Q2 2023 WELL Health Technologies Corp Earnings Call
Okay.
Ladies and gentlemen, welcome to the Technologies Corporation second quarter 2020 financial results Conference call.
On this journey and now over to you for today's call.
At this time.
Participants are in a listen only mode.
We will conduct a question and answer session theater in the call.
She will be restricted.
Please note this conference is being recorded.
I'll now turn the call over to Mr. Tyler.
Manager of Investor Relations Mr. Baber, you may begin.
Thank you operator, and welcome everyone everyone to Bauhaus fiscal second quarter financial results Conference call for the three months ended June 32023, joining.
Joining me on the call today are how much about the chairman and CEO and Eva <unk> the company's CFO .
I Trust that everyone has received a copy of our financial results press release that was issued earlier today.
Portions of today's call other than historical performance.
These statements are 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 on 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.
These forward looking statements involve known and unknown risks uncertainties assumptions and other factors many of which are outside of <unk> control that may cause the actual actual results performance or achievements to differ materially.
Seriously 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.
Do not undertake or accept any obligation or undertaking to release publicly any updates or revisions.
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.
If it is required by law.
We may use terms such as adjusted gross profit adjusted gross margin adjusted EBITDA 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 our.
And in our management's discussion and analysis the key.
Company believes that adjusted EBITDA is it meaningful financial metric as it measures 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 I will turn over the call to Mr. <unk>, <unk> chairman and CEO .
Thank you Tyler and good day, everyone. We hope that you're all keeping safe and healthy we appreciate everyone for joining us today.
We're very pleased with our record breaking quarter and to be visiting with you today.
In our quarter, we achieved record revenue and growth across all key metrics are record revenue adjusted EBITDA patient visits and provider Count are Testament to the company's continued focus on tech, enabling health care providers and supporting them and simplifying their work lives modernizing of digitizing their clinic.
Practices and delivering the best health care profitable well exited Q2 2023 with over 3200 providers and clinicians delivering 1 million patient visits over 1 million patient visits in fact in the quarter through our own physical and virtual clinics without counting any of the technology interactions or.
Technology enabled visits that happened with other people's providers.
In addition, we'll have more than 31000 providers provide supported by our own SaaS and technology services.
We are extremely passionate about supporting our providers and everyday we focus on supporting them better.
This attitude and focus is what's allowed our 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.
So I think we speaking there are a few catalysts that I wanted to touch on in todays presentation and they are as follows one continued resilience in our multi dimensional healthcare delivery platform that has allowed us to continue to deliver outstanding record result, 18 quarters in a row and allowed us to yet again.
Great our guidance this quarter for the balance of the year.
The growth of our R&D teams and costs demonstrates that we continue to invest in our growth not only with M&A, but with internal investment constantly strengthening our internal ability to grow and innovate.
This does not only contributing to the health of the company, but positioning us to grow organically as evidenced by our big Ocean M D contract win today.
Three our continued focus on artificial intelligence and strategic internal and external planning and investments that allow us to leverage AI to help our providers and patients at scale, while becoming a more efficient company.
For our disciplined M&A growth engine and how it continues to yield tremendous results.
Five our relentless focus on integration and Digitization.
<unk> has exhibited a keen focus both in the U S in Canada to improve efficiency and leverage our size and scale by integrating aspects of our business our efforts to constantly improve and tightened up our integrations never really stopped due to our growing capabilities, new innovations and our dynamic company.
Sure.
As we've discussed before at the heart of our companies our digital platform, which is being worked on by an internal team of over 100 dedicated product and engineering professionals.
And several dozen more externally on both sides of the border.
In Canada, our platform is quickly becoming one of the most important stretches of the digital health Super Highway for health care communications by enabling interoperability between.
Our systems and core EMR systems and primary specialized care providers.
This was recently evidenced by our recent wins.
With Ocean MD in British Columbia, where we were awarded a significant $38 $5 million contract by the Phs eight to help modernize and digitize the provinces workflows with our next generation E referral any console platform.
This contract win exemplifies just how strong our platform is especially given that we now have substantial contracts with Ontario, Nova Scotia, and now BC with other provinces engage deeply with our business development teams.
We are now working on taking our platform to the next level by elevating our product roadmap with the help of AI related technologies.
We're pleased to report that all of our business units are executing well and we're expecting to have strong performance for the remainder of 2023.
Yes.
The company does not foresee any material influences or challenges that would impair its ability to deliver solid results in 2023, as we are poised to invest in and achieve significant growth, while delivering an enhanced profitability.
Last month, we increased our annual guidance by $50 million to be in between $740 billion and $760 million for the year. We continued improvement in our outlook and I am pleased to provide an upgrade to our revenue guidance, which we now expect to be in the upper half of the 740 million to seven.
<unk> hundred $60 million annual guidance, essentially we're expecting annual revenue to exceed three quarters of $1 billion.
Representing annual revenue growth of at least 32%.
Just a reminder, our guidance does not include any unannounced acquisitions. We also continue to guide for maintenance the rule of 30 performance for the year.
Achieving three quarters of $1 billion in revenue. This year is a significant milestone which demonstrates that we are well on our way to reaching $1 billion in annual revenue a strong organic growth profile, a compelling acquisition opportunity gives us visibility into achieving $1 billion revenue run rate within two years.
<unk>.
Our adjusted EBITDA.
For adjusted EBITDA. We're also pleased to reiterate our guidance for annual adjusted EBITDA increased by more than 10% over 'twenty two 2022 levels.
Our revenue growth continues to outpace our EBITDA growth.
2022, due to the reinvestment of any excess cash flows back into the business for growth in.
