WELL Health Technologies Corp

TSX:WELL

Earnings Call Transcript 2022-Q1

[Operator]

Hello, everyone, and welcome to the Well Health Technologies Corp. Fiscal First Quarter 2022 Financial Results Conference Call. My name is Michelle, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded today, May 12, 2020.

I would now like to turn the call over to Pardeep Sangha, Vice President, Investor Relations. Mr. Sangha, you may begin.

[Pardeep Sangha, executive]

Thank you, operator, and welcome, everyone, to -- WELL Health's 2022 Fiscal First Quarter Financial Results Conference Call for the 3 months ended March 31, 2022. 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 yesterday.

Portions of today's call other than historical performance include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws.

Forward-looking statements are necessarily based on a number of estimates and assumptions that while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies.

These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, many of which are outside of 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 forward-looking statements.

These factors are further outlined in yesterday's press release and in our management discussion and analysis. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future.

We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions or circumstances on which such statements are based, except if as required by law.

We may use such terms as adjusted gross profit, adjusted gross margin, adjusted EBITDA, shareholder EBITDA, adjusted net income and free cash flow on this conference call, which are all 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 management discussion and analysis.

The company believes that adjusted EBITDA is a meaningful financial metric as it relates to measuring cash generated from operations, which the company can use to fund working capital requirements, service future interest and principal debt repayments and fund future growth initiatives. Adjusted EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS.

With that, let me turn the call over to Mr. Hamed Shahbazi, the Chairman and CEO. Hamed?

[Hamed Shahbazi, executive]

Thank you, Pardeep, and good day, everyone. We hope that you're all keeping safe and healthy. We truly appreciate everyone for joining us today. First quarter 2022 was an exceptional quarter, which exemplified our organic growth potential.

We're very pleased with our Q1 results in which revenue increased by 395% year-over-year compared to Q1 2021, catapulting the company to over $0.5 billion in annualized revenue run rate. Organic growth was 15% based on a year-over-year basis in the first quarter, despite the effects of seasonality that normally exist in the first quarter in our CRH Medical business, which is a substantial business for us.

This represents a 50% acceleration from the previous quarter's figure of roughly 10% organic growth. These impressive results were driven by strong patient visits in the quarter. During Q1 2022, well delivered more than 1 million combined omnichannel diagnostic and in-synchronous patient interactions. We've added significant scale to our business, and increased our leadership position as a preeminent end-to-end health care company in Canada, while our U.S. businesses continue to flourish in their respective sectors.

For the benefit of new investors and listeners on this call, I'll first provide you background on the company. WELL as a practitioner focused digital health care company. While technology has touched nearly all facets of our lives, health care is being slow to innovate, basic applications such as empowering patients with their medical record, accessing practitioners through telehealth, and booking and managing appointments online has only been a recent phenomenon.

Due to the fragmented nature of health care IT, we found that individual practitioner operators find a suite of services available in the marketplace to be confusing, it's difficult to implement and navigate and has resulted in a low adoption of most technologies, thus, the under digitization that we all see when we go to the doctor's office.

And well, we believe that post COVID now, we are entering a golden period where health care practitioners are finally actively seeking and implementing digital tools and technologies to help them modernize their practices.

This is an exciting time because it means that care providers are finally starting to see significant improvements in their operating efficiency in terms of improving their economic output and most importantly, delivering better patient outcomes as they take on more of these tools and technologies.

Make no mistake, health care is still driven by care providers, doctors, nurses, allied health professionals and clinicians take care of people when they need help. And these health care practitioners are the precious resource in the health care ecosystem. In fact, of the $300 billion health care ecosystem here in Canada, more than 14% of the sum goes to pay doctors loan representing over $40 billion annually.

WELL's big ideas that offer health care practices, its own practitioner enablement platform, which has a myriad of features, including and not limited to comprehensive end-to-end practice management tools inclusive of virtual care and digital patient engagement capabilities such as electronic medical records, revenue cycle management, e-referral digital apps and data protection services.

WELL uses this platform to power health care practitioners both inside and outside of WELL-owned omnichannel patient services offering. As we discussed before, WELL offers this platform in 2 ways. One is through an a la carte SaaS offering and the second is through a fully managed service.

Healthcare practices have a choice. They can pay for our tools and implement them in their outpatient services business or they can join one of our virtual or physical clinics and have us provide a fully managed service, which means that we not only use our platform to provide improved efficiency and patient engagement, but we also provide patient origination if needed, hiring and firing of MOAs or medical office systems and support staff.

We help run these businesses for the doctors so that they can focus on to care. Increasingly, we are seeing more and more doctors and care providers want to focus on the care and not on the business. This is a clear and unmistakable trend. What is unique here is that the vast majority of our business is comprised of the fully managed solutions. This means that while our SaaS offering is used by almost 1 out of every 4 doctors in Canada, it is still far outweighed by our non-SaaS business.

