WELL Health Technologies Corp. Q1 2023 Earnings Call
Yeah.
Welcome to the warehouse Technologies Corp, first quarter, 'twenty 'twenty financial results Conference call.
My name is 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 what's really respect at the analyst.
Please note this conference is being recorded.
I'll now turn the call over to call. It Barbour manager of Investor Relations. Mr. Baber, you may begin.
Thank you operator, and welcome everyone to Wellhouse fiscal first quarter financial results conference call for the three months ended March 31 2023.
Joining me on the call today are how much you biopsy, chairman and CEO and EBIT for the.
The company's CFO .
I Trust 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, including future oriented financial information and financial outlook information.
Forward looking statements are necessarily based upon a number of estimates and assumptions that while considered reasonable by management and are inherently subject to significant business economic and competitive uncertainties and contingencies.
These forward looking statements involve known and unknown risks.
Certainties assumptions.
And other factors many of which are outside of love control that may cause the actual results performance or achievements of well 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 statement is based except if it is required by law.
We may use terms such as adjusted gross profit adjusted gross margin adjusted EBITDA.
Adjusted shareholder EBITDA.
Adjusted net income and adjusted free cash flow on this conference call all of which are non-GAAP and non <unk> measures for more information on how we define these terms. Please refer to the definitions 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 a measure of cash generated from operations, which the company can use to fund working capital requirements.
Service feature 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 the chairman and CEO .
Thank you Tyler and good day, everyone, we hope you're all keeping safe and healthy and we appreciate you for joining us today.
Overall, we're very pleased with our record breaking quarter in which we achieved record revenue and growth across all key metrics.
Well achieved revenue of $169 $5 million in the first quarter, representing 34% year over year revenue growth.
First quarter of 2023 also marks our 17th consecutive quarter of record revenue the.
The company's growth was driven by acquisitions made over the past year as well as solid year over year organic growth of 21% in the first quarter. So most of our 34%.
Year over year growth came from organic growth.
I'm proud to report that well has healthy cash flows having achieved almost $26.7 million and adjusted EBITDA in Q1, 2023, resulting in adjusted free cash flow available to shareholders of approximately $10 $8 million.
Our record revenue profitability and patient visits are a testament to the company's continued focus on tech, enabling health care providers and supporting them in terms of simplifying their work lives modernizing of digitizing their practices and delivering the best health care possible.
We're extremely passionate about supporting our providers as we set up our business in a way that we only succeed if they do this.
This attitude and focus is what allows the company to continue 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 or other macroeconomic effects.
Last quarter, we discussed the number you catalyst that we felt were going to act as T tailwind for well.
We'd like to reiterate and update them as follows.
One the emergence of artificial intelligence to crowdy generative AI to power revolutionary new tools that can dramatically improve the productivity of the health care provider.
We will spend a considerable amount of time on.
Later on today's call discussing our AI strategy and key progress updates.
Two the increased likelihood of more public and private.
<unk> announced by political and public health leaders, most recently in Ontario earlier this year three.
Three our commitment by federal authorities and candidate to add significant additional funding to help Canada, notably improve sustainability of its health care system, but also digitize and modernize it.
For the demonstration, particularly in the United States of how valuable hybrid care networks are based on a string of highly visible multibillion dollar acquisitions, where major companies such as Amazon and large pharmacy chains have been acquiring providers of scaled hybrid health care providers, particularly in primary care with strong.
<unk> physical and telehealth offerings.
To that end well has considerably grown its physical infrastructure in the U S ending the quarter with 23 physical facilities from five at the end of December 2023.
2022 pardon me.
Five our own M&A pipeline is very strong.
We are seeing some of the best opportunities we have seen in a while we will give this topic some do focus today.
Before I hand, the call over to Eva to review the first quarter financial results I'd like to provide some additional background on well and our growing patient volume metrics.
Over the past five years, we've grown both organically and inorganically into one of the leading digital health care companies in North America in Q1, 2023, well achieved record patient interactions of approximately $1 4 million patient interactions.
An increase of 27% representing $5 6 million patient interactions on an annualized run rate basis.
Q1, 2023, well achieved 975500 total omnichannel patient visits, including both Canadian and U S patient visits an increase of 25% compared to the prior year.
The growth of our patient visit metrics demonstrates the company's continued leadership position as the preeminent end to end health care company in Canada with increasing market share in the United States.
I'm also pleased to announce that well has now surpassed over 3000 practitioners, who deliver patient care from one.
From one of well its owned.
Clinics or business units.
We offer these practitioners a fully managed service where the practitioners can focus on delivering care why well takes care of everything else.
Furthermore, there are now over 28000 unique practitioners, who rely on well in some way to power their medical practices that.
That equates to more than one out of every four health care providers in Canada, who uses one of wealth technology solutions. These practitioners can pick tools and solutions on an Ala carte basis, such as practice management telehealth revenue cycle management or patient engagement tools, such as our light patient bookings you referrals.
If you haven't had a chance to look at our Q1 2023, MD&A or management discussion analysis report posted the SEDAR. This morning, I urge you to take a look inside you'll find that we provided some enhanced segmentation, which now break down the business between our fully managed patient services and SaaS and technology services businesses.
Find a lot of new detailed metrics across both U S and Canadian businesses as well as detailed kpis on our SaaS and services businesses.
