WELL Health Technologies Corp

TSX:WELL

Earnings Call Transcript 2022-Q2

[Operator]

Welcome to the WELL Health Technologies Corp. Fiscal Second Quarter 2022 Financial Results Conference Call. My name is Debbie, and I'll be your operator for today's call.

[Operator Instructions]

Please note, this conference is being recorded. I now 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 Quarter Financial Results Conference Call for the 3 months ended June 30, 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 earlier today. Portion 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 upon a number of estimates 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 today's press release and in our management discussion and analysis. We provide forward-looking information 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's required by law.

We may use terms such as adjusted gross profit, adjusted gross margin and 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 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?

[Hamed Shahbazi, executive]

Thank you, Pardeep, and good day, everyone. We hope you're all keeping safe and healthy. We truly appreciate everyone for joining us today. Second quarter of our 2022 fiscal year was an exceptional quarter, where we achieved record quarterly revenue, record adjusted EBITDA, record cash flow and record patient visits in the quarter.

We're very pleased with our Q2 results as we were able to demonstrate strong top line organic growth while maintaining robust operating margins. Some highlights for the quarter include the following: we achieved 127% year-over-year revenue growth in the second quarter compared to the second quarter in the previous year.

The company's growth was driven by acquisitions made over the past year as well as solid year-over-year organic growth of approximately 21%. It's important to note that our organic growth rate has been accelerating materially from the past couple of quarters with last quarter's figure at 15% organic growth.

The company continues to witness healthy growth across all its business segments, including both online and in-person care channels with minimal impacts due to recession, inflation, supply chain or other macroeconomic effects currently felt by other companies in this industry and around the globe -- in this -- around the globe.

We also achieved record patient visits in the quarter with over 1.16 million combined omnichannel, diagnostic and asynchronous patient interactions. Demonstrating our continued leadership position, the preeminent end-to-end health care company in Canada, while our U.S. businesses continued to exhibit industry-leading growth metrics.

Our virtual services revenues were extremely strong, increasing 281% in Q2 2022 compared to the previous year, driven by the exceptional growth in our U.S.-based businesses of Circle Medical and Wisp. For the month of June, the combined annual revenue run rate of Circle Medical and Wisp exceeded CAD 115 million, and has continued to improve after the end of the quarter.

Our outlook for the second half of the year remains very positive. Hence, I can be very confidently increase our guidance for the annual revenue to exceed $550 million in 2022 compared to our previous guidance of annual revenue exceeding $525 million.

It's important to note that this is the third consecutive quarter that WELL has raised revenue guidance. I'm also pleased to report that we've not only been growing revenue, but also our cash flow and profitability metrics. In Q2, WELL achieved record free cash flow attributable to shareholders of $15.4 million. Q2 was truly a tremendous quarter for the company.

Before we get into further details on the quarterly results, I'd like to provide some background on the company for the benefit of new investors and listeners on this call. WELL provides care and support for the care providers themselves. The physicians, the health care practitioners, all those that serving our various different patient services businesses that serve patients.

We are a physician support company that supports more than 2,300 physicians and other health care providers in WELL's owned virtual and physical clinics. Approximately 93% of WELL's revenue comes from patient services delivered by our own care providers.

Care providers join us because we allow them to focus on the care and not having to run a business. We operate these patient services businesses using our extensive operating experience and our own digital platforms that provide significant opportunities to improve patient access and convenience while adding efficiencies and improving operating performance. The balance of our revenue is approximately 7%, is essentially the a la carte offering of our software and services capabilities, also to physicians and health care practices. This offering allows care providers to select technologies from WELL's platforms that they'd like to use in their own business as they continue to run and/or manage such businesses on an arm's length business -- arm's-length basis.

We are a unique company that has powerful technology that is industry-leading and allows WELL to create powerful and relevant links with health care practitioners all over the country. This connectivity allows us to become their prime option when they no longer want to run their own business and instead want to lean on a professional operator.

Given recent times, where there are challenges with inflation, shortages of health care workers and other issues, while we're seeing significant growth and interest from care providers that want to join this network. Initially, when I started WELL, my goal was to help doctors and their clinics achieve digital transformation and modernize their practices.

That's why we started developing and assembling our practitioner enablement platform. We believe care providers needed assistance in improving their delivery of care in the digital age.

Since then, what we've learned and how we've evolved as a company is that our value proposition goes much farther than just digital delivery. Doctors and other health care providers need our assistance to not only deliver digitally, but that actually just deliver. They need help in all aspects of their business, front office, back office, management and operating facilities, negotiation with landlords, et cetera, et cetera.

So way to really think about WELL is not just as a company that provides digital caring and competency, but also as an operating platform that helps support care providers and allows them the opportunity to focus on the care they're providing and deliver outstanding patient outcomes.

One of the reasons why the company has been able to grow and develop so quickly is because the DNA of our business is technology driven. We seek advanced yet practical tech-enabled solutions that allow us to ensure the best experience and efficiency possible for our efficiency -- for our patients and providers.

Providers that use WELL's tools have consistently demonstrated that they have more time to focus on patients and spend less time on burdens of back office and administration. This not only increases their billable hours but also reduces their administrative burden and also helps improve patient outcomes.

Our practitioner enablement platform includes a broad array of capabilities including, but not limited to, electronic medical records, EMR for short, virtual care, digital patient engagement tools, that allow patients to seamlessly connect revenue cycle management, eReferral, digital apps and digital protection services, such as cybersecurity and so forth.

