WELL Health Technologies Corp

TSX:WELL

Earnings Call Analysis

WELL's Record Revenue and Growth Outlook

WELL Health Technologies Corp. achieved a record quarterly revenue of $204.5 million in Q3 2023, a 40% hike from the previous year, fueled by acquisitions and organic growth, with a notable 16% year-to-date organic increase. Their Canadian Patient Services and SaaS & Technology Services saw revenue jumps of 27% and 10%, respectively, while WELL Health USA leaped by 52% in revenue―testaments to the robust growth in each sector. The company anticipates primary care and specialized care services to continue strong growth, with expectations of primary care clinics becoming profitable in 2024. The company expressed confidence in reaching or exceeding $100 million in revenue for certain U.S. businesses and sustaining double-digit growth.

Q3 2023: A Record-Setting Quarter Amid Strategic Reinvestments and Growth

WELL Health reported a landmark quarter with record revenue of $204.5 million, marking a 40% increase from the previous year's same quarter, buoyed by acquisitions and organic growth of 16%. Adjusted EBITDA rose to $28.2 million, a 3% increase year-over-year, reflective of strategic reinvestments in U.S. digital healthcare businesses Circle and WISP and Canadian clinic expansions.

Adjusted Gross Profit and Margins: A Tale of Selective Expansion

The adjusted gross profit saw a significant 21% uptick, reaching $94.2 million, even as adjusted gross margins fell to 46.1% from 53.6% due to acquisitions with lower margin profiles. It highlights the company's deliberate strategy to sacrifice margin percentage for greater market share and expansion opportunities.

Profitability and Free Cash Flow: Mixed Results Signaling Robust Predictability

Adjusted net income declined slightly to $12.8 million ($0.05 per share), contrasted with $14.8 million ($0.07 per share) a year earlier. Shareholders' free cash flow also decreased by 16% to $9.6 million. Notably, around 98% of WELL's revenues are deemed highly predictable due to their recurring nature, underscoring solid underlying business stability.

Business Segment Dynamics: Diverse Streams Fueling Growth

A highlight of WELL's business segmentation reveals the Canadian Patient Services delivering growth of 27%, achieving $57.8 million, and WELL Health USA Patient Services rising a steep 52% to $130.7 million. SaaS & Technology Services also grew consistently, with revenues climbing to $15.9 million, indicative of bouncing back from previous fluctuations and signaling sustained growth potential across segments.

Financial Positioning: A Sturdy Balance Sheet With Prudent Leverage

WELL's balance sheet remains strong, with $42 million in cash and cash equivalents. Total debt was approximately CAD 293 million, with a shareholder leverage ratio improving from 2.9x in Q3 2022 to 2.6x in Q3 2023, establishing confidence in WELL's financial management and capability to fulfill growth objectives.

2024 Outlook: Positive Trajectory With Margins and Profitability at the Helm

Looking ahead, WELL is poised to not only exceed $900 million in revenues for 2024 but also expects the newly acquired MCI clinics to positively impact profitability. The company remains committed to delivering robust revenue growth while sustaining profit expansion, with a performance update to follow in March 2024.

Innovations and Acquisitions: The Engines of Future Growth

WELL continues to invest in technological advancements, with Circle Medical and WISP gearing up for future expansion through hybrids of telemedicine and in-clinic services. Recent cybersecurity acquisitions signal a strong forward push into data protection, with WELL aiming to be a frontrunner in safeguarding healthcare data, a sector poised for significant revenue potential.

The Earnings Call That Sparked Confidence

This earnings call painted a picture of WELL Health as a company on the rise, capitalizing on significant revenue growth, thoughtful reinvestment, and strategic acquisitions that indicate a promising future. For investors, WELL's commitment to growth backed by financial prudence bespeaks an opportunity that balances immediate results with long-term potential, setting the stage for a robust 2024 and beyond.

Earnings Call Transcript 2023-Q3

[Jenny Karim]

Welcome to the WELL Health Technologies Corporation Third Quarter 2023 Financial Results Conference Call. My name is Jenny, and I will be your operator for today's call. At this time all participants are listen-only mode. We will conduct a question-and-answer session later in the call, which will be restricted to analysts only. Please note, this conference is being recorded. I will now turn the call over to Tyler Boba, Manager, Investor Relations. Mr. Baba, you may begin.

[Tyler Baba, executive]

