WELL Health Technologies Corp

TSX:WELL

Earnings Call Transcript 2024-Q1

[Operator]

Welcome to the WELL Health Technologies Corp. First Quarter 2024 Financial Results Conference Call. My name is Sylvie, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded.

I will now turn the call over to Tyler Baba, Manager, Investor Relations. Please go ahead, sir.

[Tyler Baba, executive]

Thank you, operator, and welcome, everyone, to WELL Health's Fiscal First Quarter 2024 Financial Results Conference Call for the 3 months ended March 31, 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.

Portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws, including future-oriented financial information and financial outlook information. These forward-looking statements involve known and unknown risks uncertainties, assumptions and 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 today's press release and in our management's 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 any such statement is based, except if it is required by law.

We may use terms such as adjusted gross profit, adjusted gross margin, adjusted EBITDA, shareholder EBITDA, adjusted net income, adjusted net income per share 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 definition 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, 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.

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

[Hamed Shahbazi, executive]

Thank you, Tyler, and good day, everyone. We appreciate everyone for joining us today. We're extremely pleased to be with you and discuss Q1 2024, a quarter in which we achieved our 21st consecutive record-breaking revenue quarter. We're also pleased to note another record, this was a record-breaking net profit performance in any Q1 period in terms of IFRS net income as well as adjusted net income.

As the first conference call for fiscal 2024, we believe this is an important opportunity to update our guidance for revenue and EBITDA while rolling out brand new guidance for free cash flow generation and provide commentary around our improving cash flow per share metrics, demonstrating the strength of our platform and the momentum of our business. The first quarter of 2024 exceeded all expectations, and we're proud to report that we've begun the year with an intense focus on enhanced profitability and capital efficiency. And are happy to report an 11% year-over-year improvement in the all-important free cash flow available to shareholders per share metric. I will speak more to this later as it is thematically very important to today's call.

You see, we believe we reached an inflection point in the history of the company, where due to the hard work and dedication of our team members and care providers and especially due to our hard work in Q1 2024, where we reduced a significant amount of costs. We can now reduce our share issuances significantly and instead leverage our own cash flow to grow our business, as well as attract and retain the best and brightest people. You may have noticed that we recently started using our stock buyback or normal course issuer bid.

While the number of shares we're buying on a daily basis are not very material as compared to our overall float at roughly $10,000 per day. We want to make sure shareholders understand that this is the beginning of a sustained and purposeful pattern that speaks to optimizing our share structure and reducing share issuances of all kinds, including stock-based compensation, while growing and optimizing our free cash flow available to shareholders. This year, we're absolutely determined to deliver our best cash flow generation performance of our history as well as the lowest amount of dilution since I started the company just over 6 years ago.

While our optimism does stem from a lot of hard work on cost reduction and improved integration, it does also come from our sustained and elevated organic growth. We're pleased to report that we achieved organic growth of 13.5% year-over-year with approximately 3.5% contribution from absorptions. As such, you will see over time that our stock buyback is symbolically and thematically very important as it ushers in a new period that we expect to be the norm period where that would be characterized by sustained growth in cash flow and improvements in reducing and then reversing dilution.

Before I get into the financials, I will first review some key operational metrics. At the end of Q1 2024, 3,900 WELL providers and clinicians were delivering care across our physical and virtual clinics. In addition, there are more than 36,000 providers benefiting from our SaaS and Technology Services that is more than 1/3 of all providers in the country, which we believe will continue to increase materially over time.

WELL achieved a record 1.3 million patient visits in Q1 2024, an increase of 34% as compared to the previous year and representing 5.2 million patient visits on an annualized run rate basis. Canadian visits grew by 45%, while U.S. visits grew by 23%. Meanwhile, total patient interactions increased to a total -- to a record 2 million interactions in Q1, an increase of 43% as compared to the previous year.

Turning to our guidance for 2024 due to the strength that we're seeing, we're pleased to increase our annual revenue guidance to between $960 million and $980 million. This increase in guidance reflects the recently absorbed 10 new clinics from Shoppers Drug Mart. We're also improving our annual adjusted EBITDA guidance to be in the upper range of the $125 million to $130 million range we provided last quarter.

In support of our operating plan for 2024, we have strategically implemented comprehensive cost-cutting measures, including a streamlined approach to staff restructuring, increased utilization of AI and technology for process improvement and optimization, consolidation of suppliers and tighter integration of our business units. These initiatives have not only strengthened our operational efficiency, but resulted in millions of dollars of annualized cost savings, which really permit us to continue our strong growth and limit our dilution.

In addition, we're providing new additional guidance for improving free cash flow available to shareholders to over $55 million in 2024, which would reflect an increase of 30% from $42.4 million in 2023. Eva will provide some additional color on this later in the call.

But before I turn the call over to her, I'd like to highlight some key themes. One, the strategic alterative process for our U.S. digital health asset, our clinic absorption model in Canada; and three, the success of our clinic transformation program.