This is because when we sell our SaaS tools, we capture roughly 1% to 4% of the economic output of the position where when that care provider joins a WELL patient services business, we capture anywhere from 20% to 50% of their economic output, and they are happier.

WELL's strategy of empowering and modernizing health care practitioners is working, practitioners that use WELL's tools have consistently demonstrated that they have more time to focus on patients and spend less time on the burdens of back office and administration and running a business. This did not only increase our billable hours but also improves their operating environment and lessens physician burnout, a significant and serious matter that is an understated aspect of health care.

Another way of thinking about the WELL's story is that we're providing investors with a unique opportunity to not only have economic exposure to this phenomenal group of human supervised care that also derive benefits at care providers, generating operating efficiencies and improvements as a result of innovation.

Over the past 4 years, we have grown both organically and inorganically into a category leader across numerous verticals within the Canadian and U.S. health care systems. We have sought to build a compelling ecosystem that leverages technology to empower practitioners. We believe WELL is the most consequential health system in Canada, and we have a burgeoning business in the U.S.

Our businesses serve millions of patients and powering tens of thousands of practitioners and employ thousands of talented people. Operationally, WELL has recognized all these businesses into 2 key lines of business, the first being omnichannel patient services and the second being virtual services. These 2 lines of business are both profitable and growing.

Omnichannel patient services includes all patient services that have any material exposure to in-person operations. This includes our clinic network, MyHealth and CRH. Omnichannel patient services generates most of our revenue and EBITDA. However, it is a slower growth business. Our second line of business, Virtual Services is comprised of businesses that are almost entirely digital in nature, inclusive of SaaS and services revenues from the company's practitioner enablement platform or patient services businesses that have little to no exposure to in-person care and is comprised of highly scalable digital businesses, which today generate less revenue and EBITDA in the company as a whole, but are growing at a much faster rate.

I would now like to provide some color on our recently announced bought deal financing. Yesterday after market closing WELL announced they bought the offering of common shares. The offering was a comparatively small offering as compared to our previous financing, providing $34.5 million, inclusive of the underwriters option or greenshoe.

We're pleased to report that even during these unprecedented times, the offering quickly sold out and was significantly oversubscribed and completed shortly after launch. Despite this additional demand, we did not upsize the offering as we were looking to minimize dilution of less than 5%.

However, we did accept a little bit of dilution here because we felt that given these unprecedented times, it was important for us to improve our defense and enhance our offensive procedure cluster. Let me first speak to the defense. We're entering into a new phase of macroeconomic uneasiness brought upon by war, escalating inflation, increasing interest rate environment and continued COVID-related uncertainties, including recent harsh lockdowns in markets such as China that are rippling through the supply chain.

While we had a solid balance sheet, given the period that we're entering, we felt that it was prudent to have more cash on the balance sheet to address any rainy-day scenarios that could arise. To be clear, I don't anticipate such rainy days, but I often feel that management teams are too focused on optimizing for price and put themselves in a position where they cannot withstand shocks to their business and put themselves in a position to suffer catastrophic value loss because they have not practiced goods with management.

As a result of these additional funds on the balance sheet, we have further improved our net debt and have put the company on a more resilient footing. This is all about risk management, and I believe this financing positions let us as having a better risk posture.

Now I'll speak to how these funds position us for improved offensive posture. As of late, we have seen the weakness in the market produced some very significant opportunities for highly accretive capital allocation. Opportunities, which, in our view, are unprecedented and only available while the market continues to decline as a result of the challenges that the world is facing.

We felt that this was absolutely the right thing to do. Otherwise, we would need to be in a fairly defensive posture given market conditions and could not participate in some of these growth opportunities. As capital outlook here, we don't just look at the price we're issuing stock.

We look at what multiples we can deploy such capital. If there's a significant improvement or arbitrage that can benefit well its shareholders, meaning that we can continue to grow revenue, EBITDA and free cash flow available to shareholders on a per share basis, we should do that.

Again, the key here is to grow revenue, EBITDA and free cash flow available to shareholders on a per share basis. So we are pleased to announce that we have a number of such targets already lined up and ready to transact within the next few weeks and months. However, we are not going to be proceeding very quickly, we are going to be proceeding very cautiously, and only taking deals that demonstrate the greatest accretion.

This means that there is really no deviation from our previously stated plans. We had indicated before we are not interested in large M&A, and we're interested in focusing on smaller tuck-ins. This additional capital will put us in a position where we can actually continue with our plan.