Thank you, operator, and welcome, everyone to WELL Health fiscal third quarter financial results conference call for the 3 months ended September 30, 2023. 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 control and 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 statements solely for the purpose of providing information about management's current expectations and plans regarding 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 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 constructed 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 hope that you're all keeping safe and healthy. We appreciate everyone for joining us today. We are extremely pleased to be with you today and discuss our strong momentum and record-breaking quarter in which we achieved record revenue, record adjusted EBITDA and record patient visits. We remain committed to the company's continued focus on tech-enabling healthcare providers and supporting them and simplifying their work lives, modernizing and digitizing their clinical practices and delivering the best healthcare possible. During Q3 2023, WELL delivered over 1 million patient visits in the quarter through our physical and virtual clinics and over 1.58 million technology and care interactions. WELL now services more than 33,000 healthcare providers with our SaaS and technology services in Canada, which is equal to approximately 1 out of every 3 healthcare providers in the country. We're extremely passionate about supporting our providers. And every day, we focus on supporting them better. This attitude and focus is what has allowed the company to continue 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. We're pleased to report that all of our business units are executing very well, and we're expecting to have strong performance for the remainder of 2023 and into 2024. We do not foresee any material influences or challenges that would impair our ability to deliver solid results in 2024 as we're poised to invest in and achieve significant growth while delivering on sustained profitability. For the fourth quarter, we are expecting to achieve record revenue in both our Canadian and U.S. patient services businesses. With continued improvement in our outlook, I'm pleased to provide an upgrade to our revenue guidance for 2023, which we now expect to be between $755 million to CAD 765 million. Just a reminder, our guidance does not include any unannounced acquisitions. In terms of profitability, we are providing guidance for 2023 annual adjusted EBITDA to increase by a figure approaching 10% over 2022 levels. Our revenue growth continues to outpace our EBITDA growth due to the following 2 reasons: One, we continue to reinvest any excess cash flow back into the business for growth. This is most demonstrated in the case of our U.S. digital healthcare businesses, Circle and WISP, who have had strong top line growth but who have both gone through a period of heavy reinvestment over the past few quarters. Two, the recent acquisitions of the MCI One Health clinics have and will have a negative impact on our EBITDA profile Q4 performance. As we've conveyed at the time of our acquisition, these clinics were not profitable, but we have initiated our clinic transformation process, where we have had an excellent track record in digitizing and modernizing our acquired clinics and improving their operating profit margins. This is what we do, and we have a proven track record of improving growth and profitability of our acquired assets. As such, we continue to believe that they will be profitable in 2024 and thus accretive to our results. Looking forward to next year, I'm really excited to introduce our revenue guidance of achieving more than $900 million in 2024 in revenues. We will provide more detailed guidance ranges for 2024 revenue and adjusted EBITDA when we report our 2023 annual results in March 2024. However, we wanted to provide you with some early indications of our confidence level in 2024. In the past, I've mentioned our goal to achieving $1 billion in annual revenue within 2 years. With the revenue guidance of $900 million that I provided today, we're clearly within reach of that $1 billion milestone, likely a little quicker than I had mentioned before. Keep in mind that our target of achieving over $900 million next year does not include any unannounced acquisitions. Given our current pipeline of compelling acquisition opportunities, we have visibility into potentially achieving $1 billion revenue run rate by the end of 2024. Before I turn the call over to Eva, I'd like to highlight our Canadian clinic business. Our Canadian business is firmly the largest and most comprehensive provider of tech-enabled care in Canada and is generating significant profitability. In Q3, we achieved $12.3 million in adjusted EBITDA in Canada, an increase of 24% compared to Q3 2022. Furthermore, EBITDA generated in Canada primarily goes to shareholder EBITDA given the small noncontrolled interest that we have in the Canadian market. This increase in profitability in our Canadian business is proof that our business model is working. As we've indicated before, our business in Canada is to tech-enabled healthcare providers. We have the most comprehensive digital platform in the country that covers practice management, billing, digital patient engagement capabilities, data protection, and a lot more. We have 2 ways in which doctors can interact with our platform. One, on an a la carte basis, they can subscribe to whichever services they like and have them implemented in their patient services business; or two, they can join one of our physical or virtual clinics where our technologies and tools are provided on a fully managed service. What we have learned since providing our services is that increasingly, doctors don't want to run their own clinics and are seeking us out to become their operating partners. As such, we have purchased or recruited entire clinics in order to better support doctors that work in such clinics. Once the new clinic is added to our network, our team employs our clinic transformation program, which includes extensive use of our own digital practitioner enablement platform and shared services program to modernize and digitize these clinics, which generally result in improved cost efficiency and operating support for physicians. Depending on the state of the acquired absorb clinics, it can take anywhere from a few weeks to a few months, and in some cases, can take more than 1 year. We believe the Canadian market continues to be an enormous untapped potential for WELL and very much remains a land grab opportunity, while O'Regan operates the largest network of clinics across the 4 most populous provinces of Canada, namely Ontario, Quebec, BC and Alberta, providing multiple services, including primary care, diagnostic, allied health, specialized care, and now our recently announced Longevity medical services. With 168 clinics in 98 facilities in Canada, we are the largest player, and we've just achieved just shy of 1% market share of this large multibillion-dollar opportunity. We believe we can grow our Canadian business to multiples of its current size, which could on a stand-alone basis, exceed over $1 billion in business in the future on its own. As we have indicated before, the Canadian market for healthcare clinics is extremely fragmented with very few large clinic chains existing in the country, which have 20 or more clinics. Acquiring smaller clinics can be laborious and difficult work, but we are pleased to report that the number of clinics and physicians that are now seeking WELL out specifically due to our growing posture in the industry has been tremendous awareness and affinity to our brand continues to grow. And due to this reason, we believe that our organic growth in recruitment will significantly grow in 2024.With that, I would now like to turn the call over to our CFO, Eva Fong, who will review the financials for the fiscal third quarter 2023, and then I'll 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 September 30, 2023. Our overall third quarter results were as follows: WELL achieved record quarterly revenue of $204.5 million in Q3 2023, an increase of 40% as compared to revenue of $145.8 million generated during Q3 of last year. This growth was driven by acquisitions and organic growth. Year-to-date, WELL has achieved organic growth of 16%. WELL achieved record adjusted gross profit of $94.2 million in Q3 2023, an increase of 21% as compared to adjusted gross profit of $78.2 million in Q3 of last year. Growth in the company's adjusted gross profit is attributable to higher revenue in the period. Adjusted gross margin percentage was 46.1% in Q3 2023 compared to adjusted gross margin percentage of 53.6% in Q3 of last year. The decline in adjusted gross margin percentage is mainly attributed to the acquisition of businesses with lower gross margin percentage. WELL achieved record adjusted EBITDA of $28.2 million in Q3 2023, an increase of 3% as compared to adjusted