We'd like to continue to shine a light on all the different levers of the business to help investors and analysts better understand well and how we're delivering on our mission of tech enabling providers.
Let's look at this new lens on segmentation and how it reflects our business first we got our patient services business.
This segment includes world owned and operated network of clinics, which is Canada's largest network of clinics, consisting of 139 clinics operating out of 77 physical facilities.
While strongly believes in the benefits of an integrated health offering and bringing together diverse multi disciplinary offering of providers in the same setting.
As such many of these physical facilities have multiple clinics operating within the same location.
Keep in mind that the total number of clinics across both the U S and Canada is north of 160 clinics operated out of 100 physical facilities, not including any <unk> or ambulatory surgery centers served by CRH medical.
Our Canadian patient services business includes primary care Allied health executive health and diagnostic clinics delivered through in person and telehealth needs, which combined generating almost 504000 patient visits in Q1 alone a 14% increase over Q1 2022.
Secondly.
In terms of segments, our patient services business.
In the United States. This group includes Omnichannel healthcare services and solutions will provide in the United States targeting specialized market such as the gastrointestinal market Women's health primary care and mental disorders under the CRH circle medical and <unk> business units.
Our U S patient services business generated almost 472000 patient visits in the first quarter, an increase of 40% as compared to the same quarter last year.
Mostly by the organic growth I circle and with in addition to the acquisition growth of CRH.
Under the TRA brand, we are the leading provider of sedation services for Colas colonoscopy in the U S in an ambulatory setting.
In the U S will continue to expand its clinical proof presence with anesthesia services now being offered in 128, ASC and Gi clinics across 18 states.
Headquartered in San Francisco, California Circle Medical is a leading.
Provider of Telehealth based primary care with an emphasis on mental health services with a growing physical clinic network and then also part of this segment is of course with one.
One of the largest and fastest growing specialty telehealth businesses, focusing uniquely on women's reproductive and sexual health.
And then the third segment.
So youll see is our SaaS technology services segment.
This group includes all of our best in class platform tools and services that help providers digitize modernized and support their clinical operations.
Inclusive of EMR billing revenue cycle management digital apps, including Ocean M D and of course, cyber security and data protection deficient, which essentially form the entire practitioner enablement platform.
Keep in mind that wells, a unique company with both patient services and technology.
We own significant intellectual property, which.
Drive our industry, leading solutions and has created compelling and relevant links with health care providers all over the country.
What is really interesting about the link between our SaaS in patient services segment as well as the largest customer of our own platform. How is that for authenticity company that uses its own software at scale and demonstrate that it works every day.
And this additional key metrics for this business unit include the fact that now the well earmark groups serves 3900 clinics in Canada.
Ocean MD reported 190000 referrals just in Q1 of.
Our billing and revenue cycle management business has expanded to serving over 5700 healthcare practitioners.
And our App start health now has 54 digital applications or apps on its platform, making it the largest health care focused app marketplace in Canada.
With that I'd now like to turn the call over to our CFO <unk> <unk>, who will review the financials for fiscal quarter 2023, I will then come back and provide further commentary on our business units and of course our outlook.
You bet.
Thank you Amit.
I'm pleased to report that we had very strong results for the three months ended March 31 2023.
Overall first quarter results were as follows.
<unk> achieved record quarterly revenue of $169 4 million in Q1, 2023, an increase of 34% as compared to revenue of $126 5 million generated during Q1 of last year. This was driven by acquisitions and organic growth.
<unk> achieved record adjusted gross profit of $86 2 million in Q1, 2023, an increase of 24% as compared to adjusted gross profit of $69 4 million in Q1 last year.
Well in the Companys adjusted gross profit is attributable to higher revenue in the period.
Adjusted EBITDA was $26 7 million in Q1, 2023, an increase of 14% as compared to adjusted EBITDA of 23 5 million in Q1 of last year.
Adjusted EBITDA attributable to <unk> shareholders was 26.
6 million in Q1, 2023, an increase of 28% as compared to adjusted EBITDA attributable to while shareholders of $16 1 million in Q1 2020.
Adjusted net income was $14 1 million or success per share in Q1, 2023, an increase of 58% as compared to adjusted net income of $8 9 million or <unk> <unk> per share.
The same period last year.
Well generated 12% office revenues from truly recurring and subscription revenues and 83% of its revenue from its highly recurring patient services revenues that means stock.
95% office revenues are highly predictable.
I will now review our segment results as described by Hammock earlier.
Our Canadian patient services business achieved another record quarter with revenue of $50 9 million in Q1, 2023, an increase of 23% as compared to $41 3 million in Q1 2020 team.
Canadian patient services revenue includes revenue generated from our from our primary care and my health divisions.
Primary camera revenues increased 45% to $24 8 million in Q1, 2023 compared to $17 1 million in Q1, 2020, primarily due to organic growth and the addition of new clinics.
Primary care revenue also benefited from a onetime stabilization payment from the BC government of approximately half a million dollars in the first quarter as well as higher billings from the new payment model for BC doctors that was implemented in February .
Sure.
In Q1, 2023, my health revenue increased 8% to $26 1 million as compared to $24 2 million in Q1 2020.
But the growth in my health revenue is attributable to continued efforts to alleviate staff shortages experienced last year, leading to higher billable time for many office diagnostic procedures.
I have also benefited in the quarter from the addition of new cardiologist to his practice.