Otherwise, given market conditions, we would have needed to be more defensive than I would have liked. We will be measured and methodical as always, but we will have clearly demonstrated that we have what it takes to identify, acquire, integrate and benefit from acquisitions of all sizes.

This is why we went from buying a small amount of shares as part of our NCIB or buyback programs to selling some stock and adding cash to treasury. We understand that this could have come across as counterintuitive given the beat actions occurred within a few weeks on one another, but we want shareholders to consider a few things here.

One, we made very few purchases of stock before at $4.85, a total of 50,000 shares in total, which really was designed to demonstrate that we felt the price of the shares was undervalued. To be clear, we do not believe the fair price of our shares to be $3.70 or anything close to that, but we also understand that the sentiment in the capital market is currently very bearish for the reasons I mentioned before.

And we felt it was important to be practical and necessary to raise a small sum at this juncture to improve our defensive and offensive posture. To that end, we limited supply at these levels. And while we could have taken a lot more capital, we decided to restrict for the most patient and supportive investors, we do not anticipate much of the stock to be in the market anytime soon.

It is phenomenally allocated. We believe what is also have done the accretion dilution benefit associated with raising these funds will far outweigh and their benefit to shareholders.

Lastly, investors should consider that in accepting these funds into our treasury, and we're able to attract world-class investors to invest in this round at a time when the concept of the bought deals which unheard of, very few are happening, if any.

We are pleased to announce that the lead orders in connection with the offering are from a large international sovereign wealth fund, in fact, one of the world's largest such funds as well as Hong Kong business man, Li Ka-shing and his partner [indiscernible]

The financing also included orders from a large multibillion-dollar Canadian pension fund and another award-winning multibillion dollar asset manager, who is very much known for investing in top tier management teams.

Where all shareholders should feel very confident and reassured that their company has not only been enhanced from a defensive and offensive perspective, but it has also done so while lifting the support of extremely powerful and supportive institutions who now have a reason to further support in back well. We have gone from strength to strength.

The company intends to use the net proceeds of the offering to fund growth initiatives, including internal capital allocation opportunities with high IRR as well as potential future acquisitions in the areas of physician acquisition, higher margin specialty clinics and executive health opportunities.

We are deeply appreciated to Mr. Li Ka-shing and one of the world's leading sovereign wealth funds for their support of this financing initiative.

With that introduction, I would now like to turn the call over to our CFO, Eva Fong, who will review the financials for the first quarter of 2022. I will then come back and provide further commentary on how our business units and our future outlook. Thank you.

[Eva Fong, executive]

Thank you, Hamed. I'm pleased to report that we have very strong results for the first 3 months ended March 31, 2022. Our first quarter results were as follows: WELL achieved record quarterly revenue of $126.5 million in Q1 2022 compared to revenue of $25.6 million generated during Q1 of last year, an increase of 395% driven by acquisitions during the past year and organic growth.

WELL achieved record adjusted gross profit of $69.4 million in Q1 2022 compared to adjusted gross profit of $10 million in Q1 2021, representing an increase of 591%. WELL achieved a just gross margin percentage of 54.8% during Q1 2022 compared to adjusted gross margin percentage of 39.3% in Q1 of last year.

The increase in adjusted margin percentage is driven by the addition of higher-margin CRH and MyHealth acquisitions as well as an increase in Virtual Services revenue over the past year. Adjusted EBITDA was $23.5 million for Q1 2022 compared to adjusted EBITDA of $0.5 million in Q1 of last year. Adjusted EBITDA was positively impacted in the quarter by healthy EBITDA margin in the company's omni-channel patient services businesses.

Adjusted EBITDA attributable to WELL shareholders was $16.1 million for Q1 2022 compared to adjusted EBITDA attributable to WELL shareholders of $0.5 million in Q1 of last year. Adjusted net income was $8.6 million or $0.04 per share in Q1 2022 compared to adjusted net loss of $2.4 million or $0.01 loss per share in Q1 of last year.

Free cash flow attributable to WELL shareholders as defined by shareholder adjusted EBITDA minus cash taxes minus cash interest costs and minus CapEx was $11.8 million Q1 of -- Q1 2022.

In terms of our segmented reporting, omnichannel patient services accounted for 70% of total revenue in the quarter, WELL Virtual Services was 30% of total revenue in Q1 2022.

Omnichannel patient services revenue increased 657% to $88.4 million in Q1 2020 compared to $11.7 million in Q1 of last year. Omnichannel patient services includes primary care, CRH and MyHealth. Primary care revenues increased 38% to $16.1 million in Q1 2022 compared to $11.7 million in Q1 2021.

First quarter is generally a seasonally strong quarter for our primary care business due to higher patient volumes in the winter month. Also Q1 tends to have higher complex care billings in British Columbia, which are typically done earlier in the year.