Let's first talk about the strategic alternatives for Circle and Wisp. Last quarter, we indicated that we've begun considering strategic alternatives for Circle and Wisp. We're pleased to report that we've hired 2 different global banks as advisers for each of Circle Medical and Wisp to help us with this process, and we believe that we should have important updates on this by the end of the year.

You may be asking why are we seeking strategic alternatives for 2 successful high-growth businesses. Our primary reason is that WELL has a call option for both of these businesses, which provides us with several alternatives, including acquiring the remaining ownership of the businesses, seeking an IPO, or selling the businesses. Call options for both businesses extend to and conclude in the Q4 time frame of this year.

The second reason for seeking strategic alternatives is that we do not believe that capital markets are signing a fair value for these 2 assets. Both Circle and Wisp are high-growth businesses that are operating at lower EBITDA operating margins than the rest of WELL due to their maturity, while investors today are primarily valuing the entire WELL business as a multiple of EBITDA. Hence, both Circle and Wisp are essentially hidden within the larger WELL company valuation. We believe that unlocking the value of one or both of these assets could result in a significant cash benefit to WELL's shareholder, which we will use to reduce our debt, issue a special buyback and/or allocate funds into new cash-producing businesses in the Canadian market, where we have a greater synergy potential given our market leadership.

As such, we believe this could be -- prove to be a positive catalyst for WELL and returning value to WELL's shareholders. I want to reiterate that we are very pleased with the success of both, Circle and Wisp.

Recall, when we announced our agreement to acquire a majority position in Circle in September of 2022. It was at an approximately [ USD 5 ] million revenue run rate in U.S. dollars and this year Circle is expected to achieve approximately USD 100 million in revenues.

Meanwhile, Wisp had an approximately $30 million revenue run rate in October 2021 when we acquired a majority stake in the company and this year is expected to achieve around USD 76 million in revenues or approximately CAD 100 million, demonstrating unquestionable value creation through our capital allocation strategy and execution.

For the second theme, I'll provide an update on our clinic absorption and acquisition program in Canada. WELL's current pipeline of new clinic opportunities consists of almost 40 clinics under an LOI agreement, of which 10 of these clinics would be actionable under our clinic absorption model, where we absorb clinics into the WELL network and the remaining 30 clinics would be under our regular M&A bolt-on program. Under the clinic absorption model, we are acquiring clinics for nominal cash costs in the range of less than 0.02x revenue multiple compared to our regular M&A program where we may pay up to 0.5x revenue multiple or in the range of 3x to 5x EBITDA.

The clinic absorption model is a very unique opportunity for WELL. Under this absorption model, we take over the lease and the staff of the clinic and the doctors join our network. There's minimal upfront capital costs in most of these cases, but there can be some relatively minor costs to secure data protection and improve IT. We're able to absorb these clinics for nominal purchase consideration because the doctors are facing such significant technology challenges, administrative burdens that -- they don't want to run their own clinics and just want to focus on providing care.

We believe the consolidation and digitization of over 20,000 primary care diagnostic allied health and longevity clinics across Canada is a once-in-a-lifetime opportunity with over 175 clinics operating in 97 facilities across Canada, WELL is the clear market share leader. Yet we just represent just shy of 1% market share of the $35 billion market opportunity for physician spending, which is a key component of the $330 billion spent every year in all health care costs across Canada.

We believe that the Canadian market continues to be an enormous untapped opportunity for WELL and very much for being a land-grab situation. We have conviction that we can grow our Canadian business to multiples of its current size in the near future.

The third theme is the success of our clinic digitization and transformation program. When we acquire or absorb primary care clinics, they're typically operating at 1% to 3% EBITDA margins. The large Manitoba clinic and the MCI, Ontario clinics that we acquired in Q4 were actually operating at a negative EBITDA margin.

During the clinic transformation process, we generally implement a number of technology solutions and processes including online booking, waiting room automation, workflow optimization, accounting shared services, virtual care, billing improvements as well as our AI suite of products, which are unmatched by any market participants. Our goal is to get these clinics to operating in the 5% to 10% EBITDA margin range within the first year and to over 10% margins within 18 to 24 months. This is not easy. Our clinic digitization and transformation program is performing better than ever. The original cohort of 18 clinics in BC that we acquired from Dr. Frankel in 2018 is now operating at over 13% EBITDA margins. Comparatively, the cohort that we acquired in 2022 achieved over 10% EBITDA margins within 18 months and are now operating at over 12% EBITDA margins.

We are now very closely watching our 2023 cohort of clinic absorptions and acquisitions. Included in the 2023 cohort is the large Manitoba Clinic and MCI Ontario Clinics. Recall, these clinics were not profitable and caused downward pressure on our EBITDA margins in Q4.