Our U S patient services revenue was $99 2 million in Q1, 2023, an increase of 38% as compared to $72 1 million in Q1 2022.
U S patient services includes our CEO , H, social circle medical and with businesses.
For Q1, 2023 C. Outreach revenues were 57 5 million, an increase of 19% as compared to $48 2 million in Q1 last year.
C L.
Case volumes also continue to be very strong with 132580 <unk> cases completed in Q1 2023, an increase of 13% compared to Q1 last year.
Case volumes in the first quarter were positively impacted by the acquisition of a fee later Tampa anesthesia associates in the quarter.
Given the nature of how health plans and deductibles work through the year for elective procedures.
Colonoscopy.
Fourth quarter is usually see our strongest seasonal quarter and normally we would expect Q1 revenue to decline from Q4. However, this quarter, we witnessed an increase of 10% in <unk> revenue from Q4 2022 to Q1, 2023, which is largely due to a onetime.
Chanel campaign.
Reagan product, resulting in a record 59620 or Reagan Nikita units being sold in the first quarter, an increase of 41% as compared to 42280 Nikita units sold in Q1 2022.
And an increase of 39% compared to 42000 and 760 like Ada units sold in Q4 of last year.
Reagan product promotional campaign has now ended and the beta unit volumes have returned to normal levels.
Circle Medical revenues were $23 1 million in Q1, 2023, an increase of 93% as compared to revenue of $12 million in Q1 of last year.
Wisp.
Achieved revenue of $18 6 million in Q1, 2023, an increase of 36% as compared to revenue of $11 9 million in Q1 2022.
<unk> met both circle medical and Wisp have achieved tremendous revenue growth over the past year, which has been entirely organic in nature.
Of note, we increased we increased our AD spending in Q1 2023, but at least to take advantage of much lower at rate in the first three months of the year as compared to the last three months of the year.
Although this did have a soft and the effects of an overall adjusted EBITDA in the quarter I am pleased to report that woods still managed to achieve positive adjusted EBITDA in the first quarter.
<unk> technology services revenues was $19 3 million in Q1, 2023, an increase of 47% as compared to $13 1 million in Q1 2020 the.
The vast majority of this growth came organically, which was 42% growth year over year.
Also in Q1, SaaS and technology services revenue growth was driven by exceptional growth in the cybersecurity and data protection business, which achieved its best quarter ever.
Cyber security and data protection revenue tends to be lumpy and we are not expecting this growth to continue into Q2 2023.
Well into Q1 2023 with a solid balance sheet as at March 31, 2023, well have cash and cash equivalents of $41 7 million in Canadian dollars.
Well continues to be in good standing and fully compliant with all covenants related with his two credit lines JP Morgan in the U S and while banking Canada.
The data from the two credit lines was approximately $253 $4 million and Canadian dollars as of March 31, 2023.
I'm also very pleased to report that we have reduced well leverage ratio to two six times at the end of Q1 2023 compared to three five times at Q1 of last year.
We defined leverage ratio as total debt excluding convertible debentures.
Cash on hand divided by shareholder adjusted EBITDA.
The improvement in wealth leverage ratio was achieved by a decrease in the company's debt levels and an increase in shareholder adjusted EBITDA.
In terms of our share capitalization as of May 11, 2023, well have $253 million 787569 fully diluted <unk> issued and outstanding.
That is my financial update and I'll turn the call back over to Hana.
Thank you Eva.
Before I speak to our outlook I'd like to take a few minutes to talk about the development use and proliferation of artificial attention intelligence or AI based technologies and solutions as well.
I am pleased to report that as a company with deep Tech experience.
Capabilities, we've made a key priority within the company and are working on compelling new products and enhancements to rollout to our provider network.
Well, we have developed a three pronged AI strategy as follows.
Versus the first prong is to develop.
And deploy new physician tools and technologies that better support our providers earlier. This week the company launched well AI voice transformational ambient scribe product that leverages generative AI to dramatically reduce the provider's administrative burden by privately and securely capturing a patient encounter conversation and.
Automatic regenerating a sustained and medically relevant chart notes for the patient interaction.
What makes well AI voice, so powerful is not only its ability to leverage generative AI, but also the ability to communicate seamlessly with wells to get more products, making it easy for providers to deploy manage and benefit from the technology quickly and easily without having to harmonize the usage of disparate tools.
Our focus is on provider facing technologies in AI and thoroughly derisking and creating guardrails for this sort of technology for health care providers. We believe that AI technologies can be used safely and securely to increase the efficiency and effectiveness of health care providers and to deliver better patient outcomes.
The second prong is for US is to establish centers of excellence as well to help our employees become better users of AI.
Long term this may end up being the most important facet of AI for US we have placed a high priority on the safe and secure usage of AI technologies, as well and are well on our way to embrace the technology to increase the core productivity of the company. We are thoughtfully considering different ways of putting the technology to work.
Including hosting internal hackathon sessions to help us coalesced around best ideas. We're also in the process of hiring AI facilitators to help ensure that our teams are deriving maximum benefit from AI.
Third prong is to place more bets or investments on AI and health care focused companies as part of our commitment to developing AI technologies, well recently announced that it was launching the well AI investment platform.
In our ventures group, whose.
<unk> goal is to invest in at least 10 companies. This year with a minimum investment of $250000 and to ensure that each investor has a strategic alliance agreement with well it allows us to benefit from wells health care ecosystem.
