Q3 2021 WELL Health Technologies Corp Earnings Call
Good afternoon, and welcome to the World Health Technologies Corp, third quarter fiscal 2021 financial results Conference call. My name is Michelle and I'll be your operator for today's call at.
At this time 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 today November 10, 2021, and I would now like to turn the call over to Mr. Hardy, Zhang Vice President of Investor Relations. Mr. <unk>. Please go ahead Sir.
Thank you operator, and welcome everyone to all the health 2021 fiscal third quarter financial results conference call joining.
Joining me on the call today are how much your body, chairman and CEO and Eva <unk> the company's CFO.
I Trust that everyone has received a copy of our financial results press release that was issued earlier today listeners are also encouraged to download a copy of our third quarter financial statements and management's discussion and analysis from SEDAR Dot com.
Portions of today's call other than historical performance include statements are forward looking information within the meaning of applicable securities laws. These statements are made under the safe Harbor provisions of those laws forward looking statements are necessarily based upon a number of estimates and assumptions that while considered reasonable by management are inherently subject to significant business economic and competitive uncertainties.
<unk> and contingencies.
These forward looking statements involve known and unknown risks uncertainties assumptions and other factors that many of which are outside of wells control that may cause the actual results performance or achievement of well to different materially from the anticipated.
<unk> performance or achievement implied by such forward looking statements.
These factors are further outlined in today's press release and in our management 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 don't 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 are sick when times on which any such statement is based except as required by law.
We may use terms such as adjusted gross profit adjusted gross margin adjusted EBITDA showed EBITDA on this conference call today, which are all non-GAAP and non iron for us measures for more information on how we define these terms. Please refer to the definitions set out in todays press release and in our Benjamin discussion and analysis.
The company believes that adjusted EBITDA is a meaningful metric as it generally is it measures cash generated from operations, which the company can use to fund working capital requirements service future interest and principal debt repayments and fund future growth initiatives adjusted.
Adjusted EBITDA should not be construed as an alternative to net income or loss determined in accordance with I for us.
And with that let me turn the call over to Mr. Tom how much about the chairman and CEO of wealth.
Thank you Prady and good day, everyone, we hope that you're all keeping safe and healthy and we truly appreciate everyone for joining us today.
I'll begin with a brief introduction to well for any newcomers to the call well health as a technology enabled health care company, whose mission is to positively impact health outcomes and.
And to empower and support health care practitioners and their patients globally.
Our overarching mission has always been to empower healthcare practitioners, we believe that digital health innovations help practitioners become better providers.
It helps them become more efficient and provide better care and deliver more value.
The whole idea of well is to participate in the Digitization and modernization.
<unk> and fragmented healthcare sector, which is one of the largest services sector.
Any economy.
Operationally wealth is organized all of its businesses into two lines of business. The first one being omnichannel patient services and the second being virtual services.
Omnichannel patient services includes all patient services businesses that have any material exposure to in person operations.
In addition to virtual care <unk> other business models.
While owns and upgrades Canada's largest network of outpatient medical clinics, serving primary and specialized health care services and as a provider of leading multinational multi disciplinary telehealth offering.
Based on our based on our knowledge, we are the market leader in Omnichannel patient services in Canada today.
And we will look to build on that lead purposely and ambitiously over the next year we.
We don't know of any other provider in Canada that has anywhere close to the capacity of delivering both physical in person and outpatient services to the same degree as we can and now with my health in the family or patient care scope includes a substantial specialized care and diagnostic offering.
Our second line of business virtual services is comprised of businesses that are almost entirely digital in nature inclusive of SaaS and services revenues.
Revenues from the companies.
Practitioner enable that platform or patient services businesses that have little to no exposure to in person care.
<unk> has built an innovative practitioner enablement platform that is used to power health care practitioners, both inside and outside of world own Omnichannel patient services offering.
This platform and its tools software products and services is compelling and is rapidly, making well a one stop shop to help support and advance health care practitioners their medical clinics and of course their patients. The platform includes practice management and EMR capabilities.
The health services billing and revenue cycle management solutions digital health productivity apps and.
An extensive array of digital patient engagement features such as online patient booking waiting room automation and self service mobile check in along with data protection solutions.
These two lines of business exemplified wealth business in a way that is easy to track and understand both are profitable and both are growing.
Omnichannel patient services as being our patient services business that has material exposure to brick and mortar.
Operations, but also has significant technology enablement.
This line of business is expected to generate approximately three quarters of our total revenues in Q4, 2021 and generates the vast majority of our EBITDA.
As our virtual services line of business has very little to no exposure to brick and mortar and is comprised of super scalable digital businesses, which today generate less EBITDA, but are growing at a much higher rate.
With wisdom family, our virtual services business is forecasted to now exceed over $100 million Canadian.
On a run rate basis, which is an incredibly important milestone for us.
So in summary, Omnichannel patient services has higher revenue and EBITDA, but grow slower and virtual services, which should now exceed $100 million in revenue.
It's growing much faster stay tuned.
Later in our remarks today will be providing some increased color and outlook on organic growth, which we believe investors will find compelling.
I will provide a quick summary of our Q3 financial results as EBIT <unk> will then provide a more detailed financial analysis later in the call.
We're pleased to report another outstanding quarter for the company as a result of the growing success of our practice sharing on the platform and strong financial performance from our recent acquisitions.
In the third quarter, we increased overall revenue by an impressive 711% to $99 3 billion, just shy of the $100 million Mark.
In addition, we achieved adjusted gross profit of approximately $50 million, which was an increase of almost 10 times. The adjusted gross profit from one year ago.
And our adjusted gross margin percentage expanded to over 50% for the first time in history.
We now have accomplished four quarters in a row of positive adjusted EBITDA and we achieved record adjusted EBITDA margins of 22%.