Over the past 4 years, we have grown both organically and inorganically into a category leader. To our knowledge, we are category leaders in the following areas: for example, we are the largest owner-operator of outpatient medical clinics in Canada. We're one of the top 3 providers of telehealth services in Canada. Depending on the metrics that you use, we may be #1, #2 or #3.

We're 1 of the top 3 practice management service providers in Canada. We are one of the leading providers of digital patient engagement services, which includes all aspects of connecting patients and doctors digitally. We're the only direct-to-consumer telemedicine offering that allows you to pick your own provider through our key health service offering, which allows you to pick practitioner based on a description provided. This is being extremely helpful for our patients and driven strong loyalty to the platform.

We are the largest provider of revenue cycle and outsourced billing services for doctors in Canada. We are the largest provider of e-referral software services in Canada. We are the leading provider of sedation services for colonoscopies in the United States.

We operate Canada's only app marketplace with integrated EMR app called apps.health. To our knowledge, we deliver more omnichannel patient visits than any other entity in Canada, except for the government. I'd also like to comment on our recent ESG activities.

On June 17, 2022, the company announced the release of our inaugural environmental, social and governance or ESG report, highlighting the company's ESG practices and performance. The report covers the year ended December 31, 2021, and details WELL's ongoing commitment to empowering practitioners and positively impacting health outcomes while highlighting the company's commitment to improve and enhance its practices around environmentalism, social awareness and governance.

In this inaugural ESG report, we highlight 4 main priorities for the company, namely, one, disciplined governance and risk framework, maintaining strong oversight and discipline, including management of risk and compliance across our business activities.

Two, providing practitioners support and digital enablement. Our offering provides all the benefits of a truly managed hybrid environment inclusive of bricks and mortar and virtual delivery capabilities, including online and offline medical assistant support, filling in back office management, referral workflow support.

It ensures health care providers can optimize their schedules so they can spend more time with their patients and less on data admin work. WELL's digital offerings reduced wait times, travel times which reduce greenhouse gases and other traditional socioeconomic barriers that are often associated with accessing in-person care.

Three, safeguarding patient data. Safeguarding the privacy and security of our patients' data while empowering them to proactively leverage their health information is a core element to achieving our mission to positively impact health outcomes. I'm pleased to say that WELL had 0 reportable data breaches in 2021.

Four, ensuring WELL as a healthy place to work. WELL provides continued support for a range of well-being initiatives available to all key members and business units to help team members stay physically and mentally healthy in a psychologically safe environment.

Diversity is highlighted in the ESG report as an invaluable strength at WELL. WELL, currently has 70% of senior executive team members representing a visible minority. Furthermore, we made a commitment to achieving at least 33% female representation on our Board of Directors by the end of 2022, a goal that we achieved on August 5, 2022, when the company announced the addition of Sybil Lau to our Board of Directors.

Sybil -- let me tell you a little bit more about Sybil. Sybil is on the Board of Directors of the Dalio Family Fund -- Family Office in Singapore and is a Board Director for a Chinese hedge fund.

We are honored to welcome Sybil to our Board.

Her knowledge and experience in advising on capital allocation and new market development will be an invaluable asset to the WELL's team and shareholders. A particular note is Sybil's passion for preventative health which was a big reason why I thought she was a fantastic fit for WELL's future vision.

We will be working closely with Sybil to evaluate if there are growth opportunities for WELL in Asian markets such as Singapore or Indonesia.

WELL is a well-diversified, fast-growing digital health and tech-enabled health care company delivering on a strong ESG program and building societal value. WELL is a purpose-driven business that aims to transform the World for the better.

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

[Eva Fong, executive]

Thank you, Hamed. I'm pleased to report that we have very strong results for the 3 months ended June 30, 2022. Our second quarter results were as follows: WELL achieved record quarterly revenue of $140.3 million in Q2 2022 compared to revenue of $61.8 million generated during Q2 2021, an increase of 127%, driven by acquisitions during the past year and organic growth.

WELL achieved record adjusted gross profit of $75.5 million in Q2 2020 compared to adjusted gross profit of $30.2 million in Q2 2021, representing an increase of 150%. WELL achieved adjusted gross margin percentage of 53.8% during Q2 2022 compared to adjusted gross margin percentage of 48.9% in Q2 2021.

The increase in adjusted gross margin percentage is driven by the addition of higher-margin CRH and MyHealth acquisitions as well as an increase in virtual services revenue. Adjusted EBITDA was $26.4 million for Q2 2022 compared to adjusted EBITDA of $11.9 million in Q2 2021.

Adjusted EBITDA was positively impacted in the quarter by healthy EBITDA margins in the company's omnichannel patient services and virtual services businesses. Adjusted EBITDA attributable to WELL's shareholders was $19.2 million for Q2 2022 compared to adjusted EBITDA attributable to WELL's shareholders of $7.2 million in Q2 of last year.

Adjusted net income was $17.2 million or $0.08 per share in Q2 2022 compared to adjusted net loss of $1.2 million or $0.01 loss per share in Q2 of last year. Free cash flow attributable to WELL shareholders was $15.4 million in Q2 2022, as defined by shareholder adjusted EBITDA minus cash taxes, minus cash interest costs and minus capital expenditure.

In terms of our segmented reporting, omnichannel patient services revenue increased 88% to $92.8 million in Q2 2022 compared to $49.3 million in Q2 2021. Omnichannel patient services includes primary care, CRH and MyHealth.

Primary care revenues increased 28% to $16.1 million in Q2 2022 compared to $12.6 million in Q2 2021. Second quarter is generally a stronger quarter that comes before the seasonally weaker third quarter during the summer months.

