Q3 2023 WELL Health Technologies Corp Earnings Call
Welcome.
Well Health Technologies Corporation third quarter of 2023 financial results Conference call.
Ms Jenny.
I'll be your operator for today's call.
At this time.
Participants are in a listen only mode.
We will conduct a question and answer session later in the call, which will be restricted to analysts only.
This conference is being recorded.
I will now turn the call over to Taylor manager Investor Relations. Mr. Baber, you may begin.
Thank you operator, and welcome everyone to Wellhouse fiscal third quarter financial results conference call for the three months ended September 32023.
Joining me on the call today are how much of a Z chairman and CEO and Eva <unk> the company's CFO I.
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.
These forward looking statements involve known and unknown risks uncertainties assumptions and.
And other factors many of which are outside of ball's control and 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 regarding the future.
We do not undertake or accept any obligation or undertaking to release publicly.
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.
I 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 definition set out in todays press release and in our management discussion and analysis.
The company believes that adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations, which the company can use to fund working capital requirements service feature interest and principal debt repayments and fund future growth initiatives.
Adjusted EBITDA should not be constructed as an alternative to net income or loss.
Determined in accordance with <unk>.
And with that let me turn the call over 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 extremely pleased to be with you today and discuss our strong momentum and record breaking quarter in which we achieved record revenue record adjusted EBITDA and record patient visits.
We remain committed to the company's continued focus on tech, enabling health care providers and supporting them is simplifying their work lives modernizing and digitizing.
Their clinical practices and delivering the best health care possible.
During Q3 2023.
Well delivered over 1 million patient visits in the quarter through our physical and virtual clinics and over 1.58 million.
<unk> and Kerr interactions will now services more than 33000 health care providers with our SaaS and technology services in Canada, which is equal to approximately one out of every three health care providers in the country where.
We're extremely passionate about supporting our providers and everyday we focused on supporting them better. This attitude and focus is what has allowed 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.
We're pleased to report that all of our business units are executing very well and we're expecting to have strong performance for the remainder of 2023 and into 2024, we do not foresee any material influences or challenges that would impair our ability to deliver solid results in 2024 as reported to invest.
In and achieve significant growth, while delivering sustained profitability.
For the fourth quarter, we are expecting to achieve record revenue in both our Canadian and U S patient services businesses with continued improvement in our outlook I'm pleased to provide an upgrade.
Our revenue guidance for 2023, which we now expect to be between 755 million to $765 million Canadian.
Just a reminder, our guidance does not include any unannounced acquisitions.
In terms of profitability, we are providing guidance for 2023 annual adjusted EBITDA to increase by figure approaching 10% over 2022 levels.
Our revenue growth continues to outpace our EBITDA growth due to the following two reasons.
One we continue to reinvest any excess cash flows back into the business for growth.
This is most demonstrated in the case of our U S Digital health care businesses Circle, and Whisk, who have had strong top line growth, but who have both gone through a period of heavy reinvestment over the past few quarters.
And to the recent acquisitions of the once Mci one health clinics have and will have a negative impact on our EBITDA profile Q4 performance.
As we conveyed at the time of our acquisition. These clinics were not profitable, but we have initiated our clinic transformation process, where we have had an excellent track record in digitizing and modernizing our acquired clinics and improving their operating.
Profit margins.
This is what we do and we have a proven track record of improving growth and profitability of our acquired assets as such we continue to believe that they will be profitable in 2024, and thus accretive to our results.
Looking forward to next year, I'm really excited to introduce our revenue guidance of achieving <unk>.
More than $900 million in 2024 and revenues.
We provide more detail we will provide more detailed guidance ranges for 2020 for revenue and adjusted EBITDA. When we report our 2023 annual results in March 2024. However, we wanted to provide you with some early indications of our confidence level in 2024.
In the past I've mentioned, our goal to achieving 1 billion in annual revenue within two years with the revenue guidance of $900 million that I provided today, we're clearly within that within reach of that $1 billion milestone likely a little quicker than I had mentioned before keep in mind that our target of achieving over $900 million next year does not incur.
Any unannounced acquisitions, given our current pipeline of compelling acquisition opportunities, we have visibility into potentially achieving $1 billion revenue run rate by the end of 2024.
Before I turn the call over to Eva I'd like to highlight our Canadian clinic business.
Our Canadian business is firmly the largest and most comprehensive provider of tech enabled care in Canada and is generating significant profitability.
In Q3, we achieved $12 3 million and adjusted EBITDA in Canada, an increase of 24% compared to Q3 2022. Furthermore, EBITDA generated in Canada, primarily goes to shareholder EBITDA given the small noncontrolling interests that we have in the Canadian market.
This increase in profitability in our Canadian business is proof that our business model is working as we've indicated before our business in Canada is to tech enabled health care providers. We have the most comprehensive digital platform in the country that covers practice management billing digital patient engagement capabilities data protection and a lot more.
We have two ways in which doctors can interact with our platform one on an Ala carte basis. They can subscribe to whichever services, they like and have them implemented into our patient services business or two they can join one of our physical or virtual clinics, where our technologies and tools are provided on a fully managed service.