In Q1 of 2022, CRH achieved revenue of approximately $48.2 million compared to $0 in Q1 2021 as we had not yet acquired CRH in the first quarter of last year. On a sequential quarter-over-quarter basis, CRH's revenue increased 2% from $47.1 million in 2021.

The first quarter in CRH seasonally weakest quarter because many patients with commercial insurance plans tend to have at those endoscopic procedures in the second half of the year when the deductibles have generally been mapped. This year, the seasonal decline in CRH business was less impactful as compared to primary's due to seasonality that being somewhat tempered by post-COVID pent up demand . The seasonality effect were also offset by the contribution from the acquisition of Utah Anesthesia, Jasper Anesthesia Care Associates, Greater Connecticut Anesthesia Associate Greater and increased ownership position of Western Carolina Anesthesia Associates.

CRH's core business is performing as expected with strong case load and stable per unit economics. CRH completed over 117,600 anesthesia cases and sold over 2,100 O'Rega units in the first quarter.

In Q1 2022, MyHealth achieved revenue of $24.2 million compared to $0 in Q1 2021 as we had not yet acquired MyHealth in Q1 of last year. On a sequential quarter-over-quarter basis, MyHealth revenue grew 4% compared to $23.2 million in Q4 2021, which is generally in line with our expectations given seasonality factors.

Virtual Services revenues increased 174% to $38.1 million in Q1 2022 compared to Virtual Services revenue of $13.9 million in Q1 2021 and increased 22% quarter-over-quarter when compared to Virtual Services revenue of $31.3 million in Q4 2021. WELL ended Q1 2022 with a solid balance sheet. As at March 31, 2022, WELL have cash and cash equivalents of $36 million.

During the quarter, we made loan repayments of $29.8 million. We thought that it was a prudent measure to bring down our total amount of debt. As of March 31, 2022, the total loan amount under both the CRH and MyHealth credit facilities is approximately CAD 260.5 million. I'm pleased to report that the company is up compliant with all components related to its credit facilities.

In terms of our share capitalization, as of May 11, 2022, WELL have 235,167,058 fully diluted securities issued and outstanding, WELL have also substantially increased its revenue and EBITDA on a per share basis, indicated that the company's capital allocation and organic growth program is delivering real value to shareholders.

For instance, WELL's revenue per share went from $0.157 per share in Q1 2021 to $0.60 per share in Q1 2022 on an undiluted basis. Meanwhile, adjusted EBITDA attributable to all shareholders per share increased from $0.03 per share in Q1 2021 to $0.077 per share in Q1 2022. This reflects an over [ 2600% ] increase in this all-important metric.

Our M&A program has slowed down compared to last year as we followed a disciplined capital allocation strategy. We have done 2 touching deals in Q1 2022 as follows. Effective Jan 1, 2022, CRH increase gives ownership of Western Carolina Anesthesia Associate from 15% to 51%.

And as a result, we now include WCAA in our consolidated revenue. On March 7, 2022, CRH entered into an asset contribution and exchange agreement to acquire 100% interest in Greater Connecticut Anesthesia Associates, a gastroenterology anesthesia services provider in Connecticut that is expected to generate more than USD 3 million in shareholder EBITDA. That is my financial update, and I turn the call back over to Hamed.

[Hamed Shahbazi, executive]

Thank you. Eva. I will now review our overall patient visits for the quarter. I'm pleased to report that WELL achieved a total of 1,064,987 patient interactions in Q1 2022, representing an annual run rate of 4.26 million patient interactions.

Total omnichannel patient visits in Q1 2022 were 772,093, representing a year-over-year increase of 62% from 477,325 in Q1 2021. On a quarter-over-quarter basis, total omnichannel patient visits increased 10% compared to 700,359 total omnichannel patient visits in Q4 2021.

During the first quarter 2022 in-person patient visits at our clinics and businesses accounted for 37% of the total business, while telehealth patient business, which include both telephone visits and virtual care patient basis represented 63% of total visits.

In-person patient visits at our clinical business has accounted for 285,260 patient visits in Q1 2022, representing a year-over-year increase of 100% compared to 142,944 in-person patient visits in Q1 2021. Telehealth patient business, which included both telephone visits and virtual care patient visits accounted for 483,833 patient visits in Q1 2022, representing a 46% increase from 334,381 telehealth visits last year in Q1 2021.

In addition to the patient visits, MyHealth conducted 149,906 in-person diagnostic visits while Wisp completed 142,988 asynchronous patient consultations. We're pleased to report that all of our business units are executing very well, otherwise, it would not be possible to beat and raise as we have been doing for a number of quarters in a row now.

