WELL Health Technologies Corp.

Welcome to the Well Health Technologies Corp First Quarter 2024 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 conference is being recorded. I will now turn the call over to Tyler Bada, Manager, Investor Relations. Please go ahead, sir.

Thank you, operator. and welcome everyone to Well Health's Fiscal First Quarter 2024 Financial Results Conference Call for the three months ended March 31, 2024. 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 laws. including feature-oriented financial information and financial outlook information. 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 wealth to differ materially from the anticipated results, performance, or achievements implied by such forward-looking statements. These factors are further outlined in today's press release and in our management's 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, assumptions, or circumstances on which any such statement is based, except if it is required by law. We may use terms such as adjusted gross profit, adjusted gross margin, adjusted EBITDA, adjusted net income, adjusted net income per share, and adjusted free cash flow on this conference call, all of which are 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 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 feature 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. Hamed Shabazi, Chairman and CEO.

Thank you, Tyler, and good day, everyone. We appreciate everyone for joining us today. We're extremely pleased to be with you and discuss Q1 2024, the quarter in which we achieved our 21st consecutive record-breaking revenue quarter. We're also pleased to note another record. This was a record-breaking net profit performance in any Q1 period in terms of IFRS net income as well as adjusted net income. As the first conference call for fiscal 2024, we believe this is an important opportunity to update our guidance for revenue and EBITDA while rolling out brand new guidance for free cash flow generation and provide commentary around our improving cash flow per share metrics, demonstrating the strength of our platform and the momentum of our business. The first quarter of 2024 exceeded all expectations, and we're proud to report that we've begun the year with an intense focus on enhanced profitability and capital efficiency. and are happy to report an 11% year-over-year improvement in the all-important free cash flow available to shareholders per share metric. I will speak more to this later, as it is thematically very important to today's call. You see, we believe we've reached an inflection point in the history of the company where due to the hard work and dedication of our team members and care providers, and especially due to our hard work in Q1 2024, where we reduced a significant amount of cost, We can now reduce our share issuances significantly and instead leverage our own cash flow to grow our business as well as attract and retain the best and brightest people. You may have noticed that we recently started using our stock buyback or normal course issuer bid. While the number of shares we're buying on a daily basis are not very material as compared to our overall float at roughly $10,000 per day, We want to make sure shareholders understand that this is the beginning of a sustained and purposeful pattern that speaks to optimizing our share structure and reducing share issuances of all kinds, including stock-based compensation, while growing and optimizing our free cash flow available to shareholders. This year, we're absolutely determined to deliver our best cash flow generation performance of our history, as well as the lowest amount of dilution since I started the company just over six years ago. While our optimism does stem from a lot of hard work on cost reduction and improved integration, it does also come from our sustained and elevated organic growth. We're pleased to report that we achieved organic growth of 13.5% year over year with approximately 3.5% contribution from absorption. As such, you will see over time that our stock buyback is symbolically and thematically very important as it ushers in a new period that we expect to be the norm. period that would be characterized by sustained growth in cash flow and improvements in reducing and then reversing dilution. Before I get into the financials, I will first review some key operational metrics. At the end of Q1 2024, 3,900 well providers and clinicians were delivering care across our physical and virtual clinics. In addition, there are more than 36,000 providers benefiting from our SAS and technology services. that has more than one third of all providers in the country, which we believe will continue to increase materially over time. Well achieved a record 1.3 million patient visits in Q1, 2024, an increase of 34% as compared to the previous year and representing 5.2 million patient visits on an annualized run rate basis. Canadian visits grew by 45% while US visits grew by 23%. Meanwhile, total patient interactions increased to a record 2 million interactions in Q1, an increase of 43% as compared to the previous year. Turning to our guidance for 2024, due to the strength that we're seeing, we're pleased to increase our annual revenue guidance to between $960 and $980 million. This increase in guidance reflects the recently absorbed 10 new clinics from Shoppers Drug Mart. We're also improving Our annual adjusted EBITDA guidance could be in the upper range of the $125 million to $130 million range we provided last quarter. In support of our operating plan for 2024, we have strategically implemented comprehensive cost-cutting measures, including a streamlined approach to staff restructuring, increased utilization of AI and technology for process improvement and optimization, consolidation of suppliers, and tighter integration of our business units. These initiatives have not only strengthened our operational efficiency, but resulted in millions of dollars of annualized cost savings, which really permit us to continue our strong growth and limit our dilution. In addition, we're providing new additional guidance for improving free cash flow available to shareholders to over $55 million in 2024, which would reflect an increase of 30% from $42.4 million in 2023. Yves Beaux will provide some additional color on this later in the call. But before I turn the call over to her, I'd like to highlight some key themes. One, the strategic alternative process for our U.S. digital health