WELL Health Technologies Corp
TSX:WELL
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WELL Health Technologies Corp
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Welcome to the WELL Health Technologies Corp. Fourth Quarter and Fiscal Year and 2020 Financial Results Conference Call. My name is Dennis, and I'll be your operator for today's call. [Operator Instructions] Please note, this conference is being recruited. I will now turn the call over to Pardeep Sangha, Vice President, Corporate Strategy and Investor Relations. Mr. Sangha, you may begin.
Thank you, operator, and welcome, everyone, to WELL Health's Fiscal Fourth Quarter and 2020 Annual Financial Results Conference Call. Joining me on the call today are Hamed Shahbazi, Chairman and CEO; and Eva Fong, the company's CFO. Everyone has received a copy of our financial results press release that was issued earlier today. Listeners are also encouraged to download a copy of our audited annual consolidated financial statements and management discussion and analysis from sedar.com. Portions of today's call on historical performance includes statement of statements or 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 and assumptions that while considered reasonable 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 statements solely for the purpose of providing information about management's current expectations and plans relating to the future. We don't 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 statements are based, except if required by law. Note, we also use adjusted gross profit, adjusted gross margin and adjusted EBITDA on this conference call, which are all non-GAAP measures. For more information on how we define adjusted gross profit, adjusted gross margin, adjusted EBITDA, 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 constituted 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 of WELL Health Technologies.
Thank you, buddy. Good day, everyone. We hope you're all keeping safe and healthy. We truly appreciate everyone for joining us today. On today's call, I'll first provide some general commentary on the quarter and give an update on each business unit, followed by our CFO, Eva Fong, who will provide a financial summary of our fourth quarter 2020 results. I'll then come back and provide some more commentary on our recently announced acquisition of CRH Medical. We will then conclude the call with a question-and-answer session. Fourth quarter 2020 was another excellent quarter for WELL, in which we achieved record quarterly revenue and gross profit but I'm almost mostly pleased to report that we achieved a significant milestone in the fourth quarter and this being the first quarter that we reported positive adjusted EBITDA in the company's history. While reported, adjusted EBITDA, positive adjusted EBITDA of $770,000 in Q4 as a result of significant revenue and EBITDA contribution from our acquisitions. Greater contribution from higher-margin software and services and improved operating efficiencies in our clinical assets. At the heart of these excellent results with strong performance from our core business units such as clinics, digital apps, EMR and cybersecurity. WELL achieved another great quarter with record revenue for Q4, with revenue increasing 75% on a year-over-year basis and gross profit increasing 123% on a year-over-year basis with the company software and services revenue increasing by 400%. Gross margins continue to improve and expand to 47% as compared to 37% in the fourth quarter of the prior year. Our M&A team was extremely busy in the fourth quarter as we completed the following 7 transactions, which positively contributed to the company's strong quarterly and annual results. One, a majority stake acquisition Easy Allied Health, a provider of integrated allied health care services; two, a 100% acquisition of Doctor Care, a market leader in providing billing as a service for doctors, in our understanding, the largest such provider of outsourced medical billing services to the medical community in Canada; Three, 100% acquisition of Insig Corporation. WELL already owned about 40% on a fully diluted basis of Insig prior to this transaction, and now we own 100%. Four, the majority stake acquisition of San Francisco, California-based circle medical technologies, a leader in providing omnichannel healthcare services in the United States with a fantastic Telehealth platform; five, the 100% acquisition of Source 44 consulting Inc. to enhance our cybersecurity revenues and expertise; six, a minority investment of over 20% in Simpill Health Group, a full-service digital pharmacy that also provides e-prescription products and services, better known as pill way; and the acquisition of ExcelleMD and its affiliate VirtualMed, marking the company's expansion for health care services into the province of Québec. I will now review our overall patient visits in the quarter, and then I'll discuss the progress of our individual business units. I'm pleased to report that we now have exceeded 1 million total omnichannel patient visits on an annualized run rate basis. Total omnichannel patient visits in Q4 were 263,699, representing a quarter-over-quarter increase of 12% compared to 236,302 total omnichannel patient visits in Q3. In-person visits at our clinics, made up of 45% of total visits and accounted for 119,905 patient visits in Q4, representing a quarter-over-quarter increase of 4% compared to 115,642 in-person patient visits in Q3. Telehealth patient visits made up 55% of the total visits and accounted for 143,794 patient visits in Q4, representing an incredible quarter-over-quarter increase of 19% compared to 120,660 Telehealth visits in Q3. Telehealth visits include both telephone visits and virtual care patient visits, the majority of which are virtual care visits using our various platforms. We are very pleased with the increasing volume of patient visits across our various business units. Let me also say that we don't know of any other provider in Canada that has anywhere close to the capacity of delivering both physical, in-person and Telehealth patient visits to the same degree as WELL. Based on our knowledge, we are the market leader in omnichannel patient services in Canada today. We will look to build on that lead purposefully and ambitiously over the next few quarters. And now an update on our business units. Over the past several quarters, we have structured the company into several business units, each with its own business unit leader. While as employing a decentralized operating strategy where most of the operating decisions are managed by the leaders of these different business units. This allows the company to grow and scale without added bureaucracy. Notwithstanding this approach, capital allocation decisions are centralized and thoughtfully planned to ensure that the company is always making the most compelling and accretive investment decisions. It should also be noted that WELL is increasingly seeking investments and situations where its business unit leaders assist with WELL's capital allocation goals. A perfect situation for WELL to acquire into a strong and resilient business where that business itself is a product of successful organic and inorganic growth, where managers of that business have a track record of allocating capital successfully and purposely. Such