I'd like to speak a bit about our outlook and for the rest of this year and for 2022. WELL's outlook for 2022 remains strong and resilient. The company's performance is very positive across all its business units and for the entire company as a whole. The cash flows generated by the company will continue to be reinvested in the business and allocate in a disciplined manner, which may come in the form of further acquisitions and to accelerate organic growth.

And if the situation calls for it to continue to look at share buybacks as well. As a result of WELL's strong organic growth profile, the company is increasing its guidance for 2022 annual revenue to exceed $525 million from the previous guidance of over $500 million in annual revenue.

Furthermore, WELL expected to generate adjusted EBITDA approaching $100 million in 2022. WELL remains on track to achieve its goals for 2022 to: one, build out and refine its practitioner enablement platform and deploy services both internally to WELL's health care practitioners as well as offer services to practitioners outside the company; two, achieve organic growth across all its operating units; three, follow a disciplined capital allocation strategy, continue to grow and activate our business; and four, WELL expected to be profitable for the full year 2022 and on an adjusted net income basis.

As a rule of thumb, the company aims to have the sum of its adjusted EBITDA margin percentage plus its organic growth percentage to exceed 30% in 2022. This is sometimes referred to as the rule of 30. For instance, in Q1, we exceeded the rule of 30 with organic growth rate of approximately 15% and adjusted EBITDA margin of 18%.

The sum of these 2 percentages is 32%. It will be a key goal for us to continue to generally be in line with rule of 30 for the entire year and beyond. Despite the current geopolitical inflationary and turbulent economic environment, the company does not see any material influences or challenges that would have impair its ability to deliver on its strong outlook in 2022. I mean if the key variables inherent in the execution of WELL business are firmly in its own grasp and not dependent on outside factors.

I'll speak to some commentary on some of our various business units now. In Canada, WELL is quickly expanding on what it has built in most consequential network of non-governmental healthcare assets across the country with significant operations and interoperability between its outpatient clinics EMR, Diagnostics, and telehealth businesses.

Primary clinic business is proving to be resilient thus far, however, we're expecting a slight slowdown as we enter the summer months, where there tends to be fewer patient visits in the warmer months and physicians generally take vacation time in the summer. And any patient volumes are expected to increase again in the fall and winter months in the latter part of the year.

Keep in mind, this is all included as part of our guidance, and this is entirely within the seasonal context of the business. We are witnessing MyHealth volumes increasing in Q2, which tends to be the seasonally strongest quarter for the company. As I mentioned on our previous quarterly call, we have started the creation of a new provider-focused business unit, which combines the divisions of the WELL EMR Group, DoctorCare and digital apps businesses.

This new consolidated group will focus on bringing together the company's tools and effectively bundling them to help simplify and support health care practitioners. The group would include companies and brands such as CognisantMD, Aware MD, Intrahealth, OSCAR Pro, DoctorCare and Doctor Services Group.

Within 1 out of 5 doctors in Canada is being served by WELL's providers. We believe the opportunity to provide integrated offerings will allow WELL to leverage its unique platform feature to continue to grow its market share. It's something that I'd like to speak a little bit about. The Ocean platform by CognisantMD, it's something that I like to speak a little bit about.

We acquired Cognisant back in Q4 for 2021, and we are seeing it continue to flourish and become the dominant player in digital patient engagement in Canada. Here is just some of their accomplishment only since the start of the year, this year, 2022, just a few months ago.

Since January 1,'22, over 800 new physicians have started using the Ocean tools for patient care and referrals. Within 1,200 physicians have added online patient booking on Ocean, which equates to roughly 1.4 million more Canadians having access to online booking, 1,100-plus physicians have added patient messaging on Ocean, making it easier for patients to connect with their health care provider. And over 43,000 new referrals have been sent on Ocean monthly with real-time updates for patients.

This is improving transparency and reducing wait times for patient care. Overall, close to 10,000 physicians now use Ocean's tools for patient care and referrals in Canada, and the company has made approximately 640,000 referrals overall. Please keep in mind that there are only about 80,000 physicians in the entire country for all subspecialties.

These figures are accelerating as we believe Ocean is quickly becoming de facto e-referral for the country as it currently is in Ontario. We know that many provinces are currently prioritizing e-referral projects and planning due to the important nature of this function for public health and safety and Ocean's platform is extremely favorably positioned to win this arena.

Meanwhile, in the United States WELL strategy to focus on key specialty areas such as gastroenterology when it's helped and primary care with a focus on specialty niches such as mental health, continues to gain momentum. WELL's patient services business in the U.S. includes CRH. We're very pleased with CRH's results in Q1 and thus far in Q2. Here are a few more details.

We are expecting Q2 to be seasonally better than Q1, and we're expecting an even stronger back half of the year when volumes for endoscopic procedures increase, as noted by Eva earlier. We experienced an acceleration in organic growth, which increased to 10% in same-store sales on a year-over-year basis. We believe this elevated growth was as a result of pent-up demand due to COVID disruptions -- previous COVID disruptions and our team's excellent execution in being able to support that elevated demand.