Both our revenue and adjusted EBITDA for Q3, not only exceeded analyst consensus expectations, but also beat the highest analyst revenue and adjusted EBITDA estimates on the street.
During Q3 2021, 55% of total revenues were $54 2 million was generated in the United States, while 45% of total revenues or $45 1 billion was generated in Canada and other locations.
In Canada, we are the leader in the Tech enabled health care sector with an end to end ecosystem of outpatient clinics, providing primary care Allied health specialized care and diagnostics and layered on top of that we are a top three telehealth network.
Top three EMR business and number one number one provider of digital apps and practitioner enabled tools in the country.
We're building an end to end ecosystem that we believe will be Canada's most consequential health care network.
Comparatively in the United States. Our focus is on a few key specialty verticals, such as serving the gastrointestinal market.
Providing women's health services.
And a growing primary care business that has an emphasis on telehealth delivery of <unk>.
Longitudinal care and mental health.
Now for an update on some of our key asset I'll start with my health.
During the third quarter, well completed its acquisition of my health, a leading provider of specialized care telehealth services and accredited diagnostic health services in the province of Ontario.
My health represents a major acquisition for the company as it boosts wells free cash flow. It accelerates wells revenue EBITDA growth profile and has established a strong presence of diagnostic and specialty services in Ontario for the company.
This is our first quarter that includes my health revenue, so I'd like to provide some additional details on this business.
My health specialist consultations and diagnostic care is focused on four main areas.
Cardiology.
Bone muscle health women's health and cancer diagnostics.
With the my Health acquisition, we provide a chain of services starting from telemedicine.
Primary care specialist consulting diagnostic care pharmacy, and health record access there is a significant effort within my health to provide a robust continuity of care to the patient and along the patient journey.
With this foundational acquisition well became the largest owner operator of outpatient clinics.
In Canada.
Since joining the well family My health has completed the acquisition of.
Nuclear imaging and nuclear Medicine clinic East of Toronto in Ontario.
Bringing the total number of my health locations to 49.
My health owns more than 90000 square feet of clinical space, which affords the opportunity to expand additional services to the market.
My health is certified as a great place to work for the past five years.
This certification is obtained through an annual survey of all employees on criteria, such as credibility respect fairness pride camaraderie and performance.
A positive might help culture as a competitive advantage in today's tight labor market.
My hope is the only chain of independent health facilities that have been accredited by <unk>, Canada. This is the same organization that accredits hospitals in Canada.
They credited my health with Commendation, which is a testament to my health protocols and patient safety standards.
We've already started to connect my health with other well assets My health is already leveraging the <unk> technology from our Investor <unk> simple for a pharmacy delivery and we are in the process of establishing referral links from our telehealth programs to my health such that patients can quickly and easily be processed for diagnostic procedures.
Furthermore, we would like to recognize the my health team for being selected by the Canadian Federal government to provide medical examination and associated diagnostics to newly arrived refugees from Afghanistan.
We're very proud of the work that my health has done in this regard to serve in this humanitarian effort.
And now I'll say, a few words about CRH medical.
<unk> core business is performing beautifully with strong case loads and stable per unit economics, we're very pleased with their performance of CRH had another great quarter in Q3 2021 series.
<unk> revenue of approximately $38 6 million U S, which represents 27% year over year growth.
As compared to Q3 2020 as measured in U S dollars.
CRH completed a record a record of almost 123000 anesthesia cases in this third quarter, a slight increase from the previous record in Q2.
CRH also sold over 'twenty $100 leg in units in the second quarter.
CRH is also making a number of strides towards digitizing legacy processes to improve areas of operation. A key example of this is its revenue cycle management function.
Over the past quarter CRH has been working on implementing tech enabled revenue cycle management tools and products.
We're expecting these improvements will result in significant savings in the coming quarters, which will drive noticeable bottom line improvements.
As part of wells ecosystem now sure it should be instrumental in unlocking opportunities for wealth other business units.
CRH is already working closely with our source 40 for cyber security business unit to provide cyber security tools to Gi practices sourced 44 has already moved past the pilot stage with its first CRH customer and secured a significant contract which will deliver over $30000 USD.
Sure.
Well, it's also working on ramping up patient services using the old Reagan system its own patented and FDA approved best in class Hemorrhoid banding system.
We have now initiated our first banding focused clinic in Canada, a de Novo site in the greater Toronto area that is a hemorrhoid banding clinic as.
As well as started to offer bending patient services and our XL in the Montreal clinic system.
As you May remember CRH owns the regen Med Tech device, a patented FDA approved device for bending hemorrhoids, what believes that the banding patient services opportunity in Canada alone could be a material business and has plans to open several new de novo sites over the next few months.
This is an excellent example of a clear and positive synergy between CRE and <unk>.
Carriage has the industry, leading band like Gator system, delivering outstanding patient outcomes.
However, historically CRH had never provided patient services with its own intellectual property.
It had generally sold its intellectual property the clinicians who have generated hundreds of billions of dollars with its technology.
CRH is business plan did not consider patient services because it didn't have the experience and providing patient services, whereas well has extensive experience in providing clinical services as Canada's largest owner operator of outpatient clinics.
We look forward to providing updates on our growth in patient services fueled by our <unk> device in 2022, as we expect this to emerge into a growing source of revenue for the company.
When we acquired CRH. It was a provider of two products and services to the GI channel, it's sold or Reagan bending products and provide industry just surfaces to Gis for routine colonoscopy.
Proud of the fact that we have now added two new sources of revenue.
Cyber security and bending patient services, which we which means we are now at four revenue streams.
We'd like to add at least one or two more revenue streams in the next few months as we are currently considering a number of new services.
When we announced the acquisition of CRH. We also indicated that we were determined to leverage the power of digital enablement to further empower the sales of our Reagan devices.