EBITDA of $27.5 million in Q3 of last year. For context, last year's results included $4.8 million more EBITDA from our U.S. digital health subsidiaries, Circle Medical and WISP prior to our decision to reinvest more of this EBITDA to continue to drive growth in their businesses. Shareholder EBITDA or adjusted EBITDA attributable to WELL shareholders was $22.9 million in Q3 2023, an increase of 13% as compared to adjusted EBITDA attributable to WELL shareholders of $20.2 million in Q3 2022. Adjusted net income was $12.8 million or $0.05 per share in Q3 2023 as compared to adjusted net income of $14.8 million or $0.07 per share in Q3 2022. Shareholders' free cash flow was $9.6 million in Q3 2023, a decrease of 16% as compared to shareholder free cash flow of $11.4 million in Q3 of last year. WELL generated 10% of this revenues from truly recurring and subscription revenues and 88% of its revenues from its highly recurring patient services revenues in Q3 2023. This means that approximately 98% of its revenues are highly predictable. I will now review our cemented third quarter results. Our Canadian Patient Services business achieved another record quarter with revenue of $57.8 million in Q3 2023, an increase of 27% as compared to $45.5 million in Q3 2022, driven by healthy organic growth in our primary care clinics and the acquisition of the MCI clinics in Alberta. Our WELL Health USA Patient Services revenue was $130.7 million in Q3 2023, an increase of 52% as compared to $85.8 million in Q3 2022. Revenue growth over the past year was due to growth in all 3 of WELL Health USA lines of business, Circle Medical, WISP and [indiscernible]. SaaS & Technology Services revenues were $15.9 million in Q3 2023, a year-over-year increase of 10% as compared to $14.5 million in Q3 of last year and an increase of 20% as compared to $13.3 million in the prior quarter Q2 2023. The increase in revenue was due to a bounce back in our cybersecurity and data protection business in the third quarter as well as organic growth in our remaining SaaS and services platform business. WELL ended Q3 2023 with a solid balance sheet. As at September 30, 2023, WELL had cash and cash equivalents of $42 million and restricted cash of $3 million. WELL continues to be in good standing 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 293 million as of September 30, 2023. I'm also pleased to report world's shareholder leverage ratio reduced from 2.9x as at the end of Q3 2022 to 2.6x as of Q3 2023. We defined leverage ratio as net bank debt less cash on hand, divided by shareholder-adjusted EBITDA. We exclude convertible debentures from this calculation because convertible debentures are not included in our bank covenants. Over the past year, the improvement in WELL leverage ratio was achieved by an increase in shareholder-adjusted EBITDA. In terms of our share capitalization, as of November 13, 2023, WELL had 258,385,460 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. I'll now provide some specific outlook on our business units. First, our primary care business. During the third quarter, Canadian Primary Care revenue increased by 51% compared to Q3 2022 driven by the acquisition of 5 Calgary-based clinics from MCI One Health and organic growth of 16%, which is much higher than industry averages. I've already commented extensively on our primary care growth opportunity at the beginning of our remarks, but I'll just reiterate that we believe primary care will maintain strong absolute and organic growth, not only through Q4, but all through 2024 and hopefully beyond. Our outlook for primary care continues to look strong for the fourth quarter and beyond, notwithstanding the transformation and retooling work that we've been doing on the acquired MCI clinics in Q4, which will have a temporary negative impact on our P&L. As we go through the process of digitizing and modernizing these clinics, we expect them to become profitable in 2024. Last thing I'll say about primary care is that our recruitment pipeline is very strong and perhaps the best we've ever seen it. We believe this is directly correlated with the challenges doctors are feeling in the marketplace and WELL's growing brand recognition. We believe 2024 could be a breakout year for primary care. Now a few words about MyHealth. MyHealth had an outstanding third quarter with strong year-over-year growth of 9%, which was all organic and improved profitability. MyHealth's revenue had a slight decline in Q3 compared to the prior quarter Q2 2023 due to normal seasonality as we had anticipated. In reference to Ontario's built 60 Your Health Act, which allows out-of-hospital facilities to perform publicly funded surgeries and diagnostic procedures, including MRI and CT, we continue to await the final regulations and call for applications for licensing, which experienced some delays. Although exact timelines are not publicly released, we anticipate a call for applications to occur by the end of this year or in early Q1 2024. MyHealth Center continues to be highly engaged through the process with the optimism of serving the patients of Ontario and helping reduce MRI/CT patient wait times the following calendar year. Notwithstanding our continued progress on profitable organic growth, we are also ramping up our M&A efforts at MyHealth to find suitable acquisitions to grow the business. Given our corporate discipline, we have not made any acquisitions here in the last couple of years, mainly due to the persistently high multiples we've been seeing. We're starting to see signs of improvement in this area and are eager to report wins in the future. I will now discuss the outlook for the WELL Health USA business. The different lines of business under WELL Health USA include CRH, anesthesia, CRH O'Regan, RADAR Healthcare Providers, Circle Medical and WISP. First, CRH and RADAR. CRH having an outstanding year so far with Q3 revenues up 73% compared to Q3 of last year. Anesthesia cases continue to grow and ligator sales also increased 12.5% in Q3 compared to the prior quarter. The CRH received a boost in revenues in Q3 from the CarePlus acquisition, which included the addition of ASC practices and radar, which is a staffing and low-component service, which specializes in anesthesiologist recruitment and placement for its network of customers, which includes provider groups, hospitals and ASCs across 29 states. RADAR adds significant upside for growth and diversification beyond clinical anesthesia services to include recruitment services. We're very pleased to be welcoming RADAR Healthcare Providers to the WELL family. We expect continued growth in Q4 for both CRH's anesthesia services and RADAR. Q4 is usually the strongest seasonal quarter for CRH. And now a few words about Circle Medical. With less energy being devoted to regulatory issues, Circle Medical is again poised to resume its growth trajectory. Circle Medical continues to grow its provider network, ending the quarter with 341 active medical providers, a year-over-year increase of 48%. This is a significant achievement and one that we know is the key to see more growth and profitability. We're seeing record growth in new patients with new patient acquisitions up 30% in Q3 sequentially. New patient acquisitions were up a further 14% month-over-month in October alone. As these new cohorts mature, they will produce additional revenue in Q4 and beyond. To support its growth plan, Circle Medical is investing heavily in its technology platform by growing its product and technology team with most hires based in the Montreal office. Product development is currently focused in 2 areas: one, patient-facing features designed to strengthen the longitudinal primary care relationship, which will drive engagement and clinical outcomes and eventually lifetime value; and two, technology to help scale operations, especially via automation and artificial intelligence. Circle Medical has begun using its own AI scribed to document encounters and is working on extending the use of AI to help monitor clinical quality. Moreover, MedCircle Medical is in the early discussions with HEELWELL to pilot a program to use AI to identify patients who may benefit from being screened for rare diseases or other medical interventions. In September, the company hired a new head of Growth, Catherine David, in Catherine's previous role, she grew a venture-backed U.K. company from GBP 20 million to GBP 400 million in annual revenue over 5 years. With 1 month down in Q4, we can already tell that Circle Medical will likely deliver record revenues and positive EBITDA in Q4. And now for WISP, I'm pleased to report that WISP reported record revenue in Q3 as the company returns to its focus to growth and profitability. Last quarter, we discussed how WISP is recooling some of its key product and distribution partners, which resulted in slower growth and minimal adjusted EBITDA contribution in the first half of the year. With has been able to successfully balance growth initiatives, along with the launch of an