We believe the elevated demand and growth may last for at least another 1 to 2 years and perhaps even longer depending on the market. Also, we had a good start to our hemorrhoid banding clinic program. We are still expecting a minimum of 7 to 8 clinics by the end of the year and still believe banding is a $50 million to $100 million and more potentially revenue business just in the United States over the long term with strong and resilient margins.

This is an area of key focus as we believe the intellectual property of our patented and FDA-approved banding device positions us to be the market leader in clinical services for hemorrhoid and lower digester related matters. We believe the key here is education, given that the extremely high level of clinical success patients are having with banding is not well understood enough.

Most patients and many physicians are not aware of how successful these tools are and how strong patient outcomes have been. As such, we're experimenting with a number of different ideas to educate the market about banding.

We've launched a number of digital tools, online education initiatives and are telling the story in a more forceable and effective way than ever before. The key here is that we believe we can grow the market and take a share out of the multibillion-dollar U.S. hemorrhoid care and treatment market. The 2 virtual services businesses in the U.S. operated by WELL include Circle Medical and Wisp.

Based on March '22 results, the combined business has generated positive adjusted EBITDA with a revenue run rate exceeding CAD 100 million. It is expected that the combined businesses will exceed CAD 130 million on a run rate basis later this year.

Circle Medical year-over-year growth in Q1 2020 was driven by patient visits increasing by 343% on a year-over-year basis. The number of practitioners working with Circle Medical Q1 increased by 206% over the same period.

Similarly, WELL's growth in Q1 2022 was driven by an 83% year-over-year increase in asynchronous patient consultations, driving significant incremental e-pharmacy. Overall, we're pleased to note that WELL's pure virtual health businesses are profitable. If you combine our Tia Health Canadian business with our Circle and Wisp businesses, they're growing extremely quickly, and they are profitable on a combined basis. I don't believe any other virtual care provider in the world operating at scale can currently say that.

And now an update on our ESG program. In 2021, WELL developed and launched our ESG program that is an integral part of our growth strategy and reflects our ongoing commitment to delivering on our mission, vision and purpose.

In 2022, well, WELL will embark on an ESG strategy implementation, including publishing our inaugural ESG report and establishment of our ESG Committee comprised of key management to oversee the delivery of our ESG commitments. Our emerging ESG strategy established a number of ESG priorities, which support our overall growth strategy.

One, safeguarding patient data by elevating the privacy and security posture of patient data through our risk management processes. Two, digital practice enablement by supporting practitioners to provide timely, accessible and high-quality patient care while reducing environmental impacts through our use of digital solutions; three, a healthy place to work by holding a culture of respect, prioritizing health and well-being and taking targeted actions to support diversity, equity and inclusion within the workplace environment. And four, disciplined governance and risk framework that provides strong and effective corporate governance, oversight and transparency across our business activities. WELL is well-diversified, fast-growing digital health and tech-enabled health care company delivering on a strong ESG mandate and building societal value.

WELL is a purpose-driven business that aims to transform the world for the better. And as such, the company has embarked on an ongoing ESG program. This is not a box-checking exercise for us. We mean business with our ESG program. The company plans on publishing a report in the coming weeks, highlighting the strategy, reporting initiatives and its targeted actions and demonstrating accountability to these commitments.

In closing, I want to thank all of you 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 it provides us with the funding that patients needed to pursue our goals.

I would also thank -- like to thank all senior management team and all of our employees and contractors for their tremendous efforts. In particular, I would like to thank our team of health care practitioners and our frontline workers who continue to keep our clinics open and provide unbeatable care. They remind us every day why we are here and why we are here to support that.

Thank you. And with that, we'll open the call to questions. Operator, please help us with questions.

[Operator]

[Operator Instructions] Your first question comes from Christian Sgro of Eight Capital.

[Christian Sgro, analyst]

First one here is a 2-part on the guidance. The first quick question is, does the revenue guidance for the year include any future unannounced M&A? And then maybe the second part of the question is just on when you issued it to now which business units have outperformed or contributed most of the increase.

[Hamed Shahbazi, executive]

Thanks, Christian. Yes, the -- well, I'll start with the question around contribution. I would say that our digital, our U.S. business -- while we're seeing very good performance from all of our business units. Our U.S. businesses, I think, are definitely leading in terms of driving that revenue enhancement, particularly the U.S. digital businesses, which, as you know, has had very strong organic growth.

But as I noted here, CRH has also seen some very strong organic growth as well. And I would say, we have minimal M&A included in that revenue guidance.