We're also pleased to provide an update on our new digital resources to promote our rigid business, we're making strong progress in this area and expect to rollout a number of new digital business to consumer sites.
And resources before the end of the year.
We also submitted our U BDC digital Gi and Reagan focused app to Apple and expect to have that operational in commercially deployed within the next few weeks.
We believe these digital resources with will further accelerate our efforts to drive organic growth across our device sales segment and well allow us to partner and provide our Gi partners and well itself with opportunity to grow patient services revenues.
The CRH acquisition is working we're making progress in terms of unlocking new revenue streams in CRH is valuable Gi channel and we're both making progress with Digitization.
As you can see CRH core business is healthy and firing on all cylinders.
And now on to our circle medical business.
Our U S. Telehealth efforts with circle medical are also gathering steam.
<unk> is currently on an annualized revenue run rate approaching 24 million U S. As of the end of October.
Monthly revenue for the month of October is expected to have over 300% growth compared with the same period last year.
Circle Medical ended October with 152 providers on its platform an increase of 424% compared to 29 providers in October of last year.
Given the growth trajectory that circle medical is on we're continuing to reinvest in the growth of its business.
As a rapidly growing telehealth provider, we don't believe circle medicals being properly priced into the wealth story currently for instance, when we announce.
The deal Circle was just at $5 billion in its revenue run rate there.
We are now approaching 24 billion U S. Just over a year later and continuing to grow and expand rapidly.
We believe circle medical will continue to grow well into 2022 and be an important asset in the U S health care ecosystem.
While well does have a call option to acquire the balance of circle sure.
Also has the right to partner with management.
And potentially launch circle as a separate IPO.
This should be considered in the value of circle and by extension well health.
And finally I'd like to talk about our recent acquisition of West.
With the Silicon Valley companies that is a national provider of telehealth and E pharmacy solution specializing in women's health delivering solutions for female reproductive and sexual health elements to patients across all 50 states in the U S.
When we announced the <unk> acquisition the company was growing at over 100% year over year and was on a $30 million revenue run rate, which is now approaching close to $33 million.
Revenue run rate only a couple months later.
<unk> gross margins exceeding 65% with majority recurring subscription revenues and has achieved positive EBITDA over the last few quarters.
Which business plan is working and the business is growing aggressively.
In early planning on launching wished in Canada by integrating with our Investor Pill way, which is an E pharmacy platform that can programmatically drive all fulfillment of with products and services here in Canada.
I'd like to turn the call over to our CFO <unk>, who will review the financials for the third quarter I will then come back and comment on our future outlook. We will then conclude the call with a question and answer session.
Thank you Amit I am pleased to report that we had very strong quarterly results for the third quarter ended September 30 of 2021.
Our third quarter results were as follows.
<unk> achieved record quarterly revenue of $99 $3 million to include the 2021 compared to revenue of $12 2 million generated during Q3 2020.
An increase of 711% driven primarily by the acquisitions of CRH and my health.
<unk> accounted for revenue of $48 7 million during the third quarter, while my health accounted for revenue of $19 2 million.
Well virtual services revenues increased to $18 million in Q3, 2021, representing a nine 597% year over year growth as compared to a virtual services revenue of $2 6 million in Q3 2020.
Well achieved record adjusted gross profit of $15 million in Q3, 2021, representing an 890% year over year growth as compared to adjusted gross profit of $5 million in Q3 of last year.
Well achieved record adjusted gross margin percentage of 53% during Q3 2021 compared to adjusted gross margin percentage of 41, 2% in Q3 of last year. The increase in adjusted gross margin was due to the addition of higher margin CRH My health and virtual services.
Revenue in the quarter.
Adjusted EBITDA was $22 3 million for Q3 2021 compared to adjusted EBITDA loss of 153000 for Q3 2020.
Adjusted EBITDA was positively impacted primarily by the addition of CRH and my health during the quarter.
Our adjusted EBITDA margin for Q3, 2021 was a healthy 22, 4%.
Net loss attributable to well shareholders was $12 $3 million or earning per share loss of <unk> <unk> per share for the three months ended September 30 of 2021 compared to a net loss attributable to well shareholders of $3 7 million or earnings per share loss of <unk> <unk> per share for the three months ended sept.
Timber 30 of last year.
Well ended Q3 with a very strong balance sheet.
As of September 30 of 2021, well had cash and cash equivalents of $38 7 million plus restricted cash of $32 7 million. The majority of which is allocated for the acquisition of <unk>, which was completed on October one 2021.
As at September 32021, the total drawn amounts on the both the CRH and my health credit facilities is approximately $282 million in Canadian dollars.
As of today, well continues to have approximately $280 million and Canadian dollars of Undrawn credit facilities available to fund future acquisitions. In addition to the cash on its balance sheet.
Im also pleased to report that the company is compliant with all covenants related to his credit facilities.
Our head count has increased substantially over the past year with the acquisition of CRH and Michael <unk>.
At September 30 of 2021, our total head count of non clinical employees and consultants across all business units was approximately 660, and we had over 2000 health care providers and clinical staff across the entire organization.
In terms of our share capitalization recently as of November 19, 2021 will have $222 million 280381 will be dilutive securities issued in outstanding.
Please keep in mind that wealth revenue per share went from <unk>.
Q3, $2022 48 in Q3 2021 on it and dilutive basis. This reflects a 469% increase in this all important metric demonstrating that wells capital allocation and organic growth program is delivering real value to shareholders.
Our M&A program continues to successfully execute and follows a disciplined capital allocation strategy.
During the third quarter, we completed the following transactions.
On July 15, well compete at the 100% acquisition on my health, a leading provider of specialized care and diagnostic health services.
The Companys CEO each subsidiary completed two majority stake acquisitions during the quarter.
On August 2nd C.