Since launching this program, we have already seen more than 100 companies come inbound into our into our channels.
In addition, our apps dot health platform as a very attractive aspect of the AI investment program as it provides a framework for AI based technology companies integrate with our Oscar EMR as well as other EMR and healthcare related applications.
We already have several AI focused applications in our apps Dot health platform.
Lastly for AI, we're also investigating opportunities to unlock the value of our own data to help further propel our providers and help to not only create more efficiency and productivity in their practices, but also importantly, better drive better patient outcomes. We believe that our data that can help create new decision support systems in the future.
This is actually a good segue to wells ESG program as you may be aware has a fulsome ESG program that is expressed at its dedicated ESG website at ESG Dot well dock company.
There are effectively three key pillars to this program one our practice your support and digital enablement, which of course is our mission and mandate. The second is the safeguarding of patient data and the third is to be a very healthy place to work.
We believe AI will profoundly impact and strengthened wells ESG program at all levels, but I'd like to zoom into pillar number two for a minute and discuss how we believe well can add societal value using its ESG program and commitments.
You see we believe that wells commitment to champion the cause of privacy safety and security of patient data now needs to be achieved within the context of allowing patients to knowingly and a clear unambiguous.
Unambiguous manner be able to have their data work for them and help them create personal insights for them that can help them acquire life changing insight, but also supports the greater good by allowing their data to be shared again knowingly for neural networks that are powering deep learning.
This is a very important but highly fundamental shift data security is not good enough. It does not allow me as a consumer or is it patient to derive benefit from my data, especially as we shift into a world where we finally have the technology that allows machine to learn find that needle in the haystack problem and provide outstanding insights.
And now I'd like to speak a bit about our outlook for 2023, we're pleased to report that all of our business units are executing very well and we're expecting to have very strong performance in 2023 across all of our be use and for the entire company as a whole the company as it foresee any material influences or challenges that would in Paris.
<unk>.
Deliver solid results in 2023, as we are poised to invest and achieve significant growth while delivering on it hits profitability as such management is pleased to provide the following guidance for 2023, we are increasing our guidance for annual revenues to between $690 million and $710 million.
<unk>, 21% to 25% annual growth. This is an increase from our prior guidance of annual revenue, which was between 665% and $685 million.
We're also pleased to reiterate our guidance for annual adjusted EBITDA to increase by more than 10% over 2022 levels.
Our guidance does not include any unannounced acquisitions.
Previously we've indicated that between organic growth and steady acquisition program. We believe we have a clear line of sight to $1 billion in revenues within three years.
Today, we'd like to report that we are now seeing one of the most compelling pipelines of acquisitions we've ever seen.
This doesn't mean, we're going to rush out and execute on all of them and we're going to continue to be extremely disciplined in.
In terms of our due diligence and our capital allocation processes. However, it does mean that we are able to execute on some of these opportunities we could potentially reach a $1 billion in sales in less than two times in three years.
Again this is highly conditioned on our ability to execute on some of these opportunities, but highly encouraging to know that this potential exists.
Especially given the health of our balance sheet.
<unk> done this as your team here at well execute.
I will now provide to provide some additional outlook for our business segments first our Canadian patient services business, including primary care and my health.
It has become a lot more difficult for doctors to run their own clinical businesses. We've talked about this in the past due to the increasing complexity brought about by hybrid and complex workflows.
Security and other challenges, making it very difficult to the physicians to run even small practices for this reason we are seeing more physicians seek well out as a professional partner to help them run their businesses. So they can focus on providing patient care our model. Our model allows for health care providers to maintain similar per unit.
But end up seeing a lot more patients because they don't have to run a practice, which allows them to elevate care improved earnings and better support the health care ecosystem.
And our patient services business in 2023 will be driven by continuing to focus on organic growth and executing on our highly disciplined clinic acquisition program organic growth includes recruiting more physicians and recruiting or absorbing clinics themselves.
In addition, we have a very active pipeline of clinic acquisition opportunities ranging from single clinics to small networks.
I'd like to now comment on our my health business in Ontario.
Well as Ontario based might help partners is the largest single license holder and service provider for specialty clinics, providing diagnostics in the province of Ontario, and we believe is very well positioned to support the Ontario government's mandate, particularly in the areas of diagnostic imaging last quarter, we discussed, Ontario government's new multi pronged.
Our energy to reduce wait times by partnering with independent service providers for Ontario's, including areas associated with MRI, ICT Colonoscopy and discovery services.
We intend to apply for new MRI, and <unk> licenses, which we will which will be provided by the province of Ontario under this new program.
We anticipate the new licenses will be awarded in the second half of 2023. If my health is success is successful in its applications, we would need to incur additional capital cost to purchase imaging equipment and for leasehold improvements, we anticipate lead times of several months to having these services will be operational in clinics as such.
We don't expect meaningful contribution in 2023, if we were to win these licenses.
Our outlook for Q2 remains positive as we are expecting might hope to report a strong quarter as the second quarter is seasonally the strongest for my health historically.
Almost all of my house revenue arise from referrals from physicians and as such as Theyre more working days in Q2 compared to the slower summer months, whereas the December holiday season, My health, therefore experiences more patient volumes in the second quarter.
And now some commentary on U S patient services businesses, including CRH Circle and wisp.
For the CRH business, we expect CRH case volumes to follow normal seasonal patterns in 2023.