In addition, our acquisitions this year have had lower operating margins than our existing businesses is quite common for us to acquire businesses that arent as profitable as our own as we then digitize and modernize these asset and increase their operating margins to be more in line with our own profitability profile.
This is what we do and this is what we have a proven track record of doing improving the growth and profitability of our acquired assets with that I would now like to turn the call over to our CFO <unk>, who will review the financials for fiscal quarter second fiscal quarter of 2023, I will then come back and provide further.
Commentary on our business units and outlook.
Thank you Amit I'm pleased to report that we had very strong results for the three months ended June 32023, our overall second quarter results were as follows while achieved record quarterly revenue of 170 <unk>.
<unk> 9 million in Q2, 2023, an increase of 22% as compared to revenue of 143 million generated during Q2 of last year. This growth was driven by acquisitions and organic growth year to date, while has achieved organic growth of 15%.
<unk> achieved record adjusted gross profit of $90 8 million in Q2, 2023, an increase of 20% as compared to adjusted gross profit of $75 5 million in Q2 2022.
Both in the Companys adjusted gross profit is attributable to higher revenue in the period.
Adjusted gross margin percentage was 53% in both Q2 of 2023 and 2022.
Well achieved record adjusted EBITDA of $27 8 million in Q2, 2023, an increase of 5% as compared to adjusted EBITDA of $26 4 million in Q2 of last year.
Adjusted EBITDA attributable to while shareholders was $22 3 million in Q2, 2023, an increase of 16% as compared to adjusted EBITDA attributable to <unk> shareholders of $19 2 million in Q2 2022.
Adjusted net income was $14 4 million or <unk> <unk> per share in Q2, 2023 as compared to adjusted net income of $17 5 million or <unk>.
Appreciate it in Q2 2022.
Well generated 11% office revenues from truly recurring and subscription revenues and 87% of its revenues from is highly recurring patient services revenues. In Q2 2023. This means that approximately 98% office revenues are highly predictable.
I will now review our cement the Q2 results.
Canadian financial services business achieved another record quarter with revenue of $54 2 million in Q2, 2023, an increase of 24% as compared to $43 7 million in Q2 of last year with both primary care and my health specialized care clinics achieving record revenue in <unk>.
Quarter.
Primary care revenues increased 39% to $24 9 million in Q2, 2023 compared to $17 9 million in Q2, 2020, primarily due to organic growth and acquisitions during the second quarter. We completed the acquisition of five primary care clinics.
Located in Calgary, Alberta from Mci, one help technologies, which are expected to generate approximately $10 million in annual revenue.
In Q2, 2023, my health revenue increased 13% to $29 3 million as compared to $25 8 million in Q2 2022. This.
This year over year growth is attributable to an increase in diagnostic procedures performed and the addition of new cardiologists to my helps practice. The second quarter is also the seasonally strongest quarter for my health.
The resulting in a 12% increase in revenue compared to prior quarter Q1 2023.
I will help USA patient services revenue was $103 5 million in Q2, 2023, an increase of 30% as compared to $79 6 million in Q2 2022, driven by growth over the past year in all three of well help USA lines of business that is <unk>.
With and CRH.
In Q2, 2023, <unk> revenues with $63 4 million, an increase of 25% as compared to $50 9 million in Q2 2022.
Yes.
I would just case volumes also continued to be very strong with over 135000 anesthesia cases completed in Q2 2023, an increase of 8% compared to Q2 2022.
Case volumes in the second quarter were positively impacted by the acquisition of affiliated Tampa anesthesia Associates, which closed in the prior quarter in Q1 2023.
<unk> sold more than 32000 or Reagan located units in Q2 2023 compared to over 45000 units sold in Q2 2022. This year over year decline was due to a promotional campaign in the prior quarter Q1, 2023, when CRH so a record of over 50.
<unk> 9000, or Reagan luck Ada unit with the conclusion of this promotional campaign and the beta unit volumes decreased in Q2, but have now returned to near normal levels in Q3.
So for medical revenues were $21 million in Q2, 2023, an increase of 34% as compared to revenue of $15 6 million in Q2 of last year.
Aldo cycle medical experienced strong year over year revenue growth as we had guided in our Q1 conference call. We were expecting softer result, as compared to Q1 2020 silicone medical has been focused on expanding its physical clinic footprint over the first half of the year to support the forecast and the public health <unk>.
C by the U S Federal government that would add some COVID-19 regulations associated with Telehealth medicine.
Which more in person visits if required.
Local medical now has 27 physical locations across 21 states in the U S. A significant increase compared to last year when Socal medical only had two physical locations in the state of California.
As Tom will cover.
Our comments today, so socal medical is back in growth mode, now and we're expecting a healthy finish in the back half of the year.
With cheap Rep revenue of $19 1 million in Q2 of 2023, an increase of 46% as compared to revenue of $13 1 million in Q2 of last year.
And the first half of the year, where customer acquisition costs are lower we were intentional in reinvesting operating cash flows generated by this business back into with growth the balance of the year should continue to see strong growth with slightly improved profit ability.
So often technology services revenues were $13 3 million in Q2, 2023, a decrease of 22% as compared to $17 million in Q2 2022.
At this time was due to timing of contracts and the company's cybersecurity related business cybersecurity and data protection revenue tends to be lumpy, which resulted in strong quarterly revenue in Q1 2023, followed by lower revenue in this quarter.
<unk> Q3 revenue to bounce back again for the summit.
Aside of cybersecurity, all remaining SaaS and services platform business increased 29% on a year over year basis to $11 3 million in Q2 2023 from $8 8 million in Q2 2022.
Well into Q2, 2023, with a solid balance sheet.
