanks, Solomon. Thanks, David.
spk01: Your next question comes from Nick Agostino of Laurentian Bank. Please go ahead.
spk05: Yes, good afternoon, guys. So just circling back on the omni-channel figures you gave earlier, first of all, much appreciated, as always. But just wanted to understand the trend through Q3. Obviously, here in Ontario and in Quebec, The governments are pushing more in-person as economies start to open up a bit. It looks like your mix is moving more towards 50-50. It looks like in Q3, your in-person visits were up, while virtual was down quarter over quarter. So just maybe you can comment how you've been seeing omnichannel visits trend through the quarter, so July, August, and then September. And just given how the mix is moving more towards in-person, assuming that's the case, does that impact your EBITDA margins in any way? And by that, I mean, does it change your G&A spend if you have more in-person, or does it impact your thinking on sales and marketing as you try to maybe advertise more to maintain or to remind people about the whole telehealth side of the business? So any thoughts there, please?
spk07: Yeah, thanks, Nick. Yeah, so we do have a significant omnichannel footprint, which, again, brings into focus just how competitively well-positioned we are. You know, our competitors really do not have that. I don't think you could point to one competitor, any other network across Canada that has anywhere close to the assets on both the online and offline, you know, capabilities. And so... That 50-50 number, I think, is being quite sticky. I mean, yeah, there's been a little bit of movement. It's certainly college. The college is starting to encourage physicians to get back into the clinics, and we don't believe that there would be any meaningful change in EBITDA margins for us, given the circumstances. In fact, in some ways, it would even be better for us, just given some of the productivity that we have in the clinics and potentially reduced expense in terms of customer acquisition online. So, no, we think we're really well positioned whether or not those physicians show up in the actual clinics or they do it from home or from the clinic, provide care to people by telehealth. We feel we're really positioned either way.
spk05: Okay, great. Also, there's been a lot of tuck-in acquisitions over the years with a lot of cross-selling potential as you bring in more tuck-ins and certainly that'll continue to be the case. Have you guys ever, and maybe you've done this in the past and called it out and it's so just highlighted, but have you ever looked at what total addressable market is internally just given all the products you have and all the potentials you have to cross-sell, what that TAM might look like so we can get a better sense of the in-house organic growth. And then any comments maybe now or in the future around an attach rate. By that I mean obviously all these services you have, just maybe talking about how many of these services are being used across your entire organization so we can just get a sense of how that adoption is moving. And I'm thinking about places like My Health and CRH just so we can get a sense of how quickly they're moving on the whole digitization side of things.
spk07: Yeah, I can give you some commentary around CAM and how we think about this. I mean, you know, I'll just start with pharmacy, right? You know, Well does not have a pharmacy business today other than our minority investment in Pillay. But if you look at all the scripts generated in Canada by our patient services businesses and our, you know, and originated through our EMRs. I mean, we're talking about roughly a million scripts and million scripts that would likely have about 1.6, 1.7 meds per script. So we're talking about a really meaningful, you know, flow of pharmacy potential there. So we're We're looking at ways that we can capitalize on that and in a way that we're not getting in the way in steering. We're really just providing a great experience for people who really want to be able to take advantage of that through our software and technology. We also think very much about patient services in Canada. What is that potential? I mean, if you look at the quarter of a trillion dollar healthcare ecosystem in close to a fifth of that is physician spending. And I think that's the real, that's the real temperature to focus on. You know, companies don't provide care practitioners do. And, you know, a big, a big, a big area of focus for well is how do we serve practitioners? And really what it comes down to is there's two choices for you as a practitioner and how you interface with well, you can either, source different components of our platform separately through SAS and services, whether it be revenue cycle management. As you may know, we have the country's largest outsource billing network with doctor care, whether it's our practice management tools, our digital productivity tools. You could just acquire these separately for your patient services business, and you can pay us whatever the going rate is for those services. Or if you're sick of running your own patient services business, which is what we're seeing more and more, you can close up the shop and you join us in our total managed service. And that's really why it's so important that we have those patient services. On one hand, when people acquire these products and services from us directly, you know, we're capturing maybe 2%, 3%, 4% of their revenue. But when they join us in our patient services business, you know, they're now sharing anywhere from 20% to 40%. of their billings with us. But we're doing everything for them. We're providing them a total turnkey ecosystem, whether it's MOAs and technology and data security, everything is there for them. They just show up and bill. And so that's really how to think about our business here in Canada is we have this very elegant model that is practitioner focused to capture as much of that ecosystem as possible, that close to one-fifth of the TAMs And that's an enormous opportunity. And more importantly than value and money, we're helping these practitioners. I mean, this is a really tough time. If you are a practitioner, it was tough enough without digital, right? When you had to run these businesses and run your back office and run your business and see patients. Now with trying to figure out technology and data security and making it all fit, it's just really, really hard. So we think with the trends involving digital, that's gonna push people more and more into wanting to be part of a healthcare ecosystem that's providing a total managed service. Hopefully that's helpful for you.
spk03: Yeah, okay, great, thank you.
spk01: Ladies and gentlemen. This is all the time we have for today, so I would like to turn the conference back over to Mr. Shabazi for closing remarks. Please go ahead, sir.
spk07: Thank you very much to all the investors that attended today's call and, of course, all the analysts with their excellent questions. I know we didn't get to some of them. I probably would have needed hours to do so, but I'm sure we'll have our one-on-ones, and we just really appreciate their ongoing support updates and review of the company. We're very excited about Q4 and have a very strong outlook for 2022. We just can't wait, frankly, for the next conference call event so we can talk more about our earnings momentum and the massive growth inside the company on organic growth. Thank you very much. And again, thanks for your support.
spk01: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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