Q3 2022 WELL Health Technologies Corp Earnings Call

Thank you, ladies and gentlemen, welcome to the World.

Technologies Corp third.

<unk> third quarter fiscal 'twenty financial results Conference call My.

My name is Sergio and I will be euro rate for this call.

At this time all participants are in decent only mode.

We will conduct a question and answer this nation, leading into coal, which you would need a restricted.

Alrighty.

Please note this conference is being recorded.

I'll now turn the call over to part D Chang.

Vice President Investor Relations, Mr. Sanjay <unk>.

Sure.

Thank you operator, and welcome everyone to well health 2022.

<unk> third quarter financial results conference call for three months ended September 32022, joining.

Joining me on the call today are how much bozzi, chairman and CEO and Eva following the company's CFO .

Just that everyone has received a copy of our financial results press release that was issued earlier today.

Portions of today's call other than historical performance include statements of forward looking information within the meaning of applicable securities laws. These statements are made under the safe Harbor provisions of those laws.

We're looking statements are necessarily based upon a number of estimates and assumptions.

That while considered reasonable management are inherently subject to significant business economic and competitive and sort of uncertainties and contingencies.

These forward looking statements may involve known and unknown risks uncertainties assumptions and other factors many of which are outside of wells control and may cause the actual performance results or achievements of well to different materially from the anticipated results performance or achievements implied by such forward looking statements.

These factors are further outlined in today's press release and in our management discussion and analysis will provide forward looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future.

We do not 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 or someone is on which.

Any such statement is based except if it's required by law.

We may use terms such as adjusted gross profit adjusted gross margin adjusted EBITDA shareholder EBITDA adjusted net income and free cash flow on this conference call, which are all non-GAAP and non <unk> measures.

More information on really define these terrorists. Please refer to the definitions as set out in todays press release and in our management discussion and analysis.

The company believes that adjusted EBITDA is a meaningful financial metric as 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 EBITDA should not be construed as an alternative to net income or loss determined in accordance with high for us.

And with that let me turn the call over to Mr. How much of a lousy chairman and CEO Amit.

Thank you Courtney and good day, everyone, we hope that you're all keeping safe and healthy.

Truly appreciate everyone for joining us today.

Quarter 2022 was an exceptional quarter.

For well achieving best ever results on both the revenue and adjusted EBITDA lines without even being in our seasonally strong this quarter.

These exemplary results once again, driven by strong organic growth, while maintaining robust operating margins.

Some highlights for the quarter include the following.

247% year over year revenue growth in the third quarter compared to the third quarter in the prior year.

The company's growth was driven by acquisitions made over the past year as well as solid year over year organic growth of approximately 2%.

We'll also achieved record patient engagements in the quarter with over $1 5 billion combined Omnichannel diagnostic.

Synchronous patient interactions, representing approximately 5 million annual patient interactions.

This demonstrates our continued leadership position as the preeminent and health care company in Canada, while our U S businesses continue to exhibit industry leading growth metrics.

Our virtual services revenues were extremely strong this quarter, increasing 191% overall.

Compared to the previous year at 75% organically.

Virtual services are now.

As the category our largest line of business at 36% of total revenue larger than CRH and also larger than our Canadian clinics business, both of which are also growing and performing very well.

Virtual services growth was driven both by our provider services platform tools segment as.

As well as our virtual patient services segments.

As noted in our press release. This morning. This concludes exceptional growth in the U S based businesses of circle medical waste as well.

For the month of September combined annualized run rate.

The new run rate of circle medical which exceeded 100 billion.

Yes.

We're over $135 million and Canadian dollars.

We achieved this milestone one quarter ahead of our previously announced school at the end of 2022.

Our outlook for the remainder of the year continues to be great positive, hence I can very confidently increase our guidance for the annual revenue to exceed $565 million in 2022 compared to our previous guidance of annual revenue exceeded $550 million. According to the D C.

The fourth consecutive quarter, where wellheads beat and raised revenue guidance.

In addition for the next year I am pleased to announce that we are expecting to achieve exit run rate revenue approaching $700 million buys.

By the end of the year that would be the end of 2023.

The company continues to witness healthy growth across all its business segments, including both on and offline channels with minimal impacts due to recession inflation supply chain or other macroeconomics effects currently felt by companies in other industries and around the globe.

Q3, 2022 was a tremendous quarter for the company and before even get further into the details of the quarter results I'll provide some background on the company for the benefit of investors and listeners on this call.

Well provide clear and support for the care providers themselves.

Sure patients our business model is very simple, we aimed to align ourselves with care providers and use our technology and operating capabilities to help them operate better patient services businesses.

Due to our alignment and exposure to their success.

When providers become more efficient and deliver better patient outcomes, while also wins.

We have created a best in class digital platform with significant intellectual property that we call big practitioner enablement platform.

This platform is digitized modernized and support providers, Andrew or clinics.

Close to one out of every four medical provider in Canada is in some way being supported by our platform.

But what is unique about well.

Sure.

The biggest user of it.

For the vast majority of our own revenue.

Is derived by our own patient services businesses.

Just because we found that the best way to support providers.

That's going to help them run their businesses.