At June 30 of 2023, wellhead cash and cash equivalents of $35 6 million.
It continues to be in good standing and fully compliant with all covenants related with this two credit lines J P. Morgan in the U S and Royal Bank in Canada. The debt from the two credit lines was approximately $233 million in Canadian dollars as of June 32023.
Im also pleased to report we have further reduced wealth shareholder leverage ratio to two three times at the end of Q2 2023 compared to three times as at Q2, 2022 and compared to two six times in the prior quarter at Q1 2023.
We find leverage ratio as net net.
Net bank debt, excluding convertible debentures less cash on hand divided by shareholder adjusted EBITDA. The improvement in <unk> leverage ratio was achieved by a decrease in the company's debt levels and an increase in shareholder adjusted EBITDA over the past year.
In terms of our share capitalization as of August 19, 2023, well have 257 million 539249 fully dilutive accretive issued and outstanding.
That is my financial update and I'll turn the call back over to Hana.
Thank you Eva.
I will now provide some specific outlook on our business units first with primary care, we're expecting our primary care business exhibit healthy growth in the second half of the year due to both organic growth and the acquisition of clinics from Mci, One health in Alberta and Ontario.
During the second quarter, we completed the acquisition of five clinics from Mci, which are located in Calgary and will have a positive revenue impact to our Q3 results. We have already started the integration of these five clinics into our National Clinic network and things are going well there.
And then on July 19th well entered into an agreement with NCI that includes the acquisition of all but one of their clinical assets located in southern Ontario, which are expected to generate annual revenues of more than $21 billion.
This acquisition brings more than 130 physicians to the wealth family and significantly expands wells footprint and breadth of services in Ontario.
These NCI clinics in Ontario are expected to come on board in October and provide a revenue boost to our primary care business in the fourth quarter.
Initially, we're expecting EBITDA to be negatively impacted by the acquired Mci clinics in Alberta, and Ontario, Notwithstanding this we've established a strong plan to improve the efficiency and output of these clinics by leveraging wells operating playbook, which includes extensive use of our practitioner enablement platform.
As we go through the process of digitizing and modernizing these clinics, we expect them to become profitable in 2024.
One of the exciting aspects of this acquisition is the fact that we will now have a much larger base of primary clinics care clinics in Ontario that can refer into our my health specialized care network, which will only strengthen our overall business in Ontario.
And that leads us to my health My health had an outstanding quarter with strong year over year growth and improved profitability with Q2 being seasonally the strongest quarter for my health.
We do expect my health revenue to decline in Q3 2023.
Compared to Q2 due to seasonality. However, we anticipate a healthy trajectory as demonstrated in year over year strength in the back half of the year.
In reference to I'm curious Bill 60, Your Health Act, which allows out of hospital facilities to perform publicly funded surgeries and diagnostic procedures, including MRI and <unk>. We continue to wait the highly anticipated final regulations and call for applications for licensing.
Although exact timelines youre not publicly released we anticipate a call for applications to occur in Q4.
<unk> Health Center continues to be highly engaged throughout the process with the optimism is serving the patients of Ontario, and helping reduce MRI patient types.
Following calendar year.
If successful in obtaining MRI ICT licenses additional capital cost to purchase the scanners and extensive leasehold improvements would be required we anticipate lead times of close to nine months to have these services fully operational clinics as such we don't expect any revenue in 2023 from the release of this regulation.
I will now discuss the outlook for our newly granted will help USA business on July 27th the company announced that it had rebranded CRH medical and launched well help USA, a multidisciplinary healthcare business spanning primary, especially life care with on and off line operations at scale will help us.
Today's call is to mirror wells mission of technical and care providers in the United States, while digitizing and modernizing their health care businesses.
In addition, we'll help USA will leverage its deep U S based health care expertise and structural advantages to.
To create a whole new category of shared services that will benefit and deliver improved integration and facilitate further growth between wells usda's lines of business.
We'll help USA is a highly profitable and rapidly growing business with operating run rate revenues of approximately half a billion CAD.
It's also important to note that we have a really outstanding team there with over 100 years that combined experienced in allocating capital integrating and growing health care businesses and working inside of some of the largest and most prominent health care companies in the United States.
The different lines of business under will help USA includes CRH anesthesia, CRH Reagan radar healthcare providers surgical medical in width.
Now I'll provide a quick update on these businesses first CRH CRH is having an outstanding year so far.
We expect CRH anesthesia case volumes to continue to follow a normal seasonal pattern in 2023 with the highest number of cases, increasing each quarter.
With Q4, 2023 again being forecast is our strongest revenue quarter again this year for CRH.
CRH anesthesia services should get a boost in revenue in Q3 from the addition of 18 ASC practices from the <unk> acquisition as well.
Also CRE just efforts to digitize operations are bearing fruit CRH has invested.
Substantially into its revenue cycle management program with implementation of numerous new digital tools designed to improve business intelligence collections visibility and collections performance.
On June 22023, the company announced that CRH has made strategic investment in <unk> health, a leading EMR company focused on anesthesia practices.
The investment is part of a strategic alliance designed to further digitize and modernize CRH is back billing and back office processes.
Based on our recent pilot project with graphene help CRH had demonstrated that it had approved it's time to capture billable charges by 58% or five six days and reduce its overall accounts receivable balance as the as the pilot project project sites by 24%.
As a result of the successful pilot investments CRH medical plans to expand this initiative to at least 54 additional <unk> over the next three years, where CRH provides anesthesia services.
Secondly, radar, we're very pleased to be welcoming the radar healthcare provider's team to the wealth family as part of the care plus acquisition radar provide staffing and low competitive services focused on anesthesia providers with a specialization in anesthesiologist recruitment and placement for its network of <unk>.