<unk> completed a 61% acquisition of greater Washington, and as DCF associate provider of Gi related anaesthesia services at two locations in Napa <unk>.
And on August 30th CRH completed a 70% majority stake acquisition of Destin anesthesia and located in the state of Florida.
Also on August 31, the Companys My health subsidiary completed the acquisition after have nuclear imaging and nuclear medicine cleaning east of Toronto.
In Ontario, Canada.
Subsequent to the end of the quarter, we completed the following additional acquisitions and strategic investments, which will have an immediate positive impact on our Q4 results.
On October 1st the company completed its acquisition of <unk>, a leading national.
Provider of Telehealth and pharmacy solutions.
<unk> Women's health we.
We acquired a majority stake position of approximately 53% and with <unk> for a total transaction value of approximately U S $41 3 million.
On a total of seven C. L is complete a majority stake acquisition of 51% of Pinellas County, anesthesia Associates, which is and this and the Ccs service provider in the state of Florida.
On the TOBA twenty-first well ventures made a strategic investment of 600000 in Toronto base has sued behavioral health to help increase the demand for mental health services in Canada.
On November 1st the company completed the acquisition of <unk>.
MD and an enterprise class and EMR provider with a focus on.
Cardiology. In addition to other specialties on the same date, well acquire Uptown Health Center, which is comprised of two medical clinics and one Allied health plan in the greater Toronto area.
That is my financial update and I'll turn the call back over to Hana.
Thank you Eva.
I will now review our overall patient visits in the quarter I am pleased to report that we exceeded $2 3 million total omnichannel patient visits on an annualized run rate basis in the third quarter.
Totally off the total omnichannel patient visits in Q3, 2021 were 582958, representing a year over year increase of 139% from 243729 in Q3 2020.
On a quarter over quarter basis total omnichannel patient visits increased 4% compared to 559008 total omnichannel patient visits in Q2 2021.
During the third quarter in person patient visits at our clinics and businesses accounted for 49% of the total visits while telehealth patient visits which include both telephone visits and virtual care patient visits represented 51% of the total visits.
In person in person patient visits at our clinics and businesses accounted for 286602 patient visits in Q3, 2021, representing a year over year increase of 148% compared to 73586.
In patient in person patient visits in Q3 2020.
Telehealth patient visits which includes both telephone visits.
And virtual care patient visits accounted for 296356 patient visits in Q3, 2021, representing a 131% increase.
From 128000 Telehealth visits last year in Q3 2020.
In addition to these patient visits my health conducted 127630 in person diagnostic visits representing over half a billion dollars annualized run rate diagnostic visits.
Combined with our two 3 million Omnichannel patient visits gives us a companywide run rate of over $2 8 million total annualized patient visits.
Before I talk about our outlook I'd like to touch on the launch of our well ventures program.
During the third quarter, we announced the formation of well ventures, a wholly owned subsidiary of well, whose mandate is to invest in exceptional leaders entrepreneurs and businesses supporting the global digital health ecosystem with an emphasis on advancing innovative digital health initiatives in Canada.
Well ventures, we seek to invest in companies that are genuinely committed to leveraging technology to improve health outcomes and can directly benefit from wells ecosystem.
Size and scale.
Furthermore, well has assembled.
And first advisory Board, whose objective is to help nurture and advised portfolio companies on their journey of growth.
The well ventures current portfolio of companies consists of strategic investments in emerging digital health companies, such as Felix AI pill weight.
Fertility bright and most recently <unk>.
Well, that's just an example of our commitment to invest in and advance digitalization and modernization of health care in Canada and around the globe.
And now our outlook for the rest of this year and for 2022.
We're still on track to achieve our goals for 2021, which are two one build out and refine our practitioner enablement platform and deploy it services, both internally to well health.
Well health practitioners as well as offered services.
To health care practitioners outside of well too.
Two to achieve organic growth across all of our operating units by leveraging our size scale and network effects across the enterprise.
We follow a disciplined.
Acquisition and capital allocation strategy, and four grow adjusted EBITDA and cash flow from operations throughout the year by pursuing our organic and inorganic growth strategies.
Our outlook remains strong for the rest of the year and into 2022.
<unk> is expecting to continue its growth trajectory in the fourth quarter, driven by healthy organic growth and the addition of wisp.
The company expects to exit the year with an annualized revenue run rate.
Approaching $450 million in operating adjusted EBITDA approaching $100 million.
On a run rate basis, our view remains very positive across all our business units and for the company as a whole and Canada well as quickly building. The most consequential network of nongovernmental health care assets across the country with significant operations and interoperability between its outpatient clinics.
Our diagnostics and telehealth businesses.
Meanwhile, well strategy in the U S is to focus on the key specialty areas such as Gastroenterology Women's health in primary care.
Well continues to have an active M&A program.
The company's M&A program can be characterized by two types of acquisitions.
That form acquisitions and tuck ins Chuck.
Tuck in acquisitions are usually much more accretive low risk and easy to diligence and integrate whereas platform acquisitions take much longer to do due diligence and are usually more expensive due to their more scaled nature.
The platform acquisition, we're referring to key business pillars that have the talent breadth and experience to action and integrate tuck in acquisitions and build value.
Think of these as key acquisition pillars.
The company presently has four of these pillars or acquisition platforms as part of its business operations. They are primary care My health CRH and virtual services.
While well continue to look for acquisitions of new pillars, which could be capable of consolidated consolidating a different area of health care services.
However, we're very happy with our current core pillars and our main focus is to generate continued earnings momentum continued organic growth and cash flow generation from these key pillars.
We believe that our current pillars will continue to lead us to significant.
Double digit growth for several years to come.
For example, we believe the company's organic growth coupled with its continued focus on tuck in acquisitions has the potential to catapult the company to approximately half a billion dollars in annual revenue run rate before the end of 2022.