On the provider turns to well for support we provide a fully managed solution.

Means you look after all aspects of their business from foreign office patient management can management of all staff to back office execution.

We're very good at giving our providers back their time and allowing them to focus on the care.

And this is why we take care of the technology and the operation of their businesses.

This formula has worked extremely well as providers have had a tough time with the growing number of distraction.

And then to run our business and provide care.

This is why well, sometimes referred to as a physician support company.

Over the past four years, we've grown both organically and inorganically into a category leader.

Our knowledge, we are the category leaders in the following areas.

We are the largest owner operator of outpatient medical clinics in Canada.

One of the top three providers of Telehealth services in Canada.

So our knowledge.

We're actually the only.

Got it.

Profitable telecom provider in the country.

One of the top three practice medicine service providers in Canada, including EMR.

Tronic Medical Records software.

We are the leading provider of digital patient engagement services, which includes all aspects of connecting patients and doctors digitally.

We are the only direct to consumer telemedicine offering that allows you to pick your own provider and revisit that provider.

In order to establish a relationship through our <unk> service offerings.

We are the largest provider of revenue cycle and outsourced billing services for doctors in Canada.

We are the largest provider you referrals software services in Canada and currently dominate this business in the province of Ontario.

We operate candidate only app marketplace for integrated EMR apps.

Referred to as apps don't help.

So our knowledge, we can deliver more omnichannel patient visits and any other entity in Canada outside of the government.

In the U S. We are the leading providers probation services for colonoscopy in.

In ambulatory settings.

Also in the U S. We wanted to SaaS is growing specialty telecom businesses.

<unk> on areas mental health and women's health.

Well, it's a strongly diversified fast growing digital health and tech enabled healthcare company delivering on its strong ESG platform.

And building societies societal value.

While the purpose driven business that aims to transform the way the world for the better one provider at a time.

With that I would like to now turn the call over towards CFO , <unk>, who will review the financials for the third quarter I will then come back and provide further commentary and some of our business units and of course, our future outlook.

Got it.

Thank you Amit I am pleased to report that we had very strong results for the three months ended September 32022.

Our third quarter results were as follow.

<unk> record quarterly revenue of $145 8 million in Q3 2022 compared to revenue of $99 3 million generated during Q3 of last year, an increase of 47% driven by acquisitions during the past year and organic growth.

<unk> achieved record adjusted gross profit of $78 2 million in Q3 2022 compared to adjusted gross profit of $15 million in Q3 of last year, representing an increase of 56%.

Well achieved adjusted gross margin percentage of 53, 6% during Q3 2022 compared to adjusted gross margin percentage of 53% in Q3 2021. The increase in adjusted gross margin percentage is driven by the increase in higher margin virtual services revenue.

Adjusted EBITDA was $27 5 million for Q3 2022 compared to adjusted EBITDA of $22 3 million in Q3 of last year.

The EBITDA was positively impacted in the quarter by higher revenue and healthy EBITDA margins in the Companys Omnichannel patient services and social services businesses.

EBITDA margin was 18, 8% in the third quarter.

Adjusted EBITDA attributable to <unk> shareholders was $20 2 million for Q3 2022 compared to adjusted EBITDA attributable to wall shareholders of $16 4 million in Q3 of last year.

Adjusted net income was $14 8 million or seven cents per share in Q3 2022 compared to adjusted net income of $9 8 million or <unk> <unk> per share in Q3 of last year.

In comparison to Q2 2022, adjusted net income declined from $17 5 million, mainly due to higher tax expenses.

Free cash flow attributable to <unk> shareholders was $11 4 million in Q3 2022.

Find by shareholder adjusted EBITDA minus cash taxes minus cash interest cost and minus capex.

Free cash flow was lower than Q2 in 2022, due mainly to timing of cash tax refunds and payment between the quarters higher interest expenses and highest capex in Q3 2020.

In terms of all segmented reporting primary care revenues, which includes our primary care clinics Allied health and executive help businesses increased 24% to $16 6 million in Q3, 2020 compared to $13 4 million in Q3 of last year.

Third quarter is generally a weaker quarter for primary care business due to seasonality in the summer months, when doctors specification and it tends to be fewer cold flu and other elements.

Our primary camp revenues with positively impacted by two months contribution from the acquisition.

In Q3, 2020 to see how each revenue increased 4% to $50 8 million compared to $48 7 million in Q3 of last year.

<unk> completed 121655 anesthesia cases, and sold 2068 Reagan units in the third quarter.

And Ms PCI cases, and sales of <unk> units declined from the second quarter of 2022 due to the impact of Hurricane Ian as well as a planned EMR cutover project with one of the Companys joint venture partners.

Despite the lower number of anesthesia cases, and Reagan goodness shells CEO .

<unk> achieved record revenue in the third quarter due to the positive currency exchange impact of the strengthening U S dollar and an increase in pricing of their own making product earlier. This year. We're pleased to report that our clinic staff, we may safe do into natural disaster and the clinics once again functioning as normal C. L.

<unk> core business is performing as expected with strong page load and stable unit economics.

