Q4 2022 WELL Health Technologies Corp Earnings Call

March 21, 2023

Okay.

Welcome to the World Health Technologies Corp, fourth quarter, and full year 2022 financial results Conference call.

My name is Michelle and I'll be your operator for today's call.

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 this conference is being recorded.

I will now turn the call over to her deep Zynga, Vice President Investor Relations. Mr. <unk> you may begin.

Thank you operator, and welcome everyone to World Health annual 2022, and fiscal fourth quarter financial results Conference call for the 12 and three months ended December 31 2022.

With me on the call today are <unk>, chairman and CEO and Eva <unk> the company's CFO .

I Trust that everyone has received a copy of our financial results press release 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.

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 and contingencies contingencies. These.

These forward looking statements involve known and unknown risks uncertainties assumptions and other factors many of which are outside of wealth control that may cause the actual results performance or achievements of well to.

To differ 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. We 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 circumstances on which any such statements based acceptance as required by law.

We may use terms such as adjusted gross profit adjusted gross margin adjusted EBITDA shows EBITDA adjusted net income.

And adjusted free cash flow on this conference call, which are all non-GAAP and non <unk> measures.

More information on how we define these terms please refer to the definitely just 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 generate 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 IRS.

And with that let me turn the call over to Mr. How much about is the chairman and CEO go ahead Amit.

Thank you and good day everyone.

We hope that you're all keeping safe and healthy we appreciate everyone for joining us today to start I'd like to provide some historical perspective on well. We recently celebrated the five year anniversary of the acquisition of our first six clinics in British Columbia, which took place in February of 2018.

That was wells first acquisition and began our journey into the healthcare market.

By Tech, enabling health care providers in helping them modernize and digitize their businesses.

Been an amazing journey during which time well, it's grown from zero revenue to completing a record year in 2022, and which we achieved over $625 million on our Q4 annualized revenue run rate basis.

More than one out of every four providers in Canada laid out well in some way to power their businesses from practice management solution to revenue cycle management to provider patient communication tools, such as unlike patient booking or E referrals.

Over the past five years, we've both grown organically and inorganically into one of the leading digital health care companies in North America.

I'd like to thank the amazing team at well, including the health care providers, who help make all of this possible during the past five years, we went through an unprecedented global pandemic during which our healthcare providers continue to provide incredible care under difficult conditions. The pandemic also accelerated the adoption of virtual.

Sure and Digitization of the industry more recently, we've also had to deal with very challenging circumstances, including worker shortages supply chain difficulties and rising costs, but brought about by high inflation.

On all occasions, our management team employees and health care providers continue to overcome all of these challenges, enabling the company to deliver phenomenal performance quarter after quarter.

We are now firmly in the post pandemic period, and witnessing a host of new catalysts that speak to wells relevance as a company and our role in helping healthcare providers digitize and modernize their practices and in many cases help make those practices more economically sustainable.

Catalysts that we're watching closely as a team and believe active tailwind for the company are as follows one the increased likelihood of more public private partnerships to support our health care ecosystem announced by political and public health leaders. Most recently in Ontario to a commitment by federal authorities and <unk>.

Canada to add significant additional funding to help tended to not only improve the sustainability of its healthcare ecosystem, but also digitize and modernize it.

Three the emergence of artificial intelligence, including generative AI to power tools and tech enablement for health care providers never even conceived or thought before it.

By the way. This is an area of intense focus for your management team. It well we will discuss this more later.

The demonstration, particularly core at the demonstration, particularly in the United States of how valuable hybrid care networks are two major pharmacies and other institutions.

We seem to be in a new Golden age of primary care, where there is ramping innovation and an opportunity to elevate care and better support providers.

Moving on to wealth financial performance.

Thrilled to report another record breaking year with strong fourth quarter result is significant growth across all key metrics, while achieved record annual revenue of $569 1 million for 2022, an increase of 88% over the prior year.

I'm proud to report that well has healthy cash flows having achieved almost $105 million and operating adjusted EBITDA in 2022, resulting in adjusted free cash flow to shareholders up approximately $49 billion.

Q4, 2022 was also a tremendous quarter for the company achieved revenue of $156 5 million in the fourth quarter, representing 35% year over year revenue growth.

Most of it was organic the fourth quarter of 2022 also marks our 16th consecutive quarter of record revenue. The company's growth was driven by acquisitions made over the past year as well as solid year over year organic growth, which was 19% for the full year and 20% organic growth in.

In the fourth quarter.

While achieved record patient engagements over the past year with approximately $3 5 million omnichannel patient visits and $4 9 million patient interactions in 2022, Omnichannel patient visits grew 50% in 2022 compared to the prior year and total patient interactions grew 86.

Sent over the same period. This demonstrates our continued leadership position as the preeminent end to end health care company in Canada, while our U S businesses continue to exhibit industry, leading growth metrics are record revenue profitability and patient visits are testament to the company's continued focus on delivering accessible.