<unk> has grown substantially over the past year and Q3 of 2020 last year, we did not own a lot of the assets that we own today.
We believe calculating organic growth on just the assets. We owned in Q3 last year would not be represented the growth profile going forward, hence we calculate organic growth based on the assumption of if we had owned all the assets that were in the family as of the day after the quarter in.
In both Q3, 2021, and Q3 2020, our organic growth for the entire business inclusive of the four key pillars I've just mentioned would have been approximately 14%.
Given that the Omnichannel patient services group is experiencing very stable mid single digit percentage growth. This demonstrates that we are experiencing strong growth in our virtual services business, which we believe is sustainable and will lead our overall organic growth story in 2022 and beyond.
Although we expect continued revenue and EBITDA growth in the coming quarters, we expect our EBITDA margins to hold steady at approximately the current levels as we intend to reinvest any excess cash flows back into driving organic growth in the business.
As a general rule of thumb, we're aiming to have the sum of our adjusted EBITDA margin percentage plus our organic growth percentage exceed 30 into next year. This is sometimes referred to as the rule of 30.
We live in interesting times, where companies have had concerns about their supply chain and ability to deliver.
As it relates to our 2022 outlook I'm very pleased to say that we don't currently see any material influences or challenges that would impair our ability to deliver on a strong outlook in 2022, we.
We feel that many of the key variables inherent in the execution of our business are firmly in our own grasp and are not dependent on outside matters.
We feel we are empowered to deliver strong results, which include above average organic growth rates across our organization I.
I think we've demonstrated with our report this quarter that we are a well diversified fast growing digital health and tech enabled healthcare company delivering on our strong ESG program and building societal value.
In closing.
I want to thank you all for joining us on this call today and thank all our shareholders and investors for their tremendous continued support the capital markets have been very supportive of our vision and it provided us with the funding needed to pursue our goals.
I would also like to thank while senior management team and all our employees and contractors for their tremendous effort and especially during the current COVID-19 pandemic.
In particular I'd like to thank our team of doctors and frontline health workers, who continue to keep all of our clinics open and provided unbelievable patient care throughout the past couple of years.
They are providing outstanding care and remind us everyday of why we are here. We're here to support them. So they can take care of patients. Thank.
Thank you and.
And with that we'll now open the call to questions. Operator would you. Please take the questions.
Thank you Sir.
Ladies and gentlemen, we will now begin the question and answer session.
If you would like to ask a question. Please press the star followed by the one on your telephone keypad. If you would like to withdraw your question. Please press the star followed by the channel.
Please standby for your first question.
Your first question comes from David Newman of Desjardins. Please go ahead.
First of all congratulations if these are great results.
Thanks, David I appreciate that and just digging into circle, a little bit obviously, it has real real steam behind it and and how youre leveraging that in terms of I think you said 152 practitioners, maybe just an idea.
How many states you're in and then then what sort of critical mass you don't want to see there until you think about the IPO and timing thereof.
Yeah, Thanks, David Yeah, you're right.
We're really scaling this two sided marketplace. I mean do you think of Telehealth, you think patient acquisition and practitioner onboarding and the steep technology tools that the company has that really really really.
It brings those two pieces together and.
I think our press release, a few weeks ago mentioned that will likely be.
And most of the states of the United States by the end of the year I believe they.
They're sort of active.
Very active in just 10, but have essentially been involved in providing consultations in and probably over 30 or 40 states at this point in time.
Okay, and then and then what sort of critical mass you need to see I think on revenue or whatever rollouts that you might actually think about IPO ing. It.
Well.
I threw that into the into my remarks, because I think what we're seeing here is really special and.
We're obviously working very closely and with the company and in terms of planning and understanding where they're going and it shows no sign of slowing down and we really believe.
That circle is going to be.
A tremendous asset in the health care ecosystem in the U S and I think in the I think originally when we bought into the company the idea was to.
Has the opportunity to call the balance of the shares in <unk> and.
And three years after the initial investment and.
We do we were thoughtful enough to.
Put in the idea that that we could also spin the company out if it makes sense to do so.
This type of growth I think it just it's just important for shareholders to be aware that that.
Likely the sum of parts.
Well, it's not really considering the full value of circle in and so I think if we continue to see these types of growth rates, which I think are very possible over the next year or two.
Things could happen a lot more quickly than two years from now.
Okay very good my last question before I jump back in the queue is just the margin the margins were quite quite strong and you mentioned the rule of 30 and you've got gross margins now above 50%. So congratulations and then your EBITDA margin around 22, but you also mentioned some sort of investment back in the platform, which I think is.
Skewed towards circle, if I'm not mistaken.
Maybe just are these sustainable I guess G&A are you getting at the G&A leverage other that we should be sort of modeling that kind of 'twenty to kind of zone on the EBITDA and is this a sustainable GM number.
Yeah, I mean, I think what we're seeing here is if there is interplay between the EBITDA margin and the growth rate and so what we're saying is we think that there are scenarios here, where where organic growth can be.
Continue to be very compelling and if that is the case.
And we get a higher percentage of organic growth it would make sense that that potentially some of that would impact the EBITDA margin, but but but the combination of both we think will continue to be better than 30, which I think is is an outstanding result for a company of our quantity and size and.
And so I think it.
Obviously, we will get.
We continue to have very strong gross profit margins and I think the operating margins will be will be strong, but I think this is part of our wave also saying we're not we're not we're not at a mature company that is just optimizing for EBITDA. We believe we are a growth company outside of M&A and there is tremendous focus in the company to activate and trigger.
And and develop further organic growth, yes for real EBITDA dollars to us at the end of the day, we care with that that's great. Thanks, Amit I appreciate it.
Thank you.
Your next question comes from Rob Goff of Echelon. Please go ahead.
