/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE
SERVICES OR DISSEMINATION IN THE UNITED
STATES/
- WELL has rebranded its subsidiary WELL Provider Solutions Group
to WELLSTAR Technologies Corp., a high growth, profitable,
pure-play Software-as-a-Service or 'SaaS' healthcare technology
company. WELLSTAR provides over 37,000 healthcare providers across
Canada with high quality
technology and services that significantly improve patient
care.
- WELLSTAR has privately closed on a $50.4
million equity placement entirely supported by Mawer
Investment Management, Edgepoint Wealth Management, and PenderFund
Capital Management, alongside WELL and WELLSTAR management, to fund
its pre-spinout growth objectives. WELL did not issue any shares as
part of this transaction. All equity issuances discussed in this
release relate to its WELLSTAR subsidiary.
- Concurrently, WELLSTAR also announces that it closed the
acquisition of two healthcare technology companies for closing
payments of $17.9 million in cash and
$3.9 million in WELLSTAR subordinate
voting shares. WELLSTAR's proforma revenue, including these two
acquisitions, is expected to be over $70
million in 2025 with EBITDA margins1 of
approximately 20%.
- This investment values WELLSTAR at a pre-financing enterprise
value of approximately $285 million.
WELL is aiming to execute a 'spinout' of WELLSTAR before the end of
2025, which is anticipated to provide investors with a unique,
pure-play investment opportunity in healthcare technology
SaaS.
VANCOUVER, BC, Dec. 12,
2024 /CNW/ - WELL Health Technologies Corp. (TSX:
WELL) (OTCQX: WHTCF) (the "Company" or "WELL"),
a digital healthcare company focused on improving health outcomes
by leveraging technology to empower healthcare providers and their
patients globally, is pleased to announce the creation of
WELLSTAR Technologies Corp. ("WELLSTAR"). WELLSTAR is
a reorganization of WELL's established WELL Provider Solutions
Group ("WPS"), whose mission is to be the leading provider
of healthcare technology solutions in Canada. WELLSTAR has been funded by way of a
$50.4 million preferred share
investment (the "Financing") supported by three of
Canada's most prominent fund
investors: Mawer Investment Management Ltd. ("Mawer");
Edgepoint Wealth Management Inc. ("Edgepoint"); and
PenderFund Capital Management Ltd. ("PenderFund").
Concurrent with the Financing, WELLSTAR closed two transactions
to acquire complementary healthcare focused technology
companies2 that are expected to add over $15 million in annualized revenue. These
acquisitions are expected to bring WELLSTAR's pro forma revenue to
over $70 million for 2025, while
maintaining strong gross margins of over 80% and EBITDA
margins1 of approximately 20%. Furthermore, nearly
90% of WELLSTAR's revenue is recurring SaaS revenue and will enable
WELLSTAR to continue as a better-than 'Rule of 40' company.
WELL is aiming to execute a 'spinout' of WELLSTAR by the end of
2025. By separating WELLSTAR from WELL's clinical operations,
investors have the opportunity to directly invest in a high-growth
healthcare technology company with a robust margin profile and
strong expansion prospects.
"A pure-play SaaS and technology leader or 'star' is born.
WELLSTAR is a high-performance company and disciplined capital
allocator in healthcare SaaS," said Hamed
Shahbazi, Founder and CEO of WELL. "Today's announcement and
the incredible support we have received from some of Canada's most esteemed technology investors
demonstrates what we have been saying for some time now, which is
that WELL's technology platform is an exciting growth business
which is set up to accelerate growth and drive higher margins for
WELL on a consolidated basis. This strategic move reflects WELL's
commitment to unlocking shareholder value by surfacing the
significant growth and market potential of its technology
segment."