[Christian Sgro, analyst]

That's helpful. And the second question I asked is on the M&A strategy and the offensive posture you spoken about. Can you touch on it a little bit on maybe what acquisition targets you think like the best? And then as a follow-on there, we've seen public sector multiples come down, but maybe you see multiples come down on the private sector?

[Hamed Shahbazi, executive]

Yes. So listen, I think in terms of the types of assets, they're not going to be out of scope to our current business. As I mentioned before, we like our -- we really like our business in terms of the current scope, and we're just getting deeper in and we're using the tuck-ins to complete white space regionally in some specialty areas or to gain additional traction in areas that we think are important.

We continue to really believe primary care is a great place. We want to have more exposure to primary care. While the per-unit economics are a bit lower in primary care, we believe those providing economics are likely on the way up as a result of the scarcity factor that the WELL's currently seeing in primary care, especially here in North America. And also, you start your journey in health care with your primary care provider so they end up controlling and driving a lot of economic output.

And I think a big part of unlocking the value of the opportunity that the WELL has is not only being able to start that journey but also fulfilling different elements of that journey. And so primary care is interesting to us as our specialty care areas, I'd say, in the MyHealth business or the CRH business.

But I think what you're going to be seeing is for us to really focus on opportunities where we are buying at a much more accretive level given what we're seeing in some of these multiples, which is, I think, a key to your second question. We are seeing multiples decline, and this is one of the reasons why I wanted to maintain an offensive posture.

With the environment out there, given just how bearish and how elevated risks are, a company like WELL, would have needed to be very defensive in this arena just even in a matter of weeks and months, the situation has deteriorated quite a bit.

The financing that we announced yesterday really positioned us to not only have that improved resilience but to also now be on an offensive posture. And I think that, as I mentioned, we will see very strong results as part of how we allocate this capital, which we'll obviously be cautious on the photos always.

[Operator]

Your next question comes from David Kwan of TD Securities.

[David Kwan, analyst]

Good commentary there, Hamed, and I appreciate that. I was curious as it relates the primary care that you were just talking about. Obviously, there's been a lot of media reports on the ongoing shortages at the family doctors, especially out here. Are you finding more doctors looking to move their practices to one of your clinics so they can do less admin work and kind of focus more on patient care as well, maybe doctors that are looking to keep their own practices, but maybe leveraging your suite of solutions to help increase the automation and kind of reduce the manual work the churning, et cetera, et cetera?

[Hamed Shahbazi, executive]

Yes, absolutely, David. That is, I think, a clear unmistakable trend. And we don't acquire small clinics anymore. We absorb them. We recruit them. We go to single practitioner clinics or various small clinics, and we don't offer them capital to join us, we demonstrate the benefits of joining us and they're joining us.

And that's, I think, something that likely is not really priced into our story, just how powerful that idea is and the kind of flywheel that we're starting to see emerging from doctors being acclimated to our tools trusting well because they use our tools and then understanding that, "Hey, I don't have to run this business anymore. And I could probably make as much, if not more, because someone else can run it in a more efficient and practical way for me.

And so I think this is a trend I often talk about as a corporatization trend as opposed to a privatization trend. Much has been made of talking about privatization in Canada, about 2 tiers of medical availability. I think the more interesting trend is the fact that practitioners don't want to run these businesses anymore and are looking for corporate support. And I think WELL is absolutely the best positioned company to capitalize on that trend.

[Christian Sgro, analyst]

That's helpful. And one other question. Just as it relates to the Circle and we also, we've seen some pretty strong growth there. Your guidance just roughly 30% growth in the balance of the year. How should we think about that growth kind of beyond that, like looking at say, 2023?

Like how long do you think we could see these very high growth rates? And would I assume that you guys would probably look to still run these businesses either on a breakeven or a profitable basis?

[Hamed Shahbazi, executive]

Yes. I mean listen, I think what's really remarkable about their growth, about the growth of these assets and it's all organic, and it's been so capital efficient, right? And I just don't know of anyone else that is running these businesses as efficiently as our operators currently are.

I note that our operators of Circle believe that we are currently here in this month in May on likely a USD 50 million revenue run rate. So we're not far from exceeding $100 million ARR business on a run rate business and with this is closely behind. And I think our CACs, our LTVs are strong.

I think that one of the really exciting thing that we're seeing is a real emphasis on supporting the patient. What I love about what Circle is doing is that they're acquiring through niche vehicles, but they're converting into customer patients into being long-term primary care patients.

And I think that's really the winner. I mean there's a lot of people out there trying to acquire patients to provide a medical consultation or maybe a mental health visit to try and offer them some kind of interventional treatment. But the idea of being able to convert those patients into long-term primary care longitudinal care patients, I think, is really the key.