In Q3 2020 to my health achieved revenue of $26 1 million, an increase of 36% as compared to $19 2 million in Q3 of last year.

The strong year over year growth is due to the might help acquisition being completed during Q3 of last year, resulting in only partial revenues recognized from the acquisition in the quarter.

On a sequential quarter by over quarter basis, <unk> revenue increased 1% compared to $25 8 million in Q2 2022.

So I think you'll see will be slightly down from Q2 due to seasonality in my helps business, but this quarter My health benefited from a onetime incremental revenue payment related to billing adjustment plus my help has resolved some of the stocks shortages. It was witnessing in the prior quarter, leading to higher billable time for some diagnostic procedures.

But the services revenues increased 191% to 50 to $52 2 million in Q3 hundred 20 to 2022 compared to $18 million in Q3 2021.

On a sequential quarter over quarter basis versus services revenue increased by 10% when compared to $47 5 million in Q2 2022.

Global services revenue growth was driven by the exceptional growth in the U S based businesses I'll circle medical and whips.

<unk> has now become <unk> largest business unit by revenue accounting for 36% of total revenue in Q3 2022.

Well into Q3, 'twenty twos with a solid balance sheet.

At September 32022, well had cash and cash equivalents of $52 4 million.

While continues to be in good standing and fully compliant with all covenants related with his two credit lines JP Morgan in the United States and Raw Bank in Canada.

During the quarter, we paid down $8 4 million U S. After Jpmorgan line in the U S to arrive at a balance of $140 7 million U S. Dollar as of the end of the quarter.

In Canada, we paid down $1 8 million to arrive at a balance of semi $79 million.

Keep in mind that U S. Dollar strengthened from an average of 129 to $1 three seven and as such due to the higher exchange rate. The total value of our debt as of September 30th was approximately $264 million, which is roughly the same overall debt level as the previous quarter.

In terms of our share capitalization as of November nine well had 246 million 914006 fully diluted securities issued in outstanding.

Well also has substantially increased its revenue and EBITDA on a push up basis, indicating that the companies.

Capital allocation in organic growth program is delivering real value to shareholders.

For instance, wealth revenue per share went from 49 40.

<unk> 49 per share in Q3, 2021 to <unk> 64 per share in Q3 2022 on an undiluted basis.

Meanwhile, adjusted EBITDA attributable to while shareholders per share increased from <unk> <unk> per share in Q3 2021 to nine cents per share in Q3, 'twenty to 'twenty, two reflecting an 11% increase in this all important metrics.

Lastly, I will provide an update on our M&A activity during the third quarter.

In the first half of the year in 2020 to our M&A program slow down considerably as compared to last year due to the volatility in the capital market, which caused public and private valuations to drop.

Now the valuations have settled we are finding outstanding opportunities opportunities to ramp up our M&A program again, but mainly to focus on smaller clinical assets.

In the third quarter, we completed the acquisition of enlist and Grand Canyon.

And as CCI and announced the acquisition of certain assets from cloud M D.

On August <unk> 2022, the company completed the asset purchase agreement to acquire the assets of <unk>, Inc, which we paid approximately $1 6 million in cash after adjusting for deferred revenue.

For the 12 months ended April 30, yet in that had revenues of approximately $7 3 million.

Double digit adjusted EBITDA margins.

And that has over 1000 customers in over 80% of its revenues from recurring membership fee.

On September 26, 2020 to see how each completed the acquisition of Grand Canyon, and its DCF of GCE.

Acquisition marks see Alex.

Entry into his 18th state up service.

<unk> was purchased for a net of $6 six $6 5 million U S. After adjusting for working capital and it is expected to generate more than 16 million U S. In annual revenue and 2 million U S in shareholder EBITDA.

Subsequent to the end of the third quarter on November 1st the company completed the acquisition of cloud <unk> cloud practice entity, which includes June Juno EMR and clean the E billing software applications as well as three primary clinics located in the province of British Columbia for total consideration.

Of approximately $5 $7 million, while contemplating more than 9 million in top line revenues with positive adjusted EBITDA.

In addition, the company completed one divestiture in the third quarter Us on September 1st see how each completed the sell off is 55% stake in west Parrotta anesthesia associates for $12 4 million U S.

Transaction includes a five year management services agreement, meaning CRH will continue to to provide services to these ASC is for the next five years for a multi million dollar song.

See how it's originally purchased is 55% stake back in 2017 and since then its share of the EBITDA has been approximately $5 1 million U S. Dollar.

When combined with the sell price. This provides a $3 5 million U S. Net positive not included in the five year management contract.

When combined with capital allocations made in the same quarter, we believe CRH continues to demonstrate compelling value.

Asian opportunities within its portfolio.

That is my financial update and now and I now turn the call back over to <unk>.

Thank you Eva.

That was a unique company with significant IP driving.

Powerful technology that is industry, leading and has created compelling and relevant links with health care providers all over the country with connectivity allows us to become their prime option when they no longer want to run their own business and he said one of them being on a professional operator.

Recent times, where there are challenges with inflation shortages of health care workers and other issues what would seem dramatically increased relevancy, which is translating into significant growth and interest from care providers.

Network.