I'm pleased to announce that the digitization and transformation efforts at these clinics is running ahead of plan. And as of today, both Manitoba and MCI and Ontario are now running at positive adjusted EBITDA. Going forward, we expect to continue to increase adjusted EBITDA margins at these clinics over the next year.

And with that, I'd like to turn the call over to our CFO, Eva Fong, who will provide some financial context I'll then come back and provide further commentary on our business units and outlook. Eva?

[Eva Fong, executive]

Thank you, Hamed. I'm pleased to report that we had very strong results for the 3 months ended March 31, 2024. I won't go into details of the financials as they are available on SEDAR+ and on our press release this morning. Instead, I'll touch on our new disclosure in the financial statement and MD&A and our plan to issue less shares this year.

First, on our new financial disclosures. At the beginning of this year, we solicited feedback from analysts, shareholders and capital market advisers on how we can improve our financial reporting disclosures.

Based on this feedback, this quarter, we have included adjusted EBITDA in our segment note in the financial statements. Also in our MD&A, we have added segmented adjusted gross profit and adjusted EBITDA for all our business units. We believe this will help investors better track margin developments around each line of business and determined that our margin changes as of the last year are more as a result of the blend with new M&A rather than a secular change in any of our margins.

Now on our plan to issue less shares this year. Last quarter, we indicated that we have a preference for preserving cash rather than issuing shares. We wanted to revisit this and advise that as Hamed noted earlier, we believe we have generally reached a fairly significant inflection point in how we think about our securities. Given the continued growth of our business as well as the successful cost optimization program, we started executing on in Q1, we will be favoring paying cash over share issuance or M&A purposes as well as looking to materially reduce our share-based compensation moving forward.

WELL experienced about a 10% share dilution in 2022 as a result of share issuance for all equity issuance, including share incentives for employees, earn-out payments, acquisitions and equity financing. Comparatively, our total share dilution declined to 4% in 2023 and we are expecting to reduce this by double-digit percentage in 2024. This is before consideration of our Normal Course Issuer Bid or NCIB buybacks which may be increased over time depending on any significant improvements to our cash flows and/or if we were to successfully unlock the value from 1 or more of our U.S. digital assets.

As of May 7, we have bought back 75,300 shares under NCIB. We are also switching our employee incentive programs to be more cash-based versus share based which we expect will result in a significant reduction in new share incentive grants in 2024 as compared to 2023. This again will result in a corresponding decrease in stock-based compensation expense this year compared to last year.

In terms of our earn-out commitment, in 2023, we settled approximately $29.4 million in earn-outs and vendor take backs, which was a 55% decline from $65.2 million in earn-out and vendor take backs resettled in the prior year 2022.

Looking forward in 2024, our current expectation is that earn-out payments will further decline by another 20% to approximately $23 million. In addition, this reduction in earn-out payments will have a favorable impact on reducing the amount of shares issued on earn-out payments.

It is also important to note that as of the end of Q1, we've already paid down the vast majority of our earn-outs for the year and are not planning significant share issuance for earn-out payments in the balance of the year. So with improving revenue, EBITDA and cash flow and while reducing our share issuance, this should result in an improvement in our per share metrics.

Looking at our balance sheet at the end of Q1 2024, WELL ended Q1 2024 with a solid balance sheet. As of March 31, 2024, WELL had cash and cash equivalents of $48.2 million. WELL continues to be intending and fully compliant with all covenants related with this 2 credit lines, JPMorgan in the U.S. and Royal Bank in Canada. The debt from the 2 credit lines was approximately CAD 303 million as of March 31, 2024. WELL's net debt to shareholder ratio for the 2 credit lines was 2.75x as at the end of Q1 2024, in line with 2.69x as at the end of Q4 2023. On a constant currency basis, the net debt to shareholder ratio actually remained unchanged compared to Q4 2023 at 2.69x.

We define net debt to shareholder EBITDA ratio as net debt, less cash on hand divided by adjusted EBITDA attributable to WELL's shareholders. We exclude convertible debentures from this calculation because convertible debentures are not included in our bank covenants. If we include our convertible debentures, which mature at the end of 2026, we will be at approximately 3.51x levered.

In terms of our share capitalization, as of May 7, 2024, WELL have 263,875,048 fully diluted securities issued and outstanding.

That is my financial update, and I turn the call back over to Hamed.

[Hamed Shahbazi, executive]

Thank you, Eva. Before I get into the individual business units, I wanted to elaborate on Eva's comments about reducing our share dilution. This is what I refer to as the fourth and most important key theme for today's call, our commitment to delivering improved shareholder value. The best expression for this commitment is closely looking at and tracking our per share metrics. While our revenue per share and EBITDA per share metrics have generally been favorable as a capital allocation company, we're quite focused on our cash flow per share available to shareholders. This metric is the gold standard in terms of delivering and exemplifying shareholder value.