managers, typically, have a professional process by which they identify, source and complete high-value and disciplined acquisitions. In these situations, we would have an understanding with these management teams to continue to support them on their capital allocation goals and look to accent their growth with additional support. This is why, aspirationally speaking, we like to refer to ourselves as the Berkshire Hathaway of tech-enabled healthcare. Let's break down that statement. Berkshire Hathaway is a successful holding company run by Warren Buffett that seeks to make investments in highly successful and resilient companies and management teams that have a superior track record in delivering results. These companies and leaders are invited to stay and continue on their value creation journeys while benefiting from being in the group. The main difference here is that Berkshire Hathaway has a wide mandate, very wide mandate. And ours is very much focused on the theme of tech-enabled healthcare. As we see this as a very pivotal time where the digitization and modernization of health care are occurring in essentially one of the largest sectors, if not the largest sector in any services economy, and that's obviously health care. It should also be noted that WELL is being very purposeful in acquiring and connecting assets that deliver on the concept of whole person health. To us, this means combining the support of medical doctors with allied health professionals and providing an environment where team-based care can be provided on and off channels. To that end, I will speak a bit about each of our business units, starting with our clinical business unit. In the prior quarter, Q3 2020 well experienced a strong rebound of its physical and clinic visits as a result of BC's economic reopening plan following the COVID-19 lockdowns in Q2. In Q4, clinical volumes continued to be steady with 4% sequential growth, as I mentioned earlier, of in-clinic patient visits. October, November and the first half of December tend to be high-volume months for our in-clinic traffic and this year proved to be the same. We believe that COVID-19 has changed health care forever and the only way to provide satisfactory care in the future is to have an omnichannel or bricks-and-clicks experience. This means that our physical clinics provide us with a distinct advantage over other Telehealth-only providers. As you can imagine, Telehealth has its limitations, and doctors and patients do often need to eventually need so that patients can be more closely examined. Telehealth is incredibly important. And it is here to stay, but the steady volume of in-clinic patient visits in Q4 tells us that health care cannot be delivered only through a piece of glass virtually. Doctors or patients still need to meet and patients still need to be examined. These trends, we believe, position WELL very strongly to benefit from the permanent trend of delivering services via a hybrid bricks-and-clicks approach. During Q4, we expanded our clinical business with the acquisition of ExcelleMD, a Montreal-based omnichannel health care company, providing both virtual and in-person care via its 5 multidisciplinary clinics and 38 healthcare practitioners. In addition to primary care, ExcelleMD provides an extensive menu of Allied Health, executive health and aesthetic services. Québec is a large market opportunity for us, and Excelle MD is intended to be a foundational acquisition for WELL's expansion into Eastern Canada and WELL's entry into corporate and executive health services, which we will look to expand on nationwide. As for Telehealth, which is part of our digital apps business unit, during the fourth quarter, we completed the acquisition of the remaining portion of Insig, as I mentioned earlier, WELL had already developed the Telehealth program known as VirtualClinic+ on Insig's full stack platform and tools. Now that we own 100% of the company, we believe the combination of Insig's Tia Health and WELL's VirtualClinic+ platforms currently positioned well as one of the top providers of Telehealth services in Canada. While Telehealth is an important area of service at WELL, it should be noted that we don't have a Telehealth business unit. Insig is now part of our digital apps business unit, and Telehealth is actually used and deployed across our entire organization. For example, our clinical business includes revenue generated by in-person visits as well as revenue generated from Telehealth visits. Our Allied health businesses, such as SleepWorks and easy Allied, have implemented Telehealth as part of their patient care programs. Our VirtualClinic+ program is already tailored to meet the needs of doctors, fully integrated to the WELL Oscar pro EMR. Our uberized doctor availability platform, Tia Health platform, resides within our digital apps group. Circle Medical has it's own Telehealth platform, which is available across the United States. Excelle MD uses its virtual med telehealth platform, and AdvoCare, which was acquired early in Q1, also uses its own proprietary Telehealth platform, providing support to Allied health businesses across the country and in 5 countries. Since Insig acquisition, we've transitioned WELL's virtual clinic brand to be targeted as a SaaS product offering on our Oscar EMR network, which has over 10,000 practitioners. As a result, we have decreased our digital marketing spend related to VirtualClinic+ and instead focused our digital marketing efforts on Tia Health, who operates a virtual health marketplace where medical practitioners are online in all hours of the day, facilitating a virtual walk-in experience for the millions of patients across Canada who don't have a regular family doctor. The marketplace-like approach not only provides patients comfort in selecting a health care practitioner, but it also encourages patients to come back to the same practitioner creating attachments and furthering a more longitudinal care model. In fact, over 50% of the visitors to our Tia Health platform are now repeat visitors and don't have to be acquired with new marketing spend. This is very good news for us because it means we can continue to acquire customers much more efficiently. Our users are liking the experience, and they're coming back again and again, improving our lifetime value. Next, we have WELL Allied Health. WELL Allied Health business unit is focused on operating, investing in and unlocking opportunities associated with allied health offerings, such as physiotherapy, occupational therapy, chiropractic, dietary, mental health counseling and sleep-related services. This business unit includes WELL majority ownership stakes in both SleepWorks Medical and Easy Allied. Both sleep works and easy Allied are mobile services as well that offer complementary services to our clinic network, which means that they are now integrated within WELL's clinical network in British Columbia and delivering results. They assist in increasing the utilization of our physical clinics and fit with our belief in an integrated team based model for improving patient care. And they are both outperforming their deal models significantly, and we're thrilled with their organic performance. Next, we have WELL Health Digital apps. I've already referenced this business unit a bit. But as you may know well, Digital Health apps is our