In Q2 of 2022, CRH revenue increased 38.5% to $50.9 million compared to $36.7 million in Q2 of last year, as we had just acquired CRH in the second quarter of last year, resulting in only partial revenues recognized in Q2 of last year. On a sequential quarter-over-quarter basis, CRH revenue increased 6% from $48.2 million in Q1 2022.

The first 2 quarters is CRH's seasonally weakest quarters because many patients with commercial insurance plans tend to have endoscopic procedures in the second half of the year when their deductibles have generally been met. CRH core business is performing as expected with strong case load and stable per unit economics. CRH completed a record number of anesthesia cases of 125,160 cases and sold over 2,266 O'Regan units in the second quarter this year.

In Q2 2022, MyHealth achieved revenue of $25.8 million compared to 0 in Q2 of last year as we had not yet acquired MyHealth in Q2 last year. On a sequential quarter-over-quarter basis, MyHealth's revenue grew 7% compared to $24.2 million in Q1 2022.

Virtual Services revenues increased 281% to $47.5 million in Q2 2022 compared to $12.5 million in Q2 2021. On a sequential quarter over quarter basis, Virtual Services revenue increased by 25% when compared to $38.1 million in Q1 2022.

Virtual Services revenue growth was driven by the exceptional growth in the U.S.-based businesses of Circle Medical and Wisp. WELL ended Q2 2022 with a solid balance sheet. As of June 30, 2022, WELL had cash and cash equivalents of $57.1 million. As of June 30, 2022, the total drawn amount under both the CRH and MyHealth credit facilities is approximately CAD 265 million.

I'm pleased to report that the company is compliant with all covenants related to its credit facilities. On June 29, 2022, WELL amended its MyHealth 200 million senior secured credit facilities led by Royal Bank of Canada and supported by a syndicate of lenders to encompass the Canadian clinics business unit and even extended it to July 2026, providing the company with additional assets to credit to help grow WELL's fleet of outpatient clinic locations.

These facilities associated with this credit agreement are currently priced at an interest rate, which is equivalent to SOFR/CDOR plus 1.25% to 3.25%. Depending on the debt to adjusted EBITDA ratio of the consolidated results for the Canadian clinics business unit, which is a very low rate. In terms of our share capitalization, as of August 10, 2022, WELL had 245,425,157 fully diluted securities issued and outstanding. WELL also has substantially increased its revenue and EBITDA on a per share basis, indicating 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 $0.33 per share in Q2 2021 to $0.65 per share in Q2 this year on an undiluted basis. Meanwhile, adjusted EBITDA attributable to WELL's shareholders per share increased from $0.04 per share in Q2 2021 to $0.09 per share in Q2 2022.

This reflects a 130% increase in this all-important metric. In the first half of the year in 2022, our M&A program slowed down considerably as compared to last year due to the volatility in the capital markets, which caused public and private valuations to drop.

Now that some of those valuations have settled, we are finding outstanding opportunities to ramp up our M&A program again, but mainly to focus on smaller clinical assets and other areas where we currently have scope.

For example, during Q2, we entered into an asset purchase agreement to acquire the assets of INLIV Inc., a health care provider located in Calgary, Alberta, Canada, specializing in consumer preventative health corporate and executive health, primary care, cosmetics fitness and integrated health services.

I'm pleased to report that we closed this transaction on August 1, 2022. WELL pay a total consideration of approximately $1.6 million in cash to [indiscernible] Limited. As part of this transaction, [ Coral ] Holdings is required to purchase WELL's shares in the open market within 18 business days after closing following certain criteria.

Lastly, I would like to quickly touch on our continued effort to cost optimize our operations. We have been working with the various business units and functional group leaders with the objective to find opportunities to improve our EBITDA profitability and free cash flow generation. In order to offset the effect of inflation and rate hikes on the company's positive cash flow.

I'm pleased to note that we're making excellent progress with this initiative and believe we will be successful in enhancing our profitability over the next few months. That is my financial update, and I turn the call back over to Hamed.

[Hamed Shahbazi, executive]

Thank you, Eva. Before I dig into the patient visits metrics, I wanted to provide a bit more color on our organic growth. In our view, WELL's consolidated organic growth is really a key metric that investors should pay attention to.

Much has been talked about in respect to WELL being a consolidator. However, the results over the last few quarters and the strong acceleration we've experienced demonstrate that our organic growth is just as an important growth driver for the story. As we've highlighted before, our Virtual Services segment has really been the main driver of our organic growth, which makes sense given that it's a more scalable growth structure in nature.

But it's important to note that we've had outstanding organic growth performances from other patient services businesses, too. For example, our primary care line of business grew organically at a whopping 21% on a year-over-year basis. This line of business includes our primary care medical clinics, Allied Health and Executive Health businesses.

Even if you take out Allied Health and Exec Health, which are faster-growing businesses for us, our primary care medical clinics grew roughly at 15% year-over-year. We're very pleased with this performance, and it is exceptional from an industry benchmarking perspective.

In fact, we don't know anyone in the country that is growing faster or more profitably in the primary care market than WELL today. What is exciting about this line of business is that we see significant runway to grow given the reduction of asset prices we're seeing out there.

We believe the reason for this growth is that we are driving real value to care providers. They want to join our competent platform and focus on providing care and stop trying to run a business. Also, we are major consumers of our own digital software and transformation, and that is helping drive efficiencies.