About WELLSTAR
WELLSTAR (WELLSTAR.health) empowers healthcare providers with
innovative technology and services to enhance patient care and
operational efficiency. WELLSTAR offers a comprehensive suite of
solutions tailored to meet the needs of healthcare providers,
including: (i) Electronic Medical Records (EMR) software for
primary care and specialist providers; (ii) Digital Health Apps
including OceanMD and a suite of AI automation solutions, as well
as the apps.health marketplace; and (iii) Medical billing and
back-office solutions including revenue cycle management (RCM) and
technology solutions. WELLSTAR's comprehensive range of products
and solutions are designed to streamline care delivery, integrate
fragmented healthcare systems, reduce provider burnout, and improve
patient healthcare experiences and outcomes. WELLSTAR serves over
37,000 healthcare providers across Canada, representing over one-third of all
healthcare providers in the country who utilize at least one of
WELLSTAR's products, underscoring its extensive reach and trusted
reputation in the industry. WELLSTAR stands out as a leader in
Canada's healthcare technology
landscape as the third-largest provider of EMR solutions in the
country and holds the country's top position for e-referrals,
digital health apps, and medical billing and RCM solutions.
WELLSTAR plans to continue to be active in M&A and has a
deep pipeline of targets in the EMR, digital apps, billing, and
clinical workflow technology solutions segments. WELLSTAR plans to
deploy capital in an accretive manner while expanding the business
and maintaining 'Rule of 40' metrics.
As the majority and controlling shareholder of WELLSTAR, WELL
will continue to play a critical role in supporting WELLSTAR's
strategic initiatives. The operational relationship between WELL
and WELLSTAR will remain unchanged, with the reorganization of WPS
into WELLSTAR creating a more robust platform that will further
enhance the capabilities and performance of WELL's Canadian clinics
network. This will enable WELL to better support its clinical
operations while benefiting from the growth and market potential of
WELLSTAR's technology business.
Management and Governance of WELLSTAR
WELLSTAR will be led by Amir
Javidan as CEO, a highly experienced technology operator who
previously held executive roles at Avigilon and TIO Networks. Amir
will be supported by Darren Hoegler
as WELLSTAR's Chief Financial Officer. Darren previously served in
executive and senior level finance positions with MDA, Zymeworks,
and Teekay. Darren joined WELL as of May
2022 and was appointed WELL's SVP Finance and Chief
Accounting Officer as of October
2023.
WELLSTAR's management team will be supported by the WELLSTAR
board of directors which includes Hamed
Shahbazi, Chairman and CEO of WELL, who will also act as
Chairman of WELLSTAR, alongside Amir
Javidan and Ammar Shah, Vice
President of Corporate Development and Strategy at WELL. Two
additional board members are expected to be appointed in the near
future, including an independent director selected by WELL and an
independent director nominee selected by Mawer.
This leadership team brings a breadth of expertise and a shared
vision to address the challenges and opportunities within the
healthcare landscape.
Amir Javidan, CEO of WELLSTAR
commented, "We are thrilled to embark on this next chapter as a
purposeful and disciplined SaaS and services business which enables
us to focus more intensely on transforming healthcare through
innovative technology. With this transaction, we have a strong
balance sheet and direct access to capital markets, enabling us to
accelerate our acquisition growth strategy and deliver even greater
value to healthcare providers and our shareholders. We are also
very happy and proud to welcome over 80 new team members from the
two healthcare software and technology tuck-ins. One company is a
well-respected regional EMR and the other is a purely healthcare
focused technology services company. Together, these two companies
support over 1,500 healthcare clinics and physicians while
maintaining high gross margins with subscription-like recurring
revenues."
Transaction Details
Pursuant to the Financing, WELLSTAR issued approximately
$45 million of preferred shares to
Mawer, EdgePoint, and Pender plus an additional $5.4 million of preferred shares to management of
both WELLSTAR and WELL. WELL continues to maintain a significant
majority of the economic and voting interest of WELLSTAR and
expects this to be the case for the long term.
