Q3 2024 WELL Health Technologies Corp Earnings Call
Thank you.
Speaker Change: Welcome to the Wealth, Health, Technologies Corp. 3rd Quarter 2024 Financial Results Conference Call.
Speaker Change: My name is Ina, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session later in the call, which will be restricted to analysts only. Please note this conference is being recorded. I'll now turn the call over to Tyler Baba, Manager, Investor Relations. Mr. Baba, you may begin.
Tyler Baba: Thank you, Operator, and welcome everyone to WellHealth's fiscal third quarter financial results conference call for the three months ended September 30th, 2024. Joining me on the call today are Hamed Shahbazi, Chairman and CEO, and Eva Fong, the company's CFO. I trust that everyone has received a copy of our financial results press release that was issued earlier today.
Speaker Change: 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 four looking statements involve known and unknown risks, uncertainties, assumptions, and other factors.
Many of which are outside of WELL's control that may cause the actual results, performance or achievements of WELL to differ materially from the anticipated results, performance or achievements implied by such poor looking statements.
Speaker Change: These factors are further outlined in today's press release and in our management discussion and analysis.
Speaker Change: We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations.
Speaker Change: or any change in events, conditions, assumptions, or circumstances on which any such statement is based, except if it is required by law.
Speaker Change: We may use terms such as Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, Adjusted Shareholder EBITDA, Adjusted Net Income, and Adjusted Free Cash Flow on this conference call, all of which are non-GAAP and non-IFRS measures.
For more information on how we define these terms, please refer to the definitions set out in today's 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, from which the company can use to fund working capital requirements, service future interest and principal debt repayment, and fund future growth initiatives.
Speaker Change: suggested EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS. And with that, let me turn the call over to Mr. Hamed Shahbazi, Chairman and CEO.
Hamed Shahbazi: Thank you, Tyler, and good day, everyone. We appreciate everyone for joining us today and discussing our Q3 2024 financial results. The third quarter of 2024 was one of the best quarters in the history of the company by just about every objective and important metric.
Hamed Shahbazi: well-delivered record quarterly performances for revenue, adjusted EBITDA, free cash flow, patient visits, and organic growth.
Hamed Shahbazi: We're also pleased to report that we surpassed $1 billion in annual annualized revenue run rate, one quarter ahead of our previously stated plan.
Hamed Shahbazi: Just to put this in perspective, five years ago in the same quarter, we reported $8.189 million in quarterly revenue, which reflects an annualized
revenue run rate at that time of $32.8 million. Our current run rate represents a 30-fold increase over five years.
Also in the same quarter five years ago, we reported an annualized adjusted EBITDA loss of approximately $2 million, while this quarter our results reflected more than $130 million in annualized positive adjusted EBITDA.
Hamed Shahbazi: These record results were driven by robust revenue growth of 35% in our Canadian patient services business and 23% overall organic growth which would have been 18.1% without Canadian clinic absorptions.
Hamed Shahbazi: Both our U.S. and Canadian businesses grew extremely well, with the U.S. business growing at 25% and the Canadian business growing at 22% organically. If one were to strip out absorptions as part of the Canadian business organic growth, the result would have been 7.4%.
Hamed Shahbazi: well-delivered $32.7 million in adjusted EBITDA, which I noted earlier was our best-ever performance. This reflected 16% year-over-year growth and 6% sequential quarter-over-quarter growth.
Hamed Shahbazi: Our growth rate of 16% in adjusted ibida was twice as much as the adjusted ibida growth of 8% that we experienced in full year 2023.
Hamed Shahbazi: In addition, Wells adjusted free cash flow to shareholders increased by 69% in Q3 compared to Q3 of last year.
Hamed Shahbazi: and 85% quarter-over-quarter as compared to Q2 2024. The free cash flow figure of 6.5 cents per share was the highest ever quarterly performance we've ever delivered on free cash flow, which was mainly driven by our improved EBITDA performance.
Hamed Shahbazi: We also paid down a significant amount of debt during the quarter and improved our leverage ratio to approximately 2.5 as compared to 2.67 in the prior quarter of Q2 2024.
Hamed Shahbazi: As a reminder, this is based on net coveted debt to shareholder EBITDA. If you incorporate our convertible notes, which are termed out for another couple years, our leverage ratio ended up at 3.26 for the quarter.
Hamed Shahbazi: Overall, we're pleased to report that all our business units are performing exceptionally well, and we anticipate closing out 2024 with continued strong execution across the board. Thus far, we've had an intense focus on enhanced profitability, capital efficiency, and organic growth.
Hamed Shahbazi: Let's move to the next slide, to operational highlights. As you're all aware, the centrifugal force that drives well is our healthcare providers, and we're committed to serving and supporting them.
Hamed Shahbazi: At the end of Q3 2024, well, that work included 4,000 providers and clinicians delivering care across our physical and virtual clinics.
Hamed Shahbazi: Of that number, I'm proud to announce that we now have almost 2,500 providers, which includes doctors and other care staff, serving patients within our well-owned clinics in Canada, which includes approximately 1,000 physicians, which is just over 1% of all the physicians practicing in the country.
Hamed Shahbazi: In addition, there are more than 38,000 providers benefiting from our staff and technology services, most of which are physicians.
Hamed Shahbazi: We estimate that well over one-third of all physicians in Canada touch our digital platform in some way.
Hamed Shahbazi: As we enhance our digital offerings and provide leading AI-inspired products and services, we can see the increasing importance, relevance, and role that our company is playing in the country's healthcare ecosystem, and we're determined to make a positive impact.
Hamed Shahbazi: well achieved a record 1.5 million patient visits in Q3 2024 an increase of 41% as compared to the previous year representing 5.9 million patient visits on an annualized run rate basis
Hamed Shahbazi: Patient visits had 31% organic growth. Patient visits were comprised of 798,000 patient visits in Canada and 682,000 patient visits in the U.S.
Hamed Shahbazi: Canadian patient services visits increased 46% while U.S. patient visits increased 35% on a year-over-year basis.
Hamed Shahbazi: On an organic basis, Canadian patient visits grew by 26%, including absorptions, and 6% without absorptions, while the U.S. figure was all attributable to organic growth without any absorption volume.
Hamed Shahbazi: Total care interactions, which is defined as total patient visits plus technology interactions plus biller provided hours, billed provider hours, were 2.2 million in Q3, which was a 41% increase compared to Q3 last year and represented 35% growth.
As far as our annual guidance
Hamed Shahbazi: We are very pleased to increase our 2024 annual revenue guidance to between $985 million to $995 million. This increase in guidance reflects recent clinic acquisitions and healthy organic growth. This revenue guidance does not include any unannounced acquisitions.