<unk>, an innovative health care solutions.

Additionally, our U S based virtual services businesses continue to perform exceptionally well further strengthening our position in the North American digital health care market.

The company continues to witness healthy growth across all its business segments, including both online and in person care channels with minimal impacts due to recession inflation supply chain issues or other macroeconomic effects.

With that I would now like to turn the call over to our CFO <unk>, who will review the annual financials for 2022 and fiscal fourth quarter. I will then come back and provide further commentary on our business units and outlook EBIT.

Thank you Amit I'm pleased to report that we had very strong results for the three months and year ended December 31 2019.

Our annual 2022 and fourth quarter results were as follows while achieved record annual revenue of $569 1 million in 2022 compared to revenue of $302 3 million generated during 2021, an increase of 88% driven by acquisitions and organic growth.

Adjusted gross profit was $303 3 million in 2022, an increase of 97% compared to $153 7 million in 2021.

Adjusted EBITDA was $104 6 million in 2022, an increase of 73% compared to $64 million in 2021.

Adjusted EBITDA attributable to well shareholders was $76 6 million in 2022, an increase of 82% compared to $42 million in 2021.

Adjusted net income was $53 7 million in 2022, an increase of 208, 28% compared to $16 3 million in 2021.

Adjusted free cash flow attributable to well shareholders was 48 8 million in 2022 as compared to $34 2 million in 2021.

Free cash flow is defined as adjusted EBITDA attributable to well shareholders minus cash taxes minus cash interest costs and minus capex.

Our fourth quarter results were as follows.

<unk> achieved record quarterly revenue of $156 5 million in Q4, 2022, an increase of 35% as compared to revenue of $115 7 million generated during Q4 2021.

This growth was driven by acquisitions and organic growth.

Well achieved record adjusted gross profit of $8 2 million in Q4, 2022, an increase of 26% as compared to adjusted gross profit of $63 5 million in Q4 2021.

In the Companys adjusted gross profit is attributable to higher revenue in the period.

Adjusted EBITDA was $27 2 million in Q4, 2022, an increase of 6% as compared to adjusted EBITDA of $25 7 million in Q4 2021.

It is worth noting that we had really strong results in the prior period Q4, 2021 with the highest margins in CRH history, which included $1 2 million of pandemic related government incentives.

Charter in exceptionally strong EBITDA performance in Q4 2021.

Adjusted EBITDA attributable to well shareholders was $21 1 million in Q4, 2022, an increase of 18% as compared to adjusted EBITDA attributable to while shareholders of $17 8 million in Q4 2021.

Adjusted net income was $12 5 million in Q4, 2022, an increase of 24% as compared to adjusted net income of $10 1 million in Q4 2021.

I will now review the financial performance of our business segments.

First primary care, which includes our primary care clinics ally healthy executive helping businesses in Canada.

Primary care revenues were $70 5 million in 2022, an increase of 36% as compared to $51 7 million in 2021.

Annual results were driven by healthy organic growth clinic acquisitions, and higher government payments for health services.

Primary care revenues were a record $21 8 million in Q4, 2022, an increase of 55% as compared to $14 1 million in Q4 of last year.

In the acquisition completed in the third quarter and three new clinics acquired from cloud <unk> in the fourth quarter positively contributed to a strong Q4 results.

In addition primary care revenues in Q4 2022 benefited from a stabilization payments from the BC government. This one time payment of approximately $1 5 million in the fourth quarter is meant as interim funding to help stabilize family practices until a new payment model was implemented in February 2023.

Compared to Q3 2022 primary care revenue was positively impacted by seasonality as the fourth quarter is a seasonally stronger quarter as compared to Q3 as that tends to be an increasing colds flus and other elements contributing to higher patient volumes.

Finally, my health.

<unk> achieved record revenues of $104 2 million in 2022, an increase of 146% as compared to 42.

5 million in 2021.

Help us acquire partway through 2021, and hence the larger revenue growth from 2021% to 2020.

In Q4 2020 to my health achieved record quarterly revenue of $28 1 million, an increase of 21% as compared to $26 2 million in Q4 of last year.

<unk> benefited in Q4 2022 from management's Hot-work and continue efforts to <unk> stock shortages experienced in the first half of the year, leading to a higher billable time for many of its diagnostic procedures.

Might help also benefited in the quarter from the addition of new cardiologists and pain management specialists.

And third I will now talk about CRH performance.

<unk> revenues were $202 million in 2022, an increase of 52% as compared to $132 5 million in 2021.

<unk> was acquired in April 2021, the increase in revenue is mostly attributable to a full year contribution of <unk> revenue and acquisitions.

For Q4 2020 to see how each revenues were 50 to $52 1 million, an increase of 11% as compared to $47 1 million in Q4 of last year in.