With a number of cases, increasing in each subsequent quarter as we expect Q4 2023 will again be the strongest revenue quarter for CRH.
Should be noted that between Q1, and Q2 2020 to CRH received more than $2 million in U S dollars in pandemic related government assistance. This grant helped offset labor costs and does the improved EBITDA in Q1, and Q2 last year, which will not be repeated in Q2 2023.
Also as previously mentioned CRH revenue in Q1 was boosted by one time promotion on or Reagan product sales, we're not looking to repeat this product promotion in Q2, hence, we do expect or weaken product sales to decline in the second quarter, which should not materially impact overall results.
For our circle medical business, Q1 was a transformative quarter, and which circle built out physical clinical network.
Already a leader in providing telehealth services for primary mental health I'm pleased to report that circle medical aggressively grew its physical clinic network to 18 clinics across the United States as of the end of Q1 2023 compared to only two clinics at the end of December .
The expansion of circle Medicals, physical clinic network will improve its hybrid care capabilities and strengthen its ability to better support its patients the new clinics strategically located in cities across the United States offer a range of medical services, including primary care and specialty care.
The clinics are equipped with state of the art technology staff by highly qualified health care professionals and designed to provide a seamless health care experience from circle Medicals excellent telematic pedal telemedicine platform.
The clinic expansion of our circle medical network positions the company well for the end of the public health emergency in the United States.
Going forward our plan.
<unk> is to follow a slower and more measured pace of expanding circles physical clinical network as compared to the aggressive pace that we've witnessed in Q1, we expect the expansion of circle medical's physical footprint and related investments to create some softness around their results in Q2, but we believe this will further fuel.
Their growth in the back half of the year and have considered this as part of our overall guidance.
Our wind business is expected to continue to experience healthy revenue growth in 2023. However.
However, we are purposely reinvesting any cash flows generated by this business back into growth.
The additional spending is primarily on marketing costs take a new patient and drive additional revenues as a result of this reinvestment we're expecting minimal adjusted EBITDA contribution from wisp in the first half of the year.
<unk> also retooling some of its key product and distribution partners in Q2, so while we expect revenues to be strong over the full year, we will have lower growth temporarily next quarter in Q2 2023.
Finally, SaaS and technology services the outlook the outlook looks promising for our SaaS and Tech services group and is even noted earlier. This group had incredible growth in Q1 with 42% organic growth.
Also for the first time in a while SaaS and services comprised more than 10% of wells overall revenues, which is really great to see.
As part of the SaaS platform, let's talk about Ocean Ocean is emerging as a leader in patient engagement and referral solutions Mo.
Recently Ocean MDC referral platform was selected by the province of Nova Scotia, which will make our surgical consult referrals easier and reduce wait times for patients that you referrals software allows primary care providers to send their request to surgeons through the Ocean E referral network instead of faxing emailing or mainly.
Already.
The dominant E referral solution in the province of Ontario, We feel ocean.
<unk> has the potential to beat that you referrals standard across the country and.
And we are currently in the bidding process for additional <unk> related proposals.
Provinces across Canada.
Meanwhile, the technology assets acquired from cloud and <unk> have been well integrated into our provider solutions group with Juno EMR.
Completing our acquisitions for the Oscar EMR based providers and clinic, a fitting in with our billing and revenue cycle management Division.
Also as Eva pointed out earlier cyber security and data protection had its best quarter ever in Q1, but being a lumpy business. We don't expect this level of activity in the second quarter. Hence we are expecting our overall SaaS and technology services revenue to experience a slight decline in Q2 as compared to Q1.
In summary, we're very pleased with our financial performance, thus far in 2023 and look forward to delivering strong results again for the rest of the year our outlook for 2023 remains positive.
Hence I am confident in raising our annual guidance again.
We have many tailwind driving growth in the business and we are a committed and disciplined team to ensure that we're able to execute on our objectives.
Finally, I'd like to thank you all for joining us on the call today and thank our shareholders investors for all of their support.
Capital markets have been supportive of our vision and provided us with the funding needed to pursue our goals and of course power and tech enable our health care providers.
I would also like to thank well senior management team and our employees and contractors for the tremendous effort in particular I'd like to thank our team of health care practitioners and other frontline workers, who provide unbelievable patient care every single day, they remind us why we are here and and what we are doing to support them.
Thank you and with that we.
We'd like to open the call for questions operator.
Thank you Sir for analysts we will now begin the question and answer session should you have a question. Please press star followed by the number one on your Touchstone fine. Thank.
If you would like to withdraw your request. Please press star followed by the number killed.
Your first question comes from the line of Doug Taylor from Canaccord Genuity. Please go ahead.
Yeah. Thank you good afternoon and good.
Good morning for you I guess and congrats on a great start to the year.
I'll I'll start with I think the most obvious question and that it's been just two months since you established your annual guidance for the year, and you're making a pretty material increase here in it.
And that's not because of M&A in fact, eventually sold a business. It seems since quarter end. So I guess the question is where is the major source of surprise and upside versus your original expectations for this year.
Thanks, Doug that's a good question.
Look if you if you just annualize our Q1 results Youll see that Theres already a lot of strength in the platform.
And if you just look at the organic growth that we've seen from reliable organic growth drove a lot of the different aspects of the business, including our U S patient services.
And actually our Canadian business.
We think that that this level of increases.