We have learned since providing our services is that increasingly doctors don't want to run their own clinics and are seeking us out to become their operating partners as such we have purchased or recruited entire clinics in order to better support doctors that work in such clinics.
Once the new clinic has added to our network. Our team employs our clinic transformation program, which includes extensive use of our own digital practitioner enablement platform and shared services program to modernize and digitize. These clinics, which generally result in improved cost efficiency and operating support for physicians.
Depending on the state of the acquired or absorbed clinics. It can take anywhere from a few weeks to a few months and in some cases can take more than one year.
We believe the Canadian market continues to be an enormous untapped potential for well and very much remains a land grab opportunity while owns and operates the largest network of clinics across the four most populous provinces of Canada, namely, Ontario, Quebec, BC, and Alberta, providing multiple services, including primary.
<unk> diagnostic Allied health specialty care and now our recently announced longevity medical services.
With 168 clinics in 98 facilities in Canada, we are the largest player and we've just.
Just achieved just shy of 1% market share of this large multibillion dollar opportunity.
We believe we can grow our Canadian business to multiples of its current size, which could on a standalone basis XT exceed over $1 billion in business in the future on its own.
As we have indicated before the Canadian market for health care clinics is extremely fragmented with very few large clinic change existing in the country, which have 20 or more clinics.
Hiring smaller clinics can be laborious and difficult work, but we are pleased to report that the number of clinics and physicians that are now seeking well out specifically due to our growing posture of the industry has been tremendous awareness and affinity to our brand continues to grow and due to this reason, we believe that our organic growth in recruitment will significantly grow.
In 2024 with that I would now like to turn the call over to our CFO <unk> <unk>, who will review the financials for the fiscal third.
2023, and then I'll come back and provide further commentary on our business units and outlook.
Yeah.
Thank you Amit I am pleased to report that we had very strong results for the three months ended September 32023.
Overall third quarter results were as follows.
<unk> achieved record quarterly revenue of $204 5 million in Q3, 2023, an increase of 40% as compared to revenue of $145 8 million generated during Q3 of last year.
This growth was driven by acquisitions and organic growth year to date, well has achieved organic growth of 16%.
<unk> achieved record adjusted gross profit of $94 2 million in Q3, 2023, an increase of 21% as compared to adjusted gross profit of $78 2 million in Q3 of last year.
Growth in the Companys adjusted gross profit is attributable to higher revenue in the period.
Adjusted gross margin percentage was 46, 1% in Q3 2023 compared to adjusted gross margin percentage of 53, 6% in Q3 of last year the.
The decline in adjusted gross margin percentage is mainly attributed to the acquisition of businesses with lower gross margin percentage.
While achieved record adjusted EBITDA of $28 2 million in Q3, 2023, an increase of 3% as compared to adjusted EBITDA up $27 5 million in Q3 of last year.
For context last year's results included $4 8 million more EBITDA from our U S digital health subsidiaries Socal medical and wisp.
Prior to our decision to reinvest more of this EBITDA to continue to drive growth in their businesses.
Shareholder EBITDA adjusted EBITDA attributable to well shareholders was $22 9 million in Q3, 2023, an increase of 13% as compared to adjusted EBITDA attributable to well shareholders up $20 2 million in Q3 2022.
Adjusted net income was $12 8 million or <unk> <unk> per share in Q3, 2023 as compared to adjusted net income of $14 8 million or <unk> <unk> per share in Q3 2020.
Shareholders free cash flow was $9 6 million in Q3, 2023, a decrease of 16% as compared to Sherwood of free cash flow of $11 4 million in Q3 of last year.
Well generate a 10% office revenues from truly recurring and subscription revenues and 88% office revenues from his high recurring patient services revenues in Q3 2023. This means that approximately 98% of its revenues are highly predictable.
I will now review also meant to the quarter results Okay.
Canadian patients services business achieved another record quarter with revenue of $57 8 million in Q3, 2023, an increase of 27% as compared to $45 5 million in Q3, 2020, driven by healthy organic growth in our primary care clinics and the acquisition of the <unk>.
Clinics in Alberta.
Well help USA patient services revenue was $130 7 million in Q3, 2023, an increase of 52% as compared to $85 8 million in Q3 2020.
Revenue growth over the past year was due to growth in all three of <unk> USA lines of business silica medical waste and CRH.
So often technology services revenues, well $15 9 million in Q3, 2023, a year over year increase of 10% as compared to $14 5 million in Q3 of last year, and an increase of 20% as compared to $13 3 million in the prior quarter Q2 2023.
The increase in revenue was due to a bounce back in our cybersecurity and data protection business in the third quarter as well as organic growth in our remaining SaaS and services platform business.
Well ended Q3 2023 with a solid balance sheet as at September 30 of 2023, well had cash and cash equivalents of 42 million and restricted cash of $3 million.
Well continues to be in good standing and fully compliance with all covenants related with his two credit lines Jpmorgan in the U S and World Bank in Canada did that from the two credit lines was approximately $293 million and Canadian dollars as of September 32023.