We're pleased to report that in Q1 2024, we've increased cash flow per share available to shareholders to [ $0.0517 ] which is more than a 10% increase from the same period last year. This shows that while we have experienced some increases in share count, we've managed to grow our cash flow to overcompensate for this.

Moving forward, given that we have improved our cost efficiency in Q1 and are working to further reduce our dilution, we expect cash flow per share figures to increase materially throughout the year. In fact, we expect notable percentage increases in the next 3 quarters and more significant increases each year moving forward.

Simply put, we've reached an exciting inflection point with the company where our earn outs are decreasing, our cash flows are increasing and our share issuances are dramatically decreasing and eventually reversing. This has the effect of substantially improving shareholder value, contributing improved cash flow per share metrics.

I might add that's above dynamic that we just discussed about will be true irrespective of the interest rate environment. If rates start coming down, this will have the effect of increasing our cash flow even more, which will improve these figures. It also doesn't assume any progress or specific outcomes with respect to our strategic alternatives initiatives that we discussed earlier in the call. If any of those initiatives results in liquidity for the company, our cash flow would improve as we would likely significantly reduce our interest costs by paying down more debt and buying more stock.

In the past, we had a strategy that relied move heavily on growth through acquisition and structuring our deals and earn outs with the help of share issuances, but now that WELL's cash flows have improved, organic growth has sustainably increased and the company has matured, we are in a phase of the company where we have a preference for using cash, then shares for acquisitions, earn outs and employee incentive programs. Of course, that preference is also partially [ readed ] to our own stock price. And at the moment, we feel that we are deeply undervalued given our operational performance as compared to our peers.

I will now provide some specific commentary on our individual business units. First, our Canadian Patient Services business. which is now overseen by Dr. Michael Frankel, our Chief Medical Officer. This division includes our primary care business and our WELL Diagnostic Centers previously referred to as MyHealth. WELL owns and operates the largest network of clinics across Canada with physical facilities in the 5 most popular provinces of Canada, namely Ontario, Quebec, BC, Alberta and Manitoba providing multiple services, including primary care, diagnostic, Allied Health, Specialty Care and longevity medical services. Performance of our Canadian Patient Services business has been exceptionally strong, generating $75.7 million in revenue in Q1, an increase of 49% from the previous year and is ahead of our previous guidance of achieving $300 million in 2024, which had already reflected a 30% increase over 2023.

Canadian Patient Services generated adjusted EBITDA of $11.3 million for the quarter, representing 15% EBITDA margin and an increase of 43% from Q1 of last year. In addition, EBITDA generated in Canada primarily goes to shareholder EBITDA given the small noncontrolled interest that we have in the Canadian market.

Let's look a bit closer at the primary care segment. Our primary care business unit includes family practice, walk-in clinics, virtual care, allied health and longevity services. The company's primary care business unit generated revenue of $45.3 million in Q1, an increase of 83% as compared to the same period last year. This increase relates primarily to the acquisitions of MCI Ontario and Alberta-based medical clinics and the large Manitoba Clinic as well as strong organic growth of 35% which includes same clinic growth as well as impact from our clinic absorption program.

Our outlook for primary care continues to look strong for the second quarter and beyond, notwithstanding the transformation and digital work that we will be doing on the acquired Shoppers Drug Mart clinics, which will have a planned and temporary negative impact on our P&L.

As we go through the process of digitizing and modernizing these clinics, we expect them to be profitable in 2024. Our longevity business has had a great start since announcing this in Q4 of last year. We've already generated close to $1 billion in new higher-margin revenues in Q1 2024 as compared to $6.6 million in Q1 2023. And while this is a young program, we believe we've created a truly special and scientifically relevant program that is helping patients with their preventative health goals.

And now for a few words about WELL Health Diagnostic Centers. WELL Health Diagnostics had a very strong Q1, achieving record number of patient visits and record revenue of [indiscernible] million, an increase of 17% on compared to the same period last year. This performance was mainly driven by organic growth from the expansion of services and an increase in the number of health care providers, which allows us to serve more patients. Q1 was also boosted by some onetime positive reimbursement, which won't be repeated in Q2.

For 2024, we're expecting our WELL Health Diagnostic Centers to achieve another year of record revenue and EBITDA. We anticipate expanding cardiology services in Q2 to address the growing demand while recruiting more physicians. This will allow for increased demand for cardiology consultations and diagnostic services.

And in terms of M&A, we're now seeing acquisition multiples finally start to moderate in this segment and become more reasonable on specialized care and diagnostic M&A opportunities. We're looking forward to expanding our diagnostic centers to more provinces in 2024 and beyond.

And now I'll discuss the outlook for our WELL Health USA business. First, CRH and Provider Staffing. CRH Medical entered 2024 and the first quarter after fully integrating its 2023 midyear acquisition of CarePlus management, which included RADAR Provider Staffing business.