As measured is fair and something that we as a management team can get behind with conviction.
I'll note that with the 21% of elevated organic growth that we had this.
This year, sorry, this quarter as compared to last year.
It was actually pretty evenly weighted between the U S and Canada. The U S was a bit more in Canada was a bit less likely Canada was around 18%, but but but sort of gone is that narrative, where the only thing thats growing for us that circle and West we had excellent performance is clear across all of our business units.
And I think thats very very encouraging.
Of note is our primary care business as well and look we talked about some of these.
Some of these trends and tailwind some of the increased health care spending across the country I think it's starting to show up as well so that's a bit of color for you.
Yeah.
As a follow up maybe I'll ask you mentioned the the incredible increase in your and then the footprint physical footprint of circle and just your U S patient services business overall, I think thats, a 23 clinics as at the end of the.
The quarter can you maybe just refresh us on what your ambitions are there for our clinic footprint within the U S market. So we can kind of understand.
How far you intend to take that that physical location build out.
Yeah, I mean look there.
The need the need for ramping this up quickly was to harmonize this with readiness for the public health emergency.
No other.
Kind of burning need to do that and this is why in the script I mentioned that.
Further increases will be more moderate.
Because we feel that we've already established a pretty good.
Platform to support patients, but as the business grows but we are committed to hybrid care. We think it's we think it results in the best patient outcomes.
And we think that.
That is.
It is also where sort of the world with land now that the public health emergency as it's been.
<unk>.
And so we don't have any particular goals.
Terms of wanting to be at a certain number but I do believe that you will continue to see this number go up.
And should we just as a related question the staffing of those clinics. It's one thing to establish it but to staff. It with the appropriate professionals is that something that's lagging or are you able to do that at the same pace.
And I'll pass the line. Thank you.
<unk>.
Yeah and look this is why I think what circle did was truly remarkable and this is why.
I was sort of preparing for some Q2 softness because I think.
It's hard to execute on everything all at the same time and so we.
We think that that theyre going to catch their breath, a little bit in Q2 and get back to.
You know.
<unk> doing.
Instead of kind of having a lot of the kind of all hands on deck approach to growing their physical footprint really being able to benefit from that I think it gives the business.
Enormous contrasts with its competitors.
And.
We're seeing still elevated NPS scores and they are changing lives with their platform and we think that.
<unk>.
We have certainly high hopes and expectations for the balance of the year for them.
Thank you.
Thank you. Your next question comes from the line of questions <unk> from eight capital. Please go ahead.
Hi, good afternoon.
It'll have the tech services metrics spiked nicely in the Q1 quarter that's providers in their network are referrals.
It's a matrix wondering and there wasn't any M&A in Canada.
Sort of obviously support that bump, but wondering where the traction is coming from.
If there is any new referenced practitioners onto the platform and what's the point of those bullets in those metrics.
I think Christian I think youre seeing in terms of our success.
In the tech and SaaS.
And platform services.
The benefits of integration.
There was a lot of <unk>.
Focus on bringing those elements together as you may remember those there are a lot of those were actually separate business units. So collapsing those into one unit.
Establishing connectivity between them.
And actually getting out and selling them as a bundle.
I think it's been really really key and I think management and team have really worked hard on integration Tonight.
That's one of the things I'm really proud of what wells are just good.
Finding great assets and acquiring them. We're also really good at integrating them.
And I think that maybe the more important part of our M&A strategy and so I think what youre seeing here is the combined benefits of that platform and being able to speak with one voice.
How we can tech enable providers.
Okay, perfect and the second question I'll ask is around artificial intelligence, which is becoming core to the offering and some of the structure internally.
<unk> was certainly an exciting start this week, but wondering if there's any other concrete examples are things you can leave us with.
Products and other solutions you'd go to market with on the AI front in the coming months or quarters.
Sure look I think this whole category.
<unk> talks about capturing and encounter in creating a note a medically relevant note that usually would take providers a long time to do because they have to observe the entire conversation all of the different nodes that they have to create this sort of condensed.
Medical note.
The thing to think about here with <unk>.
AI is that we think it sort of.
A lot of the.
Patient facing.
We're not focused on patient facing elements of the business, we think that on the provider side of things.
Think about Alexa for providers.
As a vision.
AI voice is just a component of that we think and we are investing in this vision of a provider really being able to just talk to their software as opposed to having their head buried in the software and having that software not only be able to capture notes, but actually digging deep.
With patient.
Informed consent, but digging deep into the data and identifying things that could be helpful. In that interaction. There is so many cases that I've heard of and it's a lot of them are frankly, just very sad stories about how Dr.
Doctor somewhere in that patient.
Kurt had information that that should have kind of come up or <unk>.
Could it become aware, but it's just it's just Barry too far deep.
And that means that providers can sometimes missed us and interactions can can be caused with.
Drugs that are.
There are prescribed and this is what's truly incredible about the ability to.
Confidently.
<unk> database of Av.
Patient data again with the appropriate approvals.
I think I think this is a vision that's going to take time, but it's one that I think fundamentally changes the patient doctor interaction and just reduces errors and improves elevated.
Elevated patient outcomes.
Got it looking forward updates are there throughout the year and which targets commodity investment program. Thanks for taking my questions on it.
Thanks Christian.
Thank you. Your next question comes from the line of Allen Klee from Maxim Group. Please go ahead.
Your line is now live.