improved e-commerce-enabled marketing site, which also is enhancing its supply chain redundancy and partnerships. Last quarter, we discussed with plan to launch 10 new products before the end of the year and remain on track to hit this goal. Most notably, WISP launched 5 new products in Q3, including Estradiol, marking the company's entrance into the menopause vertical. We expect WISP to report record revenue in Q4 with improved profitability as the business leans into the holiday season. In addition, we expect pulling back on some of our marketing spend due to high seasonal cost of advertising, while accelerating marketing spend again in January of 2024 when we have lower seasonal cost of advertising. And finally, our SaaS and technology services business. SaaS and technology, our business unit had a bounce back in -- bounce back quarter in Q3. As we discussed last quarter, the cybersecurity and data protection segment is a lumpy business, whose revenues declined in the second quarter as we had expected. Cybersecurity revenues can sometimes be impacted by timing of hardware shipments at the end of the quarter. Revenues improved in Q3 with several contracts delivered while the rest of the SaaS and services business continue to perform with steady growth and profitability. We also recently announced the acquisition of 2 strategic tuck-in cybersecurity businesses Seek Into and Proact security.These acquisitions demonstrate well steadfast commitment to safeguarding patient trust and operational integrity. WELL has bolstered, its cybersecurity portfolio with these 2 strategic tuck-in acquisitions, bringing on board seasoned cybersecurity professionals in the process and strengthening our capability to serve over 190 corporate and government customers across North America. During Q3, we announced also that OceanMD signed a $38.5 million contract with British Columbia's Public Health Service Authority to provide an array of digital services such as eReferrals, e-consult and e-orders to help further tech enable providers with best-in-class interoperability tools. OceanMD is already the dominant eReferral solution in the province of Ontario. In Q2, we announced OceanMD had 1 that Nova Scotia eReferral bid. And with this win in BC, we feel OceanMD has the potential to become the eReferral standard across the country. Thus far, our implementation in BC has been proceeding as planned. We've received tremendous interest with over 250 doctors signed up to participate before any participant recruiting has even begun. Doctors of BC has been fully engaged and supportive. We've already begun to receive services revenue as our teams are fully engaged with training and planning for launch. Go Live is expected in the first half of 2024, at which time we will also start to receive high-margin license revenue. OceanMD is a key component of our SaaS and technology services group and is emerging as a leader in patient engagement and eReferral solutions. Ocean's eReferral software allows primary care providers to send their request to surgeons through the Ocean eReferral Network instead of faxing, e-mailing or mailing, which makes up surgical consult referrals easier and reduces wait times for patients. OceanMD has notably proven its ability to reduce wait times by as much as 52 days and a 12% reduction in medically unnecessary MRIs, underlining a direct cost savings impact for provincial health systems. We're pleased to report that Ocean is now delivering approximately 1 million eReferral events per year. This is a real achievement, and we're very proud of the Ocean team for making the positive impact it is making in the Canadian healthcare ecosystem. In Q3, healthcare providers also continue to embrace WELL AI voice and its ability to cut down on administration time and increase patient engagement, giving physicians back time in their day. The adoption metrics of WELL AI voice are a testament to the value created for physicians. WELL AI voice has seamlessly integrated in over 15,000 patient consultations in Q3. Reclaiming time for clinicians that was previously lost due to administrative tasks, while enriching patient care quality. In Q3, we've seen a surge in platform users as WELL AI voice saw paid user growth of over 500%. Q3 also marked a successful first rollout to WELL-owned clinics, including WELL AI voice to 23 clinics in British Columbia, WELL physicians leverage WELL AI voice and been scribing over 2,400 patient encounters. Our continued expansion of WELL AI voice within our clinical network demonstrates our dedication to leveraging our AI capabilities to benefit WELL physicians and our broader clinic network. Overall, our technology platform services group continues to perform with the rollout of AI-based tools and achieving record sales in Q3 in both Oscar EMR and our billing RCM products. I'd now like to provide some additional commentary on the launch of HEALWELL AI. We recently completed our oversubscribed financing transaction with previously named NCI One Health, resulting in the relaunch of a new senior-listed public company called HEALWELL AI, a pure-play healthcare AI and data science technology company focused on preventative care. We are very pleased with the successful launch of HEALWELL, who has garnered immense interest and raised additional equity financing to strengthen its balance sheet. Since WELL's involvement was initially announced, the company has gone from a market capitalization of less than $10 million back in May to more than $100 million on an as converted basis. WELL has entered into a strategic alliance agreement with HEALWELL that enabled us to launch WELL AI decision support to our network of clinics and doctors. We believe this will become one of the most important services that we offer. This is because we believe the experience of being a physician will profoundly change over time. Physicians are currently expected to know everything about their patients, including patients that they haven't even had long tenured relationships with. Given that some patients who have chronic or complex care needs may have hundreds or even thousands of pages of clinical nodes, it is unrealistic for physicians to be expected to have a dynamic understanding of all their patients' charts and detailed requirements. We believe this is where AI technology can be extremely useful and helpful. We expect that over time, decision support will support physicians in the following ways: one, help them improve their accuracy of diagnosis, particularly for the thousands of rare and ultrarare diseases, many of which have known successful interventions once identified. Two, help physicians search patient records with much greater ease as unstructured clinical nodes become structured and searchable through the use of artificial intelligence. And three, allow patients to see more patients as they're able to more effectively and rapidly triage patients, especially as such patients have complete health history available within the provider network. WELL AI decision support will be a project that will entail progress over a multiyear period given the enormity of the scope and the objectives being sought out. We will keep shareholders posted on our progress with this initiative. Currently, on an as-converted basis, WELL owns approximately 17% of HEALWELL. As part of the investment in strategic alliance, 2 members from WELL were appointed to HEALWELL's Board of Directors and subject to satisfaction of certain conditions, WELL will also hold an option to acquire up to 30 million Class A and B shares in HEALWELL over the next couple of years. Assuming these shares are acquired WELL's economic ownership would be approximately 40% and its voting ownership would be well above 50%. This means that WELL will have an opportunity in the future to acquire control of HEALWELL in the event it elects to acquire the multi-voting shares it is optioned out subject to the terms and conditions of the various agreements, covenants and rights. Given the strong alignment, WELL is spending time and resources to support HEALWELL's growth plan, which is compelling. In summary, we're very pleased with our financial performance thus far in 2023 and look forward to delivering strong results again in 2024. Our outlook remains positive. Hence, I'm confident in upgrading our annual guidance again. We have many tailwinds driving growth in the business, and we have a committed and disciplined team to ensure we can execute on our objectives. 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 thus, we are very grateful to the capital markets for that. I would also like to thank WELL's senior management team and all of our employees and contractors for their tremendous effort. In particular, I'd like to thank our team of healthcare practitioners and other frontline workers who provide unbelievable patient care. They remind us every day why we are here and why we are here to support them. Thank you. And with that, we are now open to take some questions. Operator, would you please facilitate?

