The fourth quarter is looking good for WELL Health Technologies (WELL Health Technologies Stock Quote, Chart, News, Analysts, Financials TSX:WELL), according to Desjardins analyst David Newman. Newman delivered an update to clients on WELL on Thursday where he reiterated his “Buy” rating and target price of $11/share for a projected return of 151.1 per cent.
An omni-channel digital health company with a number of business segments and operations in Canada and the United States, Vancouver-based WELL Health has put an emphasis on acquiring digital and physical healthcare assets since pivoting to the field in 2018, largely acquiring properties through various mergers and acquisitions.
Newman’s most recent analysis comes with the pre-release of WELL’s fourth quarter financial results on Thursday.
The company announced it expects to report a record fourth quarter exceeding management’s previous guidance, with organic growth and acquisitions both playing a key role. WELL Health said it ended the fourth quarter with an annual run rate above $450 million, which comes out ahead of the previous guidance of ‘approaching $450 million’ and implies fourth quarter revenue exceeding $112.5 million for minimum sequential growth of 13.6 per cent, beating the Desjardins expectation of $106.5 million.
Meanwhile, the pre-release guidance suggests the company is nearing a $100 million for an EBITDA run rate, meaning the quarterly EBITDA would be around $25 million to beat the Desjardins estimate of $21.8 million and the consensus projection of $22 million.
The company’s potential growth in the quarter was headlined by over 965,000 patient interactions in a typically strong fourth quarter, with 692,913 in total omnichannel patient visits, up 12 per cent year-over-year and 19 per cent sequentially.
“WELL’s business has never been stronger as evidenced by our solid patient visit metrics, a key leading indicator of our financial performance and profitability given the historically resilient per unit economics of our patient services business,” said Hamed Shahbazi, Chairman and CEO of WELL Health in the company’s January 20 press release. “With our strong balance sheet and positive cash generation profile, WELL is favourably positioned to continue to grow both organically and inorganically.”
Meanwhile, in its first full quarter as part of the WELL family after closing on October 1, Wisp, a telehealth and e-pharmacy solutions business in the US, reported over 126,000 asynchronous patient consultations, helping WELL’s virtual health sector achieve a combined revenue run rate approaching US$70 million in the quarter, with an expectation of clearing US$100 million by the end of the year, representing a 22 per cent increase from management’s previous update.
For Wisp, the company’s annual run rate has grown to $36 million as of the end of November, a 20 per cent organic sequential increase compared to just three months prior. Wisp is looking to maintain its rapid growth trajectory in 2022, partially driven by expanding its services into Canada.
WELL said its digital-first primary care platform, Circle Medical, posted an annualized revenue run rate of US$28 million as of November, yielding a 195 per cent year-over-year increase, with an expectation of exceeding US$30 million by the end of the 2021 fiscal year.
“WELL’s US-based virtual services businesses have performed exceptionally well in the past few months,” Shahbazi said on December 9. “Both Circle Medical and WISP have proven to be high organic growth investments, and exemplary additions to the WELL portfolio. Exceptional leadership and differentiating business models makes each of these virtual care businesses uniquely positioned to continue to win market share in the US and beyond.
Another WELL subsidiary, CRH, also turned in a strong pre-release report, with an expectation of approximately US$43 million in FCF before tax and leverage costs in 2021. The company’s fortunes were buoyed by the acquisition of Utah Anesthesia, which features an EBITDA annual run rate of US$2.5 million. In addition, WELL opened a new hemorrhoid treatment clinic in Toronto and completed the acquisition of another centre in Surrey, BC, both of which are 51 per cent owned by WELL, with plans to build more in the coming months.
With the new update, WELL said it’s also reactivating its share buyback program, with Newman saying, “The share price has drifted ten per cent year-to-date in 2022 (trading at 2.6x EV/2022 sales versus peers at 2.8x (was high single digits at the peak), which we believe partly reflects weak performance across the healthcare technology sector (flight to safety given Omicron risks, divergence from tech names given potential interest rate hikes, etc). WELL has ample liquidity to support its NCIB, M&A (tuck-ins) and growth investments.”
Overall, WELL Health’s stock price is down 48.7 per cent over the last 12 months and down 17.5 per cent to begin 2022. WELL hit a 52-week high point of $9.23/share on February 24 before beginning its descent to its 52-week low of $3.83/share set yesterday.
Disclosure: Nick Waddell and Jayson MacLean own shares of WELL Health Technologies and WELL is an annual sponsor of Cantech Letter.