I'd also like to highlight our virtual patient services businesses, which are essentially our telehealth businesses. They grew by more than 100% as a basket, year-over-year. This was led by Circle Medical, our growth leader, but we had healthy double-digit year-over-year growth from Wisp and Tia Health as well.

Also within our Practitioner Tools group, we had fantastic growth from cybersecurity where we saw over 100% year-over-year growth, Ocean at roughly 65% -- 75% growth and DoctorCare billing at 23% growth, which has been extremely steady. I will now review our overall patient visits in the quarter. I'm pleased to report that WELL achieved a total of 1.167 million patient interactions in Q2 2022, representing an annual run rate of 4.67 million patient interactions.

Total omnichannel patient visits in Q2 were 835,000, representing a year-over-year increase of 49% from approximately 559,000 in Q2 2021. On a quarter-over-quarter basis, total omnichannel patient visits increased 7% compared to 782,000 total omnichannel patient visits in Q1 2022. During the first quarter of 2022, inpatient -- in-person patient visits that our clinics and businesses accounted for 37% of total visits, while telehealth patient visits, which included both telephone visits and virtual care patient visits, represented 63% of total visits.

In-person patient visits at our clinics and businesses accounted for 312,000 patient visits in Q2 2022, representing a year-over-year increase of 29% compared to 241,000 in-person patient visits in Q2 2021. Telehealth patient visits, which include both telephone and virtual care patient visits, accounted for 522,000 patient visits in Q2, representing a 65% increase from 317,000 in the previous year.

In addition to these patient visits, MyHealth conducted 179,880 in-person diagnostic visits while Wisp completed roughly 152,000 asynchronous patient consultations. I'd now like to speak a bit about our outlook for the rest of the year and for the quarters beyond that. We are pleased to report that all of our business units are executing very well.

Otherwise, it would not be possible to continue the beat and raise as we have been doing for the past several quarters. 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.

The cash flows generated by the company will continue to be reinvested in the business and allocated in a disciplined manner, which may come in the form of further acquisitions, share repurchases or to accelerate organic growth.

As a result of WELL's strong organic growth profile, the company is increasing its guidance for 2022 annual revenue to exceed $550 million. The previous guidance of exceeding $525 million. Furthermore, WELL expect to generate adjusted EBITDA of approximately $100 million for 2022 compared to the previous guidance of approaching $100 million.

As you can see, we are increasing our revenue guidance at a higher rate than our adjusted EBITDA guidance.

There are a few reasons for that. One, our Circle Medical and Wisp businesses have significantly contributed to our increase in revenue guidance. These businesses are experiencing tremendous growth and are profitable, but are not yet large contributors to EBITDA.

In addition, we want to continue to reinvest in our business units to drive organic growth. In the current environment, we are witnessing many clinic health care providers and digital health companies that do not have the ability to continue to invest in growth, which provides us with a competitive advantage.

Furthermore, we're seeing some inflationary cost pressures and wage increases. These cost increases are prevalent in all industries today. However, we continue to implement cost-savings initiatives and integration across our acquisitions and business units and doing everything we can to take advantage of our shared services infrastructure to offset some of these cost increases.

As a general rule of thumb, the company aims to have some of its adjusted EBITDA margin percentage plus its organic growth percentage to exceed 30 in 2022. This is sometimes referred to as a Rule of 30. For instance, in Q2, we exceeded the Rule of 30 with an organic growth rate of approximately 21% and an adjusted EBITDA operating margin of 19%. The sum of these 2 percentages is 40%.

It will be a key goal for us to continue to generally be in line with our Rule of 30 for the entire year and beyond. WELL remains on track to achieve its goals for 2022, and in a number of pillars, one, build out and refine its practitioner enablement platform and deploy services both internally to WELL health care practitioners as well as to offer its services to practitioners outside of the company; two, achieve organic growth across all of its operating units; three, follow a disciplined capital allocation strategy designed to continue to activate organic growth as well as acquisitions that are accretive to WELL's business; and four, WELL expect to be profitable for the full year of 2022 on an adjusted net income basis.

Despite the current geopolitical inflationary and turbulent economic environment, the company doesn't see any material influence or challenges that would impair its ability to deliver on a strong outlook for the balance of the year. Many of the key variables inherent in the execution of WELL's business are firmly in its own grasp and are not dependent on outside factors.

I'll now provide some commentary on the various business units, starting first with the new Canadian clinics business unit. Last month, WELL announced the formation of a new legal entity called WELL Health Canada Clinics, Inc. to house our Canadian owned and operated fleet of omnichannel outpatient clinics leveraging WELL's highly integrated hybrid brick-and-mortar and virtual services capabilities.

This new business unit includes the company's primary care, Allied Health and MyHealth specialized in diagnostic services but does not include WELL's tiahealth.com service, which is part of WELL's Virtual Services division.

This consolidation of our Canadian clinics business provides WELL with the proper foundation to become a national health system leader, providing the very best and highly integrated bricks-and-clicks care. While it's Canadian clinic business unit is already the largest and most consequential network of nongovernmental owned clinical health care assets across the country.

What is unique about our clinical business is that it not only lives in harmony with our public health reimbursement system but actually supports it. WELL has demonstrated that with strong management and tech-driven efficiencies, outpatient clinics that generally rely on provincial reimbursement can be sustainable and healthy businesses. This is enormously important to consider at a time where there's a crisis in our health care system. It is just becoming too difficult for physicians to run their own businesses and provide care at the same time.