The preferred shares automatically convert into subordinate
voting shares upon a qualifying IPO, RTO public listing, or
alternative liquidity transaction. The preferred shares will not be
entitled to dividends until 2026, after which they will accrue
quarterly dividends at an increasing rate over time. These
dividends will accrue as notional preferred shares until the
occurrence of a liquidity event, redemption or other liquidation
event in accordance with the terms of the preferred shares. The
preferred shares will also be redeemable at the option of the
holders at any time after December 31,
2026. WELL's intention is for these preferred shares to
experience a conversion event prior to the dividend payment
period.
The use of proceeds from the Financing are to fund the
acquisition of the two healthcare technology companies, and given
that the businesses which have now been consolidated into WELLSTAR
have been profitable for several years, additional proceeds from
the Financing are anticipated to be dedicated towards future
acquisitions and general corporate purposes.
The total consideration for the acquisition of the two
healthcare technology companies is approximately $28 million, consisting of: (i) $17.9 million paid in cash from the proceeds of
the Financing; (ii) $3.9 million paid
in WELLSTAR subordinate voting shares; and (iii) $6.2 million paid in deferred consideration
including anniversary payments and a multi-year earn-out.
Collectively, the two acquisitions contributed approximately
$15 million in annual revenues on a
trailing 12-month basis with EBITDA margins1 of
approximately 20%. Both companies were acquired at accretive
purchase prices inclusive of earn-outs. One of the two tuck-ins is
a control acquisition of 51% of a leading nationwide healthcare
technology services company, while the other (a Canadian based
regional EMR) is a full 100% acquisition. The Company has a call
option to acquire the balance of the technology services company
within 5 years post-closing for a defined purchase price.
As part of the Financing, WELLSTAR entered into various
governance agreements with the Financing investors, including a
shareholders agreement and a governance agreement, to grant
standard investor rights to certain classes of shareholders until
WELLSTAR ceases to be a private company.
WELL did not issue any shares as part of this transaction. All
equity issuances discussed in this release relate to its WELLSTAR
subsidiary.
Cormark Securities, Beacon Securities and Eight Capital acted as
co-lead agents on behalf of a syndicate of agents with respect to
the Financing, with Cormark Securities serving as the sole
bookrunner.
This news release does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities in
the United States. The securities
have not been and will not be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities
Act") or any state securities laws and may not be offered or
sold within the United States or
to U.S. Persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such
registration is available."
WELL HEALTH TECHNOLOGIES CORP.
Per: "Hamed Shahbazi"
Hamed Shahbazi
Chief Executive Officer, Chair and Director
About WELL Health Technologies Corp.
WELL's mission is to tech-enable healthcare providers. We do
this by developing the best technologies, services, and support
available, which ensures healthcare providers are empowered to
positively impact patient outcomes. WELL's comprehensive healthcare
and digital platform includes extensive front and back-office
management software applications that help physicians run and
secure their practices. WELL's solutions enable more than 38,000
healthcare providers between the US and Canada and power the largest owned and
operated healthcare ecosystem in Canada with over 200 clinics supporting
primary care, specialized care, and diagnostic services. In
the United States WELL's solutions
are focused on specialized markets such as the gastrointestinal
market, women's health, primary care, and mental health. WELL is
publicly traded on the Toronto Stock Exchange under the symbol
"WELL" and on the OTC Exchange under the symbol "WHTCF". To learn
more about WELL, please
visit: www.well.company.