Congratulations on the quarter.
Thanks, Rob.
And to follow on David's lead there with respect to circle.
I'm interested in terms of.
Optimizing or maximizing the growth of circle.
How does it take cash is at for development work is if a physician procurement work.
Do you see partnerships in this model.
Really I mean.
More than 95% of of <unk>.
Circle business is coming through telehealth right now.
A strong focus on mental health.
While its a primary care focused business.
There are different verticals.
And sort of acquisition on ramps that they're focused on but they are very strong in kind of what I mentioned before is really scaling. This two sided network and so a lot of emphasis and focus right now is on patient acquisition and practitioner Onboarding and so circle.
Circle doing a lot of really special things in both of those areas and really leveraging technology to scale patient acquisition and practitioner recruitment.
They've done a fantastic job really really mapping out all of the different steps for example to onboard a practitioner and really used their tech the tech enable and automate that to the degree possible, which again is a really tough thing to do not acquiring and onboarding practitioners is tough tough work and so.
To think that they more than 400% increase their number of practitioners that I think a really big key to also their success I mean, clearly there they've demonstrated that they can grow and acquire more more more more patients in and I think that's shown that they've shown a lot of scale and being able to do that but to also be able to deliver the supply.
Of practitioners I think is really special and we.
We understand how hard that is because we're in multiple telehealth businesses. So.
I think that's where the focus on the capital allocation would be is to is to continue to enable that momentum.
Okay. Thank you and if I may.
Look to your pipeline could you give us a sense of the complexion of the pipeline it sounded like it was more on the virtue of tuck in.
Tuck ins in technology, and patient facing or U S Canada.
Yeah, Great question, so so you're right.
Most of the pipeline is focused on tuck ins, we we think small is beautiful.
But we like the highly accretive nature of tuck ins, we like the low risk, we'd like and we're very happy with our key acquisition pillars and platforms, we think that.
That we have great talent that is presiding over these tuck ins and making sure that they are well integrated.
<unk>.
Most companies that would have done as much as we would have had done by now would have likely had challenges and we really don't.
As a result of of.
The real purposeful focus of of having these key acquisition platforms are pillars that that that are very skilled at doing these tuck ins and so the majority of the acquisitions. We've done over the last couple of years, even though we've announced so much stuff. The vast majority of them have been tuck ins and so that's one.
Things are working.
And so.
Yes, and they would be both software and patient services focused to answer your question.
Great. Thank you good luck.
Thanks, Rob.
Okay.
Your next question comes from Christian <unk> of eight capital. Please go ahead.
Hi, congrats on the strong quarter today.
My first day question today.
I wanted to ask about the new prescription market share in Canada.
The opportunity you see there for the wall business and working through per way on that opportunity.
Thanks, Christian I'm glad you asked.
This is another fantastic example of how well it is not just buying stuff, we are integrating and we're connecting the dots and creating real interconnectivity. So we since our.
Acquisition of 25% of <unk>, we have.
Integrated toll way into the apps to help ecosystem, we have fully integrated <unk> into our telehealth assets. So if you use tier health you can actually now have a very seamless handoff to pill way to have your script sent to you at home.
My health is using.
<unk> now to start to.
Assist patients in and giving them a.
A more convenient way of receiving their their scripts delivered to their home.
And there are other initiatives underway.
With <unk>. So we really we really think that it's been a fantastic.
You know event for us to bring <unk> to the family of course, we don't own them on a control basis, but we do have a call option to acquire the balance of the shares and I think youre going to I think youre going to see more.
More momentum with them, which I talked a little bit about wisp in launching them in Canada, we think.
Callaway is the true pill of Canada.
<unk> of course is the multibillion dollar.
A private company in the United States, which is a.
Programmatically, driven E pharmacy platform and.
Yeah.
We think that that <unk> will emerge to be this key and important asset here in Canada.
So yeah, I think I think there's a tremendous opportunity here <unk> has its own strong momentum as well outside of its integrated interactions with well, it's it's it's growing.
Quite quite well and has a compelling business development lineup.
That's helpful color and you got right into what will be my second question to that I wanted to ask about west.
What's the opportunity you see there to take west north of the border.
Totally help with some of the infrastructure may be getting going are there any other regulatory obstacles to jump over.
And is that still an opportunity to thinking about and what the timeline would be to.
West of expanding within Canada.
Yeah no.
We're very excited we agree with you that that's a great opportunity.
We are currently working.
On the regulatory side of things. So the west team is presently working with legal counsel to get a better sense of what the.
You know what the preparations are to ensure that we are launched.
Launching a fully compliant program best in class program.
But we have all the ingredients wisp as a real leader in the U S. In this area there.
There was a recent writeup in Vogue magazine about them.
I'll be highlighting them as one of the one of the key players in this area and delivering fantastic net promoter scores and we believe there is an under supply of these services in Canada and so.
There seems to be a greater supply in an immense.
Sexual health products, but not women's and so we think that that debt.
There's a great opportunity to take that proven model.
And bring it north of the border.
We just feel we have all the key components with with PIL way, there as well so.
Stay tuned this is something that I think is really a top of mind for us. We certainly hope that we will get some momentum as soon as possible here in 2022.
That's great all right. Thanks for taking my questions and I'll pass the line.
Thanks Christian.
Your next question comes from Colin Healey of Haywood Securities. Please go ahead.
Hey, guys I reiterate everyone elses comments about the good quarter congrats on that.
Talking about the virtual services, reaching 100 million in run rate revenue and growing faster than on the omni channel.
On the.
EBITDA do you have.
Internal targets for EBITDA margins for the virtual services business I'm, just wondering what the potential margins could be on a combined basis, what kind of skills gonna be needed there to generate significant EBITDA or is it really the growth.
Drag on EBITDA and there is positive EBITDA.