business unit solely focused on developing, investing in and unlocking opportunities associated with Digital Health applications or apps. This business unit will be focused primarily on establishing partnerships and/or investments with leading Digital Health apps and allows WELL to unlock the value of its other assets, such as its EMR platforms. Telehealth is indeed one of those apps. And the -- WELL's Digital Health apps business is thriving with significant sequential organic and inorganic growth experienced in Q4 due to the record Telehealth revenues achieved in the quarter by both Circle Medical in the U.S. and Insig in Canada. Circle Medical is now on an annual revenue run rate of CAD10 million plus that is driven by an increase in Telehealth patient visits. Circle Medical is also expanding its physical footprint and will be opening its third wholly-owned clinic in Austin, Texas later this quarter. Circle has also partnered with Kind Health Group of San Diego to be the first independent clinical practice to join the Circle Medical network and benefit from its digital tools and enablement. As part of the new pilot partner program, Circle Medical is allowing vetted primary care practices access to its technology platform to deliver a high-quality experience while streamlining their administrative overhead. This partner program allows Circle Medical to cost effectively expand its footprint to additional physical locations without having to open and operate its own brick-and-mortar clinics. In addition to the strong growth in Telehealth, WELL Digital Health apps business unit also experienced an incredible amount of interest and activity in its apps.health marketplace. At the end of the year, we had 27 apps from 15 different publishers. WELL also started to roll out digital health solutions, including Telehealth services through its EMR network of over 2,000 clinks across the country. As part of the digital apps group is our acquisition of Advocare, which was completed in the beginning of January. Advocare is a comprehensive omnichannel, Telehealth-first practice management platform serving over 6,800 Allied health practitioners in 5 countries, as I mentioned earlier, Advocare was built to support providers of all sizes, including some of the largest physiotherapy and medicinal cannabis companies in the country. A few words about the WELL EMR group. Our EMR business continues to be rock solid, steady and growing nicely. There has been minimal impact other than a bit of acceleration to this business unit by the COVID pandemic. We are very pleased with what we have been able to achieve with our WELL EMR group over the past couple of years.We've now completed 8 acquisitions [ with ] Oscar EMR, service providers and completely transitioned one Oscar service provider through a customer purchase agreement. We currently have over 2,200 clinics on our Oscar EMR network serving over 10,700 practitioners across the country. We have established ourselves as the third largest EMR vendor in Canada and are now actively expanding beyond the Oscar ecosystem. We are currently in the process of migrating customers from being non-Oscar EMR provider which is expected to be substantially completed in mid-2021, and we'll add hundreds of clinics to our network. In addition, we are excited about the recently-announced proposed acquisition of IntraHealth, an enterprise class EMR with a deep IP portfolio and highly customizable platform that supports a myriad of healthcare settings, including health authorities, hospitals, public health outpatient centers, community health, home care, ambulatory care and a diverse health care set of professional settings. IntraHealth supports approximately 15,000 clinicians providing care for millions of patients in its combined databases across this global network of Canada, Australia and New Zealand. Over the past 12 months, IntraHealth generated approximately $9 million in revenue with over 20% EBITDA margins. Over 80% of IntraHealth's revenues high-margin recurring revenue with approximately 2/3 of that revenue coming from Canada. IntraHealth will be a transformational acquisition for the WELL EMR group as it will transition the business from solely providing Oscar EMR services to being a provider of multiple EMR product offerings in global markets. WELL also anticipate integrating IntraHealth into the apps.health marketplace in the coming months, paving the way for third-party app developers to have their Digital Health applications available on a plurality of platforms that are inspired and supported by WELL. And now Cycura, WELL's cybersecurity business unit, well entered the cybersecurity market with the acquisition of Cycura in Q3. While in Q4, we significantly bolstered our cybersecurity business with the acquisition of Source 44, which positions WELL as the leading provider of cybersecurity products and services to healthcare-related businesses and organizations across Canada. This acquisition is intended to accelerate WELL overall cybersecurity and risk management program. We believe that cybersecurity is a key theme in terms of capturing upside and delivering value within the context of the future of healthcare. As more and more valuable personal health information comes online, it will need to be protected. There's simply no higher value data out there. And we will continue to see a burgeoning industry in terms of protecting such data in the future. As such, we continue to evaluate additional cybersecurity related acquisition opportunities that will expand our data protection services and portfolio. I'm told our cybersecurity group had a great start to the year, and we'd be a strong contributor to our Q1 earnings. Next, WELL's billing and back office business unit. During the fourth quarter, we completed the acquisition of DoctorCare, a company that provides medical billing as a service outsourcing services to over 2,000 physicians across Canada. DoctorCare's leading edge billing and back office tools are designed to support doctors who don't have the benefit of a sophisticated back office team. DoctorCare is a profitable business with EBITDA margins exceeding 30%, and the company is growing revenues at over 20% on a year-over-year basis. We view DoctorCare as a foundational acquisition as it serves as a new business unit focused on the North American billing and back office marketplace. DoctorCare is already integrated with WELL's Oscar pro EMR and is featured on the apps.health marketplace. DoctorCare will serve as WELL's consolidation point for additional billing related acquisitions and growth initiatives. That concludes my update of the individual business unit. As you can see, WELL has substantially diversified its business into several growth-oriented business units with heavy emphasis on driving collaboration and in-sourcing from the group of companies and capabilities. Each business unit is experiencing organic growth and is a leverage point for additional related acquisitions in their respective business units. Also each business unit was profitable on an adjusted EBITDA basis in Q4. Of course, not counting H2 costs, and we look to continue this trend. I will go into additional details of the proposed CRH acquisition later in the call. But first, I'd like to turn the call over to our CFO, Eva Fong, who will review the financials for the fourth quarter.