As a reminder, Provider Staffing, is a premier and trusted staffing and locum tenens business, specializing in anesthesia. It provides recruitment and placement services along with temporary staffing with national network of provider groups, hospitals and ASCs across the lower 48 states. This business is extremely complementary to CRH's legacy anesthesia business and provides high revenue growth along with many operating synergies. We expect growth of this segment to continue with anesthesia as well as plans to expand to other health care specialties.

Q1 is typically CRH's weakest seasonal quarter in both revenue and margins due to health insurance and payer mix shifts, along with the renewal of patient deductibles coinciding with year-end. With that in mind, Q1 revenue for the CRH business unit, which includes both anesthesia and hemorrhoid banding was still up 7.4% year-over-year. Also, last year's Q1 included some onetime revenue, which was not repeated this year. We're expecting Q2 revenue to be in line with Q1 levels for both CRH and provider staffing with growth and profitability accelerating into the second half of 2024 as expected.

And now on to Circle Medical. In Q1, Circle Medical saw continued growth in patient visits, an impressive uptick of 32% year-over-year with patient volumes growing from 133,000 to 175,000. Concurrently, revenues surged to $28.7 million in Q1, an increase of 24% as compared to the same period last year. For Q2, we expect another record revenue quarter with positive adjusted EBITDA. We reiterate our previous guidance of Circle expecting to reach positive adjusted EBITDA in 2024 with improved margins as compared to last year.

Some highlights about the Circle Medical business. Q1 -- during Q1, Circle launched virtual care in 8 new states, bringing their total number of active states of 38. Also Circle's pioneering AI scribe product developed in-house is currently undergoing beta testing with 15 providers and is anticipated to broaden its reach. The platform is slated to deploy to this product to 100 providers in the summer promising enhanced accuracy in medical documentation and time savings for providers. Circle has a compelling AI-inspired product development pipeline, and we look forward to updating shareholders as more products and features are released.

And now a bit of focus on Wisp. I'm pleased to report that Wisp reported adjusted EBITDA in Q1 2024 with revenue of $21.1 million and an increase of 13% from Q1 2023. More importantly, with improved its profitability, with adjusted EBITDA increasing 213% as compared to Q1 last year.

For Q2, we expect Wisp to see continued growth as the business ramps up marketing spend and continue to lean in on new product development with plans to launch its new vertical in June as well as new membership program. With increased spending in Q2, we expect adjusted EBITDA levels in -- will decline in Q2 from the level in Q1.

Finally, our SaaS and Technology Services business. Our SaaS and Technology business units experienced a revenue decline of approximately 20% in Q1 as compared to last year. This was almost entirely driven by less onetime software project revenue in our cyber security division, which tends to be fairly lumpy. However, despite the sale of Intrahealth on February 1, 2024, recurring or highly reoccurring external revenue across the SaaS and Technology Services business unit increased by 13% to $11.9 million in Q1, due to strong organic growth in our platform businesses, including OceanMD.

During Q3 2023, we announced that OceanMD signed a $38.5 million contract with the Province of BC. We've already received onetime consulting and project revenue under this contract and we expect to go live with eReferral in BC in the coming weeks, at which time we'll also begin to receive recurring subscription revenue. In addition, I'm pleased to know that OceanMD is in the final stage negotiation with another Canadian province for its eReferral solution. OceanMD is the dominant eReferral solution in Canada and is becoming recognized as the eReferral standard across the country.

And now a little bit about our AI products. In 2023, we introduced WELL AI Voice in AI Inbox Administration and AI Decision Support. I'll start with AI Decision Support or WAIDS as some people are starting to call it. This is our physician copilot that compliantly screens patient data and provides physicians with risk stratification and other actionable insights.

By risk stratifications what we mean, is that it will segment by disease patients in a physician roster that are high, medium or low risk for a particular disease. This makes it very easy for physicians to scan and determine if there are any patients that are misdiagnosed, underdiagnosed or completely undiagnosed for a particular disease, which is pretty incredible support for a physician.

Our first-generation system was focused more on rare diseases. But with the second-generation version, we now have broadening out support to chronic diseases such as hypertension, chronic kidney disease and diabetes. Both in the U.S. and Canada, more than half of all adults reported having one or more chronic diseases. Chronic diseases are the leading causes of risk and disability in both the U.S. and Canada. They're also the leading driver of health care costs. So adding chronic diseases is a game changer for WELL AI Decision Support. This is a very special co-pilot program, which is the leading product of its kind in Canada and one of very few available globally. It is powered by our investee and partner HEALWELL AI. More on HEALWELL later.

WELL AI Voice -- a little bit about WELL AI Voice now. We discussed this product before. It is a leading medical transcribing product which significantly reduces administrative burden and enhances patient engagement, giving physicians valuable time back in their day. The strong adoption of WELL AI Voice underscores its immense value to health care practitioners, having seamlessly integrated into over 131,000 patient consultations in 2023 and substantially enriching the quality of patient care.