In addition revenues also benefited from having a full quarter of contribution from the Grand Canyon anesthesia acquisition, which is one of the largest acquisitions that CRH has completed since well acquire CRH compared to Q3 2022, <unk> Q4, 2022 result benefited.

From seasonality as Q4 is a strongest quarter.

Case volumes was also very strong for CRH in Q4 was a record of 133654 and CCF cases completed in Q4, an increase of 11% compared to Q4 of last year.

H sold 2138 or Reagan buses in the fourth quarter and since each boss has 2020 <unk> unit a total of 42000 located units were sold in the quarter.

Yes.

I would also like to provide an update on CRH billing service provider.

Oh, each enter into a relationship with a new billing service provider change healthcare in Q4 2021.

Switching to a new provider has benefited accompany with the reduction in payment processing fees, resulting in higher margins. However, CRH also experienced a number of onetime transition related issues, which include the predecessor billing service provider subsequently dissolved and was not able to carry our normal accounts receivable collections.

With switch resulted in bad debt losses related to 2021 revenue.

As a result of these events CRH took this onetime loss and was also preclude us from recognizing certain patient services revenue under <unk> 15, and as such revenues would have been higher had this billing change not occurred.

Together along fine.

$5 million has been excluded from the calculation of adjusted EBITDA and these are nonrecurring and not reflective of ongoing operations.

Spite these transition issues and related impacts we remain confident that the long term savings from switching to a new billing provider will provide will more than compensate for the losses experienced over the past year as we will ultimately be able to reduce our effective collection rate cost by more than 50%.

Reflecting over $5 million savings per year.

It is also important to note that our new billing service provider offers better data and business intelligence as far as well as far superior risk management characteristics, including much better data security.

This was a giant undertaken by <unk> team and I'm very pleased that we are on the other side of this transaction transition as its substantially de risked and pet and Amy both the company and position us for better operating performance and improved data quality.

Lastly, virtual services, which includes wealth U S based circle medical and width as well as the Companys technology based solutions, including EMR billing and revenue cycle management Ocean M D digital apps and cybersecurity.

Let your services revenues were $192 4 million in 2022, an increase of 154% as compared to $75 6 million in 2021.

But just to emphasize revenue growth was driven by the exceptional growth in the U S based businesses of circle medical and whips on a combined basis. These two businesses achieved almost $160 million on a revenue run rate basis at the end of 2022.

Budget services revenues were $54 5 million in Q4, 2022, an increase of 74% as compared to 31 3 million in Q4 of last year.

Well ended 2022 in Q4 with a solid balance sheet.

As of December 31, 2022, well had cash and cash equivalents of $48 9 million.

Well continues to be in good standing and fully compliance with all covenants related to with his two credit lines JP Morgan in the U S and broadband in Canada.

During the year 2022, we paid down about U S $31 million. After Jpmorgan line in the U S to arrive at a balance of U S $131 7 million as of the end of the year in.

In Canada, we borrowed a total of $2 5 million in the year to arrive at a balance of $75 3 million.

The total value of our credit line debt as of December 31 was approximately $253 7 million in Canadian dollars.

Keep in mind at USD strengthened from an average of 126 in Q4 2021 to 136 in Q4 2022, and as such due to the higher exchange rate. Our overall debt level would have been lower on a constant currency basis.

Okay.

In terms of our share capitalization as of March 20th 2022, while had $253 million 793194 fully diluted <unk> issued and outstanding.

That is my financial update and I tend to call back over to habits.

Thank you Eva.

Now I'd like to speak a bit about our outlook for 2023.

Pleased to report that all of our business units are executing very well as we are expecting to have strong performance in 2023 across all of our units and for the entire company as a whole. Despite the current geopolitical inflationary and turbulent economic environment. The company does not see any material influences or challenges that would <unk>.

<unk> ability to deliver solid results in 2023 mini.

Many of the key variables inherent in the execution of wealth business are firmly in its own grass and not dependent on outside factors.

The company is poised to achieve significant growth while effectively managing its costs. This year management is pleased to provide the following guidance for 2023.

We expect annual revenues between $665 million, and 685 billion, representing 17% to 20% annual growth as compared to 2022, our revenue guidance above is above current consensus estimates for 2023.

We expect annual adjusted EBITDA increased by more than 10% over 2022 levels. Our guidance does not include any unannounced acquisitions.

As we indicated last quarter with future acquisitions, we see a clear line of sight to $1 billion in revenues within three years as we continue our organic growth and highly accretive clinical tuck in program.

As you may have seen from the guidance, we are expecting our revenue to increase at a higher rate than our adjusted EBITDA. This year.

There are few reasons for that firstly were aggressively reinvesting in growth in our circle medical which businesses. While we expect these two businesses to have higher EBITDA contribution. This year overall, there will still be immature compared to our other revenue streams and pulled down the average a little bit.

