This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Welcome to WellHealth Technologies Corp. Fiscal Fourth Quarter and Four Year 2021 Financial Results Conference Call. My name is Sylvie and I will be your operator for today's call. At this time, note that all 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 call is being recorded. And I would like to turn the conference over to Pardeep Senga, Vice President, Investor Relations. Please go ahead, sir.
spk01: Thank you, Operator, and welcome everyone to Well Health's 2021 Fiscal Fourth Quarter and Annual 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. Portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities law. 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 many of which are outside of wells control that may cause the actual performance results and achievements of wells to differ materially from the anticipated results, performance or achievement applied 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 do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements. to reflect any changes in our expectations or any changes in event, conditions, assumptions, or circumstances on which such statements are based, except if required by law. We may use terms such as adjusted gross profit, adjusted gross margin, adjusted EBITDA, shareable EBITDA, and adjusted net income on this conference call, which are all non-GAAP and non-IFRS measures. For more information on how we define these terms, please refer to the definitions set out in today's press release and in our management 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 repayment, and fund future growth initiatives. Adjusted EBITDA should not be construed as an alternative to net income loss or determined in accordance to IFRS. And with that, let me turn the call over to Mr. Hamed Shabadi, Chairman and CEO. Hamed.
spk07: Thank you, Pardeep. Good day, everybody. We hope you're all keeping safe and healthy. We truly appreciate everyone for joining us today. We're very pleased with our fourth quarter and full year results for 2021. Last year was a transformational year for Well. We completed two substantial acquisitions, CRH Medical and My Health, as well as several important tuck-in acquisitions, which catapulted the company to over $460 million in annualized revenue on a run rate basis and adjusted EBITDA run rate of over $100 million. We have added significant scale to our business and increased our leadership position as the prominent end-to-end healthcare health system here in Canada. And now Well is a profitable business that is generating significant free cash flow to fund its organic and inorganic growth. Before we dive deep into our results, I will give a brief introduction to Well for the benefit of the new investors and listeners on this call. Well is a practitioner-focused digital healthcare company. our overarching objective is to positively impact health outcomes by leveraging technology to empower healthcare practitioners and their patients globally. At its core, Well is an innovative practitioner enablement platform that includes comprehensive end-to-end practice management tools, inclusive of virtual care and digital patient engagement capabilities, as well as electronic medical records, or EMR, revenue cycle management, or RCM, e-referrals, digital apps, and data protection services. Well uses this platform to power healthcare practitioners both inside and outside of Well's own omnichannel patient services offerings. Well's true north is empowering healthcare practitioners with the latest tools and technologies, and everything that we do comes down to this compelling concept. Well does this in two ways by providing these two solutions, one for practitioners, who practice and provide care at one of WELL's owned and operated facilities, we provide a fully managed solution that lets healthcare practitioners focus on providing care while WELL handles everything else. The second is for practitioners who practice at non-WELL-owned operating facilities. We provide an a la carte offering of software tools, solutions, and services, typically on a SAS basis. Well's strategy of empowering and modernizing healthcare practitioners is working. Practitioners that use Well's tools have consistently demonstrated that they have more time to focus on patients and less time to focus on the burden of back office and administration. In Canada, Well's fully managed solution is supported by an extensive end-to-end healthcare system of outpatient clinics involving primary care, allied health, specialized care, and diagnostics, which we believe to be Canada's most consequential healthcare network, spanning across provincial boundaries. As such, Well owns and operates Canada's largest network of outpatient medical clinics, serving primary and specialized healthcare services, and is a provider of a leading multinational, multidisciplinary telehealth offering. Layered on top of that, we are a top three telehealth and EMR business, and the number one provider of digital apps, and practitioner enablement tools in Canada. Comparatively, in the United States, our focus is to support practitioners in a few key specialty verticals, such as serving the GI market of gastroenterologists, providing women's health services, and a growing primary care business with a focus on telehealth delivery of longitudinal care with an emphasis on mental health. Operationally, Well has organized all of its businesses into two key lines of business, The first 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. This includes our clinic network, My Health, and CRH. Think of this as our bricks and clicks division. Our second line of business is virtual services, which is comprised of businesses that are almost entirely digital in nature, inclusive of SAS and services, revenues from the company's practitioner-enabled platform or patient services businesses, again, that have very little to no exposure to in-person care. Think of this as our CLICS division. These two lines of businesses are both profitable and growing. Omnichannel patient services generates most of our revenue in EBITDA. However, it has a slower growth business. Omnichannel patient services accounted for 73% of our total revenue in Q4 2021. Conversely, virtual services line of business, which again has very little exposure to bricks and mortar, is comprised of highly scalable digital businesses, which today generate less revenue and EBITDA, but are growing at a much faster rate. Our organic growth remains strong in Q4 at over 10% for the entire business. This strong organic growth was driven through our business with over 50% organic growth, which we believe is sustainable and will lead our overall organic growth story in 2022 and beyond. With that, I would now like to turn the call over to our CFO, Eva Fong, who will review the financials for the fourth quarter and full year 2021. I will then come back and provide further commentary on some of our business units and our future outlook. Eva.
spk02: Thank you, Hamid. I'm pleased to report that we had very strong quarterly and annual results for the fourth quarter and year-ended December 31, 2021. Our 2021 annual results were as follows. Well-generated record revenue of $302.3 million during the year-ended December 31, 2021, compared to $50.2 million generated during the year-ended December 31, 2020, an increase of 502%. This increase in revenue is mainly due to the company's acquisitions over the past year and organic growth. Well achieved virtual services revenues of $75.6 million for the year ended December 31st, 2021, representing an increase of 460% as compared to $13.5 million in the prior year. In 2021, well-generated record adjusted gross profits of $154 million for the year ended December 31, 2021, which reflected a 624% year-over-year increase from the prior year. This was mainly a result of the increase in revenue in the period and higher adjusted gross margin percentage. Adjusted gross margin percentage increased to 51% in 2021 compared to 42% in 2020. which is mainly due to the addition of higher margin CLH, My Health, and virtual services revenue over the past year. Adjusted EBITDA for the year ended December 31st, 2021 was $60.4 million compared to adjusted EBITDA of $0.2 million for the year ended December 31st, 2020. Adjusted net income was $16 million or $0.08 per share for the year ended December 31st, 2021 compared to adjusted net loss of $1.3 million or a loss of one cent per share in the prior year. You may notice that we started including a new metric on our financial public release, and that is adjusted net income. We decided to do this in order to provide another tool by which to measure well and our performance. The general definition of adjusted net income for well is net income after exclusion of stock-based comp, amortization of acquired intangibles, time-based earn-out, changes in fair value of investments, and revenue precluded from recognition under IFRS 615. Our fourth quarter results were as follows. Well-achieved record quarterly revenue of $115.7 million during Q4 2021 compared to revenue of $17.2 million generated during Q4 2020, an increase of 573%, driven primarily by the acquisitions of CLH and My Health. Wealth virtual services revenues increased to $31.3 million in Q4 2021, representing a 354% year-over-year growth as compared to $6.9 million in Q4 2020. Wealth achieved record adjusted gross profit of $63.5 million in Q4 2021, representing a 693% year-over-year growth as compared to adjusted gross profit of $8 million in Q4 2020. Well-achieved record adjusted gross margin percentage of 54.9% during Q4 2021 compared to adjusted gross margin percentage of 46.5% in Q4 2020. 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 $25.7 million for Q4 2021 compared to adjusted EBITDA of $0.8 million for Q4 2020. Adjusted EBITDA was positively impacted primarily by the addition of CLH and My Health during the quarter. Our adjusted EBITDA margin for Q4 2021 was a healthy 22.2%. Adjusted net income for Q4 2021 was $5.3 million or adjusted EPS of $0.03 per share for the three months ended December 31st, 2021, compared to adjusted net income of $2.4 million or $0.02 per share in Q4 of the prior year. Net income for Q4 2021 was $707,000 as a result of the finalization of our purchase price allocation for CLH. We took an evidence-based approach to assessing the economic useful life of the assets acquired and found that the useful life is longer than what had previously been utilized as part of our calculations and amortization. We extended the useful life of certain contracts, which resulted in a favorable adjustment to amortization expense in the fourth quarter. Well ended Q4 and fiscal 2021 with a very strong balance sheet. As of December 31st, 2021, Well had cash and cash equivalents of $62 million. As of December 31, 2021, the total drawn amount under both the CLH and My Health credit facilities is approximately $279 million in Canadian dollars. As of today, Well continues to have room available on undrawn credit facilities in addition to over $200 million in unactivated accordion features to its credit lines, which could be available, provided covenants are able to be met. 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 acquisitions of CLH and My Health. As of December 31st, 2021, our total headcount across the organization, which includes all non-clinical employees, consultants, and healthcare providers, was 2,819. This figure is comprised of over 1,500 of non-clinical employees and consultants, and approximately 1,300 of healthcare providers and clinical staff. In terms of our share capitalization, as of March 30, 2022, well ahead 221,459,023 fully diluted securities issued and outstanding. Wealth share counts increased in 2021 because of financings and acquisitions. We substantially increased the company's revenue and EBITDA on a per share basis, indicating that the company's capital allocation and organic growth program is delivering real value to shareholders. For instance, wealth revenue per share went from 37.5 cents per share in Q4 2020 to $1.58 per share in Q4 2021, on an undiluted basis. Meanwhile, adjusted EBITDA per share increased from 0 cents per share in Q4 2020 to 13 cents per share in Q4 2021. This reflects an over 2,000 percentage increase in this all-important metric. Our M&A program continues to successfully execute and follows a disciplined capital allocation strategy. During the fourth quarter, we completed the following transactions. On October 1st, The company completed its acquisition of WIPS, a leading national provider of healthcare 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 November 1, the company completed the acquisition of AwareMD, 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. On December 1st, 2021, the company completed the acquisition of ConisonMD, whose Ocean platform is a category leader in digital patient engagement technology and e-referral software in Canada. Ocean's platform supports over 8,000 physicians and approximately 35,000 referrals and consults are sent electronically through the platform monthly. In addition, our CLH business unit has been an active acquirer. In Q4, CLH completed 200% acquisitions of Jasper Anesthesia's CARES Associates and Indiana-based group and Utah Anesthesia and Utah-based group. Combined, these two acquisitions are expected to generate approximately US $3.5 million in annual EBITDA. In addition, CLH completed one majority stake acquisition in October 2021 for 51% of Pinellas County Anesthesia Associates based in Florida. Subsequent to the end of quarter on March 7, 2022, the company entered into an asset contribution and exchange agreement to acquire 100% interest in Greater Connecticut Anesthesia Associates, a gestural and enterology anesthesia services provider in Connecticut that is expected to generate more than US $3 million in shareholder EBITDA. This 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 for the quarter. I'm pleased to report that Well achieved a total of 972,740 patient interactions in Q4 2021, representing an annual run rate 3.89 million patient interactions. Total omni-channel patient visits in Q4 2021 were 700,359, representing a year-over-year increase of 123% from 314,009 in Q4 2020. On the quarter-over-quarter basis, total omni-channel patient visits increased 20% compared to 582,958 total omnichannel patient visits in Q3 2021. During the fourth quarter, in-person patient visits at our clinics and businesses accounted for 45% of the total visits, while telehealth patient visits, which include both telephone visits and virtual care patient visits, represented 55% of total visits. In-person patient visits at our clinics and businesses accounted for 314,144 patient visits in Q4 2021, representing a year-over-year increase of 146% compared to 127,789 in-person patient visits in Q4 of 2020. Telehealth patient visits, which include both telephone visits and virtual care patient visits, accounted for 386,215 patient visits in Q4 2021, representing a 107% increase from 186,220 telehealth visits last year in Q4 2020. In addition to these patient visits, My Health conducted 146,116 in-person diagnostic visits, while WISP completed 126,265 asynchronous patient consultations. And now for an update on some of our key assets. I'll start with Circle Medical and WISP, our two U.S.-based virtual services businesses. Silicon Valley-based Circle Medical is one of the first truly digital-first primary care platforms in the U.S. and continues to experience unprecedented and exceptional growth. For the current month of March, we are expecting Circle Medical's annualized revenue run rate to exceed $40 million U.S., representing a 490% year-over-year growth rate compared to March of 2021. Comparatively, when we announced the deal in September of 2020, Circle was at just $5 million U.S. in annualized revenue run rate. So we've seen some pretty phenomenal growth in Circle Medical since our majority ownership in the company. Circle Medical's full-stack primary care business continued to grow as it focuses aggressive customer acquisition plan coupled with deepening engagement between patients and their primary care provider. Circle Medical has seen its number of healthcare providers increase 260% over a year with approximately 134 providers currently active on the platforms. Management is executing. WISP, an online telehealth platform that focuses on women's sexual health and reproductive health, has experienced considerable growth as well since well announced the completion of its acquisition in October 2021. In August 2021, when we first announced the WISP transaction, its annualized revenue run rate was just $30 million. For the current month of March, we are expecting WISP's annualized revenue run rate to also exceed $40 million U.S. WISP is looking to maintain its rapid growth trajectory in 2022, in part fueled by the expansion of its services as it adds new products and services onto its platform. Management is also executing on its plan. The combined annualized revenue run rate of Circle Medical and WISP is now better than $80 million U.S. based on where we are seeing March volumes. We're expecting the combined revenue run rate to exceed 100 million US later this year. Keep in mind that we had recently provided visibility on the combined total exceeding 70 million US based on our January results and our business updates just a few weeks ago. So adding another $10 million in annualized revenue run rate in the last couple of months is truly reflective of how quickly these assets are growing. Given these results, we believe that Circle and WISP are not being properly valued and priced into the WELL story currently. We believe Circle and WISP will continue to grow quickly well into 2022 and be important assets in the U.S. digital healthcare marketplace. While WELL does have a call option to acquire the balance of both Circle Medical shares and WISP shares, we also have the opportunity to partner with management and seek strategic alternatives for both firms. separately or perhaps on a combined basis. Strategic alternatives could include launching an IPO or bringing in a growth investor into the equity of these assets on a standalone or combined basis. We have already consulted with a number of tier one investment banks in the United States, and there's a near universal view that Well has a significantly valuable business here, especially given the organic growth and capital efficiency of these businesses. They are finding key niches and specialty areas in the U.S. healthcare market where they can leverage their digital platforms to serve patients and acquire market share rapidly. And now for the virtual services updates. During Q4, we completed the acquisition of Conviz and MD, whose Ocean platform includes a full suite of virtual patient engagement tools, including online appointment booking, secure messaging, appointment reminders, and digital forms, as well as in-clinic check-in kiosks and tablets. Ocean's interoperability is highly strategic for government initiatives, as evidenced by their platform powering e-referrals for the province of Ontario's e-services program. Ocean's platform supports over 8,000 physicians and approximately 35,000 referrals and consults are sent electronically through the platform every month. Well is already benefiting from the suite of Ocean products across its substantial clinical and specialty businesses. Furthermore, Ocean and Well are in the process of building integrations into other EMR assets, including IntraHealth and AwareMD Cerebrum, creating a sizable, addressable market of new physicians for Ocean's suite of services. In February, Well's wholly-owned subsidiary, AgriCare, met all provincial requirements as part of the validation process to be a verified vendor for virtual care in Ontario. This years-long process required Advocare to demonstrate that its solution met Ontario health standards with respect to privacy, security, technology, and functionality. As a result, Advocare is listed on Ontario health site as one of a few fully validated vendors for virtual care in Ontario. This means clinicians and large healthcare organizations in Ontario can confidently use Advocare's virtual care software to conduct effective virtual appointments by video and secure messaging and compliance with provincial standards. Operationally, given the strength of the provider tools we have in the company, we are in the process of forming a new provider-focused business unit, which combines the divisions of the Well EMR Group, Dr. Care, our billing unit, and digital apps businesses. This new consolidated group would focus on bringing together the company's tools and effectively bundling them to help simplify and support healthcare practitioners' lives. The group would include companies and brands such as CognizantMD, AwareMD, IntraHealth, OscarPro, DoctorCare, Doctor Services Group, and others, and will cover tools and technologies including but not limited to practice management, productivity applications, back office billing and revenue cycle management, and more. Keep in mind that more than one in every five doctors in Canada are currently being served by Well's provider tools and services teams. We believe the opportunity to provide integrated offerings will allow Well to leverage its unique platform features and grow its market share. Please keep in mind that Well only provides its a la carte software solutions in Canada. In the U.S., all of the company's tech is used for in-house purposes to support our patient services businesses. And now for a quick update on CRH. CRH's core business is performing as expected with strong caseloads and stable per unit economics. In Q4 2021, CRH achieved revenue of approximately $47.1 million Canadian. CRH completed over 120,000 anesthesia cases in the fourth quarter and sold over 2,237 O'Regan units also in the fourth quarter. The CRH acquisition is continuing to generate value for well We are making progress in terms of unlocking new revenue streams in CRH's valuable GI channel, and we are making progress with digitization. Well continues to demonstrate network effects from this acquisition. In the past quarter, for example, in the past quarter, Well has opened a new hemorrhoid treatment center in Toronto and completed the acquisition of another hemorrhoid treatment center in Surrey, B.C. Both clinics are majority owned by Well as 51% partnerships. And in January 2022, we opened the first new hemorrhoid banding clinic in the United States located in Chicago. These banding clinics are the first of many planned by CRH and its parent, Well, to drive patient access to CRH's industry-leading O'Regan patented and outcome-leading device. CRH and Well plan to open at least seven more hemorrhoid banding clinics in the U.S. this year and several additional de novo hemorrhoid treatment clinics in B.C. and Ontario as well. The total hemorrhoid spending market in the U.S. is several billion dollars and growing. As you may recall, CRH owns the Oregon MedTech device, a patented FDA-approved device for banding hemorrhoids. However, historically, CRH had never provided patient services with its own intellectual property. It had always sold its IP to clinicians who had generated hundreds of millions of dollars with its technology. CRH's prior business plans did not consider patient services due to a lack of experience in providing clinical patient services. Well, on the other hand, Well has extensive experience in providing clinical services as Canada's largest owner-operator of outpatient clinics. So the combination of CRH's IP with the Oregon device and Well's clinical experience provides Well with a phenomenal opportunity to realize revenue synergies and increase market share in the North American GI space. In addition to the banding clinics, well has been working with CRH on a number of initiatives, including working closely with our source 44 business unit to provide cybersecurity tools to GI practices. We've secured our first major pilot customer and getting ready to pursue expanded sales campaigns with more CRH clinics. CRH also changed its revenue cycle management service provider to change healthcare, who's providing significantly more digital resources, and data-driven business intelligence insights, as well as helping improve CRH's access to information. We also launched a new digital GI and oregon-banding-focused app for Apple iOS and Android users, which acts as a digital resource that will help further accelerate our efforts to drive organic growth across our device sales segment, as well as allow us to provide our GI partners and well itself, now that we are in the clinical business, with our vending operations, with opportunities to grow patient services revenues. This is something that we talked about when we announced the deal, and we are proud that we were able to deliver on it in less than a year from the point of acquisition. This is further demonstration that Well is delivering on its state of goals and objectives as articulated at the time of the announcement. And this is something that we're proud of as a management team. Our two new business tumor sites that have been rolled out are one, www.hemorrhoidanswers.com. The goal of this site is to educate patients to the point where they want to act and find a patient to treat them. And the second is www.oregonsystem.com. This is our rebranded O'Regan site. The main goal here is to differentiate O'Regan banding from other forms of hemorrhoid treatment, as well as connecting patients to trained physicians. And now for a quick update on My Health. During Q3 2021, Well completed its acquisition of My Health, a leading provider of primary care, specialty care, and accredited diagnostic health services that owns and operates 49 locations across Ontario as of December 31, 2021. My Health offers primary care consultations both in person and through telehealth, as well as diagnostic services related to cardiology, women's health, bone and muscle health, and cancer diagnostics. My Health represents a major acquisition for the company as it boosts Well's free cash flow, it accelerates Well's revenue and EBITDA growth profile, and it establishes a strong presence of diagnostic and specialty services in Ontario for the company. With this foundational acquisition, Well became the largest owner-operator of outpatient medical clinics in Canada. In Q4 2021, My Health achieved revenue of $23.2 million, representing quarter-over-quarter growth of 21%. compared to Q3 2021 as a result of Q4 being the first full quarter of revenue recognition for My Health. And these results were generally in line with our expectations given seasonality factors. And now I'd like to speak a bit about our outlook for the rest of this year and for 2022. Our outlook for 2022 remains strong and resilient. The capital we generate will continue to be reinvested in the business and allocated in a disciplined manner which may come in the form of further acquisitions, share repurchases, or to accelerate organic growth. We believe our organic growth coupled with our continued focus on tuck-in acquisitions has the potential to allow the company to exceed half a billion in annual revenue in 2022. We are looking forward to delivering continued strong results in the next few quarters with sustained organic growth as we look to achieve growth and profitability. The company's goals for 2022 are as follows. One, build out and refine its practitioner enablement platform. Two, achieve organic growth across its operating business units. Three, follow a disciplined acquisition and capital allocation strategy. And four, well expect to be profitable for the full year of 2022 on an adjusted net income basis. Our view remains very positive across all our business units and for the entire company. In Canada, Well is quickly expanding on what it has built, the most consequential network of non-governmental health care assets in the country, with significant operations and interoperability between its outpatient clinics, electronic medical record systems, diagnostics, and telehealth businesses. Meanwhile, Well's strategy in the U.S. is to focus on key specialty areas such as gastroenterology, women's health, and primary care with a focus on specialty niches such as mental health. Although we expect continued revenue growth in Q1 2022, the company expects, in line with seasonality factors, its adjusted EBITDA to experience a slight seasonal quarter-over-quarter decline in Q1 and then rise sequentially throughout the year, as expected. The decrease in adjusted EBITDA in Q1 is primarily due to seasonality in CRH's business, going from Q4 being the most profitable quarter to Q1, which is CRH's seasonally weakest quarter, in terms of both revenue and EBITDA. Q4 tends to be a strong quarter for CRH due to the way deductibles work for elective procedures such as colonoscopies, where we provide sedation services. For this reason, Q1 also tends to be a lighter quarter for us seasonally. In addition, we plan on continuing to increase spending in the coming quarters at Circle Medical and WISP to maintain healthy organic growth in those two businesses. Circle and WISP are having a positive effect on our top line revenue growth, but we do not expect them to be generating material positive EBITDA for the next couple of quarters. As a general rule of thumb, the company aims to have the sum of its adjusted EBITDA margin percentage plus its organic growth percentage to exceed 30 in 2022. This is sometimes referred to as the rule of 30. As you can see, given that our organic growth rate for Q4 for all our assets was just over 10% and we achieved better than As a result, we achieved better than rule of 30 for the quarter under review since our adjusted EBITDA was over 20% for our total revenues. It will be a key goal for us to continue to generally be in line with rule of 30 for the entire year. We have discussed a number of key areas of the business on today's call, but it's important to note that in everything that we do at Well, there's one common big prevailing idea. And that is that we provide healthcare practitioners with tools and technologies to help them be more successful. And again, we do this in two ways. By offering our tools, services, and technologies on an a la carte basis, often through SAS offerings in Canada so that practitioners can use these tools in their own patient services businesses. But increasingly, what reflects the bulk of our revenue is by offering healthcare practitioners with a fully managed environment where they can show up focus on the care they're providing, and lean on Well to do everything else. We are finding that healthcare practitioners increasingly do not want to run their own patient services business and want to join a competent health system or clinic group like ours and focus on the care for their patients and not the administrative and business concerns and benefit from all the technology and modernization that Well's platform provides for it. We take our responsibilities in supporting healthcare practitioners seriously. and are always honing our skills and improving and modernizing our operations to provide the best support possible so that care providers can provide the care that results in the best health outcomes possible. Despite the current geopolitical, inflationary, and turbulent economic environment, the company does not see any material influences or challenges that would impair its ability to deliver on a strong outlook in 2022. Many of the key variables inherent in the execution of Well's business are firmly in its own grasp and not dependent on outside factors. The company is well-positioned to deliver strong results, which include above-average organic growth rates across the organization. Well is a multiversified, fast-growing, digital health and tech-enabled healthcare company delivering on a strong ESG program and building societal values. Finally, I would like to recognize and acknowledge the challenging times that Ukraine is facing. And in response, I'd like to announce that we have exceeded our goal of donating $100,000 towards relief efforts to support Ukraine, including donations from Well Corporate and the employees at Well. The donations will be made to UNICEF Canada and will contribute towards supporting Ukrainian children who have been harmed or may be in danger. I'm extremely proud of our team's efforts and commitment to helping in this humanitarian emergency and would once again like to state that WELL stands with Ukraine and our hearts are with all those impacted by this tragic war. In closing, I want to thank you all for joining us on this call and thank our shareholders and investors for their continued support. The capital markets have been very supportive of our vision and have provided us with the funding and patience needed to pursue our goals. I would also like to thank WELL's senior management team and all of our employees and contractors for their tremendous effort and execution. In particular, I'd like to thank our team of healthcare practitioners and other frontline workers who continue to keep all our clinics open and provide unbelievable patient care. They remind us every day why we are here, and we are here to support them. That is our mission. Thank you. And with that, we will now be open to answer questions. Operator, can you please convey the questions?
spk03: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by 1 on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And if you should wish to remove yourself from the question queue, please press star followed by 2. And if you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star 1 now if you have a question. And your first question will be from Christian Escrow at Eight Capital. Please go ahead.
spk05: Hi, Hamid. Congrats on the strong quarter. I wanted to ask a first question. Sorry where you left off on the rule of 30 there, you know, achieving that mix of organic growth and adjusted EBITDA. And this will help to guide the financial profile. Do you see 2022 landing as more of a 15-15 year with investment in the U.S. business? Or do you see it being somewhere in between that and the 10-20 we saw this year? What are your early thoughts heading into the year?
spk07: Thanks for the question, Christian. Yeah, I think it's a good bet to think that our organic growth percentage will continue to be robust. And given that Circle and WISP don't contribute as much adjusted EBITDA, then yeah, that will likely cut a little bit into the operating margins. you know, I think it's, you know, in terms of whether or not it gets to 15-15, I don't know if I would go with that precision, but I do believe that this is why Rule of 30 makes just a ton of sense for us in being able to express the fact that the company's not trying to over-optimize for profitability or growth and really believes that a solid balance between both makes a ton of sense.
spk05: Got it. Now, with Spin Circle Medical, it seemed like you know, two very strong growth engines in the business. You mentioned some new products and services there. Do you want to touch on some of the areas of investment that you're thinking about in the U.S., whether that's customer acquisition or marketing or otherwise? Sure.
spk07: I mean, I think what's really remarkable about these assets is just how efficiently they're acquiring customers and able to do so without, you know, significant losses or any losses for that matter. Both businesses are currently trending at breakeven. We are We are forecasting a small loss for both businesses right now, but as we had in the past, and they continue to surprise us with breakeven performance because we are making significant investments. I think they both have different strengths, and this is why the idea of combining them is compelling. One is obviously got the asynchronous platform that allows physicians to scale and they drive significant high margin product sales that support women's health. And the other has a significant number of physicians providing synchronous consultations and being able to really scale their customer acquisition and their physician recruitment, which is extremely difficult to do in a place where most companies have fallen down. Um, and so, you know, I, I think, I think that's why we believe that, that these are, are sort of mispriced as, as part of the wealth story and part of, you know, management's, uh, goal here. And, and, and we want to be held accountable to that is, is to demonstrate that we can, we can get value for these assets. And, uh, and so we're, we're spending a lot of time, energy, and thought on, on how we, uh, how we achieve that.
spk05: Great. I'll ask just one more question before passing the line. I'll dig a little further into Circle Medical. From the $5 million you mentioned a year and a half back or less to $40 million now, that's been a big growth engine. Is there a simple way you define the success there? Is that more practitioners coming online, patients joining at an above-market sort of pace, or is there anything else that's really helped to push the Circle growth this past stretch?
spk07: Yeah, I mean, listen, I think I think it's really if you characterize circles, businesses, and most digital health businesses that have practitioners and patients as two sided networks, what's, what's difficult with these two sided networks is scaling both the patient acquisition and the physician recruitment. And, and, and, you know, you can't scale one too quickly, otherwise, you, you take on unnecessary costs or, or, You know, you could even fall down in terms of being able to provide an acceptable level of service. And there's a third dimension there, too, with all the support services required to support all those practitioners. So, I mean, for example, Circle's Montreal office, which is a pretty substantial office now, full, and it's chock full of people providing virtual MOA services to all those practitioners. So, I think, you know, management's just done a great job in acquiring the talent and delivering on those scaling vectors and behaviors. And this is why, you know, when something works, you know, you continue to refine and drive that growth. And I think that's really what we're seeing there. That's helpful context.
spk05: Thanks for taking my questions.
spk07: I'll pass the line. Thanks, Christian.
spk03: Next question will be from Adam Buckham at Scotiabank. Please go ahead.
spk08: Hi, Ahmed and Eva. Thanks for taking my question and congrats on the quarter. I wanted to sort of take in it similar to the last line of thought on the U.S. telehealth business. You know, you kind of mentioned the capital efficient, you know, model and how, you know, they're at a break even. From a unit economic perspective, can you kind of shed some light on, I guess that infers that, you know, every dollar gained of revenue is greater than the dollar spent on that customer acquisition. Can you kind of walk us through how that's been trending and, you know, any color there would certainly be helpful.
spk07: Yeah, for sure. Listen, you know, we, we, I'll just reframe your question as, as a, as a, as a characterization of, of, of CAC and LTV, right. You know, customer acquisition costs and, and, and, and lifetime value. Um, and, and I will say that, that, you know, circle particularly is trending incredibly well on their CAC and LTV metrics. Um, and, and, you know, this is something that, that really gives us great confidence in, in making the kinds of statements that we talk about here. And, and, and again, that, that, um, I think is really key. We won't go into specifics on what we're seeing for obvious reasons, competitive reasons and whatnot, but I think that's being one of the real drivers of that story. WISP has done well with CAC and LTV as well, but I would say what's strong about the WISP story is that you have a significant portion of the revenue that's subscription-based. So once once people sign on to the product, oftentimes they're doing it with automated delivery and they're subscribing to be shipped that product on an ongoing basis, which really helps in terms of supporting revenue and driving value. So, I mean, both are driving pretty good gross margins. The product gross margins on the WISP side tend to be a little higher than the patient services gross margins at the circle side. I would say that the asynchronous service delivery capabilities of WISP are more scalable just because you're delivering services in an asynchronous basis. And so you have fewer number of physicians that are needed to support that volume. But I would also say that the long-term uh, LTV associated with a, with a synchronous, uh, uh, model like, like, like circles will, will, will, will be more compelling. So, you know, again, they both have their strengths and weaknesses, and this is why I think, um, you know, there's, there's some, some, we're, we're, we're thrilled to have both, you know, we're, we're thrilled to have, you know, powerful asynchronous product delivery capabilities that fulfill competently and, and, uh, and a thriving two-sided, uh, uh, synchronous, you know, uh, program like Circles.
spk08: No, that that's really good color. Thanks for that. Um, maybe shifting gears to the other parts of the virtual services segment. Um, you know, obviously we talked in depth about Circle and WISP, but, you know, in Canada, you talked about the patient enablement or the physician enablement platform and the services that you're going to offer, um, physicians in that area and clinicians, right? Um, from an organic basis, are you kind of able to shed some color on, you know, sort of EMR, um, you know, cybersecurity and how those businesses have been trending and, and what you're sort of seeing in the Canadian market on that front? Yeah, happy to.
spk07: Um, so on the EMR basis, you know, we're seeing, you know, very robust and sticky revenue, but slower growth. So we're, we're in single digit growth there. Um, And that makes a lot of sense because obviously the market has become quite saturated. And, you know, we continue to see good, solid, you know, performance there. And, you know, just the switching costs for EMR are so high, which are a wonderful thing, but they can be a double-edged sword because it's harder to take market share from others as well. And the percentage of paper now in the country is very, very low. So that kind of characterizes EMR. Cybersecurity, we're seeing good, strong double-digit growth. Sycura has been very solid in its ability to execute on acquiring customers and providing vulnerability assessment and other services. And they're growing their product portfolio. And 44 has a plurality of other services from software to provisioning of hardware. And they've been great with their enterprise customers and whatnot. Um, apps is really where we're seeing the, the, the, the, the more significant growth. I mean, you know, ocean is, uh, I think we, we provided some visibility on, on ocean growing at over 50% per year. We we're quite confident that they'll continue to do that and perhaps even grow faster. I mean, this is a, um, this is a real Pearl, I think in our practitioner name on platform. And I think it's, it, it, it looks to be the evil full winner for the country. I mean, we are. very confident that we're going to win other provinces, that more and more practitioners will need to use Ocean, and that will be a fantastic wedge for other products and services that we bring. So I think it's a hugely consequential acquisition that we made, and I think you're going to be hearing a lot more about Ocean with time. Great.
spk08: Thanks for the color again, and congrats on the quarter. Thank you.
spk03: Next question will be from Chi Li at Desjardins. Please go ahead.
spk04: Good morning, Hamid and team. Congrats on the quarter. It's me speaking in for David. So, my first question is, in terms of the capital allocation, you mentioned the three pockets, so acquisitions, shared buyback, and organic work. Can you give us more color in the split between these three pockets as you head into 2022?
spk07: Sure. I mean, we're really stepped down our M&A activity. And we are very happy with that. We made a lot of acquisitions and we are really focused on achieving network effects. What we found as well is that capital allocation for us is not just about deploying capital and going shopping and buying companies. It's also about applying capital thoughtfully to our own business in areas where we think we can upgrade clinical opportunities, expand existing programs. And so we have a diverse and, uh, I think very active capital allocation program, but I, now it's more spread out, I would say, um, across, across, you know, external, uh, tuck-ins and internal programs. And, um, you know, I, I would say that, that, uh, again, you know, less activity, but you're going to see us by, uh, or enter into a control ownership structure with the odd clinic, um, here and there, I think probably. our core plan here for the next couple of years sees us doing at least one clinic a quarter, you know, in each of one of our, of our, of our main areas of business. Now that may happen in a basket. It may not happen every quarter, but that's generally how we're thinking about it, which again is a major step down, but we're okay with that because you know, first of all, we see multiples trending down. We think that these deals will become more creative and you know, we're, we're, we feel very strongly that while it would be nice to have more capital on the balance sheet, we can execute and grow with the capital that we have and that we generate.
spk04: Okay, thank you for that. And just switching here a bit to the new provider-focused conservative business group that you mentioned on the call that has EMR, Dr. Care, and so on. So is this going to be a new segment in your financial disclosure or just something new where you bundle your product? And perhaps if you can give us more color on You know, how are you thinking about handling this product? What kind of cost selling or promotion benefits that the physician is going to have when purchasing these bundles?
spk07: Yeah, thanks for asking about that, Chi. I'm really excited about this. These divisions and services already are in our virtual services group, and we provide a clear delineation between virtual services and omni-channel. So, it's unlikely that there will be, you know, further disclosure specifically in this area. But I think from a business perspective, it's really quite exciting, given the fact that we have not been aggressively bundling in the past. And we do believe that a lot of healthcare practitioners need and will benefit from these integrated offerings in such a way where they don't have to deal with different entities and source and manage various different vendor relationships. We also believe that this will allow us to increase the connective tissue between these products. And we think that it'll improve our overall retention rates and it'll help us acquire new customers and really better penetrate these accounts. So it's something that we are working on very purposefully and purposefully, I should say. And I think we'll provide key updates throughout the year And, you know, we're going to be thinking through providing some, you know, feedback on attachment rates and bundling KPIs with time.
spk04: And do you think that this initiative will help the practitioners to also say if they are already at one of your products, they will more understand your other offering and know that, like, despite the different brands, they are all under the World Health Umbrella and they will be more integrated that way?
spk07: I do. Yes. And that, I think that's really the key idea here. You know, think about this, you know, our, our doctor care team, which has a phenomenal sales force, um, you know, they, they scratch and claw and fight to get in front of a doctor to talk about revenue cycle management, to help alleviate that burdensome administrative task for them. You know, doctors are, are, you know, famously bad at billing and, and, and, uh, and, and the business attributes of a business and doctor care really is a, is a great painkiller there. Um, But allowing those enterprise salespeople who are very successful to be able to talk about more than just revenue cycle management when they get in front of a doctor, I think is really a big deal for us to be able to say, hey, look, we have a spectrum of EMR tools and digital patient engagement tools and virtual care capabilities and waiting room automation and online patient booking and self-service kiosk and And so you see, you start to kind of become that trusted advisor to that healthcare practitioner, and it gives us a great roadmap of what we can do with them. And I'll tell you the other thing that it does, which I think is sort of a very key network effect for us, is we believe with time, more and more of these healthcare practitioners will not want to run a business and will want to join a fully managed health system like Welles. But what it does is it gets them acclimated to our tools and capabilities. So then it creates a lot of efficiency in terms of how they enter our system. And this is really important because when we capture economic output with our practitioner enablement platform, we would capture anywhere from 1% to 4% of a doctor's economic output when we offer these tools on a SaaS basis. But when they join our health system, we we acquire anywhere from 20 to 50% of their economic output when they come on board with us. So much more material. And so you could almost look at the platform services and the SaaS offerings as a bit of a gateway to greater and bigger and better things for these practitioners as they get more and more acclimated to the well infrastructure and ecosystem. Hope that's helpful for you.
spk04: Yeah, that's a very good color. Thanks, Hamid. My last question is related to the labor and inflation. How would you characterize the labor environment over the past couple months, especially on the tech side? I know that you mentioned some inflation before, which almost all tech companies are facing.
spk07: It is tough. I'll say what I'm sure you're hearing everyone else talk about and say it is definitely tough, and this is why I'm especially proud of the results that we're posting here today and continue to experience. Our teams are are retaining, they're fighting, uh, uh, you know, uh, and, and I think a big part of that is just being the type of company that people like to work at and are proud of. Um, so, so listen, it's a complex environment. It's hard. I mean, we, for example, we know we have, we have significant open positions available in our, my health group. Um, you know, we have, we have lots of, we'd love to find more skilled labor. to run more diagnostics. We know we can grow revenues and we know that demand is not being the rate limiting factor. It has been the successful recruitment of these professionals. And so we're ramping up and we're trying to do more there. But yeah, it's tough. It's tough for developers. It's tough for finance people. There's poaching activity out there. And so I think it's probably one of the most important factors in a management team really being successful these days. As of late, I think we've seen things calm down a little bit. I think the fervor that we saw late last year has sort of calmed down, but continues to be a very key area of focus for us.
spk03: Thank you for that. I'll pass the line. Thank you. Your next question will be from Rob Goff. at Echelon. Please go ahead.
spk09: Thank you very much for taking my question. Your last question may in part answer my first question here, and that would be turning once again to Circle and WISP. Would you say that there is a gating factor on the growth that you are seeing there, be that on customer acquisition or be that on actual access to healthcare providers?
spk07: Yeah, Rob, good question. I'd say it's a bit different for Circle and Wisp. I think Wisp is much more scalable on the front end, you know, and I think because of just the way that the asynchronous model works compared to the synchronous model. So I think customer acquisition can be a lot more free-flowing and ambitious at Wisp because fulfillment is easier, right? And where Circle, again, you have to be very mindful of how you scale up this two-sided model.
spk09: Thank you. And with both assets clearly outperforming, do you see opportunities to either take best practices from either into the Canadian marketplace or to expand those brands in the Canadian marketplace itself?
spk07: Yes, I mean, that's a great point. We are trying to do that. We think that there's some exemplary execution and ideas coming from these businesses, and we have talked about launching WISP in Canada, and that continues to be something that we're very interested in doing. And, you know, we don't want to rush it because management's executing on a growth plan, and we want to make sure that, you know, Canada's not a distraction, especially given the fact that it's not as big of a market. The U.S. is a very big, deep, and lucrative market. So, you know, definitely see opportunities there with WISP. And I think with both WISP and Circle, I think what you're going to see is them going after, you know, just them applying, you know, these two platforms to more and more niche specialty areas and being thoughtful about, you know, which areas are smart to go in and which ones aren't. and test marketing some. I can also tell you on the WISP side of things, we're particularly excited about the idea of instant gratification, of developing partnerships that allow us to execute on delivering a product very, very quickly. Like if you need something today, we can get it to you today or tomorrow, as opposed to fulfilling over a several day period. Given the products and services that we provide in our women's reproductive and sexual health platform there, instant crack could be, could be, you know, really a big deal for us. So, um, so yeah, those, those are areas of focus. And I, and I, and I'd say that just even in how we acquire customers, uh, you know, we're learning about, uh, about some of those, you know, better tactics that I think that the U S folks are, are, uh, are executing on. And that is filtering up to Canada as we, as we execute on our own virtual care program with TIA Health, which is doing very well. It continues to see nice organic growth year over year.
spk09: Thank you.
spk03: Thank you. And last question will be from Nick Agostino of Laurentian Bank. Please go ahead.
spk06: Yes, David. So I guess two quick questions for me, Hamed. First, looking at the... On the organic growth side of things, we talk about the digitization of the network. I'm just wondering, when you look at all the acquisitions you guys have made over the years and these past few quarters, and specifically with the larger ones like My Health and CRH, and thinking about the opportunities, the cross-sell opportunities between billing, cybersecurity, scheduling, et cetera, have you guys put a given thought to the size of that cross-sell dollar opportunity and and if so maybe how far penetrated are you in capturing the organic dollar opportunity that's in front of you guys as you digitize all your acquisitions yeah great great question i think in many respects uh one of the key questions that we think about a lot as as a management team listen this is everything to some degree um
spk07: we feel like we have a great opportunity here. We're really at the top of the first inning when it comes to network effects. I mean, we have been, as I've talked about before in previous conference calls, very intentional about this. And I think we've achieved a lot already in terms of ensuring that products and services can communicate with one another and performing integrations. But, you know, it takes time to execute on this. And I think I think, you know, there'll be different phases where different network effects will be activated. And I'll give you a great example of what I mean by phases. Right now, I believe the quickest meaningful revenue from a synergies perspective comes from CRH in the form of the clinical business. I mean, that's going to be just in 2022 in the U.S., a seven-figure revenue opportunity with hemorrhoid banding. And that is, that is not capital allocation from a, from a, you know, we're not buying anything there. We're, we're just executing on our device. We have major structural advantages and how profitable we can be and how we can offer those services, especially given the, the, the strengths that we have across digital marketing. So, so that's an immediate and significant, you know, synergy for the company. And, and, and, Otherwise, I think what you'll see, for example, with my health is as we populate more and more primary care capabilities around Ontario, there'll be greater network effects in terms of unlocking the value of those patients. As you may know, most of our primary care population in terms of patients served in clinics is in BC. And so we also have a great opportunity to activate a diagnostic business there. That kind of thing isn't something that you sort of spring up over weeks and months, but over years it becomes enormously compelling. And I do think, you know, over time, you know, just the, and I think I've mentioned this in the past, I see just the hemorrhoid banding business being a $50 to $100 million business over time. And I see, you know, whether it be diagnostics or primary care, I mean, I think over time these can be also $50 to $100 million businesses for us.
spk06: I appreciate that, Keller. And then just my second question with regards to your capital allocation, you mentioned earlier stepping down on the M&A activity. I think in more recent calls, I think you had an LOI pipeline of around 15 companies. We've seen you guys transact on some of those companies. And I'm just wondering, is the pipeline activity that you had even a couple of months ago still active? or have things changed given what's happening in the public markets with multiples? Maybe your observations where multiples aren't compressing as fast in the private side of things, and that's driving some of your decision-making to step back on the M&A side. So just wondering if the pipeline opportunities are still as active and if valuations where you guys are seeing private company valuations at the moment relative to public.
spk07: Yeah, I would say the pipeline is still very active. We still have a very active and engaged program. Our CorpDev team continues to meet a lot of different operators. I'd say we just have less urgency. Before, I think there was a lot of urgency to try and get these done so that we could, again, I think some of them were competitive. Some of them were associated with with making sure that we build enough substrate in certain markets to be relevant, I think. And of course, you know, the market was just very different back then. And I think now we, you know, we take our time, we do more, it's just more, I think this is just more back to a regular sort of environment where, you know, there isn't a dogfight for assets and, and you can really study them in a, in a, in a deeper way. And, uh, and, and we're also just focused on smaller deals right now, uh, because we think that's most accretive and, uh, and, and, you know, we, you've probably heard me before. Small is beautiful. Um, not to say we don't look at big deals at all. We continue to look at the odd, big deal, the odd, big strategic deal. And, uh, and, and we will continue to evaluate those opportunities. I just think we're a lot more choosy now. Um, And listen, there's a time with COVID where it was hard to go out and spend a lot of time with operators. So we're back to more of a normal course. I remember pre-COVID, whether it's Well or other companies I've been with, it's great to learn about these subjects and spend time with them and culturally understand their approach to operating and to how they treat their people and their practitioners and so forth. So I think I think we're just going to make better and better decisions and acquire better and better assets over time. I like this environment. It's great for me. Okay. I appreciate that call. Thank you. Thank you.
spk03: At this time, I would like to turn the call back over to Mr. Chivazi.
spk07: Thank you very much, everybody, for attending today's conference call. We really appreciate your continued engagement with the story, all the all the support that we've received, and we will continue to execute and look forward to seeing you for Q1 and as well our AGM later this year. Thank you.
spk03: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
Disclaimer