WELL Health Technologies Corp.

Hello, everyone, and welcome to the Well Health Technologies Corp. Fiscal First Quarter 2022 Financial Results Conference Call. My name is Michelle, and I'll be your operator for today's call. At this time, 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 conference is being recorded today, May 12, 2022. I would now like to turn the call over to Pardeep Sangha, Vice President, Investor Relations. Mr. Sangha, you may begin.

Thank you, Operator, and welcome everyone to Well Health's 2022 Fiscal First Quarter Financial Results Conference Call for the three months ended March 31, 2022. 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 yesterday. 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, many of which are outside of wealth control that may cause the actual results, performance or achievements of well to differ materially from the anticipated results, performance or achievements implied by such forward-looking statements. These factors are further outlined in yesterday'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 change in our expectations or any change in events, conditions, consumptions, or circumstances on which such statements are based, except if it is required by law. We may use such terms as adjusted gross profit, adjusted gross margin, adjusted EBITDA, Shared EBITDA, adjusted net income, and free cash flow 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 definition set out in today's press release in Management Discussion Analysis. The company believes that adjusted EBITDA is a meaningful financial metric as it relates to measuring cash generated from operations which the company can use to fund working capital requirements, service future interests, 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. With that, let me turn the call over to Mr. Hamed Shabazi, Chairman and CEO. Hamed.