Thank you, Hamed. I'm pleased to report that we had very strong Q4 and annual results for the 3 and 12 months ended December 31, 2020. Our 2020 annual results for the 12 months ended December 31, 2020, are as follows: WELL generated record revenue of $50.2 million during the year ended December 31, 2020, compared to $32.8 million generated during the year ended December 31, 2019, an increase of 53%. This increase in revenue is mainly due to the company's acquisitions over the past year and the addition of Telehealth related revenue; software and services revenue increased 393% to a record $12.3 million for the year ended 2020 as compared to revenue of $2.5 million in 2019; in 2020, WELL generated record adjusted gross profit of $21.2 million for the year ended December 31, 2020, which reflected a 93% year-over-year increase from the prior year. This was mainly a result of the increase in revenue in the period and higher adjusted gross margin percentage. Adjusted gross margin percentage increased to 42% in 2020 compared to 33.5% in 2019, which is mainly due to the addition of higher-margin software and services revenue. Net loss for the year was $8.1 million or a loss of $0.06 per share for the year ended December 31, 2020, compared to a net loss of $7.8 million or a loss of $0.08 per share for the year ended December 31, 2019. Adjusted EBITDA loss for the year ended December 31, 2020, was $92,000 compared to adjusted EBITDA loss of $1.7 million for the year ended December 31, 2019. Our fourth quarter results for the 3 months ended December 31, 2020, are as follows: in Q4, WELL generated record revenue of $17.2 million during the 3 months ended December 31, 2020, compared to $9.8 million generated during the 3 months ended December 31, 2019, an increase of 75%. This increase in revenue is mainly due to the company's acquisitions in the quarter and the addition of Telehealth related revenues. Software and services revenue increased 400% to a record $5.8 million in Q4 2020 as compared to revenue of $1.2 million in Q4 2019. In Q4 2020, WELL generated record adjusted gross profit of $8 million for the 3 months ended December 31, 2020, which reflected a 123% year-over-year -- increased from Q4 in the prior year. This was mainly a result of the increase in revenue in the period and higher adjusted gross margin percentage. Adjusted gross margin percentage increased to 46.6% in Q4 2020 compared to 36.5% in Q4 2019, which is mainly due to the addition of higher-margin software and services revenue. Net income was $5.8 million or $0.04 per share for the 3 months ended December 31, 2020, compared to net income of $216,000 or [ $0.00 ] per share for the 3 months ended December 31, 2019. Adjusted EBITDA for the 3 months ended December 31, 2020, was a profit of $765,000 compared to adjusted EBITDA loss of $307,000 for the 3 months ended December 31, 2019. As Hamed has mentioned earlier, this is the first quarter that we have reported positive adjusted EBITDA. On the balance sheet, WELL improved its balance sheet during the quarter and the year 2020. We ended the year with cash and cash equivalents of $86.9 million as of December 31, 2020, compared to $15.6 million as at December 31, 2019. The increase in cash in Q4 2020 was mainly due to the completion of a [indiscernible] deal [indiscernible] offering of 11.9 million common shares at a price of $6.75 for gross proceeds of approximately $80.5 million. As at the end of the fourth quarter on December 31, 2020, the company had 174,376,833 fully diluted securities issued and outstanding. More recently, as of yesterday, the company had -- sorry, 205,403,892 fully diluted securities issued and outstanding shares, including the recent 30.9 million shares of subscription receipt. That is my financial update, and I turn the call back over to Hamed.