I think your line is muted thanks.
It seems to be no response from that.
Lying idle nuclear his question.
Your next question comes from the line of David Kwan from TD. Please go ahead.
Good morning.
I was wondering can you talk about maybe how you see the margin progression here for the balance of the year.
Sure.
On the EBITDA margin side, I guess, particularly given what I assume is going to be a moderation in growth in terms of the outspend for circle in the gas versus what you spent in Q1, but also maybe factoring I guess circles clinic footprint, which I assume would lead to a bit of a near term drag on margins.
Yeah and look.
With circle clinics, not not all of them are sort of big flagship place a lot of them are smaller clinics again, just designed to support that.
The patient volume so.
We're still thoughtful about making sure that we don't.
Create a creator in our in our in our results, but but yes, I do agree that and that's why I mentioned that there will be some softness initially.
As far as the overall progression.
Think if you look at sort of where we're guiding on revenue and our commitments on EBITDA, we are being intentional about investing in growth.
We really like the elevated organic growth profile of the company.
And but at the same time, we want well shareholders to feel that they can rely on a certain level.
Profit growth.
And this kind of brings us back to the framework of rules 30, we we feel like it's great for management to have the flexibility.
And.
Thoughtfully kind of focus on organic growth at times and.
And operating margins and not need to.
Feel like they need to over optimize on any one.
We want to accommodate this growth and so I think youre going to see.
Sort of margins be pretty stable.
Again, this is ex M&A and as I mentioned, there is a very good chance that there will be M&A. So I have a feeling that the M&A will be more impactful to margin than the actual.
Trajectory of the organic growth.
No that's helpful.
You talked about the softness, especially some softness in circles results in Q2 was that related to revenue growth or profitability per dose.
We think it'll be a little bit of both.
Again, it's something that we think gets made up in the back half of the year just just based on.
All of this all of this growth that they're experiencing since those numbers that I mentioned, they have even grown the physical footprint, even even more in Q2. So.
So, yes, it's been a pretty frenetic pace.
But but.
Yeah, No we're still of the belief that they will have another phenomenally.
Organic growth fueled.
Kind of.
Phenomenal performance for the year.
Alright, one last.
Question, just on that expansion that clinic footprint understanding that you want to try to cover off.
So as it relates to patients that are being prescribed controlled substances.
With the footprint that you have right now like.
Can you say like how much of the business that is still may be out there that isn't kind of within those geographic regions, where you are right now kind of what the revenue at risk is.
The revenue at risk is actually.
It's actually really really nil I'll tell you why.
Now withstanding our preparations for the ph D a actually.
We went ahead and extended those.
Those doses those waivers until November so I'm not sure if you're aware of that but.
But we had to get ready we knew that the end of the phe, what's happening, but even though bite and ended the official phe the DEA as it relates to control substances, which I think was the.
The focus of your question had been extended and more flexibility has allowed for companies like circle.
So really we ramped up to be there and to be able to support this but we will continue to enjoy those flexibilities for quite some time and even in November there will be a one year grandfathering period. After that so they want to give it looks like ample time for anyone operating in the spa.
Base to be able to make this transition.
That just.
I'll add that you'd mentioned 10 November right.
I'm just wondering more like when it eventually.
Yes.
Actually comes into effect, how much of that revenue could be impacted.
Yes, I mean look as of now we don't it's not even it's not even a thing but with the locations that we had ramped up.
We were kind of position.
To support the vast majority of our revenues and customers and continue our growth path.
And our budget continues to be very strong for circle.
Even pre the understanding and recognition of the fact that these restrictions would have additional flexibility associated with them.
I appreciate the color thanks, Amit.
Thank you.
Our next question comes from the line of Jason Zander. Please go ahead.
Okay.
Apologies. Your next question comes from the line of Michael <unk> from Raymond James. Please go ahead.
Hey, how about Eva Tyler Thanks, very much for taking my call and congratulations on a on a tremendous quarter.
My first question is on <unk>.
Acquisitions, I mean at the at the end of last year.
You talked about a robust pipeline starting out the year.
Very little came through in Q1, it sounds like you're still very bullish about the prospects for this pipeline I Wonder if you could.
Give us a bit more color on perhaps perhaps like what that pipeline looks like perhaps how many deals are sort of looking you're looking at in the near term.
Maybe total deal value in maturity across that funnel.
And then given your you gave some commentary about.
Yeah.
Clinics being the focus of this of your M&A wonder.
I'm wondering if you could talk about perhaps.
Focusing on Canada geographic areas of focus in creating ecosystems of multidisciplinary clinics and I'll.
And I'll leave it there.
Yeah. Thanks, Michael.
Look I think you nailed it.
Clinics as a focus both in the U S and Canada.
Wells business.
Can be characterized as wanting to accumulate this precious and scarce resource of.
Providers I mean at the end of the day the people that deliver care and demand for healthcare services is extremely high in both countries and most growth what we found is not it's not.
It doesn't seem to be challenged on the demand side, but more on the supply side. So we'll have I think a very focused strategy on acquiring assets that are provider rich. So that we can we can accumulate that precious.
Resource and increasingly.
Increasingly precious and Rick.
Scarce.
And so that manifests itself in a number of ways. It manifests itself and why do we want clinics well clinics are great.
Not so much the physical four walls that you get in the clinic, but what you do is you get is you get providers that are entrenched with patient volumes demonstrating that there is a pattern of delivering care.