The 4 months into 2024, and we've already exceeded the entire previous year's volume of encounters with nearly 200,000 documented patient consultations. This growth represents savings of over 10,000 hours for physicians, highlighting our commitment to enhancing physician efficiency and patient care through our advanced AI capabilities.

WELL AI Voice is now operational in over 40 WELL clinics across Ontario and B.C. and plans for expansion into Alberta soon. This strategic [ road ] is set to further our mission of supporting WELL's physicians and extending our network's reach.

And now a bit about WELL AI Inbox administration. WELL AI Inbox administration significantly reduces clinic administrative burden by automating fax and document handling. WELL AI Inbox is currently active in 117 clinics and processing over 40,000 faxes monthly. In Q1, WELL AI Inbox introduced full fax automation using AI technology, the application can now automatically file incoming fax documents directly into the patient chart and provider Inbox without any staff input. Based on an initial pilot, up to 50% of documents can be fully triage and assigned for provider review in the EMR, saving clinic admins up to 90% of their time.

Overall, our technology platform services group continues to perform with the rollout of AI-based tools, expansion of Ocean's eReferral solution and the continued execution by our EMR and billing solutions groups.

I'd like to provide some additional commentary now on HEALWELL AI in our partnership. We've been very pleased with the performance of HEALWELL AI. Since its debut launch on October 1, 2023, WELL has completed -- HEALWELL has completed 3 financings for a total of $29.9 million in convertible debt and equity and just launched what looks like will end up being a $20 million bought deal which will all together total approximately $50 million raised since October, just 7 months ago. HEALWELL has already, during this period of time, completed 2 acquisitions of Intrahealth and Pentavere and made a minority investment in doctorly. HEALWELL is currently on a $20 million revenue run rate, which is expected to more than double in the coming months with additional organic and organic growth based on what they've noted publicly.

WELL currently owns 18% of the common shares of HEALWELL on a fully diluted basis, taking into consideration our convertible notes and warrants, WELL's ownership is approximately 27%. WELL also has a call option on 30 million multi-voting shares, which will provide WELL with over 40% of economic ownership and 72% of Class B voting shares in HEALWELL once exercised.

In summary, we're pleased to have this opportunity to showcase some of our latest thinking on the business including the inflection point we discussed earlier on how we think about our preference for cash usage versus share issuances. We're very focused on improving our free cash flow per share metric and believe that this metric will continue to demonstrate significant improvements throughout the year and beyond.

Our outlook remains positive, hence I'm confident in upgrading our annual guidance and introducing new guidance for the first time on free cash flow generated to more than $55 million for the year. We hope the improvements in disclosure in this call and in our MD&A demonstrates that we're really committed to meeting the requirements of the analyst and investor community. If there's something that you believe is missing, please don't hesitate to reach out to the WELL Investor Relations team.

Before closing, I want to share some important updates with you. WELL Health is hosting its Annual General Meeting on June 12. This is a virtual AGM, and details can be found in our information circular, which will be filed on SEDAR in the coming weeks. We're also hosting an in-person Investor Day on June 18 at the Toronto Hilton Hotel. Details can be found under the Events section of our website.

Finally, I'd like to thank you all for joining us on this call today and thank our shareholders and investors for their continued support. The capital markets have been very supportive of our vision and have provided us with the funding needed to pursue our goals and we are working hard to return the favor and drive exceptional shareholder value. I'd also like to thank WELL's senior management team, all our employees and contractors for their tremendous effort, and in particular, I'd like to thank our team of talented health care practitioners and frontline workers who provide unbelievable patient care.

And with that, we'd like to open the call for questions. Operator, would you please accommodate?

[Operator]

[Operator Instructions]. And first, we'll have Michael Freeman at Raymond James.

[Michael Freeman, analyst]

Congratulations on another fantastic quarter. I'd like to start at a really high level. This company has been evolving very quickly and appears to be preparing itself for a period of even greater change and greater scale. I want to ask you, what does this company look like in 5 years? Like what -- and what do you expect will we -- that we will see emphasized in the company? And what should we expect to see deemphasized going forward?

[Hamed Shahbazi, executive]

Thanks, Michael. That's a really great question. And I think it's very fitting based on the themes that we discussed today. We believe that kind of -- we've hit that inflection point where the company can rely on its own cash flow. And so I think you're going to see a real emphasis on optimizing cash flow and reducing dilution and eventually reversing division. So really focused on cash flow per share. But as far as operationally, in the script I talked about how we're just shy of 1% market share in the country today in terms of our share of physician spending and being the largest player in the country. We see significant opportunity to grow because this is a hyper-fragmented market. I mean there's no reason why we can't be 5% to 10% of the market. And frankly, there's very little competition for us right now. There's very few companies that have demonstrated the ability to execute on clinic transformation and change management and supporting physicians. You think that that's easy work, but it's really hard, and it's something that we've honed over time and with the use of our technology.