Well as the largest network of clinics in Canada, which includes over 125 clinics being operated at approximately 80 physical facilities.

Primary care health executive health and diagnostic clinics.

As we've described described before in our conference calls well strongly believes in the benefits of an integrated offering is bringing together diverse multidisciplinary offering of providers in the same setting this benefit both patients and providers as.

As such many of these physical facilities have multiple clinics operating with the same location. For example, we could have a primary care in Allied health clinic operating and at the same location or we could have a cardiology clinic in a diagnostic clinic operating other one my health facilities.

At over 125 unique clinics across Canada, we own and operate the largest critical network in the country by a wide margin.

Well current clinic M&A pipeline includes five signed Loi's mou's well over a dozen additional qualified lead.

Nearing the LOI your Mou phase in over 100, plus early stage leads as we continue to comb through our proprietary relationships.

These transactions continue to be highly accretive in nature.

Multiple compression evidenced by our recently completed clinic deals.

We'll continue to expand with clinical presence within Indonesia services now being offered in 126, phds or ambulatory surgery centers and Gi clinics across eight states.

In addition, the company operates two primary care clinics in six co working spaces under the medic circle medical brand and three.

Building clinics, providing temporary treatments using the CRA rating system.

I'd like to now provide some commentary on the recent announcements affecting our clinics and the doctors.

BC.

Some of you may be aware the doctors at Tcf approved a new three year physician Master agreement with the province of British Columbia with the agreement.

Agreement provides for you payment model, which provides a compelling alternative to the fee for service model and instead to produce additional factors such as the time the Doctor says with the patients and the number of total patients with doctor support to their office.

We're very supportive of the BC government's proposition with a new payment model to retain family doctors and attract new ones.

The model is expected to be available in February of 2023 families physicians can choose to continue with the current fee for service model or off for the new one please.

Please keep in mind that doctors, who choose to remain focused on our fee for service model will also receive increases in fees. We anticipate overall government funding to increase by approximately 13% to 15% for doctors, who choose to opt into the program.

Due to our alignment with DC doctors and the fact that we share revenues with them and support their businesses. We expect the new physician Master agreement kind of a positive impact of all house not only in terms of topline revenue contribution, but more importantly, it will assist us in recruiting and retaining doctors to serve patients with <unk>.

Currently in the process of evaluating the specific impact at some doctors may choose to remain with the current fee for service model, we expect to provide more details on this topic in the new year.

And now I'd like to talk a little bit about our outlook for the rest of the year and for 2023.

We're very pleased to report that all our business units are executing very well otherwise it would just not be possible to continually beat and raise its got to be doing for the last several quarters, while the outlook for the remainder of 2022 and into 2023 release remained strong and resilient companies performance is very positive across all of its business.

And for the entire company.

Cash flows generated by the company will continue to be reinvested in the business and allocated in a disciplined manner, which may come in the form of further acquisitions share repurchases debt repayments or to accelerate organic growth as it was also strong organic growth profile as noted earlier the company is increasing its guidance.

For 2020 to annual revenue to exceed 565 billion.

From the previous guidance of exceeding 560 million. Furthermore, we'll expect to generate adjusted EBITDA of over $100 million 2022, or approximately 82% of adjusted EBITDA margin compared to our previous guidance for adjusted EBITDA of approximately $100 million in 2022.

As you can see we're increasing our revenue guidance at a higher rate than our adjusted EBITDA guidance. There are multiple reasons for that one our circle medical which businesses has significantly contributed to increase in revenue guidance. These businesses are experiencing tremendous revenue growth and although their contribution to EBITDA is increasing they are not.

Designed to be significant contributors to adjusted EBITDA.

Two in addition, we want to continue to responsibly reinvest in our business units to drive organic growth.

Three. Furthermore, we're also experiencing some inflationary cost pressures and wage increases these cost increases are prevalent in all industries. Today. However, we continue to implement cost savings.

Good day, and integration across our acquisitions and business units and taking advantage of our shared services infrastructure.

Order to offset some of these cost increases.

We expect our strong organic growth profile to continue into next year, giving us confidence in providing our expectation of approaching $700 million in.

Exit run rate revenue by the end of 2023.

This is mainly because we're based on our organic growth and a light amount of M&A activity.

We see a fairly clear line of sight to $1 billion in revenues within three years as we continue our organic growth and highly accretive critical tuck in program.

As a rule of thumb the company aims to have some of.

Adjusted EBITDA margin percentage plus its organic growth percentage.

30.

In 2022, this is sometimes referred to as well.

For instance in Q3, we exceeded the rule liquidity.

With organic growth rate of approximately 18% and adjusted EBITDA margin of eight 2%.

Some of these two percentages is 36%.

We introduced our guidance of <unk> 30 about a year ago in Q3 2021.

As we believe our ability to consistently deliver results is the key to delivering shareholder value looking back well has exceeded our guidance and has averaged a rule of 36.

Since Q3 2021, we're very proud of this and as management, we continue to be focused on generally in line with <unk> 30 for the foreseeable future.

I will now provide some commentary on the various business units starting with the Canadian clinics business unit.