Customers, which include provider groups hospitals, and ASC across 29 states with.
With a database of over 70000 anesthesia providers to leverage reader has served over 150 clients to date and is well positioned to further increase its footprint of providers and clients.
Greater add significant upside for growth and diversification beyond clinical and <unk> services to include recruitment services.
<unk> is also well positioned to serve as a shared service provider.
Shared service for provider recruitment and billing services to the other U S based businesses in wealth portfolio.
Furthermore, well hope USA intends to expand the scope of radar to other specialties and health care professionals, such as physician specialist primary care and nursing professionals.
We're off to a great start with radar so far has seen revenues and growth in line with our expectations.
And now for circle medical.
Last quarter, we mentioned that there would be some temporary softness in medical circle Medicals Q2 results as management's focus has shifted from expanding.
Physical clinic network.
And the prompt return to growth as the company makes growth. Its primary priority again, we were right on both accounts the circle medical team put an enormous amount of focus and energy into being compliant with the end of the public health emergency in May and expected removal of cobot era waivers, allowing companies such as surgical medical to prescribe <unk>.
<unk> via telemedicine.
This involved expanding its in person clinic network from a few clinics to 27% and seeing over 13000 telemedicine patients 66% of our target in person within one quarter, a logistical feat unmatched by circles competitors.
Waivers were extended at the last minute and we are optimistic that recent moves by the DEA will lead to a more flexible regulatory environment that allows for prescription of controlled substances without any in person appointment where clinically appropriate.
Either way, we are resilient and extremely well prepared for any direction that the DEA takes given our robust in personal clinical network and proven ability to rapidly adapt to changing circumstances.
We were accurate in our prediction of a rapid return to.
Two a focus on growth post public health emergency based on booking data, we have high confidence that circle medical is already exceeding a run rate of over $100 million CAD and profitable in August and we expect strong month over month growth for the balance of the year.
The growth in revenues and our projections for the balance of the year has primarily to do with circle medical growth team.
Turning their attention from establishing a strong.
Strong physical network to Onboarding physicians in fact in the last four weeks, we have increased the number of physicians on boarded by more than 25% over the previous month and continue to ramp up as we have retooled our provider recruitment process to onboard more providers in less time than before.
And now a few words on with last quarter, we discussed how with this retooling some of its key product and distribution partners, which resulted in slower growth in Q2 and minimal adjusted EBITDA contribution in the first half of the year.
I'm pleased to report that <unk> has mostly completed this work and we are now expecting revenue growth to be stronger in the second half of the year with improved profitability.
<unk> spending in Q1, and Q2, primarily on marketing costs to gain new patients and drive additional revenues is already starting to pay off thus far in Q3 that July was a record month of revenue for the company with $5 million in revenues.
With the recent launch of our new and improved online platform. We are now able to launch new products more quickly and efficiently and have plans to launch 10, new products over the next several months for example, just a couple of weeks ago.
<unk> became the first telehealth brand in the United States to Great Doxy path. The morning after pill for stds to market.
Finally, our SaaS and technology services business.
As we had previously guided in our last call cyber security and data protection business had close to its best quarter ever in Q1.
But being a lumpy business.
Revenues declined in the second quarter as we had expected.
Fiber security revenues can often be impacted by the timing of hardware shipments at the end of the quarter.
Thus for Q3 is looking like a stronger quarter again with several contracts deliveries.
We're expecting a bounce back in cyber security revenues, while the rest of the SaaS services business.
He needs to perform with steady growth and profitability.
Ocean M D. As a key component of our SaaS and technology services group and is emerging as a leader in patient engagement and referral solutions.
<unk> you referrals software allows primary care providers to send their request to surgeons through the Ocean you referral network instead of faxing, emailing or mailing, which make surgical console easier referrals easier and reduces wait times for patients.
Or should Mds already the dominant you referral solution in the province of Ontario last quarter, we reported that Ocean MTA has been selected by the province of Nova Scotia first few referrals solution and this week.
Obviously today Ocean M. D. We reported signed a $38 5 million dollar contract with BC PSS States provide an array of digital services such as E. Referrals E coastal city orders to help tech enable providers with the best in class digital interoperability tools.
With this win in D. C. We feel ocean and <unk> has the potential to become the <unk> referral standard across the country.
Ocean, Indeed has notably proven its ability to reduce wait times by as much as 52 days, including a 35 day reduction in referral processing time alone.
Thereby significantly improving access to care.
The implementation of Ocean Mt's platform was shown to result in a 12% reduction in medically unnecessary mris underlining a direct cost saving impact for provincial health systems.
What are the things that is really truly special about ocean is it's the only piece of commercial software that we know that connects with all of the major EMR and <unk> systems in the country.
That means that it connects into Telus health Acura Wells Oscar and other EMR systems. In addition to major EMR.
Shar systems for hospitals, such as epic and Cerner.
Moving onto the well EMR group. We're also very excited to report that our intra health EMR team was selected by another government agency in New Zealand on a significant multimillion dollar contract, which includes over $1 billion in IRR in more than a $1 billion and implementation services.
I will now provide an update on our AI related activities.
Credibly excited about the potential of AI in health care. Our vision is that AI powered solutions could have positive impact on the health care sector by giving healthcare providers clinical decision support tools that will give them their time back enhanced clinical productivity and provide a better patient experience.
We're determined to faithfully support and tech enabled health care professionals with the very best technology available, which now includes significant investments in AI based products and services.
Last quarter I highlighted the wellhead made a priority and I'm pleased to report that we're starting to see some of the operating improvements as a result of leveraging AI internally <unk>.