[Jenny Karim]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question is from Christian Sgro from Eight Capital. Please ask your question.

[Christian Sgro, analyst]

Start with the U.S. WELL Health segment, which, by my calculation, to 22% in the quarter. It looks like returning to growth as you guys promised on the back half of the year after some physical expansions and other restructuring but operational enhancements in Joist. So my question would be, how are the competitive dynamics in the U.S. on the telehealth side? What else could you share on both Circle and WISP into Q4? And as you think about 2024 to businesses?

[Hamed Shahbazi, executive]

Christian, thanks for your message. You're right, there's definitely a lot going on in the U.S. segment. And this is one of the reasons why we haven't taken a generalist approach to the market there. We've been very specific with is obviously a real leader in women's health and particularly in reproductive and sexual health, and they continue to demonstrate that they're connecting with their audience and their brand is growing. And so they've become a real go-to site and place for whether it's products and services to support UTIs or birth control or Herpes breakouts or whatever the case may be, that momentum continues to grow and as we launch more products and services, I think we're getting deeper into that niche and becoming more and more trusted. Similarly, Circle, WELL -- Circle Medical has a longitudinal focus and which helps drive that LTV growth, it is very much focused on acquiring patients that come in through specific niche areas. So they're not out there trying to acquire that generic customer. They're out there identifying and essentially encouraging and demonstrating significant competency in niche areas like depression, anxiety, ADHD, sleep, hormone firming therapy, definitely areas where that are topical for people where they may not be as confident in terms of going to their own primary care provider. What's quite unique, though, about Circle is that once they serve the patients with these topical needs, they're able to then convert a significant portion of them, that number moves around a little bit, but it's essentially roughly around 30% into being longer-term patients that come on board their longitudinal care platform. So that's something that we think is very positive. I think if it weren't for the go-to-market strategy of identifying these other on-ramps, it would be difficult to compete. This is why they're very successfully competing against all the different competitors out there, which you know are numerous.