WELL's objective is to continue to grow its Canadian clinics business unit, both organically and inorganically and continue to demonstrate market leadership as the country's first pan-Canadian clinical network, with a highly integrated network of tech-enabled outpatient clinics across the country.

In the second quarter, WELL added a primary care clinic in Vancouver to network at a new greenfield haemorrhoid treatment center in Hamilton, Ontario. The company's combined investment to add these 2 clinics to the network with less than $100,000. The combined annual revenues of these 2 clinics are expected to exceed $2 million in the first year under WELL and be profitable.

These 2 additions exemplify how WELL continued to grow its network with minimal capital costs. We're also pleased to welcome InLiv to our Canadian clinics business unit and is expected to generate more than $7 million per year in revenues, with 85% of such revenues, reflecting recurring membership revenue.

As Eva previously mentioned, we acquired InLiv for approximately $1.6 million, demonstrating the efficiency of our capital allocation, M&A program in the current environment where we see a number of clinical assets available at reduced valuation levels.

And as noted earlier, WELL secured an amendment to its credit agreement with RBC and the syndicate of lenders to extend the term of our credit agreement out to 2026 and grow the scope of our credit agreement to support our entire Canadian clinics business, which gives MyHealth and primary care businesses lots of headroom to grow.

We have a compelling clinical pipeline and are focused on increasing our total clinics under majority ownership by the end of the year. Now a quick update on CRH.

As you're likely aware, CRH Medical is WELL's largest business unit and wholly owned subsidiaries. It continues to perform very well. However, due to the growth we've seen elsewhere in the company, the percentage of revenue attributable to CRH is now down to approximately 37% for the quarter. CRH business is predominantly in the U.S., also had a record quarter for cases in revenue. There are now more than 1,100 CRH credentialed health care practitioners providing services as part of CRH, fully managed services in 93 medical facilities in the United States.

We're very pleased with CRH's results in Q2 and thus far in Q3, we're expecting Q3 to be seasonally better than Q2 as volumes for endoscopic procedures generally increase in the second half of the year. CRH is also benefiting from post-COVID pent-up demand and our excellent team's execution has been able to support that elevated demand.

CRH also continues to execute on unlocking the value of its O'Regan banding device, intellectual property by creating a clinical offering that leverages its technology. The first hemorrhoid banding location is operating very well in Chicago, and we have now signed 2 additional leases to open more locations.

We anticipate having approximately 8 such locations throughout the United States by the end of the year. And now a quick update on our Virtual Services segment. Our Virtual Services segment includes the newly formed Provider Solutions business unit, the cybersecurity business unit and the company's 2 U.S.-based virtual patient services businesses circle Medical and Wisp.

The company's new Provider Solutions business unit announced in the second quarter, now combines the previous WELL EMR Group, building and revenue cycle management group and several digital application businesses into one single practitioner enablement platform.

This consolidation is designed to simplify the relationship health care providers have with WELL and better promote the breadth and depth of WELL's practitioner platform. WELL's New Provider Solutions business unit encompasses companies and brands, including AwareMD, Intrahealth, OSCAR Pro, DoctorCare and Ocean.

It is comprised of tools and technologies, including electronic medical records, practice management, productivity applications, building in back office and revenue cycle management and, of course, WELL's apps.health ecosystem.

With close to 1 out of 4 Canadian doctors currently being served by WELL's practitioner focused businesses, the new Provider Solutions business unit will further support the onboarding of WELL's technology solutions, positively impacting improved health outcomes by better equipping and empowering practitioners and their patients.

This integrated offering will not only support in simplifying the relationship we have with our growing network of over 21,000 doctors, but it will also allow WELL to continue to grow its market share through a unique and unified platform offering. A key area of focus here will be to increasingly bundle our solutions and make it easier for practitioners to consume our offerings.

Provider Solutions business unit is a unique entity unlike any other technology offering in Canada. Key metrics for the group include over 3,000 EMR clinics on the network -- pardon me, [ 3,300 ] EMR clinics on the network, dozens of apps offered by dozens of app publishers driving value for our practitioners by creating enormous data and tech extensibility, over 1,000 clinics and 3,200 physicians supported by WELL's billing and back office solutions and over 129,000 referrals provided by the Ocean platform in Q2 alone.

While U.S.-based patient services businesses, which includes Circle Medical and Wisp continue to demonstrate robust growth in Q2, based on June results, combined businesses exceeded CAD 115 million in annualized revenue run rate and continue to be on track to achieve our previously stated goal of CAD 130 million annualized revenue run rate by the end of the year.

Circle Medical's year-over-year growth in Q2 was driven by patient visits increasing by almost 400%. The number of practitioners working with Circle Medical in Q2 increased by 169% over the same period. Similarly, Wisp's growth in Q2 was driven by a 60% year-over-year increase in asynchronous patient consultations.

In addition to posting solid top line growth number, Circle Medical and Wisp also both individually achieved positive adjusted EBITDA in Q2. As a result of the positive adjusted EBITDA contribution from Circle and Wisp, the company's Virtual Services segment reported record positive adjusted EBITDA profitability.

WELL's wholly owned cybersecurity businesses, Cycura and Source 44 achieved record revenue in Q2, an increase of 240% compared to the same period a year ago. This growth is being driven by an increasingly growing customer base and an expansion of services offer to its customers. Both factors are driven by the increased need and complexity of cybersecurity in data sensitive industries like health care.

Overall, we're very pleased with the results in Q2 and look forward to delivering strong results in this half of the year. In closing, I want to thank all of you for joining us on this call, 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.