<unk>, one reduced team member Q Q monitoring one of our platform team's first.
First line support group now Leverages GPT for powered AI solutions that pull answers from internal resources and automatically respond to enquiring customers too, we're leveraging intelligent chat bots to provide improved access to knowledge outside of support hours as well as improved response rates and experience for patients.
Who are reaching out for support.
Three a number of our internal development teams have been heavily leveraging Microsoft's get cut.
Co pilot and starting to benefit from generative AI solutions that can significantly increase developer productivity and.
In addition to this we are working on compelling new products and enhancements to rollout to our provider network. In Q2, we did just that with the launch of several key initiatives, including well AI voice and the World AI investment program.
And a few words on AI voice.
<unk> is a transformational ambient scribe product that leverages generative AI to dramatically reduce the provider's administrative burden by privately and securely capturing patient encounter conversation and automatically generating a succinct and medically relevant chart note for the patient interaction.
Voice is a powerful tool that is able to communicate seamlessly with wells EMR products, making it easy for providers to deploy manage and benefit from the technology quickly without having to harmonize the usage of disparate tools.
Providers love, well AI voice, because it allows us to focus more of their consultation time on the patient they spend less time taking notes.
<unk> loved the experience because they no longer have to compete with the doctors laptop for attention.
One of our physicians was recently quoted by our sales team is saying well voices might work like amazing and now I will look forward to coming to work to use it.
Strong statements like this demonstrate the value of well AI voice and the real impact it has on day to day lives with physicians.
We've had a controlled rollout to ensure quality safety and security and ensure that results are intended to date.
And we can say that well AI voice is seamlessly integrated into more than 5000 patient visits so far we've seen strong user growth with the average physician using the tool for more than 230 sessions per month. All of this demonstrates growing trust in our products and its efficiency in the real World Health care settings.
While we are providing this technology for subscriptions in our EMR network. We're also planning to rollout it out to the majority of wells primary care operations and the balance of the year and are excited about the benefits that it affords our internal network.
As part of our commitment to developing AI technologies, well announce the AI investment platform, whose goal is to invest in at least 10 companies and to ensure that each <unk> has a strategic alliance agreement with well it allows us to benefit from wells health care ecosystem.
Since launching the program we've already connected with more than 125, new companies that have spent considerable time to narrow down the group to approximately two and a half dozen companies we were having deeper conversations.
We're already in discussion.
On terms with a handful of these companies and expect to have some exciting developments to share soon.
Before we conclude the call I'd like to provide some additional commentary on the Mci strategic alliance and investment.
As part of the agreements with Mci will purchase the Mci, Ontario clinics consideration of $1 5 million and acquired the debt of the key creditor for $3 5 million.
To help facilitate the deal.
Finally, well will also lead a new investment round into Mci, and which will will commit at least $2 5 billion.
As part of a convertible debenture financing of up to $10 million.
Going forward Mci will be strategically focused on its leading AI data science and rare in complex disease detection platform.
Also intends to enter into a strategic alliance agreement designed to provide well clinics with leading edge technology from Mci and better position Mci is a key national leader in Canada.
As part of the strategic Alliance well with joined <unk> Board of directors is subject to satisfaction of certain conditions well almost all.
Also hold an option to acquire up to $30 8 million class a shares.
And class B shares in Mci overtime. This means that well will have an opportunity in the future to acquire control of NCI, one India that elect to do so.
It likes to acquire the multi voting shares it has options out subject to the terms and conditions of its various agreements covenants and rights.
We believe the multibillion dollar disease detection industry is a big opportunity for Mci with its cure health platform.
Your health is already available on the App start help platform and it's integrated into wells Oscar Peru, Emo EMR, we're looking forward to working with Mci and developing and amplify this world class technology in.
In addition, we believe Mci is an ideal company for building additional health care related data science and AI technologies.
We're really excited about the upside investment potential offered by the new strategic direction and the recapitalization of Mci <unk> health.
We have big an extensive plan plans here folks stay closely too.
In summary, we are very pleased with our financial performance, thus far in 2023 and look forward to delivering strong results again for the balance of the year.
Our outlook for 2023 remains positive, hence I am confident in upgrading our annual guidance again with more of our guided EBITDA, appearing in Q4 versus Q3.
And please keep in mind that the big contract win announced today doesn't contribute contribute meaningfully to this year's results.
We have many tailwind driving growth in the business and we have a committed and disciplined team to ensure that we're able to execute on our objectives in closing I will provide an update on our ongoing ESG program.
Proud to have released well our second ESG report on July 7th entitled taken care of the care providers. This report highlights wells ESG strategy reporting initiatives and targeted actions, while as a purpose driven company that aims to transform the world for the better as such are.
<unk> report outlines this objective.
Finally, I want to thank you all for joining us on this call today and thanks to 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 needed to pursue our goals and support our providers I would also like to thank wells senior management team and all of our employees and contractors.
For their tremendous effort in <unk>.
Particular, I would like to thank our team of health care practitioners and other frontline workers, who provide unbelievable patient care. They remind us every day why are we here and we are here to support them.
With that we will be open to receive some questions now operator can you. Please facilitate.
Thank you, ladies and gentleman, who will now begin the question and answer session.
We have a question. Please press the star followed by the one on your Touchtone phone.
You will hear a telecom technology Youll request questions will be taken in the order received should you wish to cancel your request. Please press star followed by the two.
Your first question is from Allen Klee from Maxim Group. Please ask your question.
Yes, congrats on the strong results.
In regards to the Ocean medical Ocean empty contract with British Columbia.
That's for $38 5 million can you tell us.
When you think your revenues may start in the $38 5 million is spread over how many years.
Thanks, Alan for the question it's.
It's a five year contract for the balance of this year, we expect to do some services work so.
It'll be fairly minor revenue generation this year as we sort of ramp up the services and implementation side of the business and then we'll start to see the real licensing revenue come on next year.
And I think then we will see.
Much more meaningful contribution.
Our results next year.
Thank you and one other follow up question for Circle medical could you.
Go into a little bit more of the actions that you take.
And why that gives you confidence that with the change in the regulations that this is going to return to growth mode. Thank you very much.
Yeah. Thanks.
It was really just the focus of the team.
Tire focus as the team went to preparing for the phe.
Is that was a.
A date that was very much forecasted by the bite into administration.
And at that point in time it was it was a <unk>.
Forecasted that a number of those COVID-19, Eric conveniences with fall off so it was very important for us to have the in person network setup.
Since that time that same team has now.
Move their focus towards growth and where.
We're very pleased with what's happened because again based on booking data in August here, we can certainly see that.
That has been as we thought would be a U shaped recovery. This was sort of a temporary let's think about it is the last quarter of growth really to.
To support the Phe and now we're back to the kind of growth that we had been accustomed to over the last couple of years.
So we are really the focus of the team and the retooling of the provider acquisition.
We.
Frankly, seeing tremendous results in provider acquisition provider acquisition was.
Was fairly impacted by the focus on the phe.
And now that that whole growth team is back focus on an engaging those providers and I believe just in one week, we on boarded between 15% and 20 providers, which is really incredible and very very difficult to do.
Okay.
Thank you.
Thank you. Your next question is from Christian <unk>.
From <unk> capital. Please ask your question.
Hi, good afternoon, and thanks for taking my questions I'll also start on the Ocean M. D win this morning and congrats.
We already asked about the timeline, there and what to expect this year and next but I'm just wondering.
If Ontario, Nova Scotia already live.
Is the model there it seems transactional and doctors often benefits are clear to practitioners and patients, but do you expect.
Similar sort of a ramp as doctors come on board next year. The following I guess similar to the provinces your life and already so this all to become high margin scalable revenue overtime.
Yeah. Thanks Christian.
Each of these contracts is a bit different I would say that the.
The BC contract is probably the best one so far just in terms of.
The predictability that we have in it for revenue.
And this is why we haven't really announced contract values before for ocean and so.
I think I think we're we're very excited by that and it reflects kind of the the plan to roll this out in a very comprehensive fashion in BC.
Which is which has been a little bit different than the approach that was sort of organically taken in Ontario, even though the government backed it significantly and funded it it was still fairly fairly opt in based and organic in Ontario, which obviously was very successful as you are probably aware we have over 8000 physicians.
Find up in Ontario.
But we do expect.
Again, a faster ramp here in D C.
Okay perfect.
Thank you I'll ask just one more question. Another congratulations are in order for the big surplus.
Acquisition closing so my question, there just anything you're able to share on the financial profile to help with our understanding of the size and for modeling.
And then you touched on the prepared remarks that some of the synergies or integration you see radio at the gates across that CRH in the U S business.
Sure Yeah, I mean look.
Kerr plus effectively has three components to it from a revenue perspective really really two components.
And that is the radar recruiting and then the ASC business, which I referenced in my in my script.
You know that.
What's really unique and great about this asset is that.
The ASC component fits perfectly within our network, we're very good likely acquirers for that but we.
Already had a little bit of of.
Call it.
Personnel revenue at CRH, we were already sort of dabbling in this area of lending our providers out to other sites.
And this really turbocharged is that so.
The radar recruiting really strengthened the entire CRH anesthesia platform, but then allows us to extend that platform into other forms of care providers, which then position.
Position us to provide.
Very valuable.
Shared services and provider recruiting to our other U S lines of business. So we're very pleased with that so when we express.
Some of this confidence that we have in EBITDA.
It is really coming from the fact that we're getting some some EBITDA from the actual acquisitions, but we're expecting some nice synergies there as well.
Generally speaking, we expect there to be roughly a 10% EBITDA margin.
Yes.
Contribution with the activation of all those synergies.
And given what we paid for it I mean that really puts us in a position where we generally paid gosh with all those synergies probably in the order of five to six times EBITDA and obviously, we have to work hard to make sure that those are synergies that we can obtain but if you know well you know that we are very very rigorous.
In assessing those synergies and.
We would put these more in the in the less speculative or non speculative bucket then we with the speculative.
Hopefully that gives you a little bit of color.
That's very helpful. Thank you for taking my questions.
Thanks Christian.
Thank you.
Our next question is from Rob Goff from Echelon. Please ask your question.
Thank you very much for taking my.
The question and congrats on the quarter.
Thanks Ryan.
You were pretty bullish in terms of saying wash for big and substantial things from cure and the data analytics can.
Can you describe a bit more of your picture there your strategy and.
Timeline for that are unfolding.
Sure well look at it.
You have to wonder why are we so excited about making Mci a national leader.
And really getting behind them.
First of all we we'd be watching NCI for quite some time, we felt that they were a company.
With a great group of people and an excellent idea, but they were essentially two businesses. There were in our clinic business and they were in the data science business and when we approach them. We said gosh, we think we can be really helpful. Here.
And help you focus in on one strategic focus and this is why it makes so much sense for us to buy the clinics, but.
We're not about to invested in another company and help make them extremely successful without being really involved ourselves and so the ability for us to then.
<unk>.
Essentially leverage this option that we have negotiated as part of our transaction documents to be able to.
Acquire.
Class, a and class b shares, which afford us access to their multi voting shares.
It is quite meaningful and basically allows us to.
Really consider.
The potential to activate a path to control with Mci and Thats very meaningful it's not something that happens every day, especially with the senior listed company.
And.
We have a partnership already with them. It's an early stage one, but we have seen cure health in action within our App marketplace and we can see that it works, we can see that patients and providers of deriving value. The pharma communities deriving value. Some of the biggest names in pharma that are paid.
To participate in this business and so again are our advantages.
And having this ecosystem based approach with apps Dot health has allowed us to see the best that Canadian health care has to offer and we.
With now.
As I mentioned in my script, we expect to dramatically improve the number of clinics that.
The cure has access to and really empower our providers with that technology and that you really kind of overnight makes.
Mci.
Call it sort of the remaining company a national leader and I think youre going to see.
Significant investments in growth in that business over time and quite a lot of enthusiasm and so that's.
That's why.
I mentioned stay tuned and express the excitement around it.
Thank you and one more if I may.
On Ocean MD could you talk to whether the province provincial wins to date have been on a competitive basis is this a platform that you could see you taken across other Commonwealth countries.
Absolutely.
All of these wins are extremely competitive Rob.
We.
Hats off to the talented and committed team at Ocean M D and our platform services group.
<unk>.
You got to be really good to win these contracts.
They're very long sales cycles that involves a tremendous amount of.
Hard work to to basically surpass that threshold of proof to demonstrate to.
To provincial public health leaders that we've got what it takes.
And and look yes, we are already thinking through our international strategy.
We've already started some conversations.
But we have so much momentum here in Canada, we don't want to take our eye off the ball and as I mentioned, we do have other provinces that we're engaged with and we hope to be.
Talking about more wins with ocean in the future.
Thank you and congrats.
Thank you Rob.
Yes.
Yes.
[laughter].
Thank you. Your next question is from Michael Freeman from Raymond James Please ask your question.
Hi, there.
You guys Tyler congratulations on the on some really great results Center and.
Boucher give the guidance for the year.
My question is on is on the well helped USA I. Appreciate this rebranding and also also be.
The provision of a shared services very similar to the model that we see in Canada, and we see it working in Canada.
I'm wondering.
What are in the early days of providing these sure Sir sure chips discussed network what are some aspects.
That are that are similar to the Canadian context, you can leverage the expertise from the Canadian context, and what aspects might.
It might be unique to the U S context that youre attack tackling a new.
With this new effort.
Yes. Thank you Michael for the question.
There's a number of ways, where we'll help USA can help our other lines of business.
I'll give you. One example, aegis circle whist and CRE presently use different legal and professional services.
They are getting they all.
Have good competent counsel and professional advisers, but theyre different ones and so just just aligning and harmonizing that to one we expect will.
Improved cost performance.
One of the key components of the recent care plus acquisition for CRH.
Premier choice billing.
So now we have quite robust revenue cycle management capabilities internally.
This is one big area of focus.
This is not something we've decided to do but aspirational one day, we could decide to provide revenue cycle management too.
All of Circle for example, presently circle is paying an external vendor today millions of dollars per year, so that would be millions of dollars to the bottom line.
If we could activate that again, it's not something we've decided to do just a second but I know, it's something that management is really thinking about working on that's a that's a great example of let's say a more aggressive aspirational one and then there is lower hanging fruit like legal professional insurance HR systems CRE.
CRE is just has been.
Very mature.
Mature systems, and an excellent agreement that they've already.
Structured with with providers to support their employee base. So there's a lot to drawn there.
Alright, great.
Very helpful.
Now I'd like to talk about the.
Acquisition pipeline youre dealing with today.
Wonder if you could you could described.
<unk> debt profile and composition of that pipeline in recognition of this continued narrative.
Coming from you and the team describing potentially a $1 billion in revenue within the next couple of years and doing some quick math it looks like.
Other care plus type acquisition could nearly get you there so much I wonder if you could comment on this.
Yeah, Good point, Michael well look if we did another care plus like acquisition it would happen pretty much instantly because if you look at our revenue run rate to achieve more than three quarters of $1 billion for the year. Our revenue run rates, obviously, a lot higher we're going to end the year a lot higher than that so I would say that we.
We're pretty at the reason why I'm mentioning it and then in our press release in my quote is we think this is a very achievable goal in the next couple of years without really big acquisitions, just just just with respect to our regular sort of bolt on or died of bolt on clinics and our organic growth.
Not to say that there won't be anything bigger, but I think I think to your point, we can just accelerate that and Brent and draw that goal in a lot tighter than earlier, if we make another big Big acquisition.
So.
So yes, I mean, all of those opportunities are at our disposal right now.
That's really helpful and if I, if you would entertain one more quick one.
Also talking about Careplus careplus.
It looks like the EBITDA margin profile is relatively different from the rest of the business.
And.
Would likely impact the EBITDA profile.
Balance of this year and going into next year.
While some of the somewhat wells earlier acquisitions.
We'll benefit from the wells team's hands being being on it and optimizing profitability. There I Wonder if you could talk about EBITDA outlook for 2024.
Sure I knew this question was coming.
And look we.
It took a very deliberate approach in 2023.
Which was.
We wanted to demonstrate that we were committed to it.
Certain material step up in EBITDA growth, but we were very intent on demonstrating that we are a growth company and so and so outside of that of that defined step up in EBITDA growth. We were then going to invest the balance of our of our of our cash flows.
Integral and Thats really working I think there are other other companies that are very successful again.
Looking at other mature PSX companies, we've seen at least a couple that have employed this methodology and I think it's going to be the same type of approach for next year.