I'm also pleased to report well shareholder leverage ratio reduced from two nine times at the end of Q3 2022 to $2 six times as at Q3 2023, we defined leverage ratio as net bank debt less cash on hand divided by shareholder adjusted EBITDA.
We exclude convertible debentures from this calculation because conventional convertible debentures are not included in our bank covenants over the past year the improvement in <unk> leverage ratio was achieved by an increase in shareholder adjusted EBITDA.
In terms of how share capitalization.
As of November 13, 2023, well have 258.385 million 460, 40 dilutive securities issued in outstanding.
That is my financial update and I'll turn the call back over to Amit.
Thank you Eva I'll now provide some specific outlook on our business units.
First our primary care business during the third quarter Canadian primary care revenue increased by 51% compared to Q3 2022, driven by the acquisition of five Calgary based clinics for Mci, one health and organic growth of 16%, which is much higher than industry averages.
I've already commented extensively on our primary care growth opportunity at the beginning of our remarks, but I'll just reiterate that we believe primary care will maintain strong absolute and organic growth not only through Q4, but all through 2024 and hopefully beyond.
Our outlook for primary care continues to look strong for the fourth quarter and beyond notwithstanding the transformation and retooling work that we've been doing on the acquired Mci clinics in Q4, which will have a temporary negative impact on our P&L.
As we go through the process of digitizing and modernizing these clinics, we expect them to become profitable in 2024.
Last thing I'll say about primary care is that our recruitment pipeline is very strong and perhaps the best we've ever seen it.
We believe this is directly correlated with the challenges doctors are feeling in the marketplace of wells growing brand recognition.
We believe 2024 could be a breakout year for primary care.
Okay.
A few words about my health My Health had an outstanding third quarter with strong year over year growth of 9%, which was all organic and improve profitability. My health revenue had a slight decline in Q3 compared to the prior quarter Q2, 2023 due to normal seasonality as we had anticipated.
In reference to Ontario's Bill 60, Your Health Act, which allows the out of hospital facilities to perform public.
Publicly funded surgeries and diagnostic procedures, including MRI and <unk>, we continue to await the final regulations and call for applications for licensing which experienced some delays.
Although exact timelines are not publicly released we anticipate a call for applications to occur by the end of this year or in early Q1 2020 for my Health Center continues to be highly engaged through the process with the optimism of serving the patients of Ontario, and helping reduce MRI ICT patient wait times the <unk>.
Following calendar year.
Notwithstanding our continued progress on profitable organic growth. We are also ramping up our M&A efforts at my health to find suitable acquisitions to grow the business.
Our corporate discipline, we have not made any acquisitions here in the last couple of years, mainly due to the persistently high multiples, we've been seeing where.
We're starting to see signs of improvement in this area and are eager to report wins in the future.
I will now discuss the outlook for the World Health USA business.
The different lines of business under well help USA include CRH anesthesia CRH of Reagan radar health care providers circle medical and with first.
First CRH and radar steroids is having an outstanding year, so far with Q3 revenues up 73% compared to Q3 of last year anesthesia cases continue to grow and like eight or sales also increased 12, 5% in Q3 compared to the prior quarter.
CRH received a boost in.
And revenues in Q3 from the care plus acquisition, which included the addition of ASC practices and radar, which is the staffing in locum Tenens service, which specializes in anesthesiologists recruitment and placement for its network of customers, which includes provider groups hospital and ASC is across 29 states.
Radar adds significant upside for growth and diversification beyond clinical anesthesia services to include recruitment services, we're very pleased to be welcoming radar health care providers to the wealth family.
We expect continued growth in Q4 for both CRH anesthesia services and radar Q4 is usually the strongest seasonal quarter for CRH.
And now a few words about circle medical.
With less energy being devoted to regulatory issues.
<unk> medical is again poised to resume its growth trajectory circle medical continued to grow its provider network ending the quarter with 341 active medical providers a year over year increase of 48%. This is a significant achievement and one that we know is the key to see more growth and profitability, we're seeing record.
Growth in new patients.
With new patient acquisitions up 30% in Q3 sequentially.
New patient acquisitions were up a further 14% month over month in October alone as these new cohorts mature they will produce additional revenue in Q4 and beyond.
To support this growth plan circle Medical's investing heavily in its technology platform by growing its product and technology team with most hires based on the Montreal office.
Development is currently focused in two areas one patient facing features designed to strengthen the longitudinal primary care relationship, which will drive engagement and clinical outcomes and eventually lifetime value and to technology to help scale operations, especially via automation and artificial intelligence circuit.
Medical has begun using its own AI scribe to document and counters and is working on extending the use of AI to help monitor clinical quality.
Moreover, met circle medicals into early discussions with heal well.
To pilot a program to use AI to identify patients who may benefit from being screened for rare diseases or other medical interventions in.
In September the company hired a new head of growth Catharine, David and Catherines previous roles. She grew a venture back UK company from 20 million pounds to 400 million pounds of annual revenue over five years.
With one month down in Q4, we can already tell that circle medical will likely deliver record revenues and positive EBITDA in Q4.
And now for with I am pleased to report that with reported record revenue in Q3 as the company returned to its focus to growth and profitability.