I would like to also thank WELL's senior management team and all of our employees and contractors for their tremendous effort. In particular, I would also like to thank our team of health care practices, and other frontline workers who continued to keep all our clinics open and provide unbelievable patient care. They remind us every day why we are here and we are here to support them. Thank you. And with that, we will now be pleased to take questions.

Operator, please assist?

[Operator]

[Operator Instructions]

Your first question comes from Christian Sgro with Eight Capital.

[Christian Sgro, analyst]

Congrats on the strong quarter. My first question here, I wanted to ask about the U.S. telehealth segment, which has seen good momentum. Just 2 questions. The first is, what would you say is driving that strong growth in visits at Circle and Wisp over a year? And then the second question is just based on what you've seen in the summer. Any change in the level of type of investments in those platforms?

[Hamed Shahbazi, executive]

Thank you, Christian. I appreciate the question. I think the main reason why Circle and Wisp are growing so well is because of the focus they have on the specialty niches that they serve. They selected those niches very carefully and they execute very well in terms of customer acquisition. And then second question, there was a bit of a delay. Could you repeat that?

[Christian Sgro, analyst]

Of course. The second question was more on the investment side of it. If there's any change in the type of marketing or type of investment into Circle and Wisp as they become more material businesses?

[Hamed Shahbazi, executive]

Yes. I think the only thing that I will mention is that Circle has been obviously a big success. They did start with the 2 clinics in the Bay Area. And as the patient roster has grown and our footprint has grown, obviously, across many states, we do see an opportunity now to provide more of that hybrid care in various different states.

So we do believe that we will make some further investments in brick-and-mortar clinics across the country. We think that combination of bricks-and-clicks care is going to be very helpful. We will still be enormously weighted towards virtual, but there's a small amount of investment. Now we don't plan to open clinics like One Medical that are extensive and cost. These would be more efficient, small factor clinics.

In fact, we're looking at also sharing space between Circle and CRH given that they are both expanding their clinical footprints. So we believe we'll be able to do that efficiently and not impact our results materially.

[Christian Sgro, analyst]

Okay. Perfect. And I'll switch gears and ask one more question. On the platform in Canada, you spoke earlier about building out the platform, but it already seems like there's a long list of tools that you went through. So my question is, how everything is integrated currently? And are there any tools that you'd want to add to the platform? Or do you think -- when you spoke about building it out, but is it missing anything really? Or are there features that you think you could add that doctors are looking for?

[Hamed Shahbazi, executive]

Yes, there's always customizations and features that our doctors are asking for. We also have significant investments we've made that we have to yet fully integrate. For example, our partnership with Tali.ai, which is a voice-enabled AI assistant, we think that's a phenomenal tool that will -- could have the effect of really revolutionizing the back office and the way that physicians are supported in the consultation room . Integrating and implementing those types of applications, I think, will drive enormous value to our practitioners.

And I think that's the kind of thing that I think we're referring to. Above and beyond that, there's a significant road map in just improving the patient access tools, self-service automation that patients will use to list -- to be listed in their own health journey, we think that there's enormous opportunities there.

And so we could probably fill a significant road map for many other developers, but we continue to be very efficient and very focused on the highest value features that we want to deliver so that we can be mindful of our cost and efficiency.

[Operator]

Your next call comes from Rob Goff from Echelon.

[Robert Goff, analyst]

And let me echo the congratulations on yet another very good quarter. My question will also be on Circle. Can you talk to some of the growth dynamics there or growth considerations in terms of where you see customer acquisition costs trending, your ability to find positions and costs associated, and perhaps on a broader basis, would you look at forming distribution partnerships with perhaps bricks to facilitate a broader reach?

[Hamed Shahbazi, executive]

Yes. Thanks, Bob. I think what's really unique about Circle is -- I think they've exhibited orders of magnitude better CAC than most other companies that we've seen as we -- as you know, we have a significant inbound funnel of companies that we look at all the time. And I think management is being extremely efficient and very strong in terms of what they've done there.

But what's, I think, even more unique than just maintaining a good CAC is -- it's what they've done to LTV. And herein lies, I think, the power of the platform because what we've seen is they've been able to convert that acquisition. So let's say you come in, into the platform because you are interested in depression or the hormone therapy or one of the various niches that they serve. The objective is to give you competent care there, but then attract you to the platform as the primary care customer and provide you with longitudinal care.

And that's the thing about Circle. It was never an episodical focused treatment company, a care company. It's always been about being your team-based family practice online and obviously in the Bay Area with the clinics as well.

So this is where I think the platform really excels is the fact that they've been able to convert so many of those -- what looks like an episodical visit to being an ongoing longitudinal care customer. And that 50% number is one that we've seen lately and we'd like to be able to maintain that.

As far as distribution partnerships, I think there's a lot of opportunities there. A lot of people have approached us. I think the key though with the team is they're finding that right now, they're just making exceptional gains and improvements every day, and they're very focused on just executing their plan.

I do believe that they're quite passionate about getting some of these physical clinics in place as well and elevating their bricks-and-clicks cooperation. But I think, to your point, those distribution partnerships could become compelling over time. We've seen some of that in the news with other companies. But so far right now, if it ain't broke, don't fix it. And Circle is just performing beautifully.

[Robert Goff, analyst]

And if I may, one other question. In terms of bringing on board primary caregivers, organically, shall we say, could you talk to how significant that might be for you when you look into your pipeline, buying the 1s and 2s at a time?