We're very comfortable with this approach as we're confident that both circle medical and which will continue to acquire market share and improve their operating EBITDA margins over time as they become more mature businesses.

Secondly, we continue to experience the effects of inflationary cost pressures and wage increases. These cost increases are prevalent in all industries today, although we have implemented cost saving initiatives, we're still expecting additional cost and wages increases this year as inflation remains at elevated levels.

And lastly in our CRH business there are a few factors to be aware of.

One we don't have the benefit of some of the pandemic related incentives provided by the U S government. The EBIT just spoke about during early 2022, which equals more than $2 million.

U S D between Q1, and Q2 last year in 2022.

Had some of those incentives in 2021 as well that even spoke about.

To the combined effect of the NSA, where no surprises act and our continued move to have our entire payment activity in network will remove some of the elevated billings associated with our out of network billings.

Which we were all anticipating when we bought the company.

And three our most recent large acquisition in the CRH business Grand Kenyan anesthesia has a lower margin profile than our historic margins for CRH.

Notwithstanding the above we're still firmly within the rules 30 territory as per the company's previous guidance and direction.

I will now provide some commentary on the business units themselves segmented.

First with the Canadian patient services group than U S patient services, and then SaaS and technology.

First with the Canadian patient services business unit in Canada will owns and operates the largest network of clinics in the country, which includes over 130 clinics being operated at over 80 physical facilities, consisting of primary care Allied health executive health and diagnostic clinics as we described on our prior calls.

<unk> strongly believes in the benefits of an integrated healthcare offering and it's bringing together diverse multi disciplinary offering of its providers in the same setting.

This benefits both patients and providers as many of these physical facilities have multiple clinics operating within the same location. For example, we could have a primary care in Allied health clinic operating under the same location or a cardiology clinic in a diagnostic clinic operating out of out of one of our my health, Ontario facilities.

That's how we can have more than one clinic in our facility.

With over 30 clinics across Canada, 130 clinics across Canada, we own and operate the largest network to our knowledge, we deliver more omnichannel patient visits and any other nongovernmental entity in Canada. Furthermore, we're one of the top three providers of telehealth services in the country.

<unk> objective is to continue to grow its patient services business unit, both organically and Inorganically and increase its market leadership as the country's first pan Canadian clinical network with a highly integrated network of tech enabled outpatient health care clinics.

Growth in our Canadian patient services business in 2023 will be driven by continuing to focus on organic growth, which includes recruiting recruiting more physicians and absorbing or recruiting clinics themselves and executing on highly disciplined capital allocation opportunities to acquire capable new clinics in networks into the business.

These would mostly be small acquisitions.

I'd love to share with you what we're seeing and why we're so excited about our growth in primary care in Canada.

Given recent times, where there are challenges with inflation shortages of health care workers and other issues will is seeing dramatically increased relevancy, which is translating into significant growth in interest from care providers that want to join US network as I've mentioned before in Canada. Historically in many cases, we force health care providers to provide.

Care and run the business.

But now it's become a lot more difficult to run these businesses due to the increased complexity brought about by hybrid and complex workflows and.

Data security and other challenges, making it very difficult for physicians to run EBIT small practices.

For this reason, we're seeing more physicians seek well out as a professional partner to help them run their business. So they can focus on providing care.

This is working and provides and providers are really.

Generating benefit from it because they maintained similar per unit economics, but ended up being a lot more patients with allows them to elevate care improved earnings and better support the health care ecosystem.

I'd like to now quickly comment on opportunities associated with expanding our my health network in Ontario.

On January 16th Premier Doug Ford.

And health Minister, Sylvia Jones announced the Ontario government's new multi pronged strategy to reduce wait times by partnering with independent service providers for Ontario.

Including areas associated with MRI Cte colonoscopy.

And just and Discopathy services.

Wells, Ontario based on my Health partners is the largest single license holder and service provider for specialty clinics, providing diagnostics in the province of Ontario, We believe is very well positioned to support Ontario government's mandate, particularly in the areas of diagnostic imaging, we intend to apply for these new MRI Cte licenses, which will.

Provided by the province of Ontario, We anticipate the new licenses will be awarded in the second half of 2023, although we don't know we won't know for several months yet if my hope will be ultimately successful in its applications, we would likely incur additional capital cost to purchasing imaging equipment and for lease hold improvements.

We anticipate lead times of several months to have these services fully operational clinics and as such we expect minimal revenue generation in 2023, any such meaningful revenue impact would occur in 'twenty four and beyond.

I'll now provide some commentary on our U S patient services businesses, including CRH Circle medical Wisp well.

Well provides omnichannel healthcare services and solutions across the United States targeting specialized markets such as the GI market Women's health primary care and mental disorders.

I'll start with CRH CRH continues to be a nice cash cow for the company.