[Christian Sgro, analyst]

Perfect. That's helpful color. I'll ask a second question on WELL's consolidation opportunity, a lot of competing priorities for capital right now across, [indiscernible] the AI program clinics, maybe geographically as well. How you prioritize the way you see sort of internal investments across your segments right now? What will you be looking out for M&A to come from WELL?

[Hamed Shahbazi, executive]

Look, in one word, with great discipline and truly, we prioritize. So we centralized capital allocation functions. So we are very careful in putting capital to the places where we see the greatest opportunity. In today's world, we see a lot of that in primary care. We're just seeing tremendous -- we continue to see tremendous opportunities to pick up clinics at excellent multiples, and in many cases, are just absorbing them. As I mentioned in our script, as our brand grows and as that frustration kicks in with all the irritants out there for primary care providers that are running their own show their own practices. We're seeing more and more of those physicians that want a professional partner to help them run their clinic. And so often, they're coming to us and asking us to get involved. And we're not even taking all of those opportunities, frankly, because we don't want to take on losses. So we are still being quite selective, but just seeing enormous opportunity. I think part of what's really resonating with physicians is they can see the authenticity of our company. We are not just helping them run their practice. We are also using our own technology. We are the biggest customers of our technology platform and are using that to wrap around them and really deliver the best care possible. So I would say we're seeing great opportunities there. In the U.S., I think the CRH team continues to see great opportunities to acquire from time to time as well, although with CarePlus and RADAR, we now have a more diversified base of revenues and more opportunities in terms of how we grow that business. So we continue to be very opportunistic down there as well. But just given our higher debt service costs as a result of inflation and higher interest rates, we're very careful. As you can see, we paid down our leverage ratio. So we understand the environment that we're in. We're going to continue to be very careful, but we're going to be opportunistic.

[Christian Sgro, analyst]

Great. Congrats on the strong quarter, Hamed. Thanks for taking my questions.

[Hamed Shahbazi, executive]

Thank you, Christian.

[Jenny Karim]

Your next question is from Doug Taylor from Canaccord. Please ask your question.

[Doug Taylor, analyst]

We can all see that the emphasis on building market share more aggressively is having a strong impact on your top line momentum. I'd like to talk through the profitability guidance, which is now, I think, a little bit more qualitative described as solid and sustained. I just want to make sure that we all understand what that means. Is the prior 10% EBITDA growth guidance for this year still a relevant objective?

[Hamed Shahbazi, executive]

Yes, it is. I think in the script, I mentioned that we're still very much looking to deliver, as I said, a figure that's approaching 10%. The reason for that is really just the MCI Clinics in Q4. We're expecting -- as you can imagine, previously, we didn't have those clinics closing in Q4. So we do expect there to be some retooling and some transformation that occurs there, which will create some short-term impairments to profitability, but certainly not anything that would sort of sustain longer than that. And this is why we're expecting those clinics to contribute positively to profitability in an accretive fashion in 2024.

[Doug Taylor, analyst]

And so as a follow-on question to that, and you've been good enough to provide us with some top line guidance or visibility into next year. I wonder if -- I mean, even qualitatively, you would help us define what success would look like for you in terms of profitability next year given the many moving pieces related to both the integration that you've spoken to, but also reinvestment cycles would sustain the margin on an absolute or percentage basis be the objective?

[Hamed Shahbazi, executive]

Yes. I think I've said this on prior calls, too. I'm very much believed that we're going to take a very similar approach to the propose we took this past year. We think that that's going to involve a certain level of profitability that we're going to deliver. So we're intent on delivering revenue growth, but also sustained profit growth. In March, once we're through Q4 and we've got our full year, we'll be able to be in a better place to provide that specificity, but I gather it would be very similar to the approach that we took this past year. Hopefully, that gives you a lot of perspective.

[Jenny Karim]

Your next question is from David Kwan from TD Securities. Please ask your question.

[David Kwan, analyst]

Thanks for the color on the M&A pipeline. One question I had on that now is. It seems like the focus is on clinics, but would you look at something that's outside of kind of where you're currently operating? Or is the focus primarily on adding [indiscernible] scale on what you currently have a footprint in?

[Hamed Shahbazi, executive]

Thanks, David. I think that what we're seeing in Canada, we think is momentous and, frankly, anomalous. Like the fact that we don't have significant private equity activity here in Canada, where we have to compete for these assets is pretty amazing. In the U.S., you just over the border and there's tremendous activity and competition for these types of assets. So we don't think that's going to last for long. And this is why we're taking such an aggressive approach towards it. We fundamentally believe that people are undervaluing provider and patient relationships. We're okay with that because we don't undervalue them. I think we see opportunities to grow not only in primary care, but also specialized care and diagnostics. I think we want to fill in some of the white space that we see geographically. And so there's a lot here to keep us busy. We also feel -- also quite WELL prepared to support the technology evolution of the business. And so there's not much that we need to do to bolster the platform on the tech side. Remember now, we have significant development teams so we can actually develop a lot of this organically as well. I will tell you that as more and more of these branded WELL clinics show up, I think it's also going to be very important for us to establish best-in-class digital front-door applications that allow consumers to interact with the WELL ecosystem. So that's likely going to be an area of focus for us next year as well, which I'm very excited about. Hopefully, that's helpful.