Last quarter, we discussed how with this retooling some of its key product and distribution partners, which resulted in slower growth and minimal adjusted EBITDA contribution in the first half of the year.
<unk> has been able to successfully balanced growth initiatives along with the launch of an improved E. Commerce enabled marketing site, which also is enhancing supply chain redundancy and partnerships.
Last quarter, we discussed with plans to launch 10, new products before the end of the year and remain on track to hit the school, most notably with launched five new products in Q3, including estradiol, marking the companys entrance into the menopause vertical.
We expect with to report record revenue in Q4 with improved profit profitability.
As the business leans into the holiday season.
In addition, we expect pulling back on some of our marketing spend due to high seasonal cost of advertising, while accelerating marketing spend again in January of 2024, when we have lower seasonal cost of advertising.
And finally, our SaaS and technology services business SaaS.
SaaS and technology.
Business unit had a bounce back in queue.
That bounce back quarter in Q3, as we discussed last quarter, the cyber security and data protection segment is a lumpy business, whose revenues declined in the second quarter as we had expected cyber security revenues can sometimes be impacted by timing of hardware shipments at the end of the quarter.
Revenues improved in Q3 with several countries.
<unk> delivered while the rest of the SaaS and services business continued to perform with steady growth and profitability.
We also recently announced the acquisition of two strategic tuck in cyber security businesses seek into and proactive security. These acquisitions demonstrate well steadfast commitment to safeguarding patient trust and operational integrity.
Has bolstered its cyber security portfolio with these two strategic tuck in acquisitions, bringing onboard seasoned cyber security professionals in the process and strengthening our capability to serve over 190, corporate and government customers across North America.
During Q3, we announced also that Ocean M D signed a $38 $5 million contract with British Columbia Public Health Service authority to provide an array of digital services such as you referrals consult any orders to help further tech enable providers with best in class digital Operability.
Ability tools Ocean Mds already the dominant E referral solution in the province of Ontario in Q2, we now.
Ocean empty had won that Nova Scotia E referral bid and with this we'd NBC, we feel ocean MD has the potential to become the E referral standard across the country.
Thus far our implementation in BC has been proceeding as planned we've received tremendous interest with over 250 doctors signed up to participate before any participant recruiting has even begun.
Doctors of BC has been fully engaged and supportive we've already begun to receive services revenue as our teams are fully engaged with training and planning for launch go lives is expected in the first half of 2024 at which time, we will also start to receive high margin license revenue.
Ocean MD is a key component of our SaaS and technology services group and is emerging as a leader in patient engagement any E. Referral solutions oceans E. Referral software allows primary care providers to send their request the surgeons through the ocean <unk> referral network instead of faxing emailing or mailing.
Which makes up surgical concert referrals easier and reduces wait times for patients Ocean MD has notably proven its ability to reduce wait times by as much as 52 days and a 12% reduction in medically unnecessary mris underlining a direct cost savings impact for provincial health systems.
We're pleased to report that Ocean is now delivering approximately $1 million a referral events per year. This is a real achievement and we're very proud of the ocean team for making the positive impact it is making in the Canadian health care ecosystem.
In Q3 health care providers also continued to embrace well AI voice and its ability to cut down on administration time and increase patient engagement, giving physicians back time in their day.
The adoption metrics of well AI voice are a testament to the value created for physicians well AI voice has seamlessly integrated in over 15000 patient consultations in Q3.
Reclaiming time for clinicians that was previously lost due to administrative tasks, while enriching patient care quality and Q3, we've seen a surge in platform users as well AI voice, our paid user growth of over 500%.
Q3 also marked a successful first rollout to well owned clinics, including well AI voice to 'twenty three clinics in British Columbia, well physicians leverage well AI voice MBS, describing over 2400 patient encounters our continued expansion of well AI voice within our clinical network demonstrates our dedication to.
Leveraging our AI capabilities to benefit well physicians and our broader clinic network.
Overall, our technology platform services group continues to perform with the rollout of AI based tools and achieving record sales in Q3 in both Oscar EMR and our billing RCM products.
I would now like to provide some additional commentary on the launch of <unk> AI.
We recently completed our oversubscribed financing transaction with previously named Mci, One health, resulting in the relaunch of a new senior listed public company called heal well AI, a pure play healthcare AI and data Science technology company focused on preventative care.
We're very pleased with the successful launch of heal well, who has garnered immense interest and raised additional equity financing to strengthen its balance sheet.
Since wells involvement was initially announced the company has gone from a market capitalization of less than $10 billion back in may to more than $100 million on an as converted basis.
<unk> has entered into a strategic alliance agreement with <unk> that enables us to launch well AI decision support to our network of clinics and doctors.
We believe this will become one of the most important services that we offer this is because we believe the experience of being a physician will profoundly change overtime.
Physicians are currently expected to know everything about their patients including patients that they haven't even had long tenured relationships with.
Given that some patients who have chronic or complex care needs may have hundreds or even thousands of pages of clinical notes. It is unrealistic for physicians to be expected to have a dynamic understanding of all their patients charts and detailed requirements. We believe this is where AI technology can be extremely useful and helpful. We expect that over to.