Last quarter, well announced the formation of the new Beagle entity called well health clinics, which includes the company's primary care Allied health and might help, especially like diagnostic services, but does not include wealthier wholesale com service.

<unk> objective is to continue to grow with Canadians, we would expect to see that.

Both organically and Inorganically.

To demonstrate market leadership as the country's first pan Canadian clinical network with a highly integrated network of tech enabled outpatient health care clinics across the country.

For the fourth quarter, we're expecting very strong record results from the Canadian business unit, driven by our strong organic growth and business execution as well as the recent combination and contribution of enlist.

And the clinics from cloud indeed.

We have a robust pipeline of M&A opportunities in this area at attractive valuations due to the present macroeconomic environment and we are excited about our growth.

More to come stay tuned.

And now an update on our CRH business given it is covered by you, but we're very pleased with CRH as result, so far in 2020 to CRH continues to benefit from post Covid pent up demand for endoscopic procedures, and our team's excellent execution and being able to support that elevated demand.

Furthermore, CRH continues to execute.

By unlocking the value of its O'bregon hemorrhoid banding device.

This intellectual property.

It is very key and core to.

Two creating a clinical offering that leverages our.

Yes.

The platform and now we have 5 billion clinics operating in Canada, and three bending clinics operating in United States with another two branding clinics expected to go live in Q4 in the United States.

Based on its performance thus far in the quarter were expecting Q4 to be the <unk>.

<unk> best quarter for the company with increasing volumes and as such CRH is on track to achieve record revenue and EBITDA in Q4 2022.

And now an update on our virtual services segment our largest.

Virtual services is primarily comprised of two components, our provider solutions platform services and the company's cross border telehealth offerings.

The company's new provider solutions business unit announced earlier this year combined with previous well EMR group billing and revenue cycle management and several digital application businesses into one single practitioner enablement platform.

This consolidation is designed to simplify the relationship health care providers have with well and better promote the breadth and depth of wealth practitioner, even one platform.

In the fourth quarter, we acquired cloud practice.

I'm proud and D are called practices, a medical software application company with products, including Juno EMR cloud based more solutions based on Oscar.

The acronym stands for open source clinical applications resource and clinic, a medical billing software used by health care practitioners, who don't need access to a full EMR.

Outside of well who's the largest provider of Austria, earmark products and services Juno EMR represented the largest remaining at the end market share available in the Oscar basically MRI industry.

Both Juno and communicate represent wells entrance into the Alberta, and Saskatchewan markets for it.

Modern medical building lines of business.

Both assets will be integrated into wealth provider solutions business units.

Well U S based virtual patient services businesses, which include circle medical which continue to demonstrate robust growth in Q3.

Circle Medicals year over year growth in Q3 was driven by patient visits increasing by almost 200%.

The number of practitioners working at circle medical in Q3.

By 76% over the same period.

Similarly, with <unk> growth in Q3 was driven by 83% year over year increase in a secretive patient concentrations.

In addition to posting salt.

<unk> top line growth numbers circle.

Medical with also.

Individually.

Achieved positive and growing adjusted EBITDA in Q3.

Overall, we're very pleased with the results in Q3 and look forward to delivering even stronger results in the fourth quarter.

In closing I want to thank you all for joining us on this call today and thank our shareholders and investors for their continued support capital markets have been very supportive of our vision.

And it provided us with the funding needed to pursue our goals. We hope you are proud of your company.

I would also like to think well senior management team and all our employees and contractors for their tremendous effort in particular I'd like to thank our team of health care practitioners.

And frontline workers, who continue to keep our clinics open and provide unbelievable patient care.

Thats why were here every single day, and we're here to support them.

And with that operator, we'd be pleased to take questions.

Thank you.

We will now begin the question and answer session should you have a question. Please.

So I think I'll move on your door stones.

You will hear updates on pump technology.

Your questions will be in early May are received.

Should you wish to refinance on Linzess.

You too.

Are you seeing a speaker phone please lift the cancer.

Issuing entities.

One moment. Please for your first question.

First question comes from Scott <unk> from CIBC.

Go ahead.

Hi, good afternoon, thanks for taking the question.

Wanted to dig in a little bit on the on the divestiture in the quarter could you just give us give us some of the logic behind.

Why that happened and then.

I did miss some of the numbers and if you do go back over sort of what the.

The contribution was and maybe what you think that the MSA will retain of the revenue.

Sure thing.

Sure.

The opposite.

I'll kind of speak to it at a higher level first.

The opportunities in our in our CRE portfolio.

Sometimes for an opportunity to kind of divested at higher rates and reinvest and that's kind of what we did this past quarter, we demonstrated that we were able to.

And create some value for shareholders and then reinvest that capital back into.

Lower multiples and in this environment, you think that it's important to be resourceful, particularly in opportunities, where we can divest and became a contract where we can continue to serve those locations.

On terms of the actual specific numbers.

Pretty quickly here.

Even if you've got them handy.

You can yes.

So we yeah.

We got reported.

Cash.

And then with Apollo.

Canadian dollar 5 million gain which is reflected on our financial statements.

Great and then.

Any idea on how much of the revenue.

<unk> I'm just trying to figure out how much you know what the impact is on the top line into 'twenty three.