Thank you, Eva. As Eva pointed out, our total annual revenue for WELL exceeded $50 million for the year ended December 31, 2020. However, the company is currently on an annualized revenue run rate approaching $300 million with the inclusion of the proposed acquisitions of CRH Medical and Intra Health. I'll now provide some commentary on our proposed acquisition of CRH. Subsequent to the year-end, WELL announced a major expansion into the U.S. market with the acquisition of CRH Medical, a company that is listed on the New York Stock Exchange and TSX Stock exchange. WELL has entered into an arrangement agreement to acquire all the issued and outstanding shares of CRH Medical at a price of USD 4 per share in cash, representing equity consideration of approximately $292.7 million and a total transaction value of approximately USD 396.2 million, inclusive of CRH's withdrawn credit facility. Our proposed acquisition of CRH is fully funded. We recently completed an upsized subscription receipt equity offering of CAD 302.5 million at $9.80 per share. And obviously, WELL capital, which was done at a premium to market price. The equity offering was led by Hong Kong business man and investor, Mr. [ Lika Shing ], who along with his partner, invested $100 million and was joined by several other large multibillion-dollar institutions for another couple of hundred million dollars. Please note that WELL's management and Board invested alongside our institutional investors, together as a Board and management team, we invested $1 million, with myself leading with more than half of the subscription of that $1 million. And I'm pleased to indicate that we had participation from every member of our Board of Directors and almost every member of our management team. We love the message that this sends everyone. We believe in this acquisition and its strategic fit, and its merits, and we stand ready to execute post-transaction with the talented team at CRH. Proceeds of the offering are expected to be combined with debt facilities as well as WELL's existing cash to fund the acquisition of CRH. Why do we love CRH so much? I'll tell you, CRH is a monumental acquisition for well for a number of reasons. One, it significantly boosts our free cash flow profile, which would be used to make additional cash flow generating acquisitions, enabling future reinvestment, capital compounding and capital allocation opportunities across other attractive Healthcare and Healthcare technology segments.Two, it accelerates our revenue and EBITDA growth. We are expecting significant financial accretion as a result of this transaction, including approximately 120% on a revenue per share basis and 800% plus on an EBITDA per share basis in 2021. Keep in mind, all this was done with only 17% dilution to shareholder capital; three, there is a strong strategic fit here. The proposed acquisition of CRH represents a significant tech enablement and digitization opportunity for WELL to provide digital tools, tech enablement and data protection to over 3,000 GI doctors and 70 ambulatory surgery centers in all 48 lower U.S. states.With this acquisition, WELL gained deep access to U.S. health care, with a rapidly growing asset, adding roughly $10 million in new EBITDA every year with its continued organic and inorganic growth. Post closing, WELL will unlock the value of this channel of over 3,000 GI doctors with a number of new revenue and business opportunities. The clear-eyed way to look at CRH is that it provides -- today, it provides 2 services to the GI marketplace to that GI doctor and his or her clinic. One is the best-in-class hemorrhoid banding device and the second is the anesthesia services for routine colonoscopies. It has developed a trusted adviser relationship with hundreds of GIs. Post deal, CRH's management team will be focused on expanding that product set from 2 to more products leveraging WELL's deep digital cybersecurity and other offerings. Earlier this week, CRH reported very strong financial results, which makes us even more excited with the proposed acquisition. Based on Q4 results, which were a very clear beat, CRH is currently on an annualized revenue run rate of approximately CAD 184 million with over $50 million in annual EBITDA run rate. CRH Medical's fourth quarter revenue increased by 21% compared to last year and it had healthy adjusted EBITDA operating margins of over 40%. Post closing, CRH medical acquisition and WELL's financial and operating profile makes it a clear leader in the Canadian health care market and a strong emerging player in the U.S. health care market. The past year has been a tremendous year for WELL, and we are looking forward to continued success in 2021 as we expand into the United States with CRH Medical. A few words on our outlook. Our outlook remains very positive across all our business units for the entire company. We continue to have approximately 9 executed LOIs signed and pending execution and completion. The value of these LOIs, when combined with our existing deals, propels us to more than $400 million in revenues and well over $100 million in EBITDA. Given the strong scale, WELL continues to seriously evaluate the prospects and feasibility of the U.S. IPO in the next few months. With our growing scale, and majority U.S. revenue exposure post the CRH transaction, we believe we will be very well positioned to be a successful issuer on a major U.S. exchange such as NASDAQ, where multiples are generally double what they are here in Canada. We believe this can be a compelling way to improve the currency of our stock and provide shareholders with superior returns. Let me be clear here. We are very upbeat about what we're seeing inside the company. As far as the businesses we currently run and the ones that we will hopefully run very soon and believe we are in a fantastic trajectory and look forward to delivering for you shareholders. And with that, we'd be very pleased to take some questions.
[Operator Instructions] Your first question comes from Doug Taylor with Canaccord.
I'll ask the -- for my first -- my one question, I'll ask one about the Amazon announcement yesterday at Amazon Care rolling out kind of nationwide, certainly shaking up the market. I wonder if you have any thoughts on how a development like that might impact something like Circle Medical or your strategy within the U.S. market more broadly?