Time decision support will support physicians in the following ways, one help them improve their accuracy of diagnosis, particularly for the thousands of rare and ultra rare diseases, many of which have known successful interventions once identified.
To help physicians search patient records, it's much greater ease as unstructured clinical notes become structured and searchable through the use of artificial intelligence and three allow patients to.
Allow physicians to see more patients as they are able to more effectively and rapidly triage patients, especially such patients have complete health history available within the provider network.
Well AI decision support will be a project that will entail progress over a multi year period, given the enormity of the scope and objectives being sought out we will keep shareholders posted on our progress with this initiative.
Currently on an as converted basis, well owns approximately 17% of heal well.
That's part of the investment and strategic Alliance two members from well were appointed to heal well its board of directors and subject to satisfaction of certain conditions, well will also hold an option to acquire up to 30 million class, a and b shares and heal well over the next couple of years, assuming these shares are acquired wells economic ownership.
<unk> would be approximately 40% and its voting ownership would be well above 50%. This means that while we have an opportunity in the future to acquire control of heal well in the event of Lex to acquire the multi voting shares. It is optioned out subject to the terms and conditions of the various agreements covenants at rates.
Given the strong alignment well as spending time and resources to support <unk> growth pattern, which is compelling.
In summary, we're very pleased with our financial performance, thus far in 2023 and look forward to delivering strong results again in 2024 hour up outlook remains positive, hence I am confident and upgrading our annual guidance again, we have many tailwind driving growth in the business and we have a committed and disciplined team.
Sure we can execute on our objectives.
Finally, I'd like to thank you all for joining us on this call today and thank our shareholders and investors for their continued support the capital markets have been very supportive of our vision and have provided us with the funding needed to pursue our goals.
And thus we are very grateful to the capital markets for that I would also like to think well senior management team and all of our employees and contractors for their tremendous effort in particular I'd like to thank our team of health care practitioners and other frontline workers, who provide unbelievable patient care they remind us Ed.
Every day why we are here and why we are here to support them.
Thank you and with that we are now open to take some questions. Operator would you. Please facilitation.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone.
You will hear three telecom technology northwest.
<unk> will be taken in the order received.
Should you wish to cancel your request. Please press the star followed by the tail.
Using a speaker phone please lift the handset before pressing any case once again that is star one should you wish to ask a question.
Your first question is from Chris <unk> from eight capital. Please ask your question.
Yes.
Hi, good afternoon, and thanks for taking my questions.
Start with the U S telehealth segments.
By my calculation grew 22% in the quarter.
It looks like returning to growth as you guys probably.
On the back half of the year after some physical expansions in other restaurant restriction, but operational advancements that means your west.
So my question would be.
Now I'd better competitive dynamics in the U S and Natal side, what else could you share on both circle and west.
Into Q4, and as you think about 2020 for distributions.
Hi, Christian Thanks for your for your message Youre right Theres, some theres definitely a lot going on in the U S segment and this is one of the reasons why we haven't taken a generalist approach to the market there we've been very specific.
With this obviously.
A real leader in <unk>.
Women's health, it and particularly in reproductive and sexual health and they continue to demonstrate.
They're connecting with their audience and their brand is growing and so they've become a real go to <unk>.
Right.
And place for weather.
Whether it's.
Products and services to support Utis are birth control or herpes breakouts or whatever the case may be.
That momentum continues to grow as soon as we launch more products and services I think we're getting deeper into that niche and becoming more and more trusted.
Similarly <unk>.
While while while circle medical has a longitudinal focus in and which helps drive that LTV growth. It is very much.
A focus on acquiring patients that come in through specific niche areas. So they're not out there trying to acquire that generic customer theyre out there identifying.
And.
Essentially encouraging and demonstrating significant competency in niche areas like depression anxiety ADHD sleep.
Remote affirming therapy.
Oh.
Definitely areas where.
That are topical for people, where they may not be as confident in terms of going through their own a primary care provider.
What's quite unique though about circles that once they serve patients with these topical needs they're able to then.
Convert.
A significant portion of the.
Number moves around a little bit, but it's essentially roughly around 30% into being a longer term patients that come on board their longitudinal care platform. So that's something that we think is very positive and I think if it weren't for the for the go to market strategy of identifying these other.
On ramps it would be difficult to compete and this is why they're very successfully competing against all the different competitors out there, which you know are numerous.
Okay. That's helpful color I'll ask a second question.
Non wells consolidation opportunity.
A lot of competing priorities for capital right now across coffee AI program clinics, maybe geographically as well.
How do you prioritize the way you see sort of internal investments across your segments right now.
Will you be looking out for M&A to come from Ohio.
Yeah, I mean look.
In one word.
With great discipline.
And truly we prioritize so we centralized capital allocation function. So we are very careful in putting capital to <unk>.
Laces, where where we see the greatest opportunity.
Today's world, we see a lot of that in primary care.
We're just seeing tremendous up we continue to see tremendous opportunities to pick up.
Clinics.
Excellent multiples and in many cases are just absorbing them as.