And a sustainably economic manner, and then of course, the well business model is to come there and ameliorate that in a significant way with our tech and expertise.
So.
We see deep pipeline opportunities in both the U S and Canada, there are little bit different though in Canada I would say.
A lot of smaller networks in the U S.
I think they are bigger networks in the U S. We're also looking at.
No.
Different innovative approaches.
Acquiring providers.
For example services that provide locums to hospitals and clinics.
This is this is highly desirable for a well to be able to traffic and those types of areas because again it puts us.
In a position where we can be partnered with the provider tech enable that provider and have that provider improve their productive outcome.
Hopefully that's helpful.
That's very helpful. I appreciate it.
As a follow up question I Wonder if you could shed some light on.
The government of Canada's.
Investment over over 10 years, starting now in the modernization of.
The health care system, among many other things.
You mentioned that Youre seeing some of this health care spending up spending showing up across the country I Wonder if you could expand on what Youre seeing and then also just.
Looking down the road, how well can further benefit from this investment.
Sure I'm sure you're aware of some of the.
Improvements in.
And pay for doctors here in British Columbia, where I am.
I think we're seeing after many years of not really staying current with doctor pay.
<unk> has dramatically ramped up.
It's pay and and even providing some one time payments I think ive covered that off in her script.
So we're.
We're not just seeing onetime payments, we're seeing new programs, we're seeing an effort too.
<unk> primary care providers feel that they are participating in.
And in a business that does not leave them behind.
If you kind of compare CPI and and the per unit economics of a physician and parts in some parts of the country like BC It was quite lacking.
So our understanding is that there will be other.
Fifth and upgrades across the country as we sort of deal with this health care crisis, which again to a great extent can be characterized as a lack of primary care physicians.
It's other physicians to but I will say, mostly primary care physicians.
Alright, Thats really helpful. If I could sure and one more thing in here you mentioned that wisp in seeking to retool its offerings I Wonder if you could shed some light on that.
Sure I mean look there.
They are pure play provider of women's reproductive and sexual health.
And there's a bunch of different products and services that they provide they are.
As they scale their adding new partners.
Reviewing old partners, making sure that everyone's ready able to scale.
As you grow your business you encounter.
Different.
Different different situations and opportunities for improvement and I think we've.
We believe we've got a tiger by the tail here with with we feel that.
Because especially.
They're kind of scalable growth.
Trade in terms of.
That's that revenue that you saw I think the $18 million this quarter.
Supported by a high number of providers.
And so it's an enormously scale.
Scalable due to the asynchronous nature of the business.
And so we.
Really a lot of the actual fulfillment.
Responsibilities rest with your actual partners once once a patient has been cleared for medication in his script has been established.
Making sure that those scripts manifest in products delivered on time.
In a highly compliant way either these are things that as we grow we want to expand the products.
To add partners that can give us more access and so I think what youre going to see with time is that waste is going to expand its product line. So I think it's very exciting because.
We're not seeing any.
Any slowdown or any of the categories. They are in currently but we see opportunities to kind of participate in a number of new categories.
Fantastic, Thanks, I'll jump back in the queue.
Yeah.
Thank you.
And for our last question today, we have Justin <unk> from Stifel. Please go ahead.
Alright, Thanks for taking my call on the 10 strategic investments.
At 250000 each.
I'm curious you know why.
Those parameters.
He is the chief investment not unique where you know maybe it warrants more or less and I think in the opening remarks, there was mention of a 100.
Potential acquisition opportunities is that just within AI or is that.
Larger across primary and specialty care and potential digital assets.
Thanks, Justin.
The <unk> 10 is really.
First of all let's start with the number 10, it's really a number that is demonstrative of our commitment. So we want to we wanted to have at least 10 and I think I said this year I kind of meant really in the next 12 months as our goal.
But if you look at our press release, we didn't say there would be $2 50, each we say that would be a minimum of $2 50. Each the point there is that we just.
We wanted to make sure that that we're not.
Approached by folks asking for 30 or 40 or 50 Grand for something that's really really early stage.
But at the same time, we think that it's important not to come in.
Into a more mature AI company, where our investment we'd get lots of it would be.
Irrelevant.
The idea here is for us to use our structural advantages which include our provider network our EMR.
Our digital health highway.
To help these.
Company's proliferate their technology.
When we put out that press release, we were we thought we'd get response, but we were we were really surprised that that's the 100 number.
These were specifically related to the AI investment program, we had 100 reach out just in the past few days since that announcement so.
It kind of Florida.
And it's great because we are seeing.
Some incredible business plans operators out there because and again I don't think they're necessarily seeking us out for our cash.
There's plenty of people that are willing to use your cash right now, but the fact that will can bring asked about health it can bring.
The largest provider network in the country that it can bring connect.
Connectivity with.
So many health systems digital health systems in the country I think is something that that really truly.
It's top of mind for these entrepreneurs.
Okay.
Hopefully that's helpful.
Thank you.
That ends our Q&A session for today I'd now like to turn the call back over to Mr. How much your body for any closing remarks.
I'd like to thank everyone for joining us today and for all your support.
Look forward to getting back to you on all of our advancements in AI is M&A and of course, our efforts to tech enable.
Providers and are confident and.
And passionate manner. Thank you for your time have a great day.
Thank you, Sir ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines have a lovely day.