Hamed Shahbazi: We are maintaining our annual adjusted EBITDA guidance, which is expected to be in the upper half.
Hamed Shahbazi: 125 to 130 million. We increased our annual revenue guidance but maintained our adjusted EBITDA guidance because we added three primary care clinics in Q3 which contributed to revenue but had marginal impact to EBITDA.
Hamed Shahbazi: Plus, the negative impact of hurricanes to our CRH business, in which otherwise we would have likely raised as well.
Hamed Shahbazi: Our annual guidance for adjusted free cash flow available to shareholders is expected to be approximately $55 million in 2024.
Hamed Shahbazi: due to our strong cash flow this year and as we enter into a lower interest rate environment we are currently evaluating our use of cash in these last couple months of the year.
Hamed Shahbazi: Hence, we may choose to increase our capital expenditures in Q4 with higher capitalized development costs related to our AI product development and additional capitalized equipment costs to support our clinic transformation efforts.
Hamed Shahbazi: In addition, cash flows in Q4 could also be impacted by the timing of some of our tax payments. Notwithstanding, we're still expecting this to be our best.
[inaudible]
C U L E V S E
Music Music Music Music Music Music Music Music
Speaker Change: the largest number of signed LOIs and definitive agreements in the company's history, two, our strategic review processes for Wisdom Circle, and three, a potential spin-out of our provider solutions business unit.
Speaker Change: and many more. Thank you for watching. I hope you enjoyed the video. If you did, please give it a thumbs up and subscribe to my channel. I'll see you in the next video.
Next slide, I first.
like to really just discuss the
opportunity to consolidate in the health care market.
Speaker Change: Well is uniquely positioned in the fragmented healthcare industry, leveraging our scale, technology platform, and deep industry expertise to tap into market opportunities that are ripe for growth.
Speaker Change: The Canadian healthcare market, particularly in physician spending, represents a significant opportunity. Of the $40 billion in physician spending across Canada, WELL currently has approximately $400 million worth of market share in its Canadian business.
Hamed Shahbazi: This not only includes our clinical revenues, but also our revenues attributable to services that we are providing to providers that are being paid for by providers themselves as they get paid by the single-payer system.
Hamed Shahbazi: This represents a fraction of what's possible, underscoring the immense potential for growth and the opportunity we're targeting. Our long-term goal is to grow our business to $4 billion in revenue, which is approximately 10x our current business.
Hamed Shahbazi: It's important to note that though this annual spend is growing, so once we hit $4 billion, we expect that this will happen within 10 years, we will still only represent about 5% market share in the physician-paid market.
Hamed Shahbazi: If one were to include the recently announced acquisitions of Jack Nathan Health Clinics, we would own and operate almost 200 clinics across Canada.
Hamed Shahbazi: This is a small number when compared to the total number of health care clinics across Canada of over 20,000.
Hamed Shahbazi: We see this fragmented landscape primed for consolidation. This opens up new possibilities for well to expand our footprint and strengthen our market presence by bringing efficiencies and innovation to the industry.
Hamed Shahbazi: Well, it's the undisputed market share leader and it's larger than five times
and the next five competitors combined.
We're seeing limited competition for the...
Hamed Shahbazi: from a number of companies, including CloudMD, MCI One Health, Joppa Drug Mart, and others. We've succeeded where others have struggled, mainly because of our scale, our expertise, and our proprietary technology solutions.
Hamed Shahbazi: We know how to digitize and optimize these acquired clinics and how to make these clinics operate efficiently. Additionally, the capital required to acquire these primary clinics in Canada is very low currently, especially under our absorption model.
Hamed Shahbazi: Finally, we've also introduced a new affiliate model for Canadian clinics, which is a high margin opportunity for well. I will discuss this affiliate model later on in our presentation.
If you can go to the next slide.
Hamed Shahbazi: As you can see from these charts, the historical performance of our Canadian patient services business has been exceptionally strong.
Hamed Shahbazi: This year, we will handily beat our guidance of over $300 million in Canadian clinic revenue. Over the past four years, our Canadian clinics business has had a 47% CAGR.
Hamed Shahbazi: Similarly, the adjusted EBITDA attributable to our Canadian clinic business has grown at a category of 42% and will start to approach the $40 million EBITDA mark on a stand-alone basis.
Hamed Shahbazi: Our Canadian clinics have grown to 185 at the end of Q3 compared to 128 in Q1 2022, but will likely substantially increase as we aim to complete many of the deals in our M&A pipeline over the next two to three months.
Hamed Shahbazi: A critical component of our capital allocation strategy is our Canadian clinic absorption model.
Hamed Shahbazi: The clinic absorption model is a very unique and highly efficient growth strategy for well as it's really mostly an extension of our own organic recruitment efforts.
Hamed Shahbazi: This strategy came about as our recruiters would contact physicians and have them come over to the well network.
Hamed Shahbazi: We started to hear about entire clinics wanting to come on board and have WELL take over the lease of their clinic and provide operational management, such that doctors could focus on providing care.
Hamed Shahbazi: There is very little or no capital cost required in most cases, which is why we include this model in our overall organic growth figures.
Hamed Shahbazi: This model is gaining momentum as doctors across Canada are seeking us out to join the Well Network and take over the operations of their clinics.
Hamed Shahbazi: We are attracting these doctors and their entire clinics because of our national footprint, strong brand recognition, and our valuable tech stack of software, tools, and services.
Hamed Shahbazi: We consider a clinic to be under our absorption model if we are acquiring clinics for less than 0.02 times revenue.
Hamed Shahbazi: compared to our regular M&A program where we may pay up to 0.5 times revenue or in the range of 3 to 5 times EBITDA.
Hamed Shahbazi: Since 2023, we have absorbed a total of 37 clinics representing $46 million in revenue with approximately $600,000.
Hamed Shahbazi: These metrics represent a phenomenal consolidation opportunity. The 37 clinics are now operating on an approximately 4% adjusted EBITDA margin, and we have confidence that all of them will eventually be over 10% operating margins.
Hamed Shahbazi: We have a significant long-term pipeline of absorption opportunities. Generally speaking, we aim to improve the operating margins of these clinics by at least 1,000 basis points within one to two years.
Hamed Shahbazi: Wells Clinic Business continues to deliver a solid pre-tax unlevered return on invested capital, or ROIC, of 14%. This strong pre-tax unlevered ROIC reflects Wells' ability to efficiently generate value from its investments in healthcare services. A 14% pre-tax unlevered ROIC indicates that Wells is consistently creating returns well above its cost of capital, demonstrating the company's disciplined approach to capital allocation and operational execution.
Hamed Shahbazi: are historical heroic in our primary care network is even better, achieving stickers of approximately 24%.
Hamed Shahbazi: demonstrating our ability to consistently create value. The high heroic returns in primary care are reflective of the lower cost to acquire clinics across Canada and our ability to successfully generate cash flows from these clinics post-acquisition.
Hamed Shahbazi: Note that in the past, our costs to acquire were higher, and it would take us longer to transform clinics. As time passes, this figure should improve, given that our costs have reduced and our ability to execute has improved.
Hamed Shahbazi: The WellHealth Diagnostic Network has achieved a historic growth of 11%.
Hamed Shahbazi: Generally, ROIC improvements happen after improving economics through tuck-in acquisitions, which we just started and completed our first tuck-in acquisition under my help earlier this fall with the acquisition of Alberta-based FeeHelp.
Hamed Shahbazi: Looking forward we expect our primary care heroic to continue to rise over time driven by high return tuck-in acquisitions, organic growth, and clinic transformation efforts using its latest generation of AI enabled technology tools.
Hamed Shahbazi: Primary care heroic contains to benefit from the absorption model which has an extremely high heroic. We also expect the well health diagnostic heroic to improve as we do more acquisitions.
Hamed Shahbazi: Our current pipeline of Canadian opportunities is robust and very active. In total, across the entire organization, we have 17 LOIs and deals pending close, including 11 clinic Canadian LOIs.
Hamed Shahbazi: representing, altogether representing over 100 million dollars in annual revenue which would not be diluted to current operating margins on a total basis.
The 11 Canadian clinics signed otherwise represent 20 clinics.
Hamed Shahbazi: and approximately $41 million in annual revenue. In addition, we have more than 30 clinics in pre-LOI review right now. We continue to seek more absorption clinics. We believe this is directly correlated with the challenges doctors are feeling in the marketplace and Wells Growing Brand.
Hamed Shahbazi: And now to talk a little bit about clinic transformation. When we acquire or absorb a primary care clinic, they're typically operating at break-even from 1% to 3% EBITDA margins or even slightly negative EBITDA margins.
Hamed Shahbazi: Through the clinic transformation process, we implement several technology solutions and processes, including online patient booking, waiting room automation, workflow optimization, accounting shared services,
Hamed Shahbazi: virtual care, billing improvements, as well as our AI suite, which is currently unmet by any other market participants.
We wanted to update shareholders on our 2023 cohort.
Hamed Shahbazi: of clinic absorptions and acquisitions, which included the large Manitoba clinic and the MCI Ontario clinics. You may remember these transactions from last year. These clinics were operating at negative EBITDA margins and caused significant downward pressure on our EBITDA margin in 2023. The entire cohort of 2023 clinics was operating at an
Hamed Shahbazi: average adjusted EBITDA margin of negative 1.6% of the time to close.
Hamed Shahbazi: This cohort is now operating at approximately 6.6% adjusted EBITDA margins, an increase of 820 basis points.
Hamed Shahbazi: This includes a revenue bump from a provincial retro billing payment. Without this bump, the adjusted EBITDA margins would have been 5.7% attributable to just the clinic transformation efforts.
Hamed Shahbazi: As noted before, our goal is to improve profitability in the acquired or absorbed clinics such that the operating margins can be improved by at least 1,000 basis points within one to two years.
Hamed Shahbazi: and ultimately have them all operating at over 10% operating margins and closer to 20% for specialized care clinics.
Hamed Shahbazi: With additional efforts of the Clinic Transformation Team, we expect adjusted EBITDA margins of this cohort to continue to increase over the next year. In addition, I'm pleased to announce that we recently signed an agreement with a large Canadian healthcare REIT who has agreed to have one of their managed clinics join WELL as an absorption opportunity.
Hamed Shahbazi: Now I'd like to talk a little bit about our proposed acquisition of Jack Nathan Health.
Earlier this week we announced
Hamed Shahbazi: This proposed acquisition, which was of the clinical assets from Jack, the Canadian clinical assets from the Jack Nathan Medical Corp, subject to shareholder approval this
Hamed Shahbazi: Acquisition entails the acquisition of 16 primary care clinics across 13 Canadian cities which generated over $10 million in revenue over the past 12 months and adds 90 physicians to WELL's owned and operated clinic network.
Hamed Shahbazi: These newly acquired clinics are located within Walmart superstores, providing convenient access to care in densely populated regions.
Hamed Shahbazi: well expects to leverage its shared services program and clinic transformation initiatives to improve efficiency with a focus on achieving adjusted EBITDA profitability within 2025.
Hamed Shahbazi: This proposed transaction also includes the acquisition of Jack Nathan's licensee portfolio of 62 locations within Walmart locations.
Speaker Change: Historically, the idea behind these clinics is that Jack Nathan would recruit doctors and place them into these locations.
Speaker Change: and receive a licensing fee or rent from them. Wealth sees value in this business model as it generally does not aim to own.
Speaker Change: and operate smaller clinics and sees this as an opportunity to leverage this acquired portfolio as a platform to grow new high-margin primary care affiliate clinics as a business model for well.
Speaker Change: In Well's case, this model wouldn't just involve recruiting and placing physicians into smaller clinics. It would also involve providing a comprehensive technology platform that will help physicians
to simplify their operations.
Speaker Change: This would include tools provided by well provider solutions such as EMR, or revenue cycle management, or cybersecurity, physician focused AI tools such as decision support, or virtual care tools. The affiliate clinics will provide well with a high margin revenue stream that is highly scalable.
Hamed Shahbazi: On Closing Well will acquire Jack Nathan's rights to operate medical clinics in Walmart Canadian stores, creating a platform to expand its network within Walmart Canada's footprint of over 400 Canadian locations.
Hamed Shahbazi: further solidifying WELL's position as the largest clinic owner-operator in Canada and aligns with its long-term goal of establishing a cohesive, well-integrated, and Canadian network of healthcare clinics.
Hamed Shahbazi: We all expect that a material number of these locations will over time become either licensee owned or
Hamed Shahbazi: owned and operated by WELL. In fact, our goal in the future will be to provide improved accessibility for patients to WELL's owned and operated network as well as the affiliate clinic network where providers will be able to securely access and review patient charts as required by patients.
And now I'd like to talk a little bit about
Hamed Shahbazi: our weight care initiative. Earlier this week, WELLS virtual care platform to get health
launched a new weight loss and GLP-1 program.
GLP-1 medications and therapeutics.
Hamed Shahbazi: as you may know, are known as glucagon-like peptide 1 receptor antagonists.
Hamed Shahbazi: They have shown remarkable results in treating obesity and type 2 diabetes and helped millions of people globally already. These drugs have been shown to have other positive side effects such as reduction in blood pressure, reducing the risk of heart attacks and strokes, improving lipid disorders, improving fatty liver disease, and reducing the risk of chronic kidney disease.
Hamed Shahbazi: GLP-1 drugs are also being studied as a possible way to prevent neurological diseases like Parkinson's or Alzheimer's. We're very pleased to offer this program, well-licensed healthcare providers who are here to guide patients through their weight loss journey, helping them achieve their goals with science-backed weight loss consultations.
Hamed Shahbazi: Our providers create a plan tailored to the patient needs, which may include recommendations for diet changes and exercise, and may prescribe Health Canada approved medications like GLP-1 treatments.
Hamed Shahbazi: Our doctors may prescribe a variety of weight-loss medications including and depending on the patient's needs including Wegovy, Resempik, Sexenda, Contrave, and Xenical.
Hamed Shahbazi: Our new weight loss care program is another example of how well can you expand its service offerings, leverage its virtual and physical clinic presence to deliver accessibility and help enhance patient outcomes.
Hamed Shahbazi: I'd like to talk a little bit about our current strategic review process of WISP and CERCLE now. Earlier this year, we indicated that we have begun considering strategic alternatives for our U.S. virtual services businesses, CERCLE and WISP, and we have where we have control investments, which means that we are controlling shareholders, but have minority partners on both cap tables.
Hamed Shahbazi: These are both high growth businesses that haven't reached maturity as it relates to their EBITDA generation, while investors today are primarily valuing the entire world business as a multiple of EBITDA.
Hamed Shahbazi: We believe that unlocking the value from Sterco and Wisp could result in a significant cash benefit to Well, which we could use in a variety of ways, especially as our Canadian M&A pipeline heats up.
Hamed Shahbazi: With this in mind, I'll provide an update on both companies. I'll start with WISP first.
Hamed Shahbazi: As we had previously disclosed, we have CIBC assisting us on this process, and I'm pleased to report that we're making good progress having engaged with multiple parties in a negotiation process.
Hamed Shahbazi: While there can be no assurance that a transaction will materialize, we hope to provide an update by the end of the year or in the new year as part of our earnings process.
Hamed Shahbazi: Operationally, WISP had a very strong Q3 with record quarterly revenue of $26.9 million, an increase of 35% from Q3 2023, and it achieved record adjusted EBITDA of $1.5 million in the quarter, an increase of 760% from last year.
Hamed Shahbazi: The past summer we've achieved a significant milestone of 1 million patients served nationwide in the United States and surpassed over a hundred million dollars in Canadian run rate revenue.
Hamed Shahbazi: More recently, WISP launched a comprehensive weight care offering inclusive of GLP-1 medications to support women struggling with hormonal imbalances. WISP now provides GLP-1 medications and supplements via pharmacy pickup or free discrete delivery following an online consultation with a licensed provider. This new product offering has been very well received by the marketplace and secured six figures in revenues in its first month.
Hamed Shahbazi: Moving on to Circle Medical, we have engaged a global investment bank, J.P. Morgan, for the Circle strategic review process. We're still relatively early in this process as there is more prep work that needed to be done.
Hamed Shahbazi: and we are expecting to provide an update on CIRCLE's strategic review in Q1 2025.
Hamed Shahbazi: In the meantime, Circle continues on its aggressive growth, with Q3 2024 revenues surged to a record $36.7 million, an increase of 61% compared to Q3 2023, and it achieved adjusted EBITDA of $2.6 million in the quarter.
Hamed Shahbazi: Q3 was the company's second consecutive quarter of accelerating growth, and the fourth consecutive quarter of positive adjusted EBITDA.
Speaker Change: I'm pleased to announce that based on Oktober Financial Circle, medical-to-annualized revenue now exceeds $150 million U.S.
The End
Speaker Change: During Q3, Circle Medical delivered 213,000 patient visits, an increase of 51% as compared to last year.
Speaker Change: Circle continues its heavy investment in technology with an expansion of its product and engineering teams in both Montreal and San Francisco. It continues to focus engineering and its resources on AI initiatives.
Hamed Shahbazi: and its AI tools have now documented over 10,000 patient encounters, saving providers.
more than 1,200 hours of administration time.
Hamed Shahbazi: Now I'd like to talk about the strategic spin-out of Well Provider Services, or WPS. Last quarter, we discussed the idea of spinning out WPS as a separate public company that would still be majority-owned by Well. The primary reason for pursuing this was to accelerate growth of the business, especially as we see numerous attractive M&A opportunities becoming available.
Hamed Shahbazi: Within WELL, the WPS business unit is comparatively small, as compared to WELL's nearly $1 billion in care revenues, and doesn't get the external attention that we believe it deserves.
Hamed Shahbazi: Our last significant acquisition in this group was in 2021, and since then we've been very busy integrating, obtaining synergies, and driving organic growth.
Hamed Shahbazi: Since our last quarter, we've continued to develop our plan and are excited to report that our plan has evolved to make WPS a larger entity before we speak at public listening.
Hamed Shahbazi: To that end, we have accelerated two M&A opportunities that we have been working on for quite some time involving two high-quality technology companies focused purely on health care with recurring revenues, strong margins, and strong growth profiles.
When one combines WPS current business
which would
principally be our
Hamed Shahbazi: be our current total technology platform business, not including cybersecurity, with our two signed and pending LOIs, along with our current organic growth. We expect WPS to be in the order of approximately $70 million in annualized revenue run rate next year, and operating as a Rule of 40 business or better, which is essentially what has been happening for the last couple of years.
Hamed Shahbazi: We anticipate that we would have also additional M&A opportunities next year that would further enhance the business profile.
Hamed Shahbazi: I want to be very clear that the WPS team will continue to work closely with and support our well clinics.
Hamed Shahbazi: and the Well Clinic Transformation Team, as such, there won't be any adverse impact to Well's clinic business from doing this spin-out. If anything, we believe this enhances the Well Clinic consolidation and transformation effort as it will allow our technology platform to be more capable more quickly.
Hamed Shahbazi: We believe WPS will be a very strong IPO candidate on the TSX main board sometime in 2025, but before we go public, our plan is to complete these two acquisitions imminently and continue to be active next year with more inorganic growth.
Well, the intentions are to maintain the majority voting.
Hamed Shahbazi: even after it spun out as a publicly listed company. As the majority voting stockholder, we fully expect to continue consolidating WPS financial results in accordance with IFRS accounting rules.
and the other one.
Hamed Shahbazi: Ultimately, by pursuing this spin-out, we believe WPS will be a much larger company and will be valued at much higher valuation multiples than it currently is while operating under WELL Health. We believe this will drive up both gross margins and operating margins at WELL as we execute on this strategy and a larger portion of WELL's overall revenues are attributable to high margins to offer our services.
Speaker Change: And with that, I'd like to turn the call over to our CFO, Eva Fong.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Eva Fong: Thank you, Hamed. Our overall third quarter results were very profitable. Some of the highlights include well-surpassed $1 billion annualized revenue run rate with record revenue of $251.7 million in Q3 2024, an increase of 23% as compared to revenue of $204.5 million generated during Q3 2023, mainly driven by organic growth of 23%.
Hamed Shahbazi: If we look at revenue from continuing operations, excluding the revenue impacts from businesses divested in the prior periods, the increase was actually 27% compared to Q3 2023.
Hamed Shahbazi: During Q3, we achieved record quality revenue in the following business units Primary Care, Circle, WISP, and CLH provider staffing also known as RADAR.
Hamed Shahbazi: Well-achieved record quarterly adjusted EBITDA of $32.7 million in Q3 2024, an increase of 16% as compared to adjusted EBITDA of $28.2 million in Q3 of last year.
Hamed Shahbazi: As you can see from this graph, our year-over-year EBITDA growth has been accelerating. We have achieved 3% adjusted EBITDA growth in Q3 2023 to 16% in Q3 2024, reflecting strong operational momentum.
Hamed Shahbazi: This improvement in our adjusted EBITDA is demonstrative of our focus to drive profitable growth. We're seeing strong performance across the entire platform, resulting in improved adjusted EBITDA growth.
Hamed Shahbazi: Key factors driving our adjusted EBITDA growth include, one, our clinic transformation is working and starting to really scale now as we've added more resources to that team and back office automation over the past year.
Hamed Shahbazi: Two, strong growth and margin expansion from wealth U.S. businesses. Circle Medical and WISP have been key contributors to EBITDA growth and margin improvement in 2024.
Hamed Shahbazi: Three, our platform now generates higher incremental returns, contributing to improved return on investor's capital.
Hamed Shahbazi: Net income. Well-reported IFRS net loss of $75.8 million in Q3 2024 versus a loss of $4.5 million in Q3 of last year.
Hamed Shahbazi: The unusually high net loss is due to the unrealized losses on wealth investment in HillWell AI. In the third quarter, HillWell's share price declined in value, resulting in an unrealized loss of $77.1 million for wealth.
Hamed Shahbazi: The graph on the left shows our positive net income of $1.3 million in Q3 2024 if we exclude the unrealized loss on real wealth investments.
Hamed Shahbazi: This is a year-over-year increase of 5.8 million compared to a loss of 4.5 million in Q3 last year.
Hamed Shahbazi: As some of you may be aware, the HealWell stock has been very volatile with a 52-week high of $3.26 and a 52-week low of $0.65.
Hamed Shahbazi: Although we had a very large unrealized loss this quarter, we had a very large unrealized gain in Q2. If you look at the cumulative unrealized gain or loss in the graph on the right, it is a positive unrealized gain of $93 million as of Q3 2024.
Hamed Shahbazi: We look at Adjusted Net Income because it adjusts out all unrealized gains or losses from all our HealWell investments among other adjustments.
Hamed Shahbazi: Well-achieved adjusted net income of $13 million or $0.05 per share in Q3 2024 as compared to adjusted net income of $12.9 million or $0.05 per share in Q3 of last year.
Hamed Shahbazi: However, I'd like to point out that in the graph on the left, that last year's adjusted net income of $12.9 million included a one-time realized benefit of $2.8 million from CLH associated with a divestiture which results in a management contract termination payment.
Hamed Shahbazi: For clarity, whenever CLH sells an anesthesiologist's outfit, they typically retain a management contract that provides ongoing management fees. If such a contract is terminated, it accelerates the management fees owing.
Hamed Shahbazi: So if one were to normalize for this one-time income item, last year's adjusted net income would have been $10.1 million in Q2 2023, which results in a 28% year-over-year increase to this quarterly adjusted net income as demonstrated in the graph on the right.
Speaker Change: Now, on revenue per share, WELL is extremely focused on its per share performance metrics.
Hamed Shahbazi: As you can see from this graph, WELL has had significant success with its revenue per share, going from $0.16 per share about three and a half years ago in Q1 2021, to over a dollar per share as of Q3 2024.
The End
Hamed Shahbazi: Now let's look at our per share metrics from Adjusted Shareholder EBITDA and Adjusted Free Cash Flow Available to Shareholders, or the acronym FCFA2S.
Hamed Shahbazi: Just a reminder that the adjusted figures remove the unrealized non-cash gains or loss from our HealWell investment, and the shareholder measures remove the non-controlling interest.
Hamed Shahbazi: Well-achieved adjusted free cash flow to shareholders of $16.1 million in Q3 2024 or six and a half cents per share compared to $9.6 million in Q3 last year or four cents per share.
Hamed Shahbazi: Our per share metrics have been relatively flat over the past two years, largely due to the rising interest rate environment where we have had to endure higher interest charges.
Hamed Shahbazi: As we have brought down our debt levels, our interest rates have started to decline. We are beginning to witness an increase in our per share interest once again.
Hamed Shahbazi: You can see in this graph that the shaded gray area represents the increase in interest rate dampening the growth in our per share metrics.
Hamed Shahbazi: To further reduce the amount of shared solutions, we have started to move our employee-incentive programs to be more cash-based rather than share-based compensation programs, which we expect will result in an over 60% decline in share-based compensation awards in 2024 as compared to 2023, where we had some catch-up grants that exceeded our normal course grant schedule.
Hamed Shahbazi: We expect this will further decline in 2025. While this will increase our cash expenses, we're maintaining previous adjusted EBITDA and adjusted free cash flow guidance as per our press release this morning.
Hamed Shahbazi: In Q3 2024 there were no new incentive shares issued in the quarter and we're not expecting to issue any material new incentive shares in Q4.
Hamed Shahbazi: We're seeing a significant reduction in wealth share dilution due to the impact of burnout payments rolling off, reduction of share-based incentives, and recent acquisitions being smaller in size.
Hamed Shahbazi: In 2022, we will have 10.2% shared dilution, which reduced down to 4.4% shared dilution in 2023. In 2024, we're expecting shared dilution of around 3.4%.
Hamed Shahbazi: As you can see, most of that has already been incurred in the first three quarters of the year, and we're only expecting a further 0.2% dilution for the balance of the year.
Now an NCIB update.
Hamed Shahbazi: We ended the third quarter with $263,023,030 total fully diluted shares outstanding. This is the second quarter in a row that we have reduced our fully diluted share count.
Hamed Shahbazi: This is because we pay out all our time-based earner payments in cash, we did not issue any new incentive shares in Q3, and we also purchased 131,000 shares in Q3 2024 through our NCIB program.
Hamed Shahbazi: And as of the end of Phase 3, the company has repurchased 294,500 shares at an average price of $4.17.
Hamed Shahbazi: On June 6th, the company announced the renewal of its NCID.
Hamed Shahbazi: The company's board of directors believes World's current share price does not ethically reflect the underlying value.
Hamed Shahbazi: based on wealth, business prospects, and financial proficiency. Our intent is to continue to maintain a consistent repurchase program and reassess from time to time to repurchase shares in the coming months, thereby further reducing share dilution.
Hamed Shahbazi: To the extent our strategic alternatives possess new additional cash resources, we will undertake to increase our buyback program.
Hamed Shahbazi: And now looking at our balance sheet as at the end of Q3 2024.
Hamed Shahbazi: We'll end the Q3 2024 with a solid balance sheet. As of September 30, 2024, we'll have cash and cash equivalents of $66.1 million. Our cash position will be strengthened by cash from our CRH building partner, Change Healthcare, which Hamed will address further later on in this call.
Hamed Shahbazi: WOW continues to be in good standing and fully compliant with all companies related with its two credit lines, J.P. Morgan in the U.S. and World Bank in Canada. The debt from the two credit lines was approximately $267.7 million in Canadian dollars as of September 30, 2024.
Hamed Shahbazi: Note that the U.S. dollar did strengthen during this period so it's important to note that we were able to reduce our U.S. debt facility by about 12 million U.S. dollar from 149 million USD to 137 million USD during the quarter.
Hamed Shahbazi: Wealth shareholder leverage ratio was 2.5 times as at the end of Q3 2024 compared to 2.67 times as at the end of prior quarter Q2 2024.
Hamed Shahbazi: The leverage ratio of 2.5 times is a normalized figure to normalize out the timing of cash advances received from Change Healthcare. Without this normalization, our shareholder leverage ratio would be 2.16 times.
Hamed Shahbazi: We define leverage ratio as net band debt less, cash on hand, divided by shareholder adjusted EBITDA.
Hamed Shahbazi: Please note that if one includes our convertible debentures, which are turned out for more than two years, our leverage ratio will be approximately 3.26 times.
Hamed Shahbazi: Given our trajectory of improved EBITDA and capital efficiency, we are projecting improvements to our leverage ratio over the next couple of quarters.
Speaker Change: That is my financial update and I will turn the call back to Hamed.
Hamed Shahbazi: Thank you, Eva. To summarize Eva's update, we're expecting to continue to improve shareholder value as we increase our cash flows, reduce our debt, improve our leverage ratio, reduce our share dilution by lowering our share issuances.
Hamed Shahbazi: and decreasing our earn out payments and eventually reversing our share dilution.
Hamed Shahbazi: And as we continue to execute on our cost optimization efforts, we're extremely proud and focused on building a company that supports healthcare providers deliver the best care possible while delivering sustainable, growing, and durable cash flows.
Hamed Shahbazi: A quick update on CRA since we've already talked extensively about Canadian clinics as well as WISC.
Hamed Shahbazi: and Provider Solutions. I'll just provide an update on CRH Medical and provider staffing and radar and then we'll get to our final comments.
Hamed Shahbazi: Stair Ridge Medical achieved revenues of $63.1 million in Q3 compared to $64.8 million in Q3 of last year. Provider staffing or radar...
Hamed Shahbazi: achieved revenue of $31.5 million in Q3 compared to $23.4 million in the same period last year. Adjusted EBITDA for CRH was $17.5 million in Q3 compared to $20.3 million in Q3 last year.
Hamed Shahbazi: Q3 2023 EBITDA included $3.7 million in revenue directly attributable to a one-time divestment-related impact. Normalizing for this, adjusted EBITDA in Q3 2024 increased 6%.
Hamed Shahbazi: Meanwhile, radar-adjusted EBITDA increased to 2.5 million in Q3 2024 compared to 1.6 million in Q3 of last year.
Hamed Shahbazi: Growth was steady despite an expected slowdown in CRH's year-to-date M&A activity. While CRH had nominal, organic, and same-store growth, CRH has not done any acquisitions since July of 2023.
Hamed Shahbazi: This lack of M&A activity is mainly a result of CRA's continued discipline with its capital allocation strategy, as well as an intent to de-lever in light of increased interest rates.
Hamed Shahbazi: It should be noted that the CRH pipeline has continued to build during this time in anticipation of now lowering interest rates. As such, we expect acquisition growth before the end of the year, making for a strong start going into 2025.
Hamed Shahbazi: As highlighted last year, C.E.R.H. Medical has completed its full integration of CarePlus Management, inclusive of Radar Healthcare Providers, which was acquired in July 2023 acquisition.
Hamed Shahbazi: This staffing business, which is a premier and trusted staffing and locum tenants business, specializes in anesthesia across the lower 48 states. It continues to be extremely complementary to CRH's legacy anesthesia business and more importantly as a growth engine to the overall platform.
Hamed Shahbazi: In fact, CRH has now identified additional creative acquisition targets in the staffing and locum.
Hamed Shahbazi: business line, we expect growth of this segment to continue along with anesthesia, as well as our plans to expand in other healthcare specialties as well, while staying quite focused on this area of anesthesia and provider staffing. I want to address
the impact on the theory of genocide.
business from diverse.
Speaker Change: and adverse weather conditions, namely Hurricane Helene and Hurricane Milton, which impacted most of the southeast of the United States, where the CRH has a significant footprint. First and most importantly, our prayers go out to all those folks affected by these devastating events, which included many of our providers and patients.
Speaker Change: Hurricane Helene, which made landfall in late September, impacted our business with closures.
and patient cancellations across northern Florida, Georgia, and North Carolina.
The lost revenue for Q4 was minimal.
Speaker Change: at approximately $500,000 Canadian. Hurricane Milton, which affected Florida in October, is also expected to have minor impact in Q4 of approximately $1 to $1.5 million in lost revenue.
Hamed Shahbazi: in Canadian dollars. We have made up for this lost revenue through strong organic and inorganic growth in other parts of our business, but these natural disasters are ultimately the reason why we did not increase our adjusted EBITDA guidance.
otherwise we would have.
Hamed Shahbazi: Lastly, one housekeeping item. I wanted to provide some additional commentary on the build-up
Hamed Shahbazi: in our accounts receivable balance. As we noted previously, this TRH anesthesia business
Hamed Shahbazi: has experienced delays in cash collections on anesthesia claims, including delayed billing as a result of its billing partner Change Healthcare experiencing a cybersecurity incident in February of 2024. Dairy has continued to provide anesthesia services during this outage and as a result,
AR relating to these claims has increased.
Speaker Change: Understanding the significant business interruption this has caused, Cage Healthcare has provided advanced funding to CRH in lieu of the cash collections CRH would have normally
received related to these claims with the expectation...
Hamed Shahbazi: that upon resuming normal billing and collection activities, the advanced funding would be repaid as cash collection from payers and patients are received.
Given the contractual terms underlying the advance...
Funding received these funds have been recorded within the liabilities.
as at September 30th totaling 106
Hamed Shahbazi: .5 million U.S., hence the related increase in other liabilities during the quarter, which offset the increase to accounts receivables.
Hamed Shahbazi: I'd like to offer a few words about HealWell.ai. We're very pleased with the progress of HealWell.ai as a company that we helped recapitalize
Hamed Shahbazi: and we launched in October of last year, just 13 months ago, over the past year.
Hamed Shahbazi: HealWell has raised over $50 million, completed four acquisitions and a number of minority investments, and is now operating at a seasonally adjusted annualized revenue run rate of $65 million.
Hamed Shahbazi: HealWell has an attractive acquisition pipeline and is focused on delivering over $100 million in revenues next year and be profitable on an adjusted EBITDA basis with the help of its continued organic growth and new acquisitions.
We're expecting that well could trigger its call option in
2025, at which time...
Hamed Shahbazi: Well, we'll begin to consolidate Wells financial Hill Wells financial performance into our financial statements.
adding over
Hamed Shahbazi: $100 million in revenue to our top line. Again, our call option is not related to all the shares of the company, just the multi-voting shares that have been set aside by the founders of the company last year.
Hamed Shahbazi: HealWell's technology is also gaining worldwide recognition. HealWell has been cited in over 30 scientific publications.
Hamed Shahbazi: in high-impact peer-reviewed journals demonstrating groundbreaking AI advancements with industry-leading accuracy. Some of these publications include the Journal of American Medical Association, American Association for Cancer Research,
Hamed Shahbazi: Journal of Clinical Oncology, American Journal of Kidney Diseases, Canadian Society of Allergy and Clinical Immunology, and the Journal of Pharmaceutical Sciences, just to name a few.
Hamed Shahbazi: Meanwhile, Well.AI Decision Support, which is a product developed and marketed by HealWell, is increasing its usage in our clinics.
Hamed Shahbazi: Well-AI Decision Support compliantly screens patient data from our EMR using cutting-edge AI technology to identify risk and support the diagnosis of over 200 diseases including chronic kidney disease, hypertension, diabetes, and more.
Hamed Shahbazi: Last week, we announced the expansion of our multi-year strategic alliance with HealWell that allows HealWell to launch and manage clinical trial sites at WellHealth locations across Canada, leveraging HealWell's contract research organization or CRO capabilities alongside WellHealth's network of clinics across Canada.
Hamed Shahbazi: This positions the partnership as a formidable player in AI-driven clinical trials and opens up a new revenue stream for Well and its physician community.
Hamed Shahbazi: This partnership allows HealWell to offer an end-to-end vertically integrated service inclusive of patient identification, recruitment,
Clinical Trial Architecture, Execution, and Clinical Data.
Hamed Shahbazi: analysis. Providing clinical trial sites within the WellHealth clinic network transforms these clinics into hubs of innovation, improves accessibility, and directly benefits patients by bringing experimental treatment to local sites.
Hamed Shahbazi: Launching and managing clinical trial sites at well-held clinic locations across Canada will be a powerful strategic initiative that has the potential to significantly and positively impact margins in the long term.
Hamed Shahbazi: This could allow WellHealth and HealWell to capitalize on their combined strengths in the healthcare infrastructure and AI technology, potentially transforming the landscape for clinical research.
Hamed Shahbazi: Simply put, there's nothing like this partnership anywhere on the market that we can see.
Um,
Hamed Shahbazi: And finally, I'm excited about our outlook for this year, which we expect to see record revenue, record adjusted EBITDA, record net income, and record free cash flow.
Hamed Shahbazi: For primary care, I will reiterate that we believe primary care will remain strong in absolute and organic growth through 2024 and beyond.
Hamed Shahbazi: For 2025, we expect the transformation and digitization work that we'll be doing on the Jack Nathan Health Clinics, if the transaction should close, will have a temporary negative impact on our P&L, provided, of course, that transaction does pass.
Hamed Shahbazi: As we go through the process of digitizing and modernizing these clinics, we expect them to become profitable in 2025.
Hamed Shahbazi: For the full year of 2024, we're expecting our WellHealth Diagnostic Centers to achieve another year of record revenue in EBITDA.
Hamed Shahbazi: Well Diagnostics will be working on integrating our first tuck-in, the four clinics that are recently acquired. Our pipeline for this area is strong and we believe that we'll have more M&A to discuss in the near future.
Hamed Shahbazi: For WISP, we're expecting another record quarter in Q4 with positive adjusted EBITDA. We expect WISP to see continued growth.
Hamed Shahbazi: in Q4 as the business leans into its annual holiday promo while pulling back on marketing spend. The business will also focus on expanding date coverage on its new GLP-1 weight care vertical.
Hamed Shahbazi: For Circle, although the business has had tremendous growth in the first nine months of the year, we're expecting a slight cooling off of the growth in the fourth quarter due to some re-tooling of workflows to support regulatory compliance.
Hamed Shahbazi: And for both Wisman Circle, we reiterate our previous guidance for achieving over 5% adjusted EBITDA margins in each business in the full year of 2024. This margin expansion is double the margin experience from last year.
Hamed Shahbazi: were also very much focused on seeing through the strategic initiatives that we started for these businesses.
Hamed Shahbazi: Despite some revenue loss for CRH and Q4 from the effect of the current hurricanes, we are expecting results to be positively impacted from normal Q4 seasonality. We're expecting overall revenue to improve at CRH and radar and Q4, accompanied with an increase in adjusted EBITDA as well.
Hamed Shahbazi: And again, just on those strategic alternatives that we noted, we are confident in these processes resulting in improved shareholder value.
Hamed Shahbazi: But we don't think that these are the only catalysts that investors should pay attention to. Wells Growth Engine has never been stronger. Organic Growth is operating at an optimal level where we're executing on our most compelling M&A pipeline in the history of the company, with 17 signed LOIs.
Hamed Shahbazi: Our balance sheet is strengthening and our fundamentals are improving in a manner that we are confident will improve shareholder value.
Hamed Shahbazi: As such, we're very pleased with our financial performance thus far in 2024 and look forward to delivering strong results for the remainder of the year and a compelling outlook for 2025, given that we have many tailwinds driving growth in the business and have a committed and disciplined team to ensure that we can execute.
Hamed Shahbazi: I'd like to thank you all for joining us on this call today and thank our shareholders and investors for their continued support.
Hamed Shahbazi: And I would also like to thank WELL's senior management team and all our employees and contractors for their tremendous effort. And in particular, I'd love to thank our team of health care practitioners and frontline workers who provide unbelievable patient care.
Hamed Shahbazi: With that, we're pleased to provide some questions, to respond to some questions.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised and should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from the line of Adhere Academy from 8 Capital. Please go ahead.
Speaker Change: Hey, good afternoon Hamed and team. Thanks a lot for taking my question.
Speaker Change: I wanted to see if you could comment on the pipeline for the M&A engine. You mentioned, you know, 17 signed LOIs on the call today. Can you just give us a sense of distribution of where that is? Is that largely in the absorption model, is it in primary care clinic acquisitions, or is it mostly in diagnostics? Just any call around that would be helpful.
Thanks, Adir. It's actually pretty balanced.
Adir: And if you kind of heard my comment earlier, I know the script was quite long this time.
Speaker Change: With this $100 million, this pipeline reflects over $100 million, and it would not be corrosive or non-accretive to the current margin level, so it would not pull down margins.
Speaker Change: Which means that it is quite balanced. It means that we have most of these LOIs are in the Canadian business.
The majority of them are in Canadian clinics.
Speaker Change: Canadian Technology side with WPS and we have you know a couple in the in the CRH area. So I would say that as far as the Canadian clinics are concerned
Speaker Change: We also have some pretty strong clinics that are in this one, you know, we're acquiring a few, so it's not all just absorptions. I would say we have probably a handful of absorptions in there.
Speaker Change: Okay, excellent. And we talked a lot about WISP, and so it's good to see the strength of there. Maybe just on Circle, that had also accelerating growth, I think at 61% year-over-year growth, faster than last quarter. Can you give us a sense of where some of that strength is being driven from? And then maybe some additional colour on some of the cooling off that you talked about towards the end of your comments there. With that, after that, I'll pass the line. Thanks, guys.
Speaker Change: Yeah, look, I think it's just really, it's really just executing against the plan of the company. I think that the company has a real tech advantage. I mean, most people that are operating in this business just do not have the depth of tech that Circle has. They tend to be...
Speaker Change: very marketing-forward businesses. This is a company, let's remember, that grew up in the Bay Area.
Speaker Change: through the Y Combinator program and sort of the ethos and the DNA of this business has been to build a full stack of technology and so this is a highly tech driven business.
Speaker Change: got enormous depth to it. And I think that the business model is also very elegant. So they're out there really looking to acquire patients for very specific.
Speaker Change: needs, and then they, you know, such as, you know, depression, anxiety, ADHD,
Speaker Change: And, you know, more than a third of the time, they're successful in doing that. And so, if you're able to do that in this business and convert people to being long-term patients...
Speaker Change: That's where your LPV really, really gets in hand. So I would say that that's been a consistent part of the Circle Medical growth story. And yeah, the slowdown in Q4 is really just the growth team focusing on retooling some of the software and workflows in order to support some of their compliance requirements.
Excellent. Thanks a lot, guys. Have a great night.
Speaker Change: Thank you and your next question comes from the line of David Kwan from TD Cowen. Please go ahead.
David Kwan: Hey, good morning. I was wondering if on the M&A pipeline, you talk about a bit further down the pipe into 2025, the 30 additional clinics, is that more acquisitions versus absorptions? I know there's probably a certain amount of bandwidth that you guys have on the absorption side, just given how much more work is involved there. So, I was curious to get your sense of what that mix is.
Speaker Change: Yeah, that's a great question. And, you know, look, I'll say last year, I think we were abstract and heavy. I think we're more balanced moving forward.
Speaker Change: You know, absorptions are great, but they do take more time from our clinic transformation team. So we're actually very pleased to have.
Speaker Change: you know, some clinics that do have, we believe, some nice sustained profitability.
Speaker Change: And in some cases, our ability to improve some of these clinics that are in our pipeline is not as significant, meaning that, you know, in some in some of these cases, it may not be as possible to have some of these clinics improved by 1000 basis points. You know, someone's already operating at 10 to 15.
Fifteen percent.
Speaker Change: But we still believe we can pretty much improve anything that we acquire and we believe that some of these acquisitions are coming in.
very attractive prices and we're really looking at this through
Speaker Change: The lens of our unlevered RUIC, you know, I think we have a framework for how we make these decisions. We're not out there to just buy the cheapo clinics.
David Kwan: You know, we think that it's really important with our emphasis and focus on Canada to also bring some great operators into the business, and so we're very pleased that some of the pipeline actually has some really strong operators that want to stay in the well network, they want to continue to do this for a long time, and so I think that the market will be pleased with the quality of clinics that we'll be adding next year as well.
Speaker Change: If I could quickly squeeze in one more, just on the diagnostics and the specialty health side, I know that the M&A pace had slowed down after you acquired MyHealth. Can you talk about what you see in the business? I know you just acquired Seahealth, but what kind of opportunities you're seeing there and kind of where the valuation multiples are now?
Speaker Change: Yeah, yeah, thanks for asking that. I mean, look, when we acquired...
Speaker Change: the platform, My Health. At that time, specialized care platforms, specialized care tuck-ins were still fairly expensive and it took a while but we're starting to see some moderation there and as interest rates decline and we start to see some of those multiples improving, we think it's a great opportunity to buy really high quality radiology and cardiology assets. I think you're going to see us be fairly active in that regard over the next few quarters.
Speaker Change: We've got definitely, you know, some exposure in that pipeline that I mentioned, that signed LOI pipeline that I mentioned to My Health and a lot more in the queued up ones after that.
That's great. Thanks.
Thank you. I'll now turn the call over.
to Mr. Hamed Shahbazi for any closing remarks.
and Definitive Agreements pending close. We're very busy and
Speaker Change: We think that the company is going through really phenomenal change and we are really focused on delivering strong shareholder value. So we really hope that you recognize the movement from shares issuances to cash and funding increasingly through cash. And we're very determined to drive shareholder value and very determined to be on strategy and really continue to build on the network effects that we have in the Canadian market. And with that, we invite you to continue to watch us and we hope to be bringing you more good news in the near future.
Thank you
Speaker Change: Thank you. This concludes today's call. Thank you for participating. You may all disconnect.