So I would expect that we would have a much stronger clinic platform as well. I think given that we've acquired so much technology and so much platform capability, I don't think that you're going to see us make too many more of those technology acquisitions because, frankly, we don't have to. We now have significant capability inside the company to develop software and build new products and services. And that's not saying that we'll never acquire tech anymore, we'll certainly be looking at that. But there was a time when we needed to do that to complete the platform picture. And I think this is where also the investment in the partnership with HEALWELL make -- is very important.

We are on a path to control with HEALWELL as I noted with our multi-voting share option. And so I think what you're going to see is a lot of opportunity to bring in innovation through HEALWELL, especially on the AI side of things. So really, what picture and theme you should be really thinking about is a very profitable, very relevant and important company that is helping health care providers at scale.

[Michael Freeman, analyst]

This is helpful, Hamed. And very quickly, like it seems that there will be a real emphasis on increasing market share in Canada and scaling in a sustainable way. Can it -- would it be fair to characterize that there might be a reduced emphasis on operations in the States?

[Hamed Shahbazi, executive]

I think as we noted in the script, the U.S. businesses are growing very well. And obviously, CRH has been just an anchor of strength for a long time. And we love the move that we made with the locum tenens business because ultimately, CRH is a provider rich business. It is essentially a staffing business. It is providing significant staffing solutions to ASCs across the country. And to now have a staffing platform that was previously also serving CRH integrated even strengthens that business further.

So -- and our efforts to tech enable that business have been notable and strong. And so I think you're going to continue to see us really make progress there as well. As far as Circle and Wisp, we'll see where those processes end up. I mean, certainly, we don't own 100% of those businesses. But I can't see a scenario where we'd be letting go of those assets on the cheap. We just -- we don't have to, we don't need to. We're not under no duress in terms of selling those or seeking strategic alternatives for those assets.

But it's really important with the help of our advisers to really consider what all the options are and to see if there are liquidity opportunities, particularly at a time when we're seeing such great return on investment opportunities in Canada. We're being very disciplined in Canada right now. We're not buying things that we probably should be buying because of our discipline and because of wanting to maintain and not grow our leverage ratios and wanting to deliver on growing cash flow, given that we're in a high-rate environment. Hope that's helpful.

[Operator]

Next question is from David Kwan at TD Cowen.

[David Kwan, analyst]

Can you provide an update just as it relates to the Ontario opportunity pushing more of the care and services to the private sector as it relates to -- I know you talked about MRI licenses in particular. Can you talk about where you are in that process and maybe the related CapEx?

[Hamed Shahbazi, executive]

Absolutely. We have been hearing that the process is inching forward. It -- things certainly do take time in the public sector, but we do see a real sustained and focused effort to bring -- build [indiscernible] over the line. And so we don't have any kind of confirmation just yet that -- so that we can start the planning in terms of CapEx or anything like that. But I think in the next quarter or 2, we hope to have some good news on that front. As we have heard that licenses may be coming available in the near future.

[David Kwan, analyst]

Well, that's helpful. And then just on the commentary related to minimizing share dilution. We saw the stock-based comp fall this quarter. Is that kind of what we should be expecting for the full year? And maybe more a question for Eva.

[Hamed Shahbazi, executive]

Yes. Eva, do you want to take that one?

[Eva Fong, executive]

Yes. So as we mentioned in the script, that's our strategy, and that's on plan for this year that we will continue to use cash our employee retentive plan. And so we're not expecting to issue new shares for both employee incentive share or M&A acquisitions. So what the stock-based compensation expenses that will be seen in 2024 is really based on the prior year issuance. So yes, we will expect to have those decrease quarter-by-quarter this year.

[Operator]

Next question will be from Allen Klee at Maxim Group.

[Allen Klee, analyst]

Yes. In terms of your AI initiatives, how do you find or could you talk a little about working with HEALWELL and how you think about kind of the synergies and growing that business?

[Hamed Shahbazi, executive]

Yes. Thanks for the question, Allen. We are very encouraged and probably even more encouraged than we were last quarter when we spoke to you. We I think what we're finding is that the depth of the products and technology and capabilities at HEALWELL were probably greater than we first thought.

And I think this is more of a reflection of their journey prior to being recapped and relaunched as HEALWELL when they were MCI. They had a rough time as a company. But that should not be mistaken with the power of the platform that they were able to put together. And the ability for us to launch a chronic disease tool that compliantly scans, patient data so quickly to our network in an integrated way with our EMRs, I mean it's pretty remarkable.

We are absolutely alone in the marketplace right now with that capability. And so we're absolutely very encouraged. It's still early days, but we see applications here for public sector. We've been talking to sub public sector about these technologies. We've been getting a very good reception. So not only do we feel that HEALWELL is on the right track in their business. But we think that ultimately, we'll be able to unlock the value of HEALWELL significantly across our network. So that's kind of where we sit with it.