Sure Yes.

The next over the next.

Five years will retained about $3 million of the revenue, but I think what's important to note here is that we had already received a significant return on our investment since first buying about 55% stake back in 2017, so we'd already we've already received.

The majority of our of our of our.

Our return on that investment and then we were able to.

Divest at a significant multi.

Multiple to a partner that we work with extensively and that partner retained us for the management contract and then we were able to subsequently allocate that capital directly into another significant deal. So in our view. This is the type of portfolio pruning and management debt that debt.

I think its going to demonstrate the resourcefulness of our team and create value for shareholders.

Okay. Thanks, that's helpful and.

Maybe on a similar vein.

In terms of where the debt levels are right now are you sort of.

With future acquisitions, do you anticipate sort of taking the absolute debt number up or is it sort of are you going to keep looking at repayments like you've done in the last couple of quarters.

We think our Gibson given that we're roughly.

Leverage at around three times our.

Our shareholder EBITDA.

We think we're appropriately levered.

And we like this level, we don't want to go too much higher than this so obviously as our EBITDA improves that gives us an opportunity to to.

<unk> also increased our funded debt.

So that's something we keep an eye on but we're also.

Where that were in.

In the hiking cycle. So we're.

That's why you're seeing some some meaningful contributions to reducing debt as well.

So I think that's kind of how we're balancing it right now as we continue to allocate capital, but very highly accretive circumstances, while we.

<unk>.

We're mindful of our debt, especially with the increased carrying costs and continue to make.

Contributions to improvements to group debt levels.

Okay. Thanks, I'll pass along.

Yes.

Thank you.

Next question comes from Allen Klee from Maxim Group. Please go ahead.

Good afternoon.

Talk about the Grand Canyon anesthesia, you expect to generate 16 million annual revenue $2 million in shareholder EBITDA can you talk about and maybe it could be more generically, but just the type of synergies that you try to obtain when you're requiring anesthesia groups such as Grand Canyon. Thank you.

Sure and just as with any.

Provider centric business.

We're doing everything we can to.

To apply technology and improve those businesses. Our view is that digital health isn't just virtual care, it's all aspects of ameliorating.

Health care business, our asset whether it's front office, whether it's back office, whether its revenue cycle management, whether its business intelligence. So we've made great gains with <unk>.

Since owning that even though it hasnt been a significant period of time, just just in terms of what we've done with the revenue cycle management that that was a huge undertaking and management there has been.

Done a great job with now dramatically improving the business intelligence.

Data availability.

Uh huh.

Our credentialing managements.

Just so many aspects of the operation again.

We try to apply software and workflow to everything that you do so the DNA of the business is.

And again.

Ample opportunities to continue to improve that and.

Essentially any provider of business that we get involved with.

Thank you. My last question is you noted you had free cash flow in the quarter of 11 4 million. This was kind of theoretical question, but if we assume that annualized is around 40 ish million of free cash flow.

How do you think about how much revenue you could potentially acquire from acquisitions in a given year. If you were generating 40 ish million in free cash flow and you wanted to maintain them.

Same approximate three times leverage ratio.

Yes, it's a great question I think.

It just depends on whether or not we will continue to see the types of attractive multiples. We're seeing today. It also depends somewhat on our deferred acquisition expense of 2022 was a year, where we had.

Elevated deferred acquisition expense because of acquisitions made in previous years.

And so this is the reason why we did the offering earlier this year because we wanted to make sure that while our cash flow was enough to cover.

This deferred acquisition expenses, we were able to continue to be aggressive.

We noted that we wanted to improve our offense and defense well next year.

We'll have much lower deferred acquisition expense. So so it gets pretty exciting because we will have.

For free cash flow that we can we can put back into new assets without meeting any kind of funding event.

So we're very.

We're very bullish on the future and in our guidance.

That we gave today on where we'll end up in terms of the exit revenue for next year. It doesn't have a lot of M&A in <unk>.

With the improving cash flows.

We do believe that.

Look on the clinical side, we've been buying at less than five times revenue.

And comfortably buying it at less than four times EBITDA lately.

So.

Again, depending on how much debt we pay down.

<unk>.

And depending on how many good deals we find we think that that could that could result in tens of millions of dollars immediate revenue.

Thank you so much.

Thank you. Your next question comes from David <unk> from TD Securities. Please go ahead.

Good morning, congratulations on the great quarter.

Nice to see the increased guidance I guess on that Hanmi, you provided and particularly I guess just more interesting on the 2023 target on the exit revenue run rate. There you talked about some of the key drivers behind it and mentioned.

Some light contribution from M&A. So I was wondering if you could quantify what you're expecting in that.

Seven all $700 million number exactly come from future M&A.

Yes, Thanks, David.

When I say light I mean, I think it's.

We will probably thinking a clinic or two a quarter.

To us that's pretty light.

And we are still thinking of.

Elevated organic growth.

<unk> next year.

Sure.

Depending on how things go with organic growth, we could end up doing a lot better than that but we think that that's it.

It does.

Reasonable and not too prudent level.

Level of guidance right now demonstrating managements willing to kind of go out and Linden and say look organic growth looks strong.