And as a reminder, under the CRH brand, where we are the leading provider of sedation services for colonoscopy and the U S in an ambulatory setting.

In the U S well it continues to expand its clinical presence with anesthesia services now being operated 126 ambulatory surgery centers and Gi clinics across 18 states in.

In 2022, Crs continued 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.

We continue to see elevated interest in demand in CRH is services and expect another record year of performance by CRH.

Given the nature of how health plans under deductibles work through the year for elected procedures, such as colonoscopy. The fourth quarter's CRH is strongest seasonal quarter.

We're expecting CRH revenues to decline in Q1 compared to Q4, and then increase again in each subsequent quarter in 2023.

With Q4, 2023 again being the strongest revenue quarter this year.

It should be noted that between Q1, and Q2 2020 to CRH received more than $2 million.

U S and pandemic related government assistance. This grant helped offset labor costs and improved EBITDA, which will not be repeated in 2023.

In addition, CRH continues to execute on unlocking the value of its own Reagan hemorrhoid banding device intellectual property by creating a clinical offering called Gi rapid relief that Leverages. This technology as of March 21, we now have 11 building clinics across the United States and Canada.

I'd now like to discuss well, it's U S virtual patient services businesses, which include circle medical at West.

Under the circle medical which brands, we are one of the fastest growing specialty telehealth businesses focusing on areas such as behavioral health and women's health, our circle medical and which businesses are expected to continue to experience healthy revenue growth in 2023. However, we're purposely reinvesting any cash flows generated.

By these businesses back into growth, primarily on marketing costs to gain new patients and drive additional revenues as.

As you may be aware AD rates are much lower in the first three months of the year as compared to the last three months of the year.

As such we're taking advantage of this and increasing our marketing spend earlier this year.

We will in particular see this effect with with as we're targeting a slightly adjusted.

EBITDA negative performance in Q1, which will more than be made up in the balance of the year.

Our current plan for circle Medicals to continue to scale their telemedicine business, but also now aggressively grow its physical clinic performance or network in 2023, which will improve its hybrid care capabilities and strengthens the company's ability to better support its patients, especially as we see the bite into administration sunset the.

Public health emergency.

As of March 1st Circle Medical had already had added three new clinic locations in Illinois, Florida, and New York. In addition to its existing operations in San Francisco Sure Circle Medicals now in the process of adding additional clinic locations in Washington D C and.

And 10, additional states, including Arizona, New Jersey, Pennsylvania, Nevada, Texas.

Massachusetts, Virginia, Colorado, Tennessee in Maryland, we expect to have clinical coverage across all the states in the coming weeks.

Finally, SaaS and technology SaaS and technology includes our well EMR group billing revenue cycle management.

Digital apps Ocean M D and cyber security.

Well as a unique company with both patient services and technology capabilities, we have.

Significant intellectual property, which drives our industry, leading solutions and has created compelling and relevant links within health care providers all over the country.

We have created a best in class digital platform with significant IP that we call the practitioner enablement platform.

This platform aims to digitize modernized and support providers in their clinics with.

With well over 23000 medical providers in Canada.

That are leveraging the platform in some way.

What is unique about well is that we are the biggest users of our own platform as the vast majority of our revenues is derived by our own patient services businesses. This is because we found that the best way to support providers is to help them run their businesses when it provider joins well we provide a fully managed solution. This means we look after all aspects of their business.

From front office patient management to the management of all staff and back off in that back office execution. So they can focus on providing care.

We are industry leaders in technology and innovation in digital health care in Canada. Some of our examples of leadership include one we're one of the top three practice management service providers in Canada, including EMR.

Or electronic medical records software.

Two we're one of the leading providers of digital patient engagement services, which includes all aspects of connecting patients and doctors digitally three we're one of the largest providers in fact, the largest provider of revenue cycle management and outsourced billing services for doctors in Canada.

Five we.

We are the largest provider you referral software services in Canada.

And we operate the candidates only app marketplace for integrated EMR apps called apps upheld.

Our outlook looks promising for SaaS and technology for our SaaS and technology group Ocean empty in particular is emerging as a leader in patient engagement at your referral solutions in the country.

Already the E referral solution provided by Ocean is in place in the province of Ontario.

We feel ocean M. D has the potential to become the referral standard across the country.

Ocean platform is to use that over 2700 clinics in the country by over 25000, clinicians with more than 1 million monthly patient users.

It is emerging as one of the most important digital gateways for health care in Canada with connectivity to more than 30 integrated solutions in EMR and provincial assets to our knowledge. There is no other software digital health system in Canada that is deeply connected in embedded in the Canadian health care landscape as ocean.

We have recently updated oceans web presence and invite you to spend some time learning about this amazing network you can visit the site at Ocean M D Dot com.

I'm also pleased to report that as a company with deep Tech experience and capabilities. We have made artificial intelligence a key priority within the company and are working on compelling new products and enhancements to rollout to our provider network.

