Following the company’s Q3 results, Beacon Securities analyst Gabriel Leung remains bullish on WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News TSXV:WELL).
This morning, WELL Health reported its Q3, 2019 results. The company posted a loss of $4.83-million on revenue of $8.19-million, a topline that was up 328 per cent over the same period last year.
“We continued to be very active in executing on our acquisition growth strategy in the third quarter,” said Hamed Shahbazi, chairman and CEO of Well. “We completed the acquisition of KAI and subsequently formed the Well EMR Group encompassing all of the company’s current and future EMR assets where we are seeing strong organic growth. With the proposed acquisition of OSCARwest, we continue to further consolidate the OSCAR-based EMR market and strengthen our position as the third-largest EMR service provider in Canada (based on our research). We have a very robust pipeline of potential acquisitions in both our clinical and digital portfolios and remain diligent in implementing our acquisition strategy.”
Leung summarized the quarter, which came in close to his expectations.
Well reported Q3 2019 results, which included revenues and EBITDA of $8.2M and negative $512k. We were forecasting $8M and negative $481k,” the analyst noted.
“Q3 results included a full quarter contribution from the acquisition of Oscar EMR vendors KAI, which closed on July 1st, along with OSCARprn (which closed June 12th). Consequently, the company’s digital services revenues increased from $178k in Q2 to $997k in Q3. Insured Clinical revenues were $6.2M and down from $6.5M last quarter reflecting seasonality. Non-insured clinical services were $973k, which was up from $727k last quarter,” the analyst added.
“Subsequent to quarter end on October 1st, the company completed the acquisition of 51% of SleepWorks, which should augment the company’s non-insured clinical services,” Leung said. “The company also has two pending transactions, including OSCARwest and 51% of Spring Medical Center, which should close sometime in Q4. When combined with positive Q4 seasonality, the company anticipates a q/q improvement to revenues in the quarter. The company also remains comfortable with hitting positive EBITDA in CY20. FCF was negative $184k, including $118k in operating cash flow and $66k in capex. There was also $472k in net financial lease payments and $147k in time-based earn-outs. The company ended the quarter with cash of $19.4M against debt of $8.9 (i.e. 8% semi-annual convertible debenture with $0.95 strike with a one-year force version if the daily volume weighted average trading price of the shares is greater than $1.25 for any consecutive trading days).”
Leung says he expects the company will focus on increasing the revenue per clinic numbers, continue to look to grow through acquisitions, and round out its leadership team with the potential addition of a new Chief Technology and Security Officer.
The analyst today maintained his “Buy” rating and one-year price target of $2.00 on WELL Health Technologies, implying a return of 39 per cent at the time of publication.
Leung thinks WELL will post EBITDA of negative $1.5-million on revenue of $32.0-million in fiscal 2019. He expects those numbers will improve to EBITDA of negative $100,000 on a topline of $36.1-million the following year.
Disclosure: Nick Waddell and Jayson MacLean own shares of WELL Health and the company is an annual sponsor of Cantech Letter.