As I mentioned in our script as our brand grows and as that frustration kicks in.
With all the irritants to out there for primary care providers that are running their own their own show.
Their own practices, we're seeing more and more of those physicians that want a professional partners to help them under clinic, and so often they're coming to us and asking us to get involved and we're not even taking all of those opportunities frankly, you know because we don't want to take on losses. So we we are.
We are still being quite selective, but but just seeing enormous opportunity and I think part of what's really resonating with physicians is they.
They can see the authenticity of our company we are not just helping them run their practice. We are also using our own technology. We are the biggest customers of our technology platform and are using that to wrap around them and really deliver the best care possible. So I would say we're seeing.
Great great opportunities there.
And in the U S. I think the CRH team continues to see great opportunities to acquire from time to time as well although we.
With <unk> plus.
Radar, we now have.
A more diversified base of revenues and more opportunities in terms of how we how we grow that business. So we continue to be very opportunistic down there as well, but but just given given our higher debt service costs as a result of inflation and higher interest rates were very careful as you can see we paid down.
Our leverage ratio. So we understand the environment that we're in we're going to continue to be very careful, but we're going to be opportunistic.
Great Congrats on another strong quarter, Amit and thanks for taking my questions. Thank you Christian.
Thank you. Your next question is from Doug Taylor from Canaccord. Please ask your question.
Yes. Thank you.
I will see that the emphasis on building market share more.
More aggressively as having a strong impact on your top line momentum.
Like to talk through the profitability guidance, which is now I think a little bit more qualitative described as solid and sustained I just want to make sure that we all understand.
What that means is the prior 10% EBITDA growth guidance for this year still a relevant objective.
Yes. It is I think in the script I mentioned that we're we're still are very much looking to deliver.
A figure that that's approaching 10% and the reason for that is really just the mci clinics in Q4, we're expecting as you can imagine previously we didn't have those clinics closing in Q4. So so so we do expect there to be some.
Some retooling and some transformation that occurs there which will create some short term.
Impairments profitability, but certainly not anything that would sort of sustained longer than that and this is why we're expecting those clinics to contribute.
Positively to profitability in an accretive fashion in 2024.
And so as a follow on question to that and thank you for that you've been good enough to provide us with some top line.
Guidance, our visibility into next year.
I Wonder if I mean, even qualitatively.
Help us define what success would look like for you in terms of profitability next year, given the many moving pieces related to both the integration that you've spoken to but also reinvestment cycles.
Would sustain margin on an absolute or percentage basis be the objective.
Yeah, I mean look I think I've said this on prior calls to them very much.
Believes that we're going to take a very similar approach to this approach that we took this past year, we think that.
That's going to involve a certain level of profitability that we're going to deliver so so.
We're intent on delivering revenue growth, but also sustained profit growth.
In March once were through Q4, and we've got our full year, we'll be able to be in a better place to provide that specificity, but I gather it would be very similar to the approach that we put this past year.
Hopefully that gives you a lot of perspective.
That helps thanks ill pass the line.
Thank you. Your next question is from David Cohen from TD Securities. Please ask your question.
Good morning.
Thanks for the color on the M&A.
Pipelines.
One question I had on that know us.
It seems like the focus is on clinics.
But would you look at something Thats outside of kind of where Youre currently operating or is the focus primarily on adding more size and scale on on what you currently have a footprint.
Okay.
Yes, Thanks, David.
I think that.
What we're seeing in Canada, we think is a momentous and frankly anomalous like that.
Fact that we don't have.
Significant private equity activity here in Canada, where we have to compete for these assets is pretty amazing in the U S. You just go to.
Just over over over the border and there is tremendous.
Activity.
And competition for these types of assets. So we don't think that's going to last for long and this is why we're taking such a such an aggressive approach towards it we.
Fundamentally believes that people are undervaluing provider and patient relationships and and we're okay with that because we want to undervalue them.
I think we we see opportunities to grow not only in primary care, but also specialized care and diagnostics I think we want to fill in some of the white space that we see geographically and so there's a lot here to keep us busy.
We also feel also quite well prepared to support the technology evolution of the business.
And so there's not much that we need to do to bolster the platform on the tech side remember now we have significant development teams. So we can actually develop a lot because organically as well I will tell you that as more and more of these branded well clinics show up I think it's also going to be very important for us to establish best in <unk>.
Class digital front door.
Applications that allow consumers to interact with the with the well ecosystem. So that's likely going to be an area of focus for us next year as well.
Which I'm very excited about.
Hopefully that's helpful.
That does thanks, Thanks, Amit.
One last question just on circle in West.
<unk> had a nice start.
Rebound this quarter are expected to slow down last quarter, how should we look at the growth trajectory there as we look at not just this quarter, but <unk>.
Sure.
Yes, I think I think we're we believe that both both.
Both circle and Westbrook Gonna have strong.
Years continued in terms of their growth but.
We're going to start to see EBITDA creep up a little bit as well.
Probably more in absolute terms as opposed to.
Percentage terms, even though.
Invariably Bose, but but I would say on an absolute basis.
It start going to start to make a bit of an impact in terms of our ability to deliver.