Our teams and partners are integrating different forms of AI technology, including generative AI solutions, such as jet GPT.

We look forward to unveiling these solutions in the coming weeks and months ahead.

In summary, we're very pleased with our financial performance in 2022, and look forward to delivering the strongest results yet as a company.

Our outlook for 2023 remains very positive hits I can confidently provide annual guidance for revenues between $665 billion and 685 billion for this year and the material improvement in our adjusted EBITDA to exceed at least $115 million.

Finally, I'd like to thank you all for joining us on this call today and thank our shareholders and investors for their continued support.

The capital markets have been very supportive of our vision and have provided us with the funding and patients needed to pursue our goals.

I'd also like to thank wells senior management team, our employees contractors and in particular, our network and team of health care practitioners and other frontline workers, who provide unbelievable patient care every single day, they remind us every day why we're here and we're here to support them.

You very much and with that we're very be pleased to take some some questions. Operator could you. Please assist.

Thank you Lynn.

Ladies and gentlemen, we will now begin the question and answer session.

Do you have a question. Please press star followed by the one on your telephone keypad.

You'll hear three told prompt acknowledging a request.

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One moment. Please for your first question.

Your first question comes from Allen Klee of.

Maxim Group. Please go ahead.

Good morning congratulations.

Could you talk a little about how you feel the.

The impact to your company can be from the federal government of Canada, providing additional funding to provinces over the next 10 years.

Thanks, very much Alan.

As I mentioned in my script, we do see this as a tailwind.

Particularly because we are still focused on.

Not only serving providers with our tools, but also.

Partnering with them and helping them run their business most of our revenue in Canada comes from us sharing revenue with doctors and essentially helping them run those businesses and we believe a lot of that funding is earmarked for providers.

Note that Canada is healthcare ecosystem is worth more than $300 billion.

Annually and close to $40 billion of debt has historically been.

Payment for care providers, and we believe a lot of the crisis that we're that we're talking about here in Canada. When we talk about the health care crisis is a shortage of doctors. So we understand a lot of that.

Potential funding relief will help shore up.

Some of the funding required for care providers. So we do see this as a as a fantastic tailwind for us.

Thank you very much.

Thank you.

Next question comes from Rob Goff of X.

Capital markets. Please go ahead.

Thank you very much for taking my questions and let me echo the congratulations on a good good year, a very good year and fourth quarter as well.

Thank you Rob I think congrats to you for the merger with Pi.

We're looking forward to working with any team it. Thank you.

And.

You might be surprised if I didn't ask you about circle.

Could you perhaps go into bid.

Detailed both the.

Expansion of circle, adding physical locations.

Where are you at a physical location is there.

A ramp up period.

Foreign hidden stride. His profitability are you pursuing partnerships versus bill just sort of go into some of the details and the cadence there.

Yeah, So generally speaking.

Not all of the locations, we'll look and operate the same I think what Youll generally see is circle is still very committed to scaling the business digitally.

A lot of what Theyre doing physically is to ensure that they have the infrastructure to support their patient load, particularly as the public health emergency sunsets and being able to.

Adequately prescribed and support patients.

Within the context of those rules went public when the public health emergency is over and so we will see some some.

Chip locations like the ones they Havent, San Francisco L. A and New York, and then Youll see smaller much more cost effective locations and in other areas.

And so we don't really expect there to be.

Kent.

Burdened on profitability.

They'll obviously be some investments.

But.

Circle doesn't have any debt. It's a it's got a solid cash position and it's generating very nice cash flow. So I think we're in a very good position to execute on that.

Very good and if I may as a follow up could you talk to the Rois that you were seeing in the U S virtual services and how they may have changed year on year.

Can you expand on what you mean by an ROI return on what kind of investment.

Return on advertising investment return.

On advertising Gotcha Gotcha, Yeah, Yeah, no we continue to see excellent return on advertising investment.

And frankly that's.

A big part of the reason why we've been so successful I mean, we've been very successful at ramping up our provider network, but.

But on the engagement side I think I think what's what's really need about our LTV.

Obviously, we have it.

Similar tax I would say probably better performing tax than most companies out there, but the fact that we can.

Advertisers specific specialty.

No need or on ramp as we call it to help support a patient through whatever theyre going through depression anxiety ADHD.

The fact that we can then convert a portion of those patients to being long term longitudinal care family practice patients. That's a that's a big part of why.

Our returns are as high as they are.

And why you're seeing these great results and why there is a I think a distinct advantage.

By circle over some of the other partners players that you are seeing in the industry.

Thank you very much thanks.

Thanks, Rob.

Thank you. The next question comes from Doug Taylor of Canaccord Genuity. Please go ahead.

Yes. Thanks.

And once again congratulations on the strong results.