They're on a normalized basis.
Yeah.
Great Great question Carl.
The EBITDA.
I mentioned in my remarks the.
Peripheral services, it's profitable it's growing a lot faster and we think that's really one of the reasons why we think the segmentation makes some sense its a very scalable business.
And we think that at maturity. This is a business that delivers very strong EBITDA margins.
But we do believe that we're a long ways away from that maturity just given given given the growth potential there and so.
There were certainly not looking to optimize for EBITDA range. So we don't necessarily have a minimum EBITDA threshold today.
Don't have a lot of tolerance for red ink so.
So I think I think on a on a on a whole I mean, not every line of business and virtual services right now is profitable, but that's OK provided that the group overall is profitable. So we really like the positioning of having a super scalable digital oriented.
Business is profitable and very fast growing and then our Omnichannel services, which is also growing but but not as fast but extremely profitable. We think we have the perfect compounding engine by by redirecting the cash flow from our omnichannel into virtual services.
Right. Thanks, that's helpful and just on the $450 million in annualized exit revenue, obviously you closed.
Some some transactions in in Q4 here, so $113 million for the quarter might be overreaching, but.
Monthly run rate basis, that's about 37, and a half isn't that kind of where you expect to be.
For the for December.
Around 37, 5 million and Oh, maybe just some color on how much of a contribution youre going to see from the closed acquisitions for for Q4.
Yeah. So you know.
Q4, you know you have you have a couple of small tuck ins, but they're really the major.
Additionally, we're spend we've been very clear about sort of where we're at on the run rate level. There keep in mind that December you asked specifically about December keep in mind that there is some seasonality there.
Given the holidays and patient services doesn't necessarily happen throughout that period, but.
But yeah, I mean, I think in general your math seems it seems reasonable.
Okay. Thanks, guys I'm, just trying to do and those estimates are I'll step out, but thanks a lot.
Thanks Colin.
Yeah.
Your next question comes from David Kwan of TD Securities. Please go ahead.
Alright.
Great. Thanks, David.
Want to ask some questions on CRH, obviously nice to see another good solid quarter, there and thanks for the color on kind of some of the stuff that's going on there.
As it relates to adding new revenue streams and some of the patient case data.
Okay.
The <unk> agreement I guess the renewed agreement hit this month here. So there's some revenue headwinds.
You're going to see is there any color you can provide on that and to what extent do you think growth in the rest of that business.
And potentially contributions from acquisitions can hopefully, mostly if not completely offset that headwind.
Yeah, No for sure, yes, Youre correct as of November one.
<unk> went from being a full patient services offering to being more of a management contract and so we have retained U D.
And are pleased to continue to work with them and have had a successful transition. So we are maintaining.
A significant portion of that EBITDA.
With a much higher gross profit margin because of course now we're not delivering the full patient services. So we have no cost of goods against that.
And so.
The other the other thing that debt.
That happened as a result of us.
Disconnecting from patient services, there is that really freed us up to explore other.
Other revenue cycle management partners, because you D I had sort of.
Fixed us in to one partner and that's a really big game changer for us So really I think ultimately when you start to see the benefits of the revenue cycle management come through.
The EBIT contribution of those revenue cycle management changes and the EBITDA retained will exceed our previous full EBITDA from U D.
So while there may be a revenue hit on a on a contribution.
Perspective to operating EBITDA, we will actually be ahead.
This is why.
In future quarters.
Because of that transition we may we may provide growth figures on a on a on a U D. Adjusted and unadjusted basis, just just to give people a sense of of how.
How that factors into our organic growth and to your point there are also other.
Other growth.
Other areas of growth there be it the other revenue streams that of course, the other acquisitions. So we're really set up for a banner year in 2022 for CRH.
No. That's helpful. I appreciate the color on it and one other question just on the circle, which seem to be a popular topic got today.
Obviously, you've seen some pretty spectacular growth over the last year, how sustainable do you see that being I guess looking out into 2022, and just the talk about potentially IPO ing yet would that be.
Separate from a potential U S listing for well as a whole or what are your thoughts on that.
Yes, so we do believe that is sustainable.
We do believe that.
The growth rates can continue to be very very strong.
Yeah.
In terms of in terms of just quantum of growth there.
The business, we feel could could potentially even double next year.
We'll see we'll continue to provide color on that.
And when I was referring to the IPO I was specifically referring to a spin out situation not related to wells one IPO.
And of course well have to.
Work with Circle management.
And also do its own planning in terms of assessing whether or not.
We're.
We're sort of reflecting the value increase thats coming from this asset, but just given the way it's growing.
And it really shows no sign of abating.
We wanted to really put this on shareholders.
Radars right now I mean, there's nothing to be done I think for for a while here but.
It's just really important that people are aware, what we've got and frankly I would say the same about west I mean.
That's another one that where we have the potential for a spin out.
Well.
Analysts covering well I think should just be cognizant that that kind of explosive potential exists within the company.
Yeah, that's I guess wondering of that when you talk about spinning out.
Circle as its own separate IPO, but at the same time would you also look to do that.
Apio for well as a whole in addition to that and.
I'm glad you're talking about the west cause I was wondering whether you'd look to do some elect out as well with west.
Yeah, Yeah, I mean listen I think.
We obviously commented on I think last quarter on the potential to do a U S IPO and and as you are likely aware since its public information that we have filed our base shelf prospectus and are doing the work to be positioned in such a way where we can act quickly when we believe the right conditions exist.
For successful offering with strong follow on momentum.
Keep in mind, there being some really encouraging signs lately that the U S health care. It comps are trading better after a pretty rough few months here in 2021 so.
We're doing the work we're we've got that Optionality were already public. So so we don't have to go until we feel like the conditions are absolutely correct.
Great. Thanks, so much.
Thanks, David.