assets. Two, our clinic absorption model in Canada. And three, the success of our clinic transformation program. Let's first talk about the strategic alternatives for circle and waste. We indicated that we've begun considering strategic alternatives for Circle and WISP. We're pleased to report that we've hired two different global banks as advisors for each of Circle, Medical and WISP to help us with this process. And we believe that we should have important updates on this by the end of the year. You may be asking, why are we seeking strategic alternatives for two successful high growth businesses? Our primary reason is that WELL has a call option for both of these businesses, which provides us with several alternatives, including acquiring the remaining ownership of the businesses, seeking an IPO, or selling the businesses. Call options for both businesses extend to and conclude in the Q4 timeframe of this year. The second reason for seeking strategic alternatives is that we do not believe that capital markets are assigning a fair value for these two assets. Both Circle and WISP are high growth businesses that are operating at lower EBITDA operating margins than the rest of WELL due to their maturity, while investors today are primarily valuing the entire WELL business as a multiple of EBITDA. Hence, both Circle and WISP are essentially hidden within the larger WELL company valuation. We believe that unlocking the value of water both of these assets could result in a significant cash benefit to WELL shareholders, which we will use to reduce our debt issue a special buyback and or allocate funds into new cash producing businesses in the Canadian market where we have a greater synergy potential given our market leadership. As such, we believe this could be proved to be a positive catalyst for well and returning value to well shareholders. I want to reiterate that we are very pleased with the success of both Circle and WISP. Recall when we announced our agreement to acquire a majority position in Circle in September of 2022, it was at an approximately $5 million revenue run rate in U.S. dollars. And this year, Circle is expected to achieve approximately $100 million U.S. in revenues. Meanwhile, WISP had an approximately $30 million U.S. revenue run rate in October 2021, when we acquired a majority stake in the company. And this year, it's expected to achieve around 76 million U.S. in revenues, or approximately $100 million Canadian, demonstrating unquestionable value creation to our capital allocation strategy and execution. For the second theme, I'll provide an update on our clinic absorption and acquisition program in Canada. Well's current pipeline of new clinic opportunities consists of almost 40 clinics under an LOI agreement of which 10 of these clinics would be actionable under our clinic absorption model, where we absorb clinics into the Well network and the remaining 30 clinics would be under our regular M&A bolt-on program. Under the clinic absorption model, we're acquiring clinics for nominal cash costs in the range of less than 0.02 times revenue multiple compared to our regular M&A program where we may pay up to 0.5 times revenue multiple or in the range of three to five times EBITDA. The clinic absorption model is a very unique opportunity for Well. Under this absorption model, we take over the lease and the staff of the clinic and doctors join our network. There's minimal upfront capital costs in most of these cases, but there can be some relatively minor costs to secure data protection and improve IT. We're able to absorb these clinics for nominal purchase consideration because the doctors are facing such significant technology challenges, administrative burdens, that they're increasingly don't want to run their own clinics and just want to focus on providing care. We believe the consolidation and digitization of over 20,000 primary care diagnostic allied health and longevity clinics across Canada is a once-in-a-lifetime opportunity. With over 175 clinics operating in 97 facilities across Canada, Well is the clear market share leader. Yet we just represent just shy of 1% market share of this $35 billion market opportunity for physician spending, which is a key component of the $330 billion spent every year in all health care costs across Canada. We believe that the Canadian market continues to be an enormous untapped opportunity for wealth and very much remains a land grab situation. We have conviction that we can grow our Canadian business to multiples of its current size in the near future. The third theme is the success of our clinic digitization and transformation program. When we acquire or absorb primary care clinics, they're typically operating at 1% to 3% EBITDA margins. the large Manitoba clinic and the MCI Ontario clinics that we acquired in Q4 were actually operating at a negative EBITDA margin. Through the clinic transformation process, we generally implement a number of technology solutions and processes, including online booking, waiting room automation, workflow optimization, accounting shared services, virtual care, billing improvements, as well as our AI suite of products, which are unmatched by any market participant. Our goal is to get these clinics to operating in the 5% to 10% EBITDA margin range within the first year and to over 10% margins within 18 to 24 months. This is not easy. Our clinic digitization and transformation program is performing better than ever. The original cohort of 18 clinics in BC that we acquired from Dr. Frankel in 2018 is now operating at over 13% EBITDA margin. Comparatively, the cohort that we acquired in 2022 achieved over 10% EBITDA margins within 18 months and are now operating at over 12% EBITDA margins. We're now very closely watching our 2023 cohort of clinic absorptions and acquisitions. Included in the 2023 cohort is the large Manitoba clinic and MCI Ontario clinics. Recall, these clinics were not profitable and caused downward pressure on our EBITDA margins in Q4. I'm pleased to announce that the digitization and transformation efforts at these clinics is running ahead of plan. And as of today, both Manitoba and NCI Ontario are now running at positive adjusted EBITDA. Going forward, we expect to continue to increase adjusted EBITDA margins at these clinics over the next year. And with that, I'd like to turn the call over to our CFO, Eva Fong, who'll provide some financial context. I'll then come back and provide further commentary on our business units and outlook. Eva.