And we feel good about it that's really what that message was about today.

Should we read into that that you expect kind of a very very strong growth rate that circle and wisp that continue into 2020.

No.

We are continuing to see strong performance there and so.

We'll see we'll see what happens in 2023.

But I think.

And what the sequential growth could look like but we think on a year over year growth perspective.

Those businesses are demonstrating again strong resilience and ability to grow.

There are there are likely going to be some changes next year due to at some point.

The ending of the public health emergency, which will likely have a little bit of an impact on circle.

But we I think management has done a great job preparing for that and we still expect to have elevated growth levels for the year.

Okay and the last question I guess somewhat related to that obviously, we've seen a pretty strong.

Strong move in the U S dollar in particular, which is providing a nice headwind or sorry.

A tailwind for you guys.

Given most of your businesses in the U S. In the fastest growing parts are obviously circle and west how much of a stronger U S. Dollar is baked into that guidance.

That's a good question I think we're not.

We're not expecting any kind of strengthening I think we're probably thinking that it comes off a little bit next year at some point in time I think the bank forecasts estimate that it probably peaks at some time in the in the first half of the year and then it comes off.

EBIT did you have a <unk>.

Forecast rate for next year's budget.

Yeah, Yeah, so we're actually.

Yeah, we're assuming pretty much a similar level.

Q2, Q3 average, which is about $1 three for one country.

And of course, we're going to continue to monitor and well yeah.

Excellent I'll leave it there thank you.

Thank you. Your next question comes from Bruce Yes Russell.

Eight capital. Please go ahead.

Hey, good afternoon, and thanks for taking my questions.

First one I want to thank you guys.

Pointing us toward our revenue guide for 2020 through the approaching $700 million.

I'm just curious on your thoughts on profitability.

How maybe you would think about profitability next year on a margin basis, maybe using this year as a baseline would you be motivated to invest more in the business or do you expect to see scale in some margin growth for the full year next year.

Yeah, Thanks Christian listener.

Listen I think that's that's why my my script was probably a bit longer today I really wanted to give some color around our thinking there.

As I mentioned.

Circle risks are not yet really designed to be major profitability drivers. They are designed to be growing profitability drivers, but not meaningful and so this is why we think that it's still prudent to speak.

Speak to our rule of 30.

We think that's an excellent disposition.

And in a great way to be able to provide the street.

A predictable level of performance from the company so.

And this also comes from the belief that there is.

No.

Yeah.

A related kind of view on how organic growth.

Operating margin sort of relationship between those two metrics and so we.

We do believe that if growth comes off hopefully, we'll start to see some improved profitability and vice versa. So.

Look we've been fairly consistent at around 18%.

In terms of our operating margins.

We set out to achieve rules 30, we'd been a rule 36 so.

We think again as the numbers grow it's going to be harder and harder to maintain that but we feel very good about maintaining roofer to your better.

That's all helpful context.

My second question here I wanted to dig into maybe a smaller part of the business, but on the virtual services side.

Practitioner enablement platform I was just curious on any underlying trends there.

If theres any change in what you're offering your go to market strategy and the way youre going to practitioners with that solution in the market.

Yeah, no. It's very good and look I think I think this is a this.

This is an exciting business for us.

At some point in the next.

Three to four years this is a $100 million business on its own.

The team there has just done a fantastic job.

It's changed probably has all the integrated benefits I don't I don't think we get enough credit for the work that we're doing there.

And I don't mind, saying like we are doing a great job integrating those businesses and so now there's a very much a focus on bundling and.

And taking a bundling costs a bundled offer two two.

Providers and this makes the provider's job lives a lot easier to they don't want to deal with.

With multiple different companies and so.

We're seeing good strong growth from that from that business.

And it is contributing to the growth of our virtual services Division and I think youre going to youre going to see some nice strong wins.

Come out of that group and we hope to get some more news out over the next few months.

That's perfect gentleman, thanks for the context and thanks for taking my questions.

Thank you.

Yes.

Thank you. Your next question comes from Ross from Angola. Please go ahead.

Thank you very much for taking my question and.

Congratulations on very strong results.

And thank you Rob together, perhaps a question on the growth at Wisp and circle can you talk to the growth. There is a gain in any way by the availability of practitioners is it really just too Coa versus lifetime revenue are heard.

But youre looking at.

Yeah, So Ravi.

Rob Youre right in that and that both of those businesses are finely tuned to trying to understand and improve constantly the whole relationship between CAC and LTV.

And both businesses have sort of different strengths and weaknesses associated with them. So the way to think about how this is different.

Apart from the general specialty areas that they support is that circle is very focused on synchronous care. So when you see a provider on the circle site E U.

You have a session with that you have a you have a discussion with them.

Through video.

On on the West side, it's asynchronous, so youre going through some kind of relationship.

Software and workflow kind of kind of chat.

But then sometimes in some states you have to also engage in a <unk>.

Chris <unk>.

Interaction.

But.

So the eastern side tends to be a lot more scalable.

Yeah.

And also which has a subscription based business model. So if you need a product or service from them. Once it's prescribed for you you can engage in a subscription and more than half the revenue comes from.