[David Kwan, analyst]

That is. Thanks, Hamed. And one last question. Just on Circle and WISP had a nice rebound this quarter after the expected slowdown last quarter. How should we look at the growth trajectory there as we look into not just this quarter but next year?

[Hamed Shahbazi, executive]

I think we're -- we believe that both Circle and WISP are going to have strong years continued in terms of their growth, but we're going to start to see EBITDA creep up a little bit as well. Probably more in absolute terms as opposed to percentage terms even though invariably both. But I would say on an absolute basis, it's going to start to make a bit of an impact in terms of our ability to deliver higher quantum on a total basis. But yes, generally, given the retooling and the investments that we made this year, we feel quite confident that both will be either approaching or exceeding $100 million in revenue and essentially within a year to 2 years, we think both will solidly be $100 million businesses for us and continuing to exhibit double-digit growth interactions.

[Jenny Karim]

Your next question is from Allen Klee from Maxim Group. Please ask your question.

[Allen Klee, analyst]

Can you talk about the steps you're taking to improve the profitability of the acquisitions made, such as MCI One Health and also CarePlus, and RADAR? And should we be thinking that like for MCI One Health, you can get the margins to where they are for your primary clinics overall? Or -- and anyway, those are my thoughts.

[Hamed Shahbazi, executive]

Thanks, Allen. We take a lot of different steps on our primary care transformation and retooling efforts. So we would focus heavily on just digitally optimizing and enhancing the business. So many of these clinics throw people as a problem. So they're over -- and they're not even functioning very well as a result of not having mature workflows. And so a lot of times, what we'll start with is adding things like online patient booking or improving actual workflow within the clinics. What we find then is that we can actually reduce the number of people or have them focus on other elements that improve care delivery or billable services, that's a big part of what we do. There's not much you can do with the rents. And so that's one of the big things that we do prior to an acquisition is make sure that we can live with those structural costs. It's those more nonstructured caustic that can be influenced quickly that we do a lot of assessment work in advance. And so we're not trying to figure out what to do once we're into our integration plan. We've already figured that out prior to the acquisition. We're just go-go-go really against those opportunities. Now with something like MCI, it's a much bigger network, is the third largest network in the country. So it's not something that will happen overnight, and there's a lot of doctors. But we feel very confident that we'll be able to affect some of those changes fairly quickly. I think we'll have our sort of first order of profitability improvements probably in the first several weeks and then a bunch more that will kick in over the next several months. And again, this is things like in a lot of these clinics, there's a lot of people just frontline people just sitting there making and collecting phone calls because they don't have proper digital booking systems, things of that nature that we focus on. So I'll just call it kind of the first order of optimization and then we kind of have a playbook about what we focus on second, third and fourth. Pastor RADAR and CarePlus, I think that business is -- we feel that it's fairly optimized in terms of its overhead. We were quite impressed with what they were doing already, but we found that there's a lot of synergies with our business. And of course, we have a significant anesthesia care delivery business. And so the ability to have a platform that can supplement our supply-demand care delivery is quite momentous. So those synergies will take hold over the next several quarters as well. They just are growing very fast. So we think that a lot of sort of incremental margin is going to show up as a result of that continued momentum. Healthcare is all about providers, and this is absolutely in line with our focus. And so this is why RADAR made so much sense. We're not just tech-enabling healthcare providers. We're also the source of delivering care providers to hospital systems and ASCs, which again is highly synergistic with our own business.

[Jenny Karim]

Thank you. Your next question is from Robert Goff from Echelon. Please ask your question.

[Robert Goff, analyst]

You mentioned the consolidation of the Canadian market and to a lesser extent, the U.S. marketplace. My question would be whether you are looking at potentially pushing out an affiliate model as a virtual consolidation of those markets? And whether or not what you have seen with Circle being both physical and virtual may enter into that picture?

[Hamed Shahbazi, executive]

Yes. No, it's a good question, Rob. Thank you. I think in a way, we regard our digital business as our affiliate business because we're already touching so many clinics and providers. I think it's our unfair advantage in getting the -- creating this network and this is in this brand equity that we have with the Canadian market, imagine having a business that already generates significant positive EBITDA for delivering best-in-class tools to providers and roughly 1/3 of the country uses it. 1/3 of the country's providers. Probably 2 quarters ago, I was talking about how 1/4 of the country's providers are using it. So you can see that number is sort of kind of pushing up. One of the things that we've thought about in the past is there the idea of an affiliate WELL clinic where we don't own and operate it, but our tools are there. So we start to provide kind of a power by brand. Those are discussions and ideas that we continue to think about. One of the areas where I think that we're working on that could activate that is, let's say, you're patient and you can go to any WELL EMR location to retrieve your chart. And that starts to look more like not just an EMR network where we're providing service, but it starts to be able to deliver value for the patients. And there, that could be fertile ground for some kind of [indiscernible] approach. So those are the types of things we're thinking about. As it relates to Circle Medical and WISP, I think what's unique about those 2 businesses is that all of their growth has been organic. And so they have a specific playbook that I think specifically does rely on a hybrid strategy, meaning that they don't want to just be telemedicine players. They very much want to complement the telemedicine with best-in-class in clinic services. Obviously, Circle is a lot further ahead in that they've established a significant network as part of getting through the public health emergency. And WISP is very much considering its options in terms of how it shows up at retail or how it shows up in other primary care offices and WELL USA very much wants to help facilitate that. So that's the sort of to be continued story, I think.