[Hamed Shahbazi, executive]

Sure. Sure. And you did bring that up with Circle and I forgot to mention something about that. So I'd say that's another key area where they have excelled. It's just how they've been able to organically onboard all of those physicians.

I mean, the growth in physicians is notable given how hard it is to acquire physicians. And that has taken a very tech-centric approach, lots of QA and kudos, just really executed masterfully.

Back to your question on Primary Care, additions of physicians. You're absolutely right. This is really key. As we consolidate these clinics, we're not just adding revenue and EBITDA and giving ourselves an opportunity to tech-enable, modernize and advance those assets, we are also then able to start to onboard more and more of those practitioners to drive our telemedicine businesses.

And I think that's a very important kind of flywheel in the model. So I think you're right to focus on that, and it continues to be one of the key aspects of our long-term value creation strategy. Thank you.

[Operator]

Your next question comes from Adam Buckham from Scotiabank.

[Adam Buckham, analyst]

Now it's obviously a strong quarter. I'm just wondering sort of in the context of some of the health care staffing shortages and bottlenecks that we've been hearing about in the news, have any of these issues had an impact on WELL's patient-facing businesses? I guess maybe just to rephrase it a little bit, are there reasons why a segment like MyHealth, for instance, could potentially have a stronger quarter than was announced in a more normalized environment?

[Hamed Shahbazi, executive]

Adam, absolutely. Great question. Thank you. Yes, as I mentioned in the script, we are seeing the effects of staffing shortages and just the entire macroeconomic environment. And so I think our results would have been better had we not been facing some of those headwinds and this goes to show you how effective and resilient the platform has been to be able to churn in these types of performances.

And a particular note is MyHealth, I think, being impacted by such shortages more than other areas. And that is due to the more technical nature of their offering, given that they are a provider of specialized care and diagnostics.

I mean primary care is a bit different. When you need MOAs, it's not easy to find them, but it's easier than finding someone who is uniquely qualified to operate a radiology -- specialized radiology equipment. And you can't just find someone and train them up quickly, they have to have the proper certifications to be supported and be able to achieve reimbursement from the Ministry of Health.

So we do think some of those shortages will get better over time because during COVID, a lot of the schools that produced new graduates of these programs were not operating as well or at all and not producing as many graduates.

And so again, we think that will get better. Of note too, something that we've been dealing with, is hospitals competing for workers because they're experiencing these shortages as well. And that's why, again, I feel that these results and our ongoing confidence in our revenue and EBITDA underscore just how resilient this platform is because we are definitely seeing it out there.

[Adam Buckham, analyst]

Great. That's good color. Maybe just another question on MyHealth. We talked -- or you've talked a decent amount about the primary care runway here in terms of picking up clinics. Just hoping to get an update on maybe the acquisition pipeline on MyHealth and sort of plans for expansion and sort of the clinical footprint of that business.

[Hamed Shahbazi, executive]

Yes. We're definitely active and we're talking to subjects and candidates all the time. We're not finding the same significant deterioration in asset prices that we saw in primary care. So my guess is we're going to be a little less active in terms of deploying capital.

But I think we're finding good opportunities. And my guess is we will deploy capital. We want to deploy capital. This is an area that we think is a great area for growth. But one of the fantastic opportunities that we have as a capital allocation company is to have a bird's eye view of all the different areas where we can allocate capital.

And right now, the asset prices in primary care are much lower. Now having said that, the allocation of capital primary care doesn't preclude us from investing in specialized care given that the asset prices are just so low as evidenced by the 2 clinics that we've invested in for less than $100,000.

So hopefully, that gives you a bit of color. But yes, we continue to be very interested in growing that business. And I think asset prices have come down as well. They're just, I think, taking a bit longer to settle.

[Operator]

Your next question comes from David Kwan from TD Securities.

[David Kwan, analyst]

Obviously, some great performances again this quarter. Just looking at the different business segments, I guess, from a revenue perspective, it looks like most of the business stayed roughly in line with my forecast, but really with the Virtual Services business that kind of really stuck out this quarter.

I know you -- obviously, Circle has to have been kind of generate some pre phenomenal growth there. And more recently, you've been flagging CognisantMD or Ocean. But I was wondering if there was really anything else kind of going on in the quarter. I was just wondering if maybe there's some lumpier revenues that came in like on the cybersecurity, Cycura, Source 44?

[Hamed Shahbazi, executive]

Yes. Yes, that's a really good point, David. We definitely have a lumpier business model in cybersecurity, and we did definitely see some lumpiness there. So it was definitely a record quarter. But keep in mind, that's not a -- now that's not a huge contributor to the overall Virtual Services segment. So even though it's substantial, I think I would still turn to those virtual patient services businesses for the lion's share of the growth.

[David Kwan, analyst]

No, that's helpful. I'm just trying to get a sense of looking out beyond this quarter, the vast majority of the revenues being kind of recurring or reoccurring. To what extent there might have been like such some of these lumpier revenues just going into the seasonally softer Q3, right?

[Hamed Shahbazi, executive]

Yes. Yes.

[David Kwan, analyst]

Yes. Looking at the revenue outlook for Q3 in particular. So -- yes, I guess -- the other question I've got is just on the primary clinic side, and maybe this is a question for Eva. The EBITDA margins there jumped to roughly 20%, I think, this quarter, and that's roughly double where it was -- has been. So I was wondering what in particular might have been driving that.

[Hamed Shahbazi, executive]

Eva, would you like to grab that one?