Your next question comes from Nick Agostino of Laurentian Bank. Please go ahead.
Yes, good afternoon guys.
So just circling back on the Omnichannel figures you gave earlier.
Much appreciate it as always but just wanted to understand the trend through Q3, obviously here in Ontario, and Quebec governments are pushing more in person as economies start to open up a bit it looks like your mix is moving more towards 50 50.
Like in Q3 or in person visits were up.
While virtual virtual was down quarter over quarter. So just maybe if you can comment how how you have been seen omnichannel visits trend true through the quarter. So July August and September.
And just given how the mix is moving more towards in person assume thats the case.
Does that impact your EBITDA margins in any way and by that I mean does it change your G&A.
If you have more in person or does it impact your thinking on sales and marketing.
If you as you try to maybe advertise more to maintain or to remind people about the whole telehealth side of the business. So any thoughts there. Please.
Yeah. Thanks, Nick Yeah. So we.
We do have a significant omnichannel footprint, which again brings into focus just how can just just how competitively well positioned we are.
Our competitors really do not have that they I don't think you could point to one competitor.
Any other network across Canada that has anywhere close to the assets on both the online and offline.
Capabilities.
And so.
That 50, 50 number I think it's been quite sticky I mean, yes, there has been a little bit of movement certainly college. The college is starting to encourage physicians to get back into the clinics and we don't believe that there would be any meaningful change in EBITDA margins for us given.
Given the given the circumstances in fact in some in some ways it would even be better for us just given given some of the productivity that we have in the clinics and potentially reduced expense in terms of customer acquisition online.
So so no. We are we think we're really well positioned whether or not those physicians show up in the actual clinics or they do it from home or from the clinic provide care to people by telehealth.
We feel we're really positioned either way.
Okay, Great and then.
Also.
There's been a lot of tuck in acquisitions over the years with a lot of cross selling potential as you bring in more tuck ins and certainly that will continue to be the case have you guys ever and maybe you've done this in the past and called it out but if so just highlight but do you ever looked at what total addressable.
The market is internally just given all the products you have and all the potentials you have to cross sell what that Tam might look like so we can get a better sense of the in house organic growth and then any comments, maybe now or in the future around the attach rate, but how do I mean, obviously all of these.
All of these services you have just maybe talking about how many of these services are being used.
Other across your entire organization. So we can just get a sense of Apollo that adoption is moving and I'm thinking about places like my health in CRH.
Get a sense of how quickly they are moving on the whole digitization side of things.
Yeah, I could give you some commentary around around Tam and how we think about about this I mean.
I'll just I'll just start with.
Pharmacy right.
<unk> does not have a pharmacy business today other than our minority investment in <unk>.
But if you look at all the scripts generated in Canada by our patient services businesses.
And our.
R and originated through our EMR I mean, we're talking about roughly a million scripts.
Million scripts that would that would likely have about 1617 <unk> per script, so were talking about a really meaningful.
Flow of.
Our pharmacy potential there. So so we're we're looking at ways that we can.
That we can capitalize on that.
And in a way that that we're not getting in the way in steering, we're really just providing a great a great experience for people, who really want to be able to take advantage of that through our software and technology.
We also think.
I'm very much about patient services in Canada, what is that potential I mean, if you look at the quarter petroleum.
Health care ecosystem close to a fifth of that as physicians spending and I think that's the real.
That's the real tempted or to focus on.
Companies don't provide care practitioners do.
A big a big a big area of focus for well is how do we serve practitioners and really what it comes down to is there's two choices for you as a practitioner and how you're interfacing with well you can either source different components of our platform separately through SaaS and services, whether it be revenue cycle management, you know as you may know.
We have the country's largest outsourced billing network with was with Doctor care, whether it's our practice management tools are digital productivity tools you could acquire these separately for your patient services business that you can pay us whatever the going rate is for those services or if you're sick of running your own patient services business, which is what we're seeing.
More and more.
Close up the shop and you join us in our total managed service and that's really why it's so important that we have those patient services.
On one hand.
You're when people acquire these products and services from us directly.
We're capturing maybe two to three 4% of the revenue, but when they join us in our patient services business.
They're now sharing anywhere from 20% to 40% of the revenue of their of their billings with us, but we're doing everything for them, we're providing them a total turnkey.
Ecosystem, whether you know Emma ways in technology and data security everything is therefore that they just show up and bill.
So that's really how to think about our business here in Canada is there.
We have a very elegant model, but as practitioner focused.
Two to capture as much of that ecosystem as possible that close to one sixth of the Tam.
And that's an enormous opportunity and more importantly than value and money. We're helping these practitioners I mean this is a really tough time.
If you are a practitioner it was tough enough without digital right. When you had to run these businesses.
And run your back office and run your business and see patients now with trying to figure out technology and data security and making it all fit it just really really hard. So we think with the trends involving digital that's going to push people more and more into wanting to be part of our health care ecosystem.
Providing a total match service hopefully that's helpful for you.
Okay, great. Thank you.
Ladies and gentlemen, this is all the time, we have for today, So I would like to turn the conference back over to Mr. <unk> for closing remarks. Please go ahead Sir.
Thank you very much to all the investors that attended.
<unk> tended todays call and of course, all the analysts with their excellent questions.
No we didn't get to some of them.
I.
It probably would've needed hours to do so, but we are I'm sure. We will have our one on ones and we just really appreciate their ongoing.
Updates and a review of the company. We are very excited about Q4 and have a very strong outlook for 2022, we just can't wait frankly for the next conference call is that so we can tell you more talk more about our our earnings momentum and the massive growth inside the company on an organic growth.
Thank you very much.
And again, thanks for your support.
Yeah.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Yeah.
Yes.
Yeah.
Hum.
Okay.
Okay.
Thank you.
Thanks.
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