[Operator]

Next question will be from Rob Goff at Echelon.

[Robert Goff, analyst]

Congrats on the quarter. My question would be around Circle. Could you discuss the ongoing expansion of Circle's virtual and physical coverage. And within that, can you also discuss where you are seeing opportunities to leverage the CRH network?

[Hamed Shahbazi, executive]

Sure. Yes. I mean, look, there was a time when we felt that the physical side would grow a lot faster due to the requirements of the regulatory side of things following the pandemic. And that really just has not happened. So the regulatory has not been as severe and structured and challenging as we thought it would. So there isn't as much of a need to leverage physical brick-and-mortar. And so actually, you're probably going to see the physical brick-and-mortar side of things not being emphasized or grown significantly and more of an emphasis on the more cost-effective and scalable virtual side of things. So that's why we're pleased to report that we have now launched in 8 new states.

I think with -- if you sort of look at the different business units of Circle, the virtual side is a lot more profitable in the physical side. And we know that based on what we see here in Canada. But in the U.S., you also have better per unit economics for virtual care. So it's quite a bit more pronounced.

And I think with their product development efforts and the tech advantage that they have. It's one of the reasons why they continue to perform and contract so many other unprofitable platforms in the U.S. You may have heard that a number of platforms are closing shop in the U.S. and it's because it's really hard to execute and innovate. And I think what Circle has is just really great tech. I mean, this was a Y Combinator company. It's a Bay Area company with a tradition of fantastic technology. And that's really what sustained it, and that's really what will cause it to grow. So we're quite pleased on that. And so to really answer your question, it's a lot more emphasis on the virtual expansion.

[Operator]

Next question will be from Christian Sgro at Eight Capital.

[Christian Sgro, analyst]

Eva called out a 2.75x leverage ratio. I was wondering for the consolidated organization, if you have a target leverage ratio you're comfortable with? You want to get it down to before you become more active on M&A or buybacks or that sort of thing.

[Hamed Shahbazi, executive]

Yes. Thanks, Christian. I'll note that while she did talk about 2.75 leverage ratio, we actually did not see an increase in our leverage ratio on a constant currency basis. So the only reason why the leverage ratio went up was because USD went up, and the majority -- sorry about that. And the majority of our U.S. -- of our debt is denominated in U.S. dollars. So look, we -- I think in the past, we said that we're pretty comfortable with it being less than 3x and I think we still feel that way. I think we're sort of at our threshold for pain here. We generally don't like debt, but we can service it, and it's the right thing to do right now to, I think, sustain it and not add to it, especially given that we are still in a high-rate environment.

We are eagerly looking forward to rate decreases in both the U.S. and Canada. It appears that, that will show up for us in the Canadian market, given what we're seeing in the macro side of things. So we're encouraged. And look, the good news for us is that notwithstanding the high-rate environment, we're going to be delivering 30% more cash flow this year than last year. I mean that's what's hopefully notable for analysts and investors on this call today.

[Operator]

Next question will be from Justin Keywood at Stifel.

[Justin Keywood, analyst]

Just on the EBITDA contribution for the Canadian business, it was pretty strong in the quarter, 14.6%, a little over half of the overall EBITDA. And I know there's been some active M&A pursuits where that margin appreciation takes a little while to work out. So just wondering what led to that improvement in the Canadian EBITDA.

[Hamed Shahbazi, executive]

Yes. Thanks, Justin. Just kind of what we've been saying now for a while. The strength of the Canadian business has just really started to shine through the acquisition multiples, I mean, the ability to buy assets at the rates that we've been buying them and the ability to improve them by several hundred basis points within a several month period of time. These are really substantial numbers. And I don't think people have really locked into what this really means. I mean -- and I think it's quite unprecedented just given the challenges that we're seeing in the health care ecosystem. We're all -- we all seem to sort of play out in the broader media landscape when we hear about physicians struggling. And I do think it's just demonstrating the relevance that we have to the market.

And so you're right. This was the first time that our Canadian shareholder EBITDA on a hold exceeded our U.S. And I think it's very notable and I think it will continue. I think this trajectory. And I think what's really interesting about it is just the capital efficiency with which it's done. And I might add that it's not just the clinics. I think we continue to see great EBITDA contributions from the platform side of things. We have a really strong software and services business that if it was a separate business onto itself, it would probably command a very significant valuation. So we'll do more to highlight that in the future.

[Operator]

And at this time, I would like to turn the call back over to our speakers for any closing remarks.

[Hamed Shahbazi, executive]

Thank you very much for everyone joining. We really appreciate your time today, and we look forward to speaking with you over the next several weeks and months. And of course, during our next conference call late summer. Have a great day.

[Operator]

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.