You made some changes to the assumptions regarding why how earn outs in the quarter and I believe again since quarter end can you step us through what's what's happening there as your commentary on the overall financial performance suggests.

Mrs.

Are executing well and I have a bright outlook so.

So could you talk through that and when we should now expect those payments to flow through.

Sure I mean look we are always looking at all of our earn out arrangements on an ongoing basis and and assessing them for.

What's been paid to date, how much time left that kind of thing and so.

That debt that just as the normal course activity for us at work.

Correcting any.

Discrepancies that exists with what we have on the book. So that's what you saw there, but as you can tell my health is operating extremely well.

And we're very confident in their ability to continue to deliver for the company.

Alright, thanks for that I'll follow up with I guess, a perfunctory question about the M&A kind of backdrop and environment since the last quarterly call. We've seen a rebound in sentiment around the digital health space tied to a lot of the catalysts that you've mentioned as that worked its way into.

The M&A landscape in any way in terms of either private company valuations or the quantity of opportunities that you're seeing come across your desk.

Yeah, that's a great question Doug.

We're operating with M&A I mean first of all we slowed down the M&A aligned and focused a lot on organic growth, but where we're where we're focused is again those smaller networks because you've heard me say this before small is beautiful.

We are not seeing elevated valuations in those in those places we're seeing a lot of need a lot of.

Frankly, a lot of <unk>.

Flores.

Because of the challenges that I mentioned, you know smaller clinics and smaller networks are just not able to optimally perform and they are seeking out folks like us. So.

With with better run clinics were still kind of seeing that four to six times range, but.

Austin, we are seeing.

Slightly profitable clinics.

Much lower valley.

Valuation ranges and Youre right in that.

Much more scaled and strategically relevant players are seeing much higher valuations, but we're not playing in that in that market today.

That's great color I'll pass the line. Thanks.

Thanks, Doug.

Okay.

Thank you.

Next question comes from Christian <unk>.

Eight capital. Please go ahead.

Alright, congrats on the quarter and thanks for taking my questions.

First one I'll lead on my health as well the question I've got is it looks too it looks like through 2020 to my health performance improved sequentially.

Q2, being the strongest quarter of the year normally and I think there were some comments around that being due to staffing with cardiologists and such but are there any other.

Reasons, why my all of the revenue climbed into the year and do you see that trend continuing its between 23 with my helping shrunk.

Great question. The first part I think my line Blitz, a bit what did you say on the first part.

I was just going through the 2022.

Quarterly build of my health and it looked like it was a nice lift each quarter. Despite some of the seasonal patterns, we would expect.

Okay, Yes, so youre right I mean, there was there was definitely.

It changed throughout the year, we started the year frankly with.

Much more elevated costs and we saw the same effect interestingly in the United States.

Last year, particularly the first half of the year was very challenging with costs.

And with worker shortages, we think some of that was brought about to buy again some of it was COVID-19 related because the hospitals.

<unk> had cleared their COVID-19 backlogs. They were now back to doing diagnostic imaging and wanted to kind of re welcome those patients that that data.

They were not serving before and so they will then seeking some of the same experienced technicians that we were in order to power those diagnostic facilities and so that was a real tough thing because we had extreme.

Extremely strong demand for our services, but our ability to support that demand is really.

Made possible by by those experienced professionals and care providers, we saw that.

Improve a lot in the back half of the year, partially of course due to the incredible work of our team, but I think from an industry perspective, we also saw that the debt.

You know kind of kind of let up a little bit in <unk>.

The worker shortage kind of relax a little bit we saw that particularly in the U S as well with.

With Q3, a lot of the worker shortage issues being alleviated.

And this just goes to show you that there was just excellent execution.

In that business as.

As we were able to take advantage of that.

The better workforce availability and deliver great results.

Great. That's helpful and for my second question I'll switch over to a British Columbia even.

I mentioned, the new payment model that was introduced this year I'm. Just wondering if you could comment on the impact youre seeing regulatory wise and any impact on walls operations.

Well, so it's a very favorable outcome for us.

We're hoping actually more doctors switched to the new model.

So far we've had quite a few.

Switch to it.

<unk>.

It's it's some.

Thing that obviously as we've talked about before.

Doctors can decide to to kind of go with the new model or stick with the oil free for service level in any event there is additional funding available.

And some of that is.

Required us to kind of cut new deals in and go through the negotiation process with providers again, but.

I think we're at the tail end of that and we think that ultimately this is going to be a nice tailwind for us.

Perfect. Thanks for taking my questions on this.

Thank you Christian.

Thank you. The next question comes from Jason Zhang Berg of Pi Financial Corp. Please go ahead.

Hi, guys. Thanks for thanks for taking my call.

I just wanted to ask a boat.

Your recent venture into a Europe I know, it's just an initial sort of.

To tap into the into the market, but just wanted to get your outlook in terms of what your long term plans are for the European market.