Thanks, Doug. There's not a lot of details about the offering, but I'll just say that the market is so large that we feel -- we feel that we are just heads down and focused on continuing to execute. We feel that there'll be plenty of market share available for the leading providers out there. And in the past when Amazon is access to new market, there's always been some concerns initially, but I think what's been found is that these markets have stabilized and continued to demonstrate strong competitive spirit across the landscape. We feel the same way here. I'll just say Circle Medical has extremely high NPS scores. It is a very Silicon Valley ask type offering in terms of its ease of use, in terms of its phenomenal experience. And we just -- we see an environment where experience wins. And with the incredibly high NPS scores that we have, just for reference, our NPS scores are between 80 and 90 consistently, whereas Teladoc's, my understanding, are sort of in the mid-50s which are actually respectable NPS scores. And so Amazon has to deliver, and Amazon has to also deliver high NPS scores, and they're going to be also put to task in the marketplace. And so we're very comfortable given just the sheer size of the market that we'll continue to be able to grow very effectively, considering as well that we're not a large market share provider today. So I think if you're a large market share provider today, you're the one that stands to lose most from an Amazon announcement. We're still tiny in reference to the overall market. So we've got enormous room for upside.
Perhaps is then just a follow-up to that. I mean, in Canada, where you are, as you say, a larger player within the market. We've seen some change related to a lot more emphasis on these private pay or employer pay primary care models. I'm talking about like the maples, the dialogues, most of your own business is tied to that public insured model. So my question is, how do you see this market evolving? Do you think that post COVID, we're moving to a true 2-tier primary care system? And how does that impact your capital allocation within the Canadian landscape.
Yes. I mean, to some extent, we're already there, given just the availability of private and public funded offerings out there. And obviously, there's been a lot provided lately just in terms of insurance companies going out there and offering employees the added service. Again, we -- what we see are very strong trends. We do think that those private focused folks who are currently paying -- engaging those large employers. Those large employers, I think, are making those purchases and decisions to go with those care providers because they think that it's really helpful and important to support their employees, which we agree. But are they going to continue to do that if public support maintains, and we have claim codes that continue to stay persistent over the next few years. I like our positioning a lot more. I don't think there's the will to remove public support. It's now way too ingrained. It may modulate, it may change. It may evolve, but it's not going to go away. So if you're a company that's paying $7, $8, $9, $10 a head right now, are you going to do that when it's free? And the public is going to pay? Or are you going to evolve to more hybrid arrangements that take advantage of more public funding available? So you got to remember, as Canadians were very proud of our single payer environment. And I think that, that public support will continue to persist. And I think there's some risk for those private focused -- 2 private focused players out there. That's my view.
We have a following question from David Newman with Desjardin.
I guess my first question would be on IntraHealth. It obviously expands our geographic horizons and does get you into new health care verticals in a bigger way and beyond primary care and into home care and ambulatory care, so how can you leverage that IntraHealth platform? Because it seems very interesting to kind of move you beyond our borders as well as into other verticals.
Yes. Thanks for the question, David. We're really excited about IntraHealth. You're right. It's a game changer for us for a number of reasons. Obviously, we expand beyond Oscar. We also think it's -- we just think EMR is a force multiplier for us. It gives us access to practitioners, it elevates our apps business. You're going to see some really great evolutionary work that we're doing in terms of our apps business and interoperability in the industry. We think we're going to be a key leader in the country from that perspective. We also think IntraHealth is going to be a phenomenal platform with which to expand beyond those countries that they're in today. In fact, they have significant RFPs out there that they responded to in all kinds of different countries to support major health systems and programs. And we think they've got a really great shot to acquire some of those, and we're going to really ramp it up and amp it up. So yes, I couldn't be more pleased with our capital allocation there. We're getting a great team. They're going to, obviously, be within our EMR division, but I think they're going to add a lot of value, and they're going to really grow the scope of this business. And it's going to kind of evolve into the same thing that we see with Telehealth with us, which is a portfolio driven approach with talented operators that allow us to take more market share. So we don't necessarily look at these things and say, "Gosh, they have to be integrated." We don't see that. That's, I think, some of the really big advantage that we have in being true technologists and having decades of experience and technology. Sometimes tech folks look at assets and they say, "Gosh, we have to combine them and integrate them because we need the synergies." That's the best thing about buying great businesses that are already profitable. You don't need to scratch that itch.
Would you look at the other verticals like Ambulatory Care, Home Care? Is it a segue into like acute care? Can you introduce other things like-e referrals? I mean, how can you leverage the other verticals where you have like a continuum of care from primary all the way to acute care?
Yes. Unquestionably, I mean we'll take a good look at the platform, we'll try to understand the gaps that exist for it to be able to support much higher and much larger opportunities. And we are already looking at some assets that we think will be highly synergistic with IntraHealth in terms of being able to go upstream in the acute system.
Very good. My second question is just on the apps marketplace in terms of resonating any KPIs or metrics that you can point out to on how successful it's been to date? And I believe that you're looking to integrate it in with the EMR to provide a simple log in to access. What's the status of that?
Yes. So we are pulling together some of those early KPIs. We don't have anything to report just yet, but that is something that I think you'll see in the future. We are, I believe, rolling out our log-in screens really just now. So I think that's a multi kind of faceted project that involves a number of other code changes and deployments. And I believe that's actually being deployed across our clinical network now. So we are seeing as a result of everything that we're doing and creating awareness for apps.health, greater and greater exposure. And yes, as traffic builds and as we continue to add more partners, we'll definitely be bringing more of those KPIs over to the Street.
And do you think that will be a catalyst to drive receptivity towards the app to health marketplace? If you make it easier for the health care practitioners to actually access it?
Definitely. I mean just think about your experience with your iPhone, right? You don't -- when you download an app, you don't go to a website and invoke it that way. You go to your app store right there on your device, and that's where you invoke that app. And so when we launched apps.health, the only way to really activate that app learning and activation process was to go to a website that was outside of your EMR. And so to be able to invoke that directly to your EMR, I mean that is the aspirational process that we're moving towards is more of an iPhone App Store integrated experience where it's just instant. Keep in mind, Apple has had many years and significant resources to make that happen, and that -- but we think that, that's the type of experience that we want, and that's where we're going to go.
Your next question comes from Rob Goff with Echelon Wealth.
My question will be on Circle, where I was very interested in your talking about the pilot primary care partners. Could you talk about how you'd like to see that accelerate? And to the extent that Amazon's announcement actually likely to encourage more uptick of such a partnership model?
Yes. I think with the significance of that pilot and why we announced it was -- as we talked about before, there's a real kind of developing importance of omnichannel, right, which is -- I see someone online as a doctor or as a care provider. And I assess that, that person needs to be seen by someone physically. Where do I send them? Or do I just, hey, bid them, good well or good luck, go to an emerging care center somewhere and tell them this and that, that's not very good service. What's good service just to say, hey, I've made a note in your file. So when you come to one of our clinics, we'll be able to kind of be able to pull that note and be able to provide you with strong continuity of care and excellent service, which will lead to better health outcomes. So in order to do that, I mean, you look at a company like One Medical, they have 75-plus -- it was 72, I think they're growing at brick-and-mortar centers across the United States, and they spent hundreds of millions of dollars building that out. And with Circle Medical, they had their 2 medical centers. They're opening one in Texas. The one in San Diego is leveraging a clinic that they don't own that has now agreed to be rolled into their tech enablement so that they can participate in this omni-channel experience. So to us, that is really noteworthy because if that pilot goes well, which we don't have any reason why we don't think it would go well. In fact, I think already, it's going well. It's something that we could extensively deploy throughout the country. And that would also be a really interesting precursor to allocating capital into some of those clinics, either through Circle directly or through WELL, as you know, as you may know, Circle is a controlled transaction of us. We don't own it at 100% just yet. So yes, I do agree with you that it's an important sort of event for us and something that we'll be tracking and providing feedback on closely.
Great. And if I may, as a follow-up on the omni-channel theme, though. Where do you -- perhaps an update on where you see that physical versus virtual balance leveling off over time?
Yes, yes. It's definitely a topic of much discussion, as you saw, we're a majority at Telehealth today. And I would tell you that I think it levels out a bit more. I think we're -- I think today, we said that we're at 55% Telehealth based on Q4. So in my mind, I think that, that levels up a bit as the pandemic goes away, but I think that -- and maybe Telehealth ends up being sort of persistently 40% to 50% in Canada. I think globally, it's closer to 50% over the long term. And even for Canada over the long term, you're going to kind of be at that 50-50 level for a while. And then I think it's going to slowly creep back up to majority Telehealth.
Your next question comes from Gabriel Leung with Beacon.
I wanted to ask a few questions on the cybersecurity part of your business. The Q4 revenues there came at a touch below what we were expecting, considering you got a month of Source 44. I'm just curious if that might have just been related to a number of billable days in December? That's the first part of the question. The second part of the question is, Hamed, you mentioned that it sounds like Q1 was very robust for that division. So perhaps you can talk to us about some of the initiatives that they've been working on. Maybe [ the biggest ] one.
Yes. Thanks, Gabriel. So actually, there was a big shipment of equipment that we had -- Source 44 had been shipping out to support a large enterprise customer. And I believe, what had happened is that it shipped in December, but it actually didn't get accepted and delivered until January. And that was the main reason why revenue would have been a bit lighter. I think if it were a bit different by 1 or 2 days, revenue for Source 44 would have been substantially higher in Q4. So definitely, just the timing thing related with shipments because Source 44, as you may know, provides services similar to Cycura, but also they do provide enterprise products and services and large-scale implementations. So that's what sort of affected us. So we're very comfortable with that and it being just a timing difference. And I think if that timing difference hadn't happened, it would have been a -- I mean, we were in line and beat revenue, but I think we would have crushed it. So that's okay. We'll crush it in Q1 because we obviously have now pent-up revenues that got pushed over into Q1. And notwithstanding that, we're seeing strong -- a strong booking and shipments in that division for Q1 so far. Hopefully, that gives you a little color.
Your next question comes from Daniel Rosenberg with Paradigm.
I had a question regarding your technology road map and product road map along the digital channel. I was wondering, is there a point at which you scale where you have enough resources internally that you start thinking about product development internally? Or will you continue to be looking to acquire it externally? And how do you think about that balance between internal R&D and acquiring new product capability?
Yes. Thanks, Daniel. Great question. We are doing quite a bit internally now. I mean, with all the businesses that we've acquired, we have brought on some really talented folks across multiple divisions and have significant product development capabilities. I think just the echo of the company is likely that we will not try to significantly ramp those up in order to tackle ambitious product development -- new product development initiatives to the extent that, that could be speculative, truly speculative in terms of our growth objectives. And so I think it's -- we just have to be very thoughtful about what we're doing and how we are leveraging internal resources and external resources. When you have been around software like I have for a couple of decades, you have enormous respect for how much time it takes to actually build it and mature it and get it to a point of commercial acuity, where it's actually able to deliver for patients and for customers and so forth. Look at [indiscernible] profile. It's been around, I think, for well over a decade. And it's just -- it's been millions and millions of lines of code and person hours in developing all these solutions. So it's kind of a windy way to tell you that we're going to continue to be disciplined in terms of how we spend, but we now do have significant capabilities. We are definitely looking to [ where ] possible actions those capabilities to be able to make meaningful improvements. But we also have a really compelling road map, and I'm really excited about it. And I think over the next few weeks and months, you're going to hear about, I think, some really great innovation that's going to be a product of our internal and external teams. And the other thing is, sometimes you don't necessarily need to develop -- you bring in developers. You can work with very talented outsourcing shops. And we've been intentional in creating relationships with external software development entities that are skilled at building health care-related applications. And we think that also really helps us. So yes, it's an area of focus for us because, as you know, digital and technology is our DNA as a company.
And just a follow-up to that. As it relates to the EMR assets you have outside of the Oscar ecosystem. Is there any compatibility issues or anything, any friction in rolling out apps? Or are you able to design apps to be kind of future-proof to any other EMR assets that might be out there?
Yes. So to be clear, we don't own a non-Oscar EMR yet, but we will with internal profile. That's -- I'll just say that, that's -- what you just mentioned is a really important area of focus for us right now. I think we are looking at broad framework updates for apps.health functionality. And we're very excited at some of the future announcements and reveals that we'll be making in terms of how we are going to be leading in this area. So maybe just hang on to that thought and know that this is an area of intense focus and product development at the company.
We have a following question from Justin Keywood with Stifel.
I just had a question on the broader M&A strategy. Obviously, the pace has been quite strong, and it sounds like the pipeline is still pretty wide. I'm just wondering how you balance perhaps the grand like opportunity that exists in some of these fragmented healthcare markets and also ensuring that all these acquisitions get integrated well.
Yes. Justin, I mean, I think our unique business unit structure is really what allows us to do as much as we do. Without the support of our business unit leaders, we wouldn't be doing most of these acquisitions. And it's because -- one of the things -- one of the areas where I think we're very thoughtful and we thrive is we don't just think about the financial accretion. We think about the human components. We've had a lot of experience. Our team is deeply experienced in understanding the culture fits and integration is where most of these things fail. So all of our structures are very intentional about understanding what is going to happen afterwards, who is staying or who is not staying. If they're not staying, who's integrating? Is it a tuck in? Or is it a foundational investment? Sometimes you'll see us make control acquisitions, in which case, that's a built-in team that's really designed to have us as an investor and as a group participants but not necessarily as an operator until such time as we learn the business from those operators when we call the balance of the shares, some number of years downstream. So I would say that don't think of WELL as having a CEO and a CFO and a management team and this management team's tasked with doing all this integration. Think about WELL as having 6 operators, soon to be 7 operators with strong, deep and thoughtful teams that are thinking through how to integrate and how to acquire and how to ensure post-transaction harmony and more importantly, to deliver results. And I think if there's anything that I find incredibly compelling about the company today is that we have not misstepped in this big storm of acquisitions that we've had. We are executing. We are growing. Our assets are performing. And we are, I think, generally speaking, more than executing against our deal values, which is not something you see very often. So I think it's an incredible proof point in the WELL's strategy, in the WELL's execution, which I would say is all due to our very talented team.
I appreciate that. And is there like a target IRR that you're looking at or some other value creation metric that you task your leaders of the individual units to achieve?
Yes. I mean, so the target IRR that I like to really focus on and that we talk a lot about is 20%. And within the context of just CapEx, like if we're going to buy this laser machine for a dermatology clinic, is it going to deliver better than 20% IRR? So that's the kind of metric that we throw around for pretty much any kind of CapEx. As it relates to M&A, with clinics, as you know, we've been around that 5 -- that sort of 5x EBITDA range at 20%, CRH has been remarkably consistent in patterning M&A at around that same metric. I think, actually even better than that in terms of their history. And obviously, if you're going to be buying SaaS companies that are growing, you're not going to be able to buy them at a 20% IRR, but then you have much more resilient cash flows which, from a downstream value perspective, you can afford to pay a bit more. But as you know, WELL has also been incredibly successful at buying recurring revenue SaaS stories for single-digit EBITDA multiples. So I think we've been really disciplined, and you can expect that to continue.
Ladies and gentlemen, that's all the time we have for questions. Mr. Shahbazi, please proceed.
Great. Well, thank you very much for your questions and for joining us on this call today. I'd like to 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 and support needed to pursue our goals. That's not lost on us. So please accept our thanks and our gratitude. I'd also like to thank WELL's senior management team and all our employees and contractors for their tremendous effort, especially during the current COVID pandemic. In particular, I'd like to thank our team of doctors and frontline health workers. We continue to keep our clinics open and provide absolutely unbeatable patient care throughout the past year. Thank you, and very excited to talk to you next quarter.
Ladies and gentlemen, this concludes our conference call for today. We thank you for participating and ask that you please disconnect your lines.