Digital healthcare name WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL) kept its Top Pick status with Haywood Capital Markets after analyst Colin Healey reviewed WELL’s latest quarterly results in an update on Tuesday. Healey said solid fourth quarter top and bottom lines are signs of continued operational strength through 2023 for WELL.
Vancouver-based WELL Health released its Q4 2022 numbers on Tuesday before the market open, featuring record quarterly revenue of $156.5 million, up 35 per cent year-over-year, and adjusted EBITDA up six per cent to $27.2 million.
The company, which has a network of primary care, specialized care and diagnostic services clinics in Canada along with digital health tools including Electronic Medical Records and telehealth and clinic and virtual health assets in the US, finished 2022 with total revenue of $569.1 million, up 88 per cent from 2021. Its Virtual Services segment saw a 154 per cent increase to $192.4 million while Omni-channel patient services were up 66 per cent to $376.8 million.
Management guided for 2023 annual revenue of $665-$685 million for a growth rate of 17-20 per cent and a ten per cent year-over-year increase in annual adjusted EBITDA.
“With our contingent liabilities and deferred acquisition costs decreasing and our core cash flow increasing, we are in an excellent position to continue to have the option to allocate capital into new growth initiatives and/or further de-lever our debt position,” said Hamed Shahbazi, WELL’s Chairman and CEO, in a press release. “With our leadership position in the digital healthcare industry and continued cash flow generation, we are well-positioned for continued success in 2023 and beyond.”
Healey called the Q4 topline of $156.5 million a slight beat of his forecast at $149.6 million and the consensus call at $146.2 million, while adjusted EBITDA at $27.2 million was in-line with his forecast at $27.0 million and the Street’s estimate at $26.7 million. Gross margin at 51.3 per cent was slightly under the analyst’s forecast at 53.5 per cent and the consensus at 53.3 per cent.
Healey said patient visit data from the fourth quarter indicate very strong growth and he pointed to total patient interactions which were up 40 per cent year-over-year and up nine per cent sequentially.
“WELL continues to deliver rapid growth across financial metrics driven by its consolidation strategy which has been accretive by all accounts including margin,” Healey wrote.
“We continue to like WELL, underpinned by strong management and evolving technical offerings, as the company continues to grow organically and acquisitively,” he said.
With the update, Healey reiterated a “Buy” rating on WELL and $7.00 target price, which at press time represented a projected one-year return of 71 per cent.
On valuation, Healey said WELL is currently trading at an 11.7x EV/EBITDA of his 2023 estimates which compares to its services peers at 9.8x and its healthcare technology peers at 23.1x.
“Our valuation multiples reflect the broader investment base that WELL is reaching relative to small-cap peers and credit the company with strong execution of disciplined and accretive M&A to drive rapid growth. We utilize a 16.3x EV multiple of our 2023 EBITDA forecast to reach our $7.00 target price,” he said.
Disclosure: Nick Waddell and Jayson MacLean own shares of WELL Health Technologies and WELL is an annual sponsor of Cantech Letter.