Thanks, Jason I'm glad you asked that.

While our patient services business is very North America centric, it's important to note that that well has a global business and the technology side of things we have.

Millions of dollars of revenue from Australia, and New Zealand and our EMR business.

And we have a technology that we have a technology platform that can really be sold all over the world and here I think we found a phenomenal opportunity to.

Access the German market without having to.

Deploy a lot of capital teams and establish a greenfield office there.

Through our partnership and our partners.

At Horizon ventures, we identified.

Opportunity to invest in Doctor Lee.

Dr. Lee as the new EMR.

<unk> in Germany, and it's very difficult actually for there to be new EMR at all in that market because.

Regulations.

It's so difficult.

Yes.

It's a pretty substantial journey.

With a lot of regulatory approvals required in order to be able to.

The launch of new EMR, and they've been able to do that.

And.

We believe that their emr's quite disruptive and could acquire a lot of market share.

Our investment not only.

Allow us to co invest with.

<unk> group, there with horizon vectors, but it actually secured us a five year exclusive contract to embed our software into the Doctor, We software and provide online patient booking for example, and we believe other digital patient engagement attributes, but primarily.

That's specific software and we believe that that will.

There'll be strong revenue potential there.

And it will be a great beachhead for us into that market and I think from there we will watch carefully but without the need to expend a lot of capital because again.

We're just really leveraging our <unk>.

Our intellectual property and incurring the cost of translating our platform, it's a German which isn't really too bad.

We are looking for opportunities to do this elsewhere in the world.

But but.

But we believe that this will potentially start to impact some of our results in 2024.

Well, that's great and if I could ask a second question just wanted to.

Drill down on the primary care growth. So you posted $21 8 million during the fourth quarter, which was <unk>.

Very impressive 55% year over year.

And equally impressive 34% quarter over quarter, just wanted to get an idea of where.

Organic versus acquired growth and Youre able to break that down.

Sure maybe ill color on EBIT to help with this one I do note that we also had a.

Substantial.

Stabilization payment by the government in Q4, which.

Which I think is fairly anomalous I don't think we're going to see that again.

Our margins on those payments are a lot less so it's not something that contributed greatly to EBITDA, but it would have contributed quite a bit to organic growth.

Eva is that something organic versus inorganic that you can speak to.

Yeah, So definitely of course right with all the automation and technology, we deployed into kleenex, we continue to really improve the workflow of the clinics.

And so that continues to help the doctors and include automation and of course the.

And yes, we did have the <unk>.

Our FTE on.

Longitudes.

Family practice.

I guess payment from the government in Q4, and then and then we have some.

Inorganic growth or M&A.

Despite only hassle in all of our thoughts on the clean is continuing to have really good results in Q4, and we continue to see that happening.

In the next few in 2023.

Yes, Jason the way I think to think about this is if you even stripped out those anomalous payments, we would have still had elevated double digit organic growth.

Because our M&A throughout the year was not that extensive.

Hopefully that's helpful.

Yes, no that definitely explains thanks, okay. Thank you. Thank you very much for the color.

Okay.

Thank you.

The next question comes from Justin.

Stifel. Please go ahead.

Hi, Thanks for taking my call just wanted to circle back on the medium term goal in the opening remarks of hitting 1 billion in sales.

If that goal is organic.

So margins could this business generated a $1 billion in sales.

Yeah. Thanks, Justin.

I think if you just look at it.

The kind of organic growth that we've been.

<unk> and <unk> and you extend that out for two or three years, you could see that it really wouldn't take that much inorganic growth to get us there.

And.

So that's what gives us the confidence that.

We're.

We're well positioned for that result.

Especially because we're also getting a lot more confidence with our balance sheet.

As even noted.

Paid down over $30 million U S of our of our U S line.

And had USD not dramatically strengthened we would've reported a significant delevering in Canadian dollars and.

And so really what you have is a situation where our core cash flows growing because our EBITDA is growing.

And our commitments and contingent liabilities are decreasing.

So we have a lot more capital left to deploy into assets and we're still finding very cost effective assets.

Especially in the small acquisition category.

You May have noted that I also spoke to this notion that we're not only recruiting.

Doctors, but we're recruiting clinics. This is a new phenomenon that is very interesting for us because we don't buy very small clinics like very small, meaning one to three practitioners very difficult to do that because there's not really any franchise value in that.

What we have started to do is is at times actually absorbs those because those doctors need so much support and help in running their businesses.

So.

It's sort of a.

Our combined collective group of factors that really encourage us about our ability to continue to grow organically and inorganically to meet that result.

Hopefully that's helpful.

That's very helpful. And then just on the margins I assume there is some operating leverage in the business from now and then.

Is there any indication of what the business could generate that.

Sales level.

Yeah, Yeah, sorry, that's what that was.

Q4 2022 WELL Health Technologies Corp Earnings Call

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