WELL Health could see accelerated telehealth success, Laurentian says

Look for WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News TSX:WELL) to turn EBITDA-positive by the second half of the year, according to Nick Agostino, analyst for Laurentian Bank Securities, who in an update to clients on Wednesday said that the current COVID-19 crisis could speed the uptake of WELL’s new telehealth platform.

Vancouver-based WELL Health is a medical services company with both a network of currently 20 clinics (19 wholly-owned) in BC and a OSCAR-based electronic medical records (EMR) business to about 1,500 clinics in BC and Ontario, supporting over 8,280 physicians. Through acquisitions, WELL has become the third-largest EMR provider in Canada.

Ahead of WELL’s fourth quarter financials due on March 31, Agostino said he is calling for $9.1 million in sales and an EBITDA loss of $384,000, which would compare to Q4 2018’s revenue and EBITDA of $4.7 million and negative $105,000, respectively.

Agostino said his forecast is in line with the consensus take. “Focusing on QoQ growth (as YoY comparison impacted by transition to Dec. YE), we note growth from seasonality (winter months) in the Insured/Non-Insured Clinical Services base along with initial M&A contributions from Spring Medical (1 month at
+$200,000) and Sleepworks (+$425,000), and in Digital Services from the acquisition of OSCARwest EMR (1 month at +$30,000),” Agostino wrote.

The analyst estimated WELL’s annualized revenue run-rate at about $41 million, saying that the company’s clinical services and sticky EMR subscription model give it solid visibility in the currently volatile market. Moreover, Agostino pointed to the company’s telehealth platform VirtualClinic, which was launched earlier this month, as potentially faring well during the pandemic.

“The initial aim [with VirtualClinic] is to ramp up physicians in its clinical/EMR networks, although WELL has received interest from non-client parties. Furthermore in the wake of COVID-19, both the Ontario and BC governments expanded support for their telehealth programs, which could accelerate WELL’s base/revenues from this new module,” Agostino.

This morning WELL announced a $5.94-million strategic investment into Insig Corp., which it described as a a market leader in the telehealth space, with more than 100,000 patients using its platform.

The analyst estimated WELL’s current cash —following its recent $11.0-million convertible debenture issue and conversion of prior special warrants and partial convertible debenture— at about $19 million.

Looking ahead, Agostino thinks WELL will generate fiscal 2020 sales and EBITDA of $45.3 million and $0.9 million, respectively, and fiscal 2021 sales and EBITDA of $54.4 million and $2.7 million, respectively.

With the update, Agostino has reaffirmed his “Buy” rating and $2.50 price target, which at press time represented a projected 12-month return of 83.8 per cent.

On VirtualClinic, which connects patients and physicians and supports both longitudinal care with family practice visits and episodic care, WELL Health’s chief medical officer Dr. Michael Frankel said in a March 2 press release, “As a physician with experience working with various telehealth platforms over the past several years, I believe VirtualClinic+ is the most comprehensive telemedicine program in Canada due to its coverage of a number of different use cases and scenarios including virtual walk-in and due to its empowerment of family practice clinics to support existing attached patients,” Frankel said.

Disclosure: Jayson MacLean and Nick Waddell own shares of WELL Health and the company is an annual sponsor of Cantech Letter.