Forward-Looking Statements
This news release contains "Forward-Looking Information" within
the meaning of applicable Canadian securities laws, including,
without limitation: information regarding the WELL's and WELLSTAR's
goals, the intention to consummate a public listing by the end of
2025, the expectation of generating certain revenue, gross margins
and EBITDA margins as set out herein, the expectation that WELLSTAR
will continue as a 'Rule of 40'+ company, the anticipation that
WELLSTAR will continue to be a high-growth healthcare technology
company with strong expansion prospects, the plan to continue to be
active in M&A and its ability to consummate on these
opportunities, the belief that the reorganization will enable WELL
to better support its clinical operations, the expectation that
WELL will maintain a significant majority in the economic and
voting interest of WELLSTAR, and that the reorganization will
accelerate growth and drive higher margins for WELL on a
consolidated basis. Forward-Looking Information is necessarily
based upon a number of estimates and assumptions that, while
considered reasonable by management, are inherently subject to
significant business, economic and competitive uncertainties, and
contingencies. Forward-Looking Information generally can be
identified by the use of forward-looking words such as "may",
"should", "will", "could", "intend", "estimate", "plan",
"anticipate", "expect", "believe", "goal" or "continue", or the
negative thereof or similar variations. Forward-Looking Information
involves known and unknown risks, uncertainties and other factors
that may cause future results, performance, or achievements to be
materially different from the estimated future results, performance
or achievements expressed or implied by the Forward-Looking
Information and the Forward-Looking Information is not a guarantee
of future results or performance. WELL's comments expressed or
implied by such Forward-Looking Information are subject to a number
of risks, uncertainties, and conditions, many of which are outside
of WELL's control, and undue reliance should not be placed on such
information. Forward-Looking Information are qualified in their
entirety by inherent risks and uncertainties, including: that
capital markets decline to a point whereby an exit strategy is not
feasible on economically favorable terms; WELLSTAR is unable to
fund future growth; WELLSTAR is unable to negotiate and consummate
future M&A acquisitions on favorable terms; direct and
indirect material adverse effects from adverse market conditions;
risks inherent in the primary healthcare sector in general;
regulatory and legislative changes; litigation risk; that future
results may vary from historical results; an inability to realize
the expected benefits and synergies of acquisitions; that market
competition may affect the business, results and financial
condition of WELL and other risk factors identified in documents
filed by WELL under its profile at www.sedarplus.ca, including its
most recent Annual Information Form and its most recent Management,
Discussion and Analysis. Except as required by securities law, WELL
does not assume any obligation to update or revise any
forward-looking information, whether as a result of new
information, events or otherwise.
This news release contains future-oriented financial information
and financial outlook information (collectively, "FOFI")
about WELLSTAR's expected increase in revenue, EBITDA1,
and EBITDA margin1 on a post-closing basis, all of which
are subject to the same assumptions, risk factors, limitations, and
qualifications as set out in the above paragraphs. The actual
financial results of WELLSTAR on a post-closing basis may vary from
the amounts set out herein and such variation may be material. WELL
and WELLSTAR and its respective management believe that the FOFI
has been prepared on a reasonable basis, reflecting management's
best estimates and judgments. However, because this information is
subjective and subject to numerous risks, it should not be relied
on as necessarily indicative of future results. Except as required
by applicable securities laws, WELL undertakes no obligation to
update such FOFI. FOFI contained in this news release was made as
of the date hereof and was provided for the purpose of providing
further information about WELL and WELLSTAR's anticipated future
business operations on a post-closing basis. Readers are cautioned
that the FOFI contained in this news release should not be used for
purposes other than for which it is disclosed herein.
Footnotes:
- Earnings before interest, taxes, depreciation and amortization
("EBITDA") and EBITDA margin (EBITDA divided by revenue) are
each Non-GAAP measures. EBITDA and EBITDA margin should not be
construed as alternatives to net income/loss determined in
accordance with International Financial Reporting Standards
("IFRS"). EBITDA does not have any standardized meaning
under IFRS and therefore may not be comparable to similar measures
presented by other issuers. The Company believes that 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. For EBITDA reconciliation to
Net income, please refer to the Company's most recent Management
Discussion and Analysis on sedarplus.ca. EBITDA margin is EBITDA as
a percentage of total revenue.
- One of the two tuck-ins noted herein was a control acquisition
of 51% and not a full acquisition. The company has a call option to
acquire the balance of the company within 5 years.
SOURCE WELL Health Technologies Corp.