And I think that's -- if you don't do that, I think it's tough to win out there. And we've seen from other companies that have had tough and has delivered tough guidance lately that they're kind of dilemma of their -- the acquisition costs out there. And I think the key is your LTV. The key is what are you really doing with those patients once you acquire them? And I think we've got really the best posture there. And so that's why I'm so hopeful about this business moving forward.

[Christian Sgro, analyst]

I think I know which company you're talking about. I don't need to mention it, but I appreciate the color, and good luck.

[Operator]

Your next question comes from Jerome Dubreuil of Desjardins.

[Jerome Dubreuil, analyst]

First modeling question on your comment about the possible minimal additional M&A and definitely now more possible with the additional dry powder that you have. You cited areas of interest being physician acquisition, specialty clinics and executive health opportunities. So we should probably model future opportunities in the omnichannel business segment, right?

And then my second question in terms of the reopening, you mentioned that there could be elevated demand for 1 to 2 years, definitely consistent with what we've seen from industry publications. I wonder what type of excess capacity you currently have within your assets that could make you capitalize on this opportunity?

[Hamed Shahbazi, executive]

Yes. Thanks for the question, Dubreuil. As far as modeling our M&A, I think we have dramatically reduced our M&A. And as Eva discussed, we only had a couple of small tuck-ins to speak of in this quarter. And I think that kind of cadence is reasonable and maybe even lower, depending on how big the tuck-ins are.

But I think that in general -- and again, it just depends on how strong and accretive these acquisition opportunities look like. I mean we have a number of things lined up. They are spread across primary specialized care and virtual services. So it's tough, I think, to kind of dig into all the permutations of what it could look like.

But I think if you were to look at recent M&A activity and model accordingly, that would be probably a reasonable approach. No doubt, Pardeep can give you some additional perspective as he's working with analysts.

On the elevated demand question, I think -- listen, seeing 10% same-store sales growth in CRH has been very good. And I do think that the biggest difference, I think that we're seeing right now is normally if you wanted to schedule a case, a colonoscopy and accompanying anesthesia, before you could do it within a few days.

And now they're scheduling 2, 3 months in advance. This has the effect of obviously making sure that we have strong timetables and queues in terms of patients and making sure that we're very methodical and efficient in terms of tackling the cases that are there. But it also minimizes your no shows, right?

Every business, every health care business does deal with no shows. And if you know that you're not going to get another opportunity to have that consultation for months, the chances that you will not show up go down dramatically. That's one of the things that we've seen.

So I think there are a number -- and listen, our team has really executed. There's a number of things we've done in terms of workflow. We're always optimizing our business. We're always doing everything we can to improve the different aspects of it. And that's certainly one of the reasons why we did this acquisition because it's not just virtual -- virtual care is not the only way health care digitization and modernization shows up, all aspects of health care, all aspects of preparing practitioners enabling them from a back office perspective and empowering them to produce results and to care for patients are kicking up these tools.

And I think that will continue to be something that we will work on in order to ensure that we see elevated performance from CRH and those practitioners.

[Operator]

Your next question comes from Justin Keywood of Stifel.

[Justin Keywood, analyst]

I had a follow-up question on the Wisp medical asset. Just given the Supreme Court case going on in the U.S., [indiscernible] and some potential ramifications for that in women's health. Is that business preparing for any type of change in demand? I know there provide some contraception products and related services? Or how do you see that shaping up?

[Hamed Shahbazi, executive]

Justin, I think it's a very on-point question. The team actually at Wisp is working on a number of different product opportunities. And I do believe that there are some -- likely some benefits in terms of with being in a position to better support women in the United States as a result of some of these changes.

And we have tremendous connectivity with our patient base today. They trust us. And so we are focused on reproductive health. And I believe that there are a number of different products and services that we could be adding. And I know, I don't want to take the wind out of the sales of any launches or say anything, but just I will say that there is tremendous product development activity taking place, and I do expect that to be a catalyst.

[Justin Keywood, analyst]

Great. And of the expected run rate for the U.S. virtual businesses, are you able to sparse out what the Wisp business is run rating at?

[Hamed Shahbazi, executive]

I believe -- I don't know if I have where we're at in May, but I believe we were over USD 40 million comfortably. This is likely where we're at right now.

[Operator]

There are no further questions from the phone lines. I will now turn the call back to Mr. Shahbazi for closing comments.

[Hamed Shahbazi, executive]

Thank you all for your questions and everyone for your attendance today. And again, thank you for all your support of WELL, its management team and all the practitioners and employees that are out there every day caring for patients. We appreciate your support and look forward to speaking with you next quarter.

[Operator]

Ladies and gentlemen, this does conclude your conference call for today. We would like to thank you for participating and ask you to please disconnect your lines.