Subscribe products. So there's some nice predictability there.

On the circle side.

What's really great about that business as the LTV tends to be quite a bit stronger because once you come in through one of the specialty on reps.

The team has had a fantastic record to be able to convert you into a longer term longitudinal care customer.

And patients that that is really key so we're not just kind of helping you with whatever your issue is that Gabe.

<unk> IV ADHD.

Whatever the case may be.

You've come to us because of your concern there.

We dealt with their ailments or your concerns and a competent manner now you've become a longitudinal care patients and so that that drives ltvs quite a bit and I think that's been.

A lot of the secret sauce, if you will.

Circle and how.

<unk> been able to just have these fees.

These kind of classic metrics.

With both having grown so quickly and achieve significant scale are there considerations of.

Various partnership models for go to market strategies.

Well listen I think commodity wood has to do with focus I think a lot of it has to do with those teams doing a very good job.

Scaling product market fit.

And being very efficient and performance in their marketing.

Most most specialty telehealth businesses.

Our two sided networks it's about.

Being able to acquire patients and then service them with the supply of physician so not enough credit goes to.

The ability.

Circle then.

To be able to have found as many and recruited an onboard as many physicians as they have.

That is really due in part to do and no matter how many customers you acquired if you can't service them.

It's not going to work so they've just done I think an incredible job driving both sides of that two sided network and I think that's where that's why what theyre doing is not easy to replicate and Thats why you don't see this type of growth all the time.

Marketing effectiveness can go up and down but not everyone has supply physicians.

Support.

But that growth and acquisition.

And I think in circles case. They also have a very deep platform that is allowing providers to be successful and what's keeping them there.

Okay, that's great color I appreciate it.

Got it.

Thank you. Your next question comes from Helane Becker.

Josh Scotiabank. Please go ahead.

Good afternoon, Thanks for taking my question and congrats on the quarter.

I just had one on the sort of vision for the Pan Canadian sort of clinic network.

Think about some of these segments historically that are going to make up this business they've been a little more siloed in terms of their operation.

Sort of kind of integrate.

Acquisitions, and sort of look at utilization and grow that I'm, just wondering from a margin perspective whats the white space there.

Some of these assets, where maybe a 20% adjusted EBITDA margin historically, so just curious if there's any insight you can add there.

Yeah, Adam Thanks.

Thanks for the question I think Youre right.

This is what this is what we're finding is the better the integration.

We're seeing that.

That's sort of driving operating margins and helping our growth. If you think about the clinical business.

Especially primary care the margins arent so great even with these steps that are coming from the government.

Try and stay in line with CPI, it's a tough business, but the way well I think has clearly exceeded.

Anyone in this industry in Canada here is precisely by what you just said it is by is by bringing together more integrated benefits.

Primary care is.

Is valuable because of.

The.

Orchestration of of your journey.

Are any of your health care journey your health care journey begins with primary care.

And after that you may need to see key geologists are a mental health expert or.

Or sometimes a specialist and for us to be able to provide more and more of those services.

Internally.

And that I think we can't tell our physicians were to refer and how does the FERC, but what we can do is create a really compelling platform that gives them confidence.

And that's what we try to do is we try to we try to create the environment where they can.

No.

Still more and more of those needs internally, where they get really great data back where they where they feel that confident as opposed to sending those referrals outside.

Of the network.

Okay. Thanks for the color.

That's it for me.

Thank you. Your next question comes from Justin <unk> from Stifel. Please go ahead.

Alright, Thanks for taking my call. So I'm just wondering how wells are preparing for the change in the telehealth guidance are within Ontario, Canada.

Unattached Ah patients need to see either the doctor.

In order to receive a virtual care and if this is a challenge or opportunity for well ahead.

Thanks for the question Justin I think I think it's both I think it's a challenge and an opportunity I think it's increasingly an opportunity per well because it does have.

Brick and mortar infrastructure and a growing clinical network I think most telehealth businesses will be.

We'll have a tough time meeting these demands and havent.

Having said that I think it's good guidance and good.

Good policy for months or you.

You want to see more of a focus on lunch to no cure and so look we've always said that.

We think the right care model is not just telehealth, it's a combination of on and offline support and so.

As youre likely where our primary care network is stronger in DC than it is in Ontario, but we're growing and improving in Ontario, and I think.

With time this benefits us.

And could there perhaps be some assets that come up for potential acquisition.

Given this change in guidance, maybe some really good technology with.

With a patient base that well may looks at.

Possibly yeah, that's a good point I mean, we.

We try to keep our ears close to the ground and see what's available out there and and I think you're right.

This type of regulation has a way.

Creating new opportunities and we.

No. We haven't we haven't seen anything big come up lately, but you can be sure that we'll be focused on that.

Understood. Thank you for taking my questions.

Thank you Joseph.

Thank you.

Mr. <unk> there are no further questions. Please proceed.

Well. Thank you everyone, who attended the call today, especially the analyst in there.

<unk>.

Really again appreciate.

Everyone's engagement with our story and the support that we've received and we look forward to speaking with you again on our next conference call. We hope you have a wonderful day.

Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask you. Please disconnect your lines.