Higher quantum on a total basis, but.
Yes generally.
Given the retooling and the investments that we made this year, we feel quite confident that.
Both will be.
Either approaching or exceeding $100 million in revenue and essentially within a year to two years, we think both will solidly be $100 million businesses for us and continuing to exhibit double digit growth.
Interactions.
Great. Thank you.
Okay.
Thank you. Your next question is from Allen Klee from Maxim Group. Please ask your question.
Yes, hi.
Can you talk about the steps you're taking to improve the profitability of.
The acquisitions made such as Mci, one health and also <unk>.
<unk> plus and radar.
Should we be thinking that.
Like for Mci, One health you can get the margins to where they are for for your primary clinics overall errors and.
Anyway those are my thoughts thank you.
Thanks Alan.
We take a lot of different steps on.
On our primary care <unk>.
Formation and retooling efforts.
So we would we would focus heavily on.
Digitally.
Optimizing and enhancing the business' sales many of these clinics.
Throw people at the problem, so they're there, they're there and they're not even a functioning very well very well as a result of not having mature workflows and so a lot of times, what we're what we'll start with is adding things like online patient booking or.
We're improving.
Actual workflow within the clinics and what we find then is that we can actually reduce the number of people or.
Or have them focus on other elements that improve care delivery.
Our billable services and that and that's a big part of what we do I know there's not much you can do with the rents.
So that's one of the big things that we do prior to an acquisition is make sure that we can live with those structural costs.
There's more.
Non structured cost.
That can be influenced quickly that that we do a lot of assessment work in advance and so.
We're not trying to figure out what to do once once we're into our integration plan, we've already figured that out prior to the acquisition. We're just Gogo go really against those opportunities now with something like Mci is a much bigger network as the third largest network in the country. So it's not something that will happen overnight and theres a lot of doctors.
But we feel very confident that we'll be able to.
Affects some of those changes fairly quickly and I think we will have our sort of first order of.
Profitability improvements probably in the first several weeks and then a bunch more that will kick in over the next several months.
And again this is things like you know a lot of in a lot of these clinics. There's a lot of people just frontline people, just sitting there, making and collecting phone cost because they don't have proper digital booking systems.
Things of that nature that we focus on so I'll just call. It kind of the first order of optimization and then and then kind of have a playbook about what we focus on second third and fourth.
Faster, if we're radar and careplus.
I think that business.
Got it.
We feel that it is fairly optimized.
In terms of its overhead.
White impressed with what they were doing already but we found that there was a lot of synergies with our business and of course, we have a significant anesthesia.
Care delivery business and so the ability to have a platform that can supplement our supply demand care deliveries, it's quite momentous. So so those synergies will take hold over the next several quarters as.
As well they are growing very fast so we think that a lot of.
Sort of sort of incremental margin is going to show up as a result of that continued momentum.
Health care is all about providers.
This is absolutely in line with our focus and so this is why radar makes so much sense.
Not just tech, enabling health care providers. We're also the source of delivering care providers to hospital systems in an ASC.
Which again is highly synergistic with our own business.
Okay.
Thank you again.
Thank you. Your next question is from Rob Goff from.
Please ask your question.
Thank you very much.
You mentioned the consolidation of the Canadian market.
Lesser extent in the U S marketplace.
My question would be whether you are looking at potentially pushing out.
Affiliate model.
Virtual consolidation of those markets and whether or not what you have seen with circle being both physical and virtual may enter into that picture.
Yeah, no. It's a good question Rob Thank you.
I think I think in a way we regard our digital business as our affiliate business because.
We're already touching so many clinics and providers and I think it's our unfair advantage in and getting the creating this network and despising. This brand equity that we have with the Canadian market imagine, having a business that already generates significant positive EBITDA for delivering best in class tools.
Providers and roughly a third of the country uses it a.
Third of the country's providers.
Probably two quarters ago, I was talking about how a quarter of the country's providers. So you could see that number is sort of.
Kind of kind of pushing up.
The one of the things that we've thought about in the past is there is there the idea of an affiliate well clinic where.
We don't own and operated but our tools are there. So we start to we start to provide kind of a powered by brand those are discussions and ideas that we continue to think about one of the one of the areas where I think.
We're working on that could activate that is let's say you're a patient.
And you can go to any well EMR location to retrieve your chart.
That starts to look more like not just an EMR network, where we're providing service, but but but.
To be able to deliver value for patients and there that could be that could be fertile ground for some kind of an affiliate approach. So those are the types of things, we're thinking about as it relates to circle medical in width.
I think what's unique about those two businesses is that all of their growth is inorganic and so they have a specific playbook.
Think.
Specifically.
It does rely on.
Our hybrid strategy, meaning that they don't want to just be telemedicine players they very much want to.
Complement to telemedicine with best in class in Clinic services, Obviously circle is a lot further ahead in that in that they've established a significant network.
Part of getting through the public health emergency.
And with this is very much considering its options in terms of how it shows up at retail or how it shows up in other primary care offices, and well USA very much wants to help facilitate that so that's the sort of to be continued story I think.
[laughter].
Okay. Thank you that's great Intel.