[Jenny Karim]

Your next question is from Scott Fletcher from CIBC. Please ask your question.

[Scott Fletcher, analyst]

I wanted to ask on the cybersecurity tuck-ins. Could you give us an idea now that after these 2 deals on a run rate basis, like what percentage of the SaaS and technology business you think you would expect cybersecurity to make up?

[Hamed Shahbazi, executive]

That's a good question, Scott. I don't have that off the top of my head because I think the number isn't very material. But Eva, do you have that off the top of your head? We can always get back to that.

[Eva Fong, executive]

Yes, we can always get back to that. But when you look at the key -- it's about a small percentage of about 5% to 10% kind of thing. And we projected like, Hamed said earlier, we're seeing that this cybersecurity business will continue to have steady growth into 2024.

[Scott Fletcher, analyst]

Okay. It's not material. I won't ask anything else on that. Maybe I'll ask, again, maybe coming back to the profitability side of things. I mean the CRH are WELL Health USA in the anesthesia business, the margins are impacted by these recent deals. Do you have an idea looking forward where the consolidated anesthesia services business can land on a margin perspective, given they were quite strong before these deals?

[Hamed Shahbazi, executive]

Yes. It's a good question. I think the margins have been -- the actual payer rates have been very stable. The margin differences that you're seeing right now are mainly related to the mix of RADAR. And notwithstanding the fact that the consolidated blended margins are down, we think it's a much healthier business because we felt that we were a little bit overweight on anesthesia in WELL USA. And now we're starting to see a more diverse revenue stream and also the locum tenants business really adds value to anesthesia, but it's also something that is durable in its own and constant on its own 2 feet. So we're not concerned about the margins in that business, the case rates and pay rates are very stable. We've now gone through the No Surprises Act and all of the different volatility that came from that. Clearly, some of the EBITDA margin changes also did result from things like inflation and whatnot and our increased costs. But I think [indiscernible] done a great job weathering that. So we expect very steady performance moving forward.

[Jenny Karim]

Your next question is from Jason Amber from PI Financial. Please ask your question.

[Jalson Zandberg, analyst]

I got interrupted on the last caller, and I heard cybersecurity in the answer. So I hope that I'm not repeating a question here. But I just wanted to get just your general overview on that market. I know you've made 2 tuck-in acquisitions, stated that you're protecting over 10,000 servers and 190 corporate and government entities, and also just your aspiration to make this $100 million a year business. Just wanted to get your thoughts on what you believe your -- the total addressable market is for this for cybersecurity in your business and how quickly you can get to that $100 million level?

[Hamed Shahbazi, executive]

Yes. Thanks, Jason. Yes, I really love the cybersecurity business. I really want to continue to invest in it because I think those investments pay dividends in 2 ways. First of all, I think it's a great growth area. I think as more and more industries and more and more data is generated and goes online, there's going to be more bad behavior that needs to be curtailed. But then also, as we invest in this technology, we can also help keep WELL safe. WELL has an enormous data footprint. Tens of millions of lives are and the data associated with those lives fit in our EMRs. And so I'm very proud of the work that we've done, not just going out and protecting this data, but being proactive and really wanting to be profoundly involved in cybersecurity at a thought leadership level and wanting to champion that cause for the rest of the industry. I don't think there's an industry that has more -- that generates more data. I think there's a recent leadership that's been published on this. We can share that if you're interested, but healthcare generates 30% of all data in all sectors. By the year 2025, I believe that figure will be closer to 36%. So it's just in mind-boggling how much data healthcare is generating. And the more that happens, the more we'll need to protect it. So the comment in our press release about the $100 million was more aspirational about where we think we're taking this business. It wasn't kind of a near-term goal. We're still pretty far away from it. But it really, I think, framed -- it was important for us to say this because it framed for us -- and how we think about this business internally and we wanted to frame that externally that we're not just doing this because we want to protect data. We really think that this is going to be a very significant business. And much in the same way that WELL is the largest consumer of its technology platform for things like practice management and other things, we are really demonstrating that for cybersecurity. We don't like to be involved in any businesses where we're not going to build a $100 million business at least. We would rather just not be in the business. I think that kind of commitment and that kind of McKinsey mindset, if you will, of wanting to be a top shelf provider in any market that we participate in is important behavioral kind of context for WELL. Consider the fact that we have great tech, for example, in the United States, but we don't sell it on an a la carte basis. Why? We don't sell it because we don't want to be fifth, sixth, seventh competitor. We sell it in Canada because we know that in many categories, we're #1, and in some were #2 or #3. So anyway, that just gives you some more perspective culturally of how we look at this. But we're very much gunning for a leadership position in data protection in Canada with our cybersecurity business unit. And we think that, that has a significant 9-figure potential in revenue.

[Jenny Karim]

Thank you. There are no further questions at this time. Please proceed.

[Hamed Shahbazi, executive]

Well, thank you very much, everyone, for joining this call. Thank you to the analysts for your great questions and for continuing to help us tell the WELL story, and we look forward to visiting with you again in 2024. If we don't speak to you before that, I hope you have a wonderful holiday season, and we look forward to engaging with you soon. All the best.

[Jenny Karim]

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.