[Eva Fong, executive]

Sure. Yes. I think we're seeing strong growth in our executive health clinic and also the -- our Quebec, Montreal clinics. So that contributed to a very strong EBITDA growth in this quarter. And of course, in addition, Q2, our primary clinics is also continuing to be staying strong and with growth in our primary clinic visit. Anything to add, Hamed?

[Hamed Shahbazi, executive]

No, I think you nailed it, probably some of the clinics that improved the most on a year-over-year basis were the Quebec clinics. But we continue to have good strong growth in the balance of the network as well. And we continue to see really good performance from groups like our Allied Health business. I mean, that line of business, again, as a whole has been quite successful for us.

[Operator]

And your next question comes from Nick Agostino from Laurentian Bank Securities.

[Nick Agostino, analyst]

Yes. Just a quick question, Hamed, just with regard to the competitive environment. Obviously, Amazon acquiring One Medical, and this is in addition to the pharmaceutical bolt-on many, many quarters ago. So just your thoughts on whether -- where you think Amazon head is at? Where do you think they could encroach over time on your U.S. business? Where do you think that Amazon could maybe take their model up into Canada and maybe approach on the business here?

And then similarly, we saw TELUS Health acquiring LifeWorks. Just your thoughts on that as to whether if TELUS Health ever gets around to a full-on integration, if you think that TELUS Health could overtime, again, encroach on what you kind of do here in Canada. So just your overall thoughts on those active things on the competitive landscape.

[Hamed Shahbazi, executive]

Thanks for the questions, Nick. Yes, I agree. There's lots of interesting transactions lately. I'll first comment on One Medical and Amazon. I think that demonstrated -- that transaction really demonstrated the value that comes with tightly integrated experiences between on and offline.

And notwithstanding the fact that One Medical wasn't anywhere close to profitability. I think they've had some pretty good NPS scores and people like the experience. And I think that's something that Amazon likes, and it was a big reason why they invested. And this is, I think -- to us, it makes a ton of sense, and this is why you're going to see more and more of that on and offline coordination building more of those experiences together, both in the U.S. and Canada.

That's a key goal for us. I think, to also remember about One Medical, as you think about that as a competitive threat to us is that, that carries a monthly premium to -- as a consumer or as a company if you want to engage with One Medical.

Whereas Circle Medical, there's no monthly premium. There's no monthly cost. There is an episodical cost that is mostly paid by your health care insurance provider. And so the app does a great job of authenticating you as a member of one of the various different companies. They pretty much have agreements with all the key health insurance companies.

And so the consumer or the patient only has to pay a small co-pay, and in some cases, for example, during COVID, there was no co-pay. And so the friction to use Circle is much lower than One Medical. And so as we start getting into a recessionary time, one has to think which is the better model.

I'm very comfortable with Circle Medical's platform in the way that -- and how incredibly efficient it is for the user to be able to access those services. I think it's important to note that most One Medical customers are probably also a member of a health insurance policy somewhere.

And so if I had my druthers, I would probably assume that there's more likely for consumers to drop One Medical and use Circle than the other way around just because of cost friction associated with that. So I think that's a really important distinction that not a lot of people appreciate.

And the other thing is Circle is profitable, right, and growing extremely quickly, much more quickly. Of course, we're working off a smaller base, but I think those are notable. We don't see that model coming into Canada anytime soon because you wouldn't even really be able to operate that business model in Canada due to the regulatory framework.

So they dramatically have to change how they make money if they wanted to bring that network into Canada. On TELUS and LifeWorks, listen, I think, it was a really smart move just given from a capital allocation perspective, given where TELUS stock is at, given where LifeWorks stock is at.

I think it's a great asset. My hat's off to TELUS on that. And TELUS is, I think, executing very well in that employer-based market. It feels to me like with this acquisition, they've got commanding approach and business in that area. And we're, as you're probably aware, not competing in that area.

That's where the Dialogues and CloudMD that are competing in that area. But -- yes, for me, I think that was -- there were a lot of key logos and accounts there, both in the United States and Canada, and I think it really strengthens that platform. Hopefully, that's helpful to you.

[Nick Agostino, analyst]

Yes. No, I appreciate that color. And then just one quick one. I'm not sure if you've highlighted in those prepared remarks, but just the update on where you are on the apps take up, how many apps do you have these days, how many publishers? If you have any stats on usage, that would be appreciated as well.

[Hamed Shahbazi, executive]

Yes. No, absolutely. Actually, we did see -- we are seeing some nice growth with apps.health. I believe that in Q2, we saw 95% year-over-year growth. And listen, it's a smaller number, but it's just evidence that we have pockets of growth occurring in the platform.

I think we have over 40 apps right now, driven by 30 plus application partners. But -- the objectives, initially, when we started this business, it was all about the number of apps. And while we continue to add more apps, I think we're realizing quickly that the 80/20 rule does exist. And so we're getting deeper into this business and building stronger relationships and really trying to figure out how to help our app partners win, and that's working as evidenced by the growth in app revenue.

And I'm very confident in the new managers of our Provider Solutions group, Paulo and Adam, who are the leaders of our Doctor Care acquisition. They've -- as you're likely aware through our press releases, they're now running this area. And I think they've got a fantastic plan. And -- yes, very excited about growing this area of the business.

It looks like there's no other questions or our operator is experiencing a glitch. Operator, are you around?

Okay. Well, maybe we'll just take that as a cue to end the conference call, given that it's 7 past the hour.

Thank you very much to everybody for joining. Thanks to all the analysts for your questions and your thoughtful perspective. We look forward to visiting with you next quarter, and we wish you the best in health. All the best. Thank you.