Okay.
Your next question is from Scott <unk> from CIBC. Please ask your question.
Hi, good afternoon.
Wanted to ask on the cyber security Tuck ins.
Could you give us an idea now that after these two deals on a run rate basis like what percentage of the SaaS and technology business. You think you would expect cyber security and make up.
That's a good question Scott.
I don't have that off the top of my head because I think the number isn't very material, but EBIT do you have that off the top of your head as we.
We can always get better.
Yeah, we can always get back to it but no.
When you look at the Q.
Yes, it's about.
Small percentage now.
10% kind of thing so and then we project out lately, how much said earlier, where we're seeing that on the spy cybersecurity business will continue to have steady growth into 2024.
Okay. Thanks, if it's not material I won't I won't ask anything else on that maybe.
Maybe I'll ask.
Again, maybe coming back to the profitability side of things.
The CRH.
The CRH are well help USA in the anesthesia business. The margins are impacted by these recent deals like do you have an idea looking forward where the consolidated.
Anesthesia services business can land on a margin perspective, given they were quite quite strong before these deals.
Yes, it's a good question I mean look I think.
I think the margins have been.
The actual.
Payer rates have been very stable.
The margin differences that Youre seeing right now are mainly related to the mix of radar.
<unk>.
Notwithstanding the fact that the consolidated blended margins are down we think it's a much healthier business because.
We felt that.
We were a little bit overweight.
On anesthesia and well USA and now we're.
We're starting to see a more a more diverse revenue stream and also.
The locum tenants business really adds value to anesthesia, but it's also.
Something something that that is durable in its own.
And then can standards on its own two feet. So.
We're not concerned about the margins in that business that the.
The case rates and pay rates are very stable. We've now gone through the no surprises at all of the different volatility that came from that.
Clearly some of the.
EBITDA margin.
<unk> also did result from things like inflation, and whatnot and our increased costs, but I think.
CRH has done a great job weathering that so we expect very steady performance moving forward.
Okay. That's helpful context, thank you.
Thank you. Your next question is from Jason <unk> from Pi financial Please ask your question.
Hi, and thanks for taking my question.
I got it here.
Update on the last caller and I heard your cyber security and the answers so I hope that I'm not repeating a question here, but just.
Just wanted to get just your general overview on that market I know you made two tuck in acquisitions.
Stated that you're protecting over 10000 servers, and 190 corporate and government entities.
And also just your aspiration to make us a $100 million in your business just wanted to get your thoughts on what you believe your the total addressable market is for this.
For cyber security in your in your business and how quickly you can get to the $100 million level.
Yeah. Thanks, Thanks, Jason.
I really loved the cyber security business.
I really want to continue to invest in it because I think those investments pay dividends in two ways. You know first of all I think it's a great growth area.
As more and more industries and more and more data is generated and goes online theres going to be.
More more bad behavior that needs to be curtailed.
But then also as we invest in this technology. We can also help keep well safe well has an enormous data footprint.
Tens of millions of lives are.
And the data associated with those lives sit in our EMR and so I'm very proud of the work that we've done not just going out and protecting.
This data, but being proactive and really and really wanting to be profoundly involved in cyber security and a thought leadership level and wanting to champion the cause for the rest of the industry.
Look I don't I don't think there is an industry that.
That has more that to generate some more data I think there is.
This recent.
No.
Thought leadership, that's been published on this we can share that if you're interested but.
Health care generates 30% of all data in all sectors.
And by by the year 2025, I believe that figure will be closer to 36%.
So it's just mind boggling, how much data health care is generating and the more that happens the more we will need to protect it and so the comment in our press release about the $100 million.
It was more aspirational about where we think we're taking this business. It wasn't kind of a near term goal, we're still pretty far away from it but it really I think framed.
It was important for us to say this because it framed for us and how we think about this business internally, we wanted to frame that.
Externally that we're not just doing this because we want to protect data. We really think that this is going to be a very significant business and much in the same way that well is the largest consumer of its technology platform for things like practice management and other things we are really demonstrating that for cyber security.
And and and and and and look we don't like to be involved in any businesses, where we're not going to build a $100 million business at least.
We would rather just not be in the business.
So I think I think that kind of commitments and that kind of mckinsey mindset. If you will of wanting to be a top shelf provider in any market that we participate in is important.
Behavioral kind of context for well consider the fact that we have great Tech for example in the United States, but we don't sell it on an Ala Carte basis, why we don't sell it because we don't want to be $56 seven competitor.
We sell it in Canada, because we know that in many categories were number one and in some where two or three so.
That just gives you some more perspective culturally of how we look at this but.
We're very much gunning for.
Our leadership position in data protection in Canada, with our cyber security business unit, and we think that that has a significant nine figure potential and revenue.
That's great color. Thank you.
There are no further questions at this time. Please proceed.
Well. Thank you very much everyone for joining this call. Thank you to the analysts for for your great questions and for continuing to help us.
Tell the <unk> story.
And we look forward to visiting with you again.
2024, if we don't speak to before that hope you have a wonderful holiday season, and we look forward to engaging with you soon all the best.
Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect.