Well Health sees opportunity in healthcare gaps

  As Canada’s healthcare system struggles to keep up with ever growing demands, three homegrown players continue to find opportunity by filling in gaps in the system.

Telus Corp. (TSX:T) and Loblaw Co. Ltd. (TSX:L) are building on strategies that own clinics and wellness centres, offer telehealth services and sell software to help doctors manage medical records and patients connect with doctors and pharmacists.

The third company, Well Health Technologies Inc. (TSX:WELL) is a much smaller and more focused player that has gone from a standing start in 2018 to become the largest owner of out-patient clinics in Canada. Like Telus, it sells a software suite for doctors and dentists which helps integrate its acquisitions.

 Here a closer look:

 Well Health Technology (TSX:WELL) started with six clinics in BC in 2018, went public in 2020 and is now the largest owner of primary care clinics in Canada with 220 across the country. Its US subsidiaries also own clinics and target specific markets such as gastrointestinal health, mental health, and women’s health. Some of these are up for sale.

In Canada Well Health is the third-largest vendor of Electronic Medical Records (EMR) software after Telus and Loblaw. As with Telus, it offers a comprehensive platform for doctors to manage their practices including an AI-powered virtual assistant that can recod and summarize patient visits.

Investment summary: Well Health has an active acquisition strategy adding seven clinics so far this year. It integrates them into its software platform improving profitability and efficiency.

 In a research note, RBC Capital Markets analyst Douglas Miehm estimates that only 1–2% of the Canadian clinic market is consolidated, leaving a long list of potential candidates. He says the company has been proven to significantly improve pre-tax earnings of acquired clinics within 24 months and has a brand recognition that resonates with GPs.  [

Well Health plans to spin off its WellStar subsidiary as a stand alone company by the end of this year. WellStar has a software development focus including records management and AI-powered clinical tools.  

Late last year, Well Health’s US subsidiary Circle Medical came under investigation by regulators over its billing practices. It led to a reporting delay and loss of $1.1 million in its US subsidiary for the 2023 year.

While the sum was not substantial it shook faith in the company sending the shares sharply lower. Well Health has fixed the problem but is looking at options for Circle Medical, which could mean a sale, restructuring, or even winding down operations.

It expects some operations to be sold by year end with the proceeds being invested in Canadian expansion.

Financials: Between 2019 and 2024 revenue grew from $37 million to $958 million. Net income has been erratic, but operating income has moved steadily higher.  In its latest quarter, revenue of $356.7 million was up 57% year-over-year.  Adjusted EBITDA of $49.7 million was 231% higher.

Share performance: The stock is down 40% year-to-date at the current price. Despite strong results in Canada, there is an overhang from the US accounting problems and what sources of revenue will replace its US operations if they are sold. Concerns about its growth-by-acquisition strategy are another factor. More recently, investors have soured on high-growth, unprofitable tech names. Well Health is in this basket.

Even so, Well Health seems poised for growth as it applies economies of scale to its acquisitions of clinics in Canada’s fragmented market.

This article appeared in a recent issue of the Internet Wealth Builder.  For information on how to reprint this article please view this page.