Thank you, Pardeep, and good day, everyone. We hope that you're all keeping safe and healthy. We truly appreciate everyone for joining us today. First quarter 2022 was an exceptional quarter which exemplified our organic growth potential. We're very pleased with our Q1 results in which revenue increased by 395% year over year compared to Q1 2021, catapulting the company to over half a billion in annualized revenue run rate. Organic growth was 15% based on a year over year basis in the first quarter despite the effects of seasonality that normally exist in the first quarter in our CRH medical business, which is a substantial business for us. This represents a 50% acceleration from the previous quarter's figure of roughly 10% organic growth. These impressive results were driven by strong patient visits in the quarter. During Q1 2022, well delivered more than 1 million combined omni-channel diagnostic and asynchronous patient interactions. We've added significant scale to our business and increased our leadership position as the preeminent end-to-end healthcare company in Canada, while our U.S. businesses continue to flourish in their respective sectors. For the benefit of new investors and listeners on this call, I'll first provide some background on the company. Well, it's a practitioner-focused digital healthcare company. While technology has touched nearly all facets of our lives, healthcare is being slow to innovate. Basic applications such as empowering patients with their medical record, accessing practitioners through telehealth, and booking and managing appointments online has only been a recent phenomenon. Due to the fragmented nature of healthcare IT, we found that individual practitioner operators find the suite of services available in the marketplace to be confusing, difficult to implement, and navigate, and has resulted in low adoption of most technologies. Thus, the under digitization that we all see when we go to the doctor's office. Well, we believe that post-COVID now we are entering a golden period where healthcare practitioners are finally actively seeking and implementing digital tools and technologies to help them modernize their practices. This is an exciting time because it means that care providers are finally starting to see significant improvements in their operating efficiency. in terms of improving their economic output, and most importantly, delivering better patient outcomes as they take on more of these tools and technologies. Make no mistake, healthcare is still driven by care providers. Doctors, nurses, allied health professionals, and clinicians take care of people when they need help. And these healthcare practitioners are the precious resource in the healthcare ecosystem. In fact, of the $300 billion healthcare ecosystem here in Canada, More than 14% of the sum goes to pay doctors, a loan representing over $40 billion annually. Well's big idea is to offer healthcare practitioners its own practitioner enablement platform, which has a myriad of features, including but not limited to comprehensive end-to-end practice management tools, inclusive of virtual care and digital patient engagement capabilities, such as electronic medical records, revenue cycle management, e-referral, 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 offering. As we've discussed before, WELL offers this platform in two ways. One is through an a la carte SaaS offering, and the second is through a fully managed service. Healthcare practitioners have a choice. They can pay for our tools and implement them in their own patient services business, or they can join one of our virtual or physical clinics and have us provide a fully managed service, which means that we not only use our platform to provide improved efficiency and patient engagement, but we also provide patient origination if needed, hiring and firing of MOAs or medical office assistants and support staff. We help run these businesses for doctors so that they can focus on the care. Increasingly, we are seeing more and more doctors and care providers want to focus on the care and not on the business. This is a clear and unmistakable trend. What is unique here is that the vast majority of our business is comprised of the fully managed solution. This means that while our SAS offering is used by almost one out of every four doctors in Canada, it is still far outweighed by our non-SAS business. This is because when we sell our SAS tools, we capture roughly 1% to 4% of the economic output of a physician, whereas when that care provider joins a well patient services business, we capture anywhere from 20% to 50% of their economic output, and they are happier. 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 spend less time on the burdens of back office and administration and running a business. This not only increases their billable hours, but also improves their operating environment and lessens physician burnout, a significant and serious matter that is an understated aspect of healthcare. Another way of thinking about the wealth story is that we're providing investors with a unique opportunity to not only have economic exposure to this phenomenal group of humans who provide care, but also derive benefits as care providers, generating operating efficiencies and improvements as a result of innovation. Over the past four years, we have grown both organically and inorganically into a category leader across numerous verticals within the Canadian and U.S. healthcare systems. We have sought to build a compelling ecosystem that leverages technology to empower practitioners. We believe Well is the most consequential health system in Canada, and we have a burgeoning business in the U.S. Our businesses serve millions of patients, empowering tens of thousands of practitioners, and employ thousands of talented people. Operationally, Well has organized all of its businesses into two key lines of business, the first being omni-channel patient services and the second being virtual services. These two lines of business are both profitable and growing. Omnichannel patient services includes all patient services that have any material exposure to in-person operations. This includes our clinic network, My Health, and CRH. Omnichannel patient services generates most of our revenue in EBITDA. However, it is a slower growth business. 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, and is comprised of highly scalable digital businesses, which today generate less revenue nipita in the company as a whole, but are growing at a much faster rate. I would now like to provide some color on our recently announced spot deal financing. Yesterday after market closing, well announced a bought deal offering of common shares. The offering was a comparatively small offering as compared to our previous financing, providing $34.5 million inclusive of the underwriters option or green shoe. We're pleased to report that even during these unprecedented times, the offering quickly sold out and was significantly oversubscribed and completed shortly after launch. Despite This additional demand, we did not upsize the offering as we were looking to minimize dilution to less than 5%. However, we did accept a little bit of dilution here because we felt that given these unprecedented times, it was important for us to improve our defense and enhance our offensive posture. Let me first speak to the defense. We're entering into a new phase of macroeconomic uneasiness brought upon by war, escalating inflation, increasing interest rate environment, and continued COVID-related uncertainties, including recent harsh lockdowns in markets such as China that are rippling through the supply chain. While we have a solid balance sheet, given the period that we're entering, we felt that it was prudent to have more cash on the balance sheet to address any rainy day scenarios that could arise. To be clear, I don't anticipate such rainy days, but I often feel that management teams are too focused on optimizing for price and put themselves in a position where they cannot withstand shocks to their business and put themselves in a position to suffer catastrophic value loss because they have not practiced good risk management. As a result of these additional funds on the balance sheet, we have further improved our net debt and have put the company on a more resilient footing. This is all about risk management, and I believe this financing positions us as having a better risk posture. Now I'll speak to how these funds position us for improved offensive posture. As of late, we have seen the weakness in the market produce some very significant opportunities for highly accretive capital allocation, opportunities which in our view are unprecedented and only available while the markets continue these declines as a result of the challenges that the world is facing. We felt that this was absolutely the right thing to do. Otherwise, we would need to be in a fairly defensive posture given market conditions and could not participate in some of these growth opportunities. As capital allocators, we don't just look at the price at which we're issuing stock. We look at what multiples we can deploy such capital. If there's a significant improvement or arbitrage that can benefit well in a shareholder's meaning that we can continue to grow revenues, EBITDA, and free cash flow available to shareholders on a per share basis, we should do that. Again, the key here is to grow revenues, EBITDA, and free cash flow available to shareholders on a per share basis. So we are pleased to announce that we have a number of such targets already lined up and ready to transact within the next few weeks and months. However, we are not going to be proceeding very quickly. we are going to be proceeding very cautiously and only taking deals that demonstrate the greatest accretion. This means that there is really no deviation from our previously stated plan. We had indicated before we are not interested in large M&A and we're interested in focusing on smaller tuck-ins. This additional capital will put us in a position where we can actually continue with our plan. Otherwise, given market conditions, we would have needed to be more defensive than I would have liked. We will be measured and methodical as always, but we will have clearly demonstrated that we have what it takes to identify, acquire, integrate, and benefit from acquisitions of all sizes. This is why we went from buying a small amount of shares as part of our NCIB or buyback program to selling some stock and adding cash to Treasury. We understand that this could have come across as counterintuitive given that these actions occurred within a few weeks of one another, but we want shareholders to consider a few things here. One, we made very few purchases of stock before at $4.85, a total of 50,000 shares in total, which really was designed to demonstrate that we felt the price of the shares was undervalued. To be clear, we do not believe the fair price of our shares to be $3.70 or anything close to that. But we also understand that the sentiment in the capital markets is currently very bearish for the reasons I mentioned before. And we felt it was important to be practical. and necessary to raise a small sum at this juncture to improve our defensive and offensive posture. To that end, we've limited supply at these levels, and while we could have taken a lot more capital, we decided to restrict to the most patient and supportive investors. We do not anticipate much of the stock to be in the market anytime soon. It is phenomenally allocated. We believe when it's all said and done, the accretion dilution benefit associated with raising these funds will far outweigh in their benefit to shareholders. Lastly, investors should consider that in accepting these funds into our treasury, we are able to attract world-class investors to invest in this round at a time when the concept of a bought deal is virtually unheard of. Very few are happening, if any. We are pleased to announce that the lead orders in connection with the offering are from a large international sovereign wealth fund, in fact, one of the world's largest such funds, as well as Hong Kong businessman Li Ka-shing and his partner, Selena Chow. The financing also included orders from a large multibillion-dollar Canadian pension fund and another award-winning multibillion-dollar asset manager very much known for investing in top-tier management teams. Well, shareholders should feel very confident and reassured that their company has not only been enhanced from a defensive and offensive perspective, but it has also done so while enlisting the support of extremely powerful and supportive institutions who now have a reason to further support and back well. We have gone from strength to strength. The company intends to use the net proceeds of the offering to fund growth initiatives, including internal capital allocation opportunities with high IRR, as well as potential future acquisitions in the areas of physician acquisition, higher margin specialty clinics, and executive health opportunities. We are deeply appreciative to Mr. Li Ka-shing and one of the world's leading sovereign wealth funds for their support of this financing initiative. With that introduction, I would now like to turn the call over to our CFO, Eva Fang, who will review the financials for the first quarter of 2022. I will then come back and provide further commentary on how our business units and our future outlook