Where we then take our sort of total 2023 EBITDA. We then make a commitment probably similar to this year's commitment and we say hey look we're going to continue to invest the rest of our EBITDA and cash flow free cash flow and in growth.
And I think it's the right thing to do because.
We are still.
Fairly alone, especially here in Canada with respect to our activities and growth in particularly in M&A with.
It's smaller clinical networks, and I really want to stay focused on growth, particularly because we've been able to demonstrate that as we grow and acquire these clinics, we have been able to help providers and by helping providers. The byproduct of that is we've been able to grow and improve margins and growth in these clinics and we're getting pretty good at this.
And of course, we're loading up a lot more clinics. So are the execution will be more difficult, but we're up to the challenge.
Great.
Alright. This is great. We look forward to seeing all of this growth thanks very much Amit.
Thank you.
Thank you. Your next question is from David Kwan from TD Securities. Please ask your question.
Good morning.
I wanted.
I wanted to get some color on on the charcoal business I know in the segmented information.
EBITDAR it looks like it turned negative this quarter I suspect that ways, obviously distractions that led to the sources.
Revenues declining sequentially, but I'm, assuming also kind of the cost of all the clinics and the startups are so just trying to get understand.
How you see the clinic rollout impacting the margin outlook for circles business.
Yes, Thanks, David.
Youre right. There is definitely a lot of the with the focus of starting up and driving.
All that critical infrastructure did impact our Q2.
<unk>.
We're done now I mean, we're not really expecting to to grow the <unk>.
Clinical network too much further at this point in time, we built appropriately for.
For the end of the public health emergency.
And we.
We're very robust we're very we're very much ready for any any decision that the DEA.
The public health officials taken the United States, given given that they did they sort of kick the can down the road on some of those Covid era conveniences just in the past few days. We've also heard that the DEA may again.
Improve some of those conveniences. So it's possible that our clinic network is now very comfortable for us in terms of.
<unk> positioning is and so.
I think we're well positioned I think that we're going to demonstrate.
A fairly strong.
Back half of the year weighted.
And profitability into Q4, and I think circle is going to deliver.
So do you expect that the business can return to positive EBITDA in Q3, and Q4 and into next year.
Absolutely absolutely we already see it in August .
July was a transition month, but we did see higher revenue.
And August .
Definitely is.
Track for our growth objectives for the balance of the year, we will see positive EBITDA in Q3.
But much higher numbers in Q4, that's sort of what we're looking at.
Great and just one last question. So it looks like I guess 27 of the 30 to 30 clinics in the U S or circle medical.
And I think the balance or the CRH founding clinics sure.
Im guessing that none of them at this point are kind of multi disciplinary where you might bring in services from west for CRH in particular.
And just curious how many of those clinics.
You like to see.
These multidisciplinary clinics similar to what you might have sharing or what you have here in Canada.
Yeah no. Thanks, we actually do have a couple of multidisciplinary clinics. So so we have a couple of sites where circle and CRH are collaborating already which is which is great to see.
And we do expect that we're going to start to add with over the next quarter or two.
And.
Those discussions in terms of what the what does the within person offer look like what does it tackle where was the site those are all starting to kind of roll out now.
In terms of thinking through what the implementation of that would look like but I would say that's very much. So we're sort of setting the table. This year and we'll provide some guidance for 2024, but I think we'll hopefully see some.
Some more momentum.
We've launched while USA into 2024 multi disciplinary.
That's great I appreciate it.
Sure.
Thank you. Your next question is from Jason Zander.
Financial please ask your question.
Thanks for for letting me ask some questions.
Just first of all I'd like to again.
I congratulate you on the Ocean <unk> contract, that's a big win.
I wanted to know I wanted to know are you.
April to talk at this point of boats.
Any bids in the other provinces sort of what would be the expectations of rolling this out.
Uh huh.
In other provinces.
Yeah look.
Fortunately I can't get into specific names, but we do have one other province that we we hope to be contracting with in the not too distant future.
And discussions with other provinces.
We're always.
Occurring.
Going on the other thing I'll mention is that there are.
Further activities and developments ongoing.
On the National scale as we talked about earlier this year, there is increased investments going into <unk>.
A federal funds perspective into Digitization efforts for the country and one of those priorities is E referral for the country and so we are we're also engaging in those efforts and we do believe that they will bear fruit, albeit those work.
<unk> more slowly over time and they could also show up in <unk>.
And manifest.
Through the provinces themselves, but.
It is great to know and see that you referrals is a federal priority as well and being already.
In a great position and really being a national platform already between.
We see Ontario, Nova Scotia, I think we're very well positioned to acquire some additional business there hopefully that's helpful.
No that's very helpful and just one further question.
You talked a lot about the potential upside of Mci.
Stand alone after you purchase the clinics in terms of their secure.
AI applications.
Just wanted to know in the you have a coal option I don't believe in the press release had talked about the <unk>.
Cost you to execute that are you able to divulge that information at this point.
We haven't publicly talked.
Talked about the quantum of the call option I'll, just say that it's not prohibitively expensive for us.
And something that.
If we see the right environment and opportunities, it's something that I think is well within our means and thats.
Yes, I wouldn't be playing up our ability to carry out.
And accomplish it.
Path to control transaction, if that was predictable the expenses, let's just put it that way.
Okay, well that's great. Thank you very much.
Thank you.
There are no further questions at this time I will now hand, the call over back to your host for closing remarks.
Thank you very much everyone for.
Being with us today and.
Hearing about our our development and thank you for the great questions from the analysts again.
Are excited about our growth and momentum lots going on and we look forward to returning in three months and presenting our Q3 financial results until then.
The rest of your summer and be safe. Thank you.
Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect.