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Good afternoon, ladies and gentlemen, and welcome to the WELL Health Technologies Corp. Second Quarter Fiscal 2021 Financial Results Conference Call. My name is Michelle, and I'll be your operator for today. [Operator Instructions] Please also note this conference is being recorded. I'll 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 2021 Fiscal Second Quarter Financial Results Conference Call. 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. Listeners are also encouraged to download a copy of our second quarter financial statements and management's discussion and analysis from sedar.com. Portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, many of which are outside of WELL's control that may cause the actual results, performance or achievements of WELL to differ materially from the anticipated results, performance or achievements implied by such forward-looking statements. These factors are further outlined in today's press release and in our management discussion and analysis. We provide forward-looking 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 under which any such statements is based except if it's required by law. We may use terms such as adjusted gross profit, adjusted gross margin, adjusted EBITDA and shareholder EBITDA on this conference call, which are all non-GAAP and non-IFRS measures. For more information on how we define these terms, please refer to the 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 payment -- repayments and fund future growth initiatives. Adjusted EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS. And with that, let me turn the call over to Mr. Hamed Shahbazi, Chairman and CEO of WELL Health Technologies Corp. Hamed?
Thank you, Pardeep, and good day, everyone. We hope that 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 company and the second quarter, followed by our CFO, Eva Fong, who will provide a financial summary of our second quarter 2021 results. I'll then come back and comment on the recently completed acquisition of MyHealth and provide an outlook for the third quarter. We will then conclude the call with a question-and-answer session. Before we discuss the second quarter results, I'd first like to zoom out and provide a brief high-level overview on WELL. I think this will be helpful for existing shareholders and will also be helpful for new listeners -- investors or just prospects that are evaluating WELL. While WELL has grown a lot and been very active, it has never strayed from its mission and vision, and that is what is so compelling about the company. Our overarching mission has always been to empower healthcare practitioners. You will see we believe that health innovations, digital health, in particular, help practitioners become better care providers. It helps them be more efficient, provide better care and deliver more value. The whole idea of WELL is that we are participating in this new economy, one of the largest services sectors in any economy. This is why WELL has built a comprehensive practitioner enablement platform. This platform and its tools, software, products and services is compelling and is rapidly making WELL a one-stop shop to help support and advance healthcare practitioners, their medical clinics and, of course, their patients. The platform includes, but is not limited to, practice management and EMR platforms, telehealth and an extensive array of digital patient engagement features such as online booking and waiting room automation, self-service mobile check-in, robust billing and revenue cycle management solutions, all kinds of digital health apps and data protection solutions. WELL then unlocks value from its platform via 2 revenue streams: one, a substantial omnichannel patient services offering powered by its own practitioners; and two, a virtual SaaS technology services and product offering, where -- that is offered to practitioners outside of our walls, outside of our businesses. We now power thousands of healthcare practitioners and clinicians, both inside and outside of our business. The central idea behind WELL is that practitioners care for patients, not companies. We have created a best-in-class platform that powers those practitioners. If you believe that healthcare practitioners are going to be advanced by technology and these new productivity tools, why wouldn't you want to be a provider of those tools and a provider of those services that leverages those tools? Our strategy is working, take CRH, for example, which had a fantastic quarter. It has over 800 healthcare practitioners providing care, but it also sells a best-in-class medical device to thousands of GI practitioners. So [ it strikes ] at the heart of both revenue streams. And now let's get into the second quarter. Second quarter 2021 was an outstanding quarter for the company in which we achieved record quarterly revenue and adjusted gross profit with revenue increasing 484% and year-over-year and adjusted gross profit increasing 615% year-over-year. This growth was driven by the acquisition of CRH Medical in the second quarter as well as continued and strong growth of the company's virtual services revenue, which advanced by 432%. Our virtual services revenue includes revenues derived from our practitioner enablement platform to practitioners and clinicians outside of WELL as well as any patient services businesses that have little to no bricks or physical locations. For example, even though Circle Medical owns and operates 2 clinics, the vast majority of its business is derived by its iOS and Android consumer apps and telehealth offering. This also includes our other telehealth offers such as Tia Health and VirtualClinic+ as they have no bricks exposure and our data protection revenues. It also bears mention that we continue to see strong performance from WELL's omnichannel primary care clinics who have experienced substantial EBITDA growth in the last year. In addition, Q2 was the third quarter in a row that we reported positive adjusted EBITDA while reported adjusted EBITDA of $11.9 million, a significant improvement from last year where the company reported adjusted EBITDA loss of $0.5 million. Our M&A program continues to successfully execute and follow a disciplined capital allocation strategy. In addition to the CRH acquisition, we also completed the following transactions in the second quarter: one, the acquisition -- the 100% acquisition of Intrahealth Systems, an enterprise-class EMR provider operating in Canada, Australia and New Zealand. With the Intrahealth acquisition, our EMR network in Canada expands to approximately 2,800 clinics, serving over 15,000 physicians across the country. This excludes Intrahealth's enterprise customers. Two, the 100% acquisition of ExecHealth, a primary care and executive health services group in Ottawa region. Three, the 51% majority stake acquisition of Doctor Services Group, our first tuck-in acquisition for DoctorCare, our billing and back office and revenue cycle management billing unit -- business unit. And four, CRH Medical completed its first 3 acquisitions as a WELL business unit, with an 85% majority stake acquisition of New England Anesthesia Associates, 51% stake in Northern Indiana Anesthesia Associates and a 51% stake in an add-on practice in Bradenton, Florida, which will be part of the CRH affiliate, FDHS Anesthesia, LLC group. I will now provide an update on our acquisition of CRH Medical. During Q2, on April 22, 2021, we completed the acquisition of CRH. CRH is a consequential transaction for WELL as it significantly boosts our free cash flow, which would be used to make additional cash flow generating acquisitions and this acquisition represents a significant tech enablement and digitization opportunity for WELL. Furthermore, CRH provides WELL with access to the healthcare system with a rapidly growing asset. Since closing the acquisition, we're experiencing strong results from CRH driven by an increase in patient cases and a steady per case economic model. During Q2, CRH contributed revenue of $36.7 million despite the foreign exchange headwinds in the quarter. And remember, we didn't even have a full quarter of CRH, we closed the acquisition on April 22. So we had just over 2 months contribution from them. CRH had a record performance in the quarter and achieved revenue of approximately USD 39.3 million for the quarter, which represents a 190% year-over-year growth compared to Q2 2020 when CRH's revenues were negatively impacted by COVID pandemic. CRH also completed a record of over 120,000 anesthesia cases and sold a record of almost 2,300 O'Regan units in the second quarter, firing on all cylinders. As I mentioned before, CRH provides 2 services to the GI marketplace and it has developed a trusted adviser membership with thousands of GIs. WELL's goal is to unlock the value of this channel of over 3,000 GI doctor relationships with new revenue and business opportunities. CRH's management team has been executing and delivering on the core business while thoughtfully expanding that product set to more products, leveraging WELL's deep digital patient engagement and cybersecurity offerings. We're already in discussions to onboard our first cybersecurity customer, for example, in the CRH channel. But really, more importantly, CRH's core business is performing beautifully with strong caseloads and stable per-unit economics. We're very pleased with their performance and for all intents and purposes, they are ahead of our investment case for the acquisition for the full year. Also, now that we've had a chance to really dig into the CRH business and are excited about the added efficiencies we gain as a result of updating -- we have determined that further tech-enabling the revenue cycle management tools and platform of the business could yield substantial benefits. This is something that we'll keep shareholders in the loop-on, but we're optimistic that there will be real savings here that will add further bottom line impact, positive bottom line impact that was not part of our investment thesis. I will now review our overall patient business this quarter. I'm pleased to report that we exceeded 2.2 million total omnichannel patient visits on an annualized run rate basis in the second quarter. Total omnichannel patient visits in Q2 2021 were 559,000, representing a year-over-year increase of 173% from 204,000 in the previous year's quarter. On a quarter-over-quarter basis, total omnichannel patient visits increased 17% compared to 477,000 in Q1. In-person patient visits at our clinics and businesses made up 43% of the total visits and accounted for 241,000 patient visits in Q2, representing a year-over-year increase of 228% compared to 73,500 in-person patient visits in Q2. On a quarter-over-quarter basis, in-person visits increased 69% compared to 142,900 in-person patient visits in Q1. This quarterly increase was primarily due to the addition of over 92,000 CRH cases in Q2. Telehealth patient visits, which include both phone visits and virtual care patient visits, made up 57% of the total visits and accounted for 317,000 patient visits in Q2, representing a 142% increase from 131,000 telehealth visits last year. On a quarter-over-quarter basis, telehealth visits experienced a slight decline of 5% compared to 334,000 telehealth visits primarily due to our Allied Care businesses, such as Advocare, who experienced a shift from telehealth to in-person visits with the lifting of COVID restrictions as Allied Care tends to be better served through in-person care. Given the way Advocare charges for these visits, there was virtually no or very little negligible impact on revenues. If we remove the negative impact of Advocare and the addition of CRH patient visits, overall patient visits still increased by about 10% on a sequential quarter-over-quarter basis, showing strong resilience in the business. Our U.S. telehealth efforts with Circle Medical are also gathering steam. Circle Medical saw 214% growth in revenue and 238% growth in appointments as compared to the previous year. While many other telehealth businesses are cooling off, we're seeing Circle Medical gain momentum. 88% of Circle Medical's revenues are attributable to their telehealth program. We see them scaling through to the end of the year. Based on our knowledge, we are -- back to Canada, based on our knowledge, we are the market leader in omnichannel patient services in Canada today. And we look to build on that lead purposefully and ambitiously over the next year. We do not know of any other provider in Canada that has anywhere close to the capacity of delivering both physical in-person and telehealth patient services to the same degree as we can. And now with MyHealth in the family, our patient care scope includes a substantial specialized care and diagnostic offering. There's simply nothing that comes close to WELL now in the Canadian healthcare ecosystem given the combination of outpatient clinic infrastructure, telehealth, EMR assets and sheer patient visits. I'll go into greater detail on the recently completed MyHealth acquisition later in this call today, but first, I'd like to turn the call over to our CFO, Eva Fong, who will review the financials for the second quarter. Eva?
Thank you, Hamed. I'm pleased to report that we had a very strong Q2 and quarterly results for the 3 months ended June 30, 2021. Our second quarter results for the 3 months ended June 30, 2021 are as follows: WELL achieved record quarterly revenue of $61.8 million during Q2 2021 compared to revenue of $10.6 million generated during Q2 2020, an increase of 484%, driven mainly by the CRH acquisition, which accounted for revenue of $36.7 million during the quarter. WELL achieved virtual services revenues of $12.5 million in Q2 2021, representing 432% year-over-year growth as compared to $2.3 million in Q2 2020. During Q2 2021, WELL achieved record adjusted gross profit of $30.2 million, representing 615% year-over-year growth as compared to adjusted gross profit of $4.2 million in Q2 2020. WELL achieved adjusted gross margin of 48.9% during Q2 2021 as compared to adjusted gross margin of 40% in Q2 2020. Net loss was $14.1 million or a loss of $0.08 per share for the 3 months ended June 30, 2021 compared to a net loss of $3.4 million or a loss of $0.03 per share for the 3 months ended June 30, 2020. Adjusted EBITDA was $11.9 million for Q2 2021 compared to adjusted EBITDA loss of $0.5 million for Q2 2020. Adjusted EBITDA was positively impacted by the addition of CRH during the quarter. Now on our balance sheet. WELL ended Q2 with a very strong balance sheet. The company had cash and cash equivalents of $70.6 million as at June 30, 2021 compared to $86.9 million as of December 31, 2020. During the quarter, WELL's CRH subsidiary has entered into an amended senior credit arrangement with a syndicate of lenders led by JPMorgan for an aggregate amount of USD 300 million. As of June 30, 2021, the company had drawn down CAD 182 million under this facility, primarily for the purposes of funding the CRH acquisition. Subsequent to the end of the quarter, WELL's MyHealth subsidiary acquired a senior credit facility provided by a syndicate of banks led by the Royal Bank of Canada for an amount of up to $200 million. Currently, the total drawn amount under both the CRH and MyHealth credit facilities is approximately $270 million. WELL continues to have approximately $300 million of undrawn credit facilities available to fund future acquisition and their working capital requirements in addition to the cash on its balance sheet. I'm also very pleased to report that the company is compliant with all covenants related to both the CRH and MyHealth credit facilities. As of the end of the second quarter on June 30, 2021, WELL had 211,702,586 fully diluted securities issued and outstanding. More recently, as of August 11, 2021, WELL had 220,001,922 fully diluted securities issued and outstanding. That is my financial update, and I turn the call back over to Hamed.
Thank you, Eva. So let's take a closer look at our recent MyHealth acquisition. On July 15, the company completed its acquisition of MyHealth, the leading primary care, specialized care telehealth services and accredited diagnostic health services provider that owns and operates 48 locations across Ontario. With this foundational acquisition, WELL is now the largest owner operator of outpatient medical clinics in Canada with 74 combined clinics. Approximately 75% of MyHealth's medical consultations are currently conducted via telehealth, which when combined with WELL's multiple telehealth businesses, now make WELL the leading multidisciplinary telehealth service provider in Canada. MyHealth is a unique and substantial asset in the healthcare ecosystem, and most analysts thought that it could have likely IPO-ed with a substantial value in excess of $300 million to $400 million given its revenue and EBITDA scale and strong organic growth. We're very proud of the way we structured this transaction. We did not use one dollar from treasury. The acquisition upfront price of $206 million was funded in 3 parts: one, a $30 million vendor take-back note that is payable in cash or the 5-day VWAP at 3-, 6- and 9-month increments at $10 million each; two, we paid $82 million in cash by leveraging MyHealth itself only as collateral with the $200 million line led by Royal Bank and included an extremely strong syndicate comprised of BMO, HSBC, TD Bank, ICICI Bank and Laurentian Bank; and three, we paid 8.34 million shares to satisfy the $94 million remaining price tag. At first, we priced the shares at $9.80 to satisfy this balance. However, the number of shares was subject to an adjustment that was reflective of the price action between signing and close because our stock performed well after close, we ended up pricing the shares at $11.30 to satisfy this balance. So why did we like MyHealth? MyHealth represents a substantial acquisition for the company for the following reasons: it significantly boosts WELL's free cash flow, which would be used to make additional cash flow-generating acquisitions; two, it accelerates WELL's revenue and EBITDA growth profile. MyHealth is expected to generate pro forma revenues of approximately $100 million and with EBITDA margins of approximately 20%; it establishes a strong presence for WELL in Ontario with 48 additional healthcare clinical locations, and it strengthens our telehealth presence with approximately 75% of MyHealth medical consultations currently being conducted by telehealth, which when combined with WELL's multiple businesses, make WELL, as I mentioned earlier, a real leader in this space; four, it expands WELL's expertise into providing complementary diagnostic services and specialty services. For the 12 months ended March 31, 2021, MyHealth recorded over 500,000 patient visits, including primary, specialized, telehealth and diagnostic visits. Our plans are to aggressively expand MyHealth under the leadership of Suresh Madan. We'd like to see MyHealth continue to do what it has been doing, but of course, we would like to contribute to their success with greater tech collaboration and regional expansion. The network effects between WELL's primary care group and MyHealth are substantial. Our outlook looks strong for the remainder of the year. I'd like to comment on that quickly, and then we will move to the question-and-answer period. Our view remains very positive across all our business units for the entire company as a whole. With the acquisitions of CRH and MyHealth, the company's financial and operating profile makes it a clear leader in the Canadian healthcare market and a strong emerging player in the U.S. healthcare market. The company estimates it is currently on an annualized revenue run rate of almost $400 million and approaching $100 million in operating adjusted EBITDA. We're still on track to achieve our goals for 2021, which are to: one, build out and refine our practitioner enablement platform and deploy services of that platform, both internally to WELL healthcare practitioners as well as offer those services to healthcare practitioners outside of WELL; two, achieve organic growth across all of our operating units; three, follow a disciplined acquisition and capital allocation strategy; four, grow adjusted EBITDA through the year; five, increase operating cash flows through optimization of our operations, digitizing clinical assets and with the addition of new cash flow generating acquisitions; and six, increase market share of our digital health-related products and virtual care programs. WELL is expecting its substantial revenue and EBITDA growth experienced in Q2 will continue into Q3 as a result of a full quarter of CRH contribution as well as the contribution of 2.5 -- sorry, 2.75 months of MyHealth, given that the acquisition closed on July 15 -- with 2.5 months of MyHealth instead of 2.75. With the acquisitions of CRH and MyHealth and the momentum created by the rest of the business, the company's financial and operating profile makes it a clear leader in the Canadian healthcare market. WELL continues to have an active pipeline of acquisition opportunities of both clinical and digital assets. We operate as a decentralized organization with each business unit having a fair amount of autonomy. As we mentioned before, WELL looks to attract acquisitions with strong operators to run these businesses and generate profits, which then would be thoughtfully allocated against new growth opportunities. The company now has 3 engines of M&A growth with corporate development teams at CRH, MyHealth and WELL's own corporate team, thereby effectively scaling the company's inorganic growth potential. As a result of that, WELL currently has 15 signed letters of intent across the organization. We believe the successful execution of these signed LOIs has the potential to catapult the company to approximately $0.5 billion in annual revenue run rate. Given the strong scale, WELL continues to seriously evaluate the prospects and feasibility of the U.S. IPO in the next few months. That is why we hired Jamil Nathoo, who left his Managing Director post at Goldman Sachs and joined us. Given our leadership in the healthcare IT market, where we are the largest publicly traded comp, it only makes sense that we start to seriously evaluate new listing opportunities. When you look at WELL's quantum and now post MyHealth, we are now as big or bigger than some of the most notable names in the U.S. healthcare IT comp set with much greater profitability. We are a unique company with a unique mission and believe it would be highly beneficial for us to have more exposure to the U.S. capital markets. Finally, I want to talk a little bit about a recent initiative that I'm personally very excited about, namely the launch of WELL Ventures. A couple of weeks ago, we announced the formation of WELL Ventures, a wholly owned subsidiary of WELL, whose mandate is to invest in exceptional leaders, entrepreneurs and businesses supporting the global digital healthcare ecosystem with an emphasis on advancing innovative digital health initiatives in Canada. WELL has already established a track record of making successful venture style investments in early-stage digital health companies such as Circle Medical and Insig prior to the control transactions and the follow-ons received from WELL. We specifically seek to invest in companies that are generally committed to leveraging technology to improve healthcare outcomes and can directly benefit from WELL's ecosystem, size, scale and, of course, our practitioner enablement platform. The WELL Ventures portfolio of companies currently consists of strategic investments in a number of emerging companies such as Phelix.ai, Pillway, Twig Fertility and most recently, Bright. Furthermore, WELL has assembled a unique and diverse advisory board whose objective it is to nurture and help advise those companies on their journey of growth. WELL Ventures is an example of our commitment to invest in and advance the digitization and modernization of healthcare in Canada and around the globe. In closing, I want 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 the funding needed to pursue our goals. I'd also like to thank WELL's senior management team and all our employees and contractors for their tremendous effort and especially during the current COVID pandemic. In particular, I'd like to thank our team of doctors and frontline healthcare workers who continue to keep our clinics open and provide unbelievable care throughout the past year. They are an outstanding group and remind us every day why we are here, to enable and empower healthcare practitioners. We want to support them so they can support patients. With that, we're now open to questions. Operator, please proceed.
[Operator Instructions] Your first question comes from Rob Goff, Echelon Wealth Partners.
Congratulations on your outperformance in the quarter. My question would be on Circle. I tend to put, perhaps, too much emphasis on Circle, but could you talk to the organic growth prospects you see for Circle, the potential for inorganic growth, i.e., acquisitions to accelerate that growth and/or the potential for an affiliate model within Circle?
Sure. Rob, thanks for the question. You're right to be inquiring about Circle because they've just had phenomenal performance. As I mentioned in my script, they had phenomenal year-over-year growth. They've essentially doubled since we -- since they came into the family and our announcement back on September, I think, it was first last year. The growth rate in revenue year-over-year was 214%. The growth rate in appointments was 238%. What we find that they're doing very well is really mapping out the scaling and growth process. I recently visited with them in the Bay Area, one of my first trips since Trudeau is allowing us to get outside of the country without a quarantine. And it was lovely because I really got a chance to understand, in greater detail, with a longer visit with the team that they are really preparing the company for much more scaled organic growth. And I think that's really -- when we sort of look at the company and we look at all the different growth levers like inorganic and affiliate program and this and that, frankly, what we're seeing with them is their ability to scale, the addition of practitioners is unlike anything that we're seeing not only in our -- in the rest of the company, but also with all the other assets that we're out there diligencing. They have mapped out every step in the practitioner recruitment process and our tech enabling that. That's what you get with the Bay Area team, super focused on structure and scaling. They know exactly what they're doing. They hired a very strong person that actually came over from Google who was an expert in the AdWords program even at Google. So this person was a subject matter expert within the Google family, they've now come over and helping them scale their acquisition. So you got scaling improvements occurring on the acquisition side as well as the recruitment side on the practitioners' side of the equation. So if you think of telehealth, it's really a two-sided marketplace, and they are ramping both sides of those up. And so we really like the run rate there, and we're going to just continue to encourage them to scale, and we want to get behind their growth. And as I mentioned in my script, I think it's going to grow. I believe we're now north of CAD 20 million in terms of our latest run rate. So that just gives you an idea of just how quickly this asset is growing for us.
Your next question comes from David Kwan, TD Securities.
Hamed, I was wondering if you could -- good job on the quarter, it's nice to see you guys kind of ahead of expectations. I was wondering if you could talk about CRH. Obviously, big impact on the quarter, looks like a very nice performance there came ahead of my expectations, at least on a revenue standpoint. But just trying to figure out how to model it going forward, say, over the next year or maybe just looking at 2022, trying to figure out how seasonality plays into this business. And if there's kind of any nuances that we should be aware of, hopefully, 2022 gets closer to kind of pre-pandemic conditions?
Yes. Thanks, David. So you're right, CRH was a great performer for us, and we're very bullish about its continued prospects and outlook, not only for the balance of the year, but for the years ensuing. I think as far as the modeling of the business, obviously, you have the number of cases or procedures that the business drives and we talked a little bit in our script about how there was a very strong case load in the quarter. But obviously, the per unit economics and the case rates is obviously very key with the business as well. And there is a little bit of seasonality to what those case rates can be, but when we compare where they're at -- and again, this was a big topic in our due diligence of the company, given the historical case rate performance. What we found is that it hit sort of a low watermark notwithstanding this continued very strong EBITDA profile. And it's basically doing exactly what we hoped and thought it would do, which is remain steady and with some potential for it to actually curl up now. And so I think given the stability of the case rates and the scaling number of cases and the sort of 3% to 5% organic growth that we're seeing in the cases themselves, no one talks about that, but on the quantum that we've had, that's material, right? I think this is a substantial business that's going to drive really, really strong EBITDA for us. And then you start looking at some of the cross fertilization initiatives that we're employing, which obviously will take some time, but they're just going to add more [ tops ] into the business. And of course, any kind of efficiencies, we talked a little bit about the revenue cycle management, tech enablement initiative that management is working on, that could drive millions to the bottom line potentially. So again, those are -- that's how we think about the business. It's sort of ahead of investment case right now, which rarely happens, as you know, especially with these big deals, but it is happening, and we feel very good about it.
I guess to clarify, Hamed, because obviously, last year, things got really skewed as it related to -- also Q2, you saw the big drop, and then Q3 and Q4 maybe higher than what they normally would be just as a big play some catch-up there as people return to doing some of these elective procedures. So like if you look at CRH, maybe, like what they did in maybe 2019 or 2018, is that like a decent kind of barometer or yardstick that we can use in terms of at least forecasting quarter-to-quarter trends?
I think so. Yes. Again, I think as long as you're able to discern that in those periods, you did have declining per unit economics, which I might add was intentionally willed by management. I mean management decided that they wanted to deliver a more stable case rate for the capital markets. And so they kind of employed a strategy of short-term pain for long-term gain. So they moved out of network into a lot more in-network relationships. And now their vast majority of their businesses is in network and contracted with a small amount that's sort of strategically out of network. And so I think if you're sort of conscious of how the declining per unit economics sort of hurt the company before, but now that, that is addressed and is, again, highly resilient due to the contracted rates, I think you can really model this properly. And we can spend some time with you to also talk through how the seasonality can affect case rates. But essentially, the case rates are more sort of at their seasonal lows in the first half of the year. So we actually expect case rates to improve throughout the year a little bit. So hopefully, that's helpful for you.
No, that's helpful. And maybe one just quick last question. On the margin side, you talked about, I guess, stable per unit economics. So were the kind of the margins similar to what we had seen when they were a public company?
Yes. I think they're probably now a tad better. I think the low watermark was just under $300 per case. And I think they're now -- they've now advanced that a little bit and are hovering right around $300. And don't forget, the case rates will probably improve throughout the year. So I think they're really, really well positioned, especially with the organic growth in case loads. And then, of course, they're remarkably strong capital allocation program that just keeps adding caseloads by the bucket. Also, don't forget that the supplies billing legislation is kicking in which should help the company better monetize it out of network. I mean out of network is small, but still, I think it's one of those things that's a bit of an x-factor, I would say, to the positive over the next year or 2.
Your next question comes from Adam Buckham of Scotiabank.
So kind of a follow-up to David's. When you think about the overall gross margin on a Florida basis, particularly thinking about Q3 and the addition of MyHealth. I know CRH, obviously, a bit accretive from an adjusted margin standpoint. And then I think it was highlighted that MyHealth is about a 50% plus sort of gross margin business. So kind of if you take that together, it kind of implies that there's room for additional improvement here. Is that the right way to be thinking about it?
I think so. I don't think we're going to see too much movement in the consolidated gross margins just because of the current quantum of the business. Even though MyHealth is substantial, I think it's fairly close to our consolidated gross margins today. There may be a little bit of movement, but I think, obviously, listen, we've seen tremendous expansion in that figure. And I'll just ask Eva if there's anything else you'd like to add to that.
Not much to add. So I think you summarized it all.
Thanks, Eva.
Okay. Great. So I'll just slip an additional question here. Thinking about the regulatory landscape in Canada, particularly sort of on the B2C side within virtual care, I think Quebec was one of the provinces that kind of highlighted the increased costs associated with patients essentially going through a virtual care channel and then also into the hospital channel as well. I'm just wondering from a top-level standpoint, obviously, your B2B side is fairly strong. Thinking about B2C, is -- do you think there's any sort of risk on that standpoint from a regulatory standpoint?
There's been a lot of discussion around whether or not these telehealth codes stick around. Obviously, Ontario, as you might have heard, just renewed them for a period of time. I think if you talked to most people, they'll tell you that telehealth is here to stay, the codes are here to stay. They will -- they may be modulated to some extent to kind of incline towards more of a longitudinal care model, meaning that telehealth providers will need to ensure that they have team-based care and the ability to have practitioners support patients, not just on an episodical basis. I think some of the funding could be reduced for that episodical side of things, but again, no sign of that changing soon. But in our view, that's what could happen in the future as things sort of settle down from the pandemic. I will say, to the extent there are any changes, we are incredibly well positioned to weather them because of our strong outpatient clinic network. I mean take MyHealth for example. 75% of their visits for medical consultations specifically are occurring through telehealth and roughly 50% of all of our primary care in sort of the classic WELL clinics. If there was a situation where some of those billings will not be able to happen, those practitioners just go back to those clinics, and they don't miss a beat, whereas some of the other folks out there who lack that omnichannel presence and that strong physical infrastructure that we have, I think, would be in a much more difficult scenario to weather that storm. So I think WELL is extremely strongly positioned to continue to advance patient services business irrespective of what happens with regulatory.
That's great color and a very good point. Congrats on the quarter.
Thanks, Adam. Welcome onboard as our 12th analyst. We're excited to have you onboard.
Your next question comes from Christian Sgro of Eight Capital.
I wanted to start on the tech enablement opportunity at CRH around the revenue cycle management there. It sounds interesting. It sounds like it's still in the works, but could you provide some color around the opportunity there? And am I right in thinking that it's a cost savings opportunity?
Yes, that's correct. Well, as you're likely aware, the U.S. ecosystem is a lot different than the Canadian one. And so merely collecting and managing all those receipts is highly nontrivial and very complicated. And if it wasn't, the company would just be doing it itself, but it has traditionally outsourced that like many companies do, many care providers do in the United States. Its current care provider does a lot of work, but also charges quite a bit as well. And what we see and management has been really great in terms of their focus and targeting this cost, there's potential to reduce it substantially by working with a more tech-enabled partner who, again, could shave off quite a few basis points off what we're currently paying. So that can turn into real money. Again, as I mentioned in my script, it could be in the millions. And again, it's probably too early for us to provide specific outlook against that, but I know it's one of the biggest areas of focus internally in terms of operational excellence with the company. And of course, it fits right in with the whole idea of WELL, which is we saw this with the Canadian clinics. We were able to grow the top line, but we've been able to more than double, I think, close to triple the EBITDA of those clinics by focusing on all aspects of the business from driving new revenue and mix, but more importantly, how we manage the business and adding software to workflow. So yes, it's something that we're going to be tracking really closely and we hope we have more good news for you on that in the next quarter or 2.
That's helpful. We'll stay tuned for updates there. Another area I wanted to ask on is Intrahealth. Intrahealth provided a nice lift to the number of EMR networks -- or sorry, EMR network clinics rather under the WELL umbrella. I just wanted to ask if there's an update you could provide, how are you doing integrating that asset? And if you're seeing any synergies or cross-sell opportunities, I know it was more of a global asset, but curious to hear how that one is coming along.
Yes. No, I mean the thing that I would tell you is we are not looking to integrate that with OSCAR or merge that or combine that with OSCAR in any way. I think we were very clear in our communication around the fact that we really see ourselves as being a portfolio of EMR provider so that WELL EMR Group obviously consolidated quite a few of those OSCAR service providers, and it's really taken a leadership position with OSCAR and actually taken on some of the leadership duties from McMaster and the partnership with McMaster. But Intrahealth is going to be -- is an enterprise-class EMR that's a bit different. And we think that it addresses different market needs than OSCAR and especially given the fact that it has a very strong presence in Australia and New Zealand. And so our focus is to continue to operate that and make sure that it can be the best that it can be. The thing that I will add is that, obviously, we have built out apps.health, which is an internal innovation at WELL, building the country's first and only app marketplace for integrated EMR apps. We, I think, had a very important few months there where we announced that we had now updated apps.health to the FHIR standard. This is the same standard that Apple and really the largest mega-platforms in the world are embracing for healthcare interoperability, and that's how we were able to launch Apple health records. We're the first -- and to my understanding, only EMR in Canada, a major EMR anyway, that has been able to activate that. And that is because we were able to update that framework to the FHIR standard. And what's neat about that is if you're an app developer, now our whole -- the whole objective behind WELL is that you'll be able to publish once, that app, and then have it sort of propagate and be able to activate against WELL's portfolio of EMRs because they will all adopt the same FHIR standard. So we don't need to have merging of EMRs for the benefit of the app store and all the innovation work that we're doing around that. So I think a takeaway from this conversation should be WELL will likely look at other EMRs, potentially even outside of the country, and really continue to invest in the FHIR standard and this concept of empowering and driving digital health apps that work with the FHIR standard and interoperate against our EMR assets. Hopefully, that's helpful.
That's very helpful. Thanks for the update on the standardization and the apps marketplace there.
Thanks, Christian.
Your next question comes from Daniel Rosenberg of Paradigm.
I had a follow-up around your strategic priority. The first one you mentioned was product enablement. I was just wondering, where are we in that cycle? Are you looking to bundle product in terms of before you're going out to market within the physician footprint that you built through the EMR practice to cross-sell into that base or is it just individual products that you've assembled that you're already targeting with cross-selling initiatives? Kind of how far are we in that process?
Great question, Daniel. I think there's a lot of potential here for us. Yes, you're right. There are a lot of different components to the platform. And a number of them are decentralized in nature. But increasingly, we're building connective tissue to bring them together. A great example is apps.health, of course, and all the different apps and investments that are now being plugged into the EMR. And even if you look at the revenue cycle management group, we've created an app, a DoctorCare app essentially that operates there. We created obviously that Apple records app. So again, that's a bit of a centralized area and how we're bringing that together from a technology platform perspective. But let me also say this, let's sort of zoom out and look at the company at 80,000 feet, we are a practitioner enablement platform, we are here to make practitioners more successful. So increasingly, we're going to give you guys as The Street and investors a lot more data around the number of practitioners we power, both inside our patient services businesses and outside of our patient services businesses. And we want to do more to improve the practitioner journey. So there's so much that we offer now. We want to be able to allow practitioners to fill out an intelligent questionnaire and understand the areas where we can help them and then guide them through all the different areas of the business and be able to demonstrate that WELL's platform can kind of coalesce and help them be more successful. So there are already initiatives around the company that are working on experiences like that. And we're very excited about that because I think that's what starts to really demonstrate to practitioners that WELL becomes their sort of one-stop shop, if you will, for all these different opportunities: data protection, revenue cycle management, telehealth, digital patient engagement. There's just a lot that we can do to help.
And just one last one before I pass the line. On the success of Circle Medical in their digital initiatives, I was wondering if the appointments, the telehealth and virtual health appointments, are they all within their footprint? Or are you starting to reach into that broader section across the U.S. that the company does quasi-cover with their agreements with insurance providers?
Daniel, the focus -- while they have these broad agreements with the payers across the country, their focus continues to be their strongest states right now. And I think that a lot of the growth that I think we're going to see is them tapping into other markets. That's what's so compelling about their story right now. They're not even a broad 50-state story yet, and they can be. And that's just a -- there's no regulatory limitation except for ensuring that you have the right practitioner. If you want to light up in Illinois, you just need to make sure that you have a practitioner that is properly credentialed in Illinois, but their payer relationships extended to Illinois, their app's reach extends into Illinois. And I'm just picking Illinois out of the air, I don't think it's a big state for them, but that's the point is that there's so much potential here. They're really -- they've essentially been able to grow this business with the kind of impressive percentage increases that we've seen solely in really a very small handful of states. So again, as they scale that two-sided marketplace, there's just a lot that can happen. And this business can really surprise on the upside.
Your next question comes from Scott Fletcher of CIBC.
Just a couple of clarifications from me on the CRH data. Obviously, it has contributed to a strong amount in the quarter. You mentioned the organic growth was 3% to 5% on the case level. Do you think that any of that was maybe pent-up demand given relaxation of COVID restrictions? Or do you think that, that 3% is maybe something we could look at going forward?
Thanks for the question, Scott. I remember that we -- when we were doing due diligence, we were seeing similar organic growth profiles. So I don't think it's anomalous for them to see this type of growth. But I do know that there -- that endoscopic procedures were pushed out, and it may be contributing to a little bit to the strength, but I doubt that it's anything that's not sustainable just given the historical organic growth that we saw. During diligence, we looked at every single deal. And I think every one of them, but a couple of them, they've made 30 at that time -- 32 or 33 acquisitions. Every single one of them except for a couple were experiencing organic growth. So yes, I think we feel that, that is sustainable.
Great. Okay. And then the second one is just another quick clarification. On the case rate you mentioned there, that sort of $300 range. I'm just -- I'm pretty sure, but I'm just making sure that's in U.S. dollars, correct?
Absolutely, sir.
Okay. I just wanted to make sure. I'll pass the line there.
Which hopefully will be worth more here with time.
Your next question comes from Justin Keywood of Stifel.
On acquisitions and the 6 LOIs mentioned, and if I heard correctly, there's an opportunity to exit the year at $0.5 billion in run rate. How many of those acquisition opportunities would need to close to hit that run rate number?
Great question, Justin. I think that a number of them are smaller. So I think it depends on just the mix, but -- and the sort of the growth that you would experience from some of those different acquisitions, but I'll just say, for the most part, we were kind of doing the sum total of all of them. I think we were sort of in that 15 range. I thought I heard you say 16. So again, just to kind of tell you a little bit about our philosophy around capital allocation, even though we've done these big deals, the prevailing sentiment and real thinking for capital allocation is that small is beautiful. And so as long as you can do small deals in an efficient and effective way, you could build phenomenal value, especially if you have a very strong integration plan with great leaders who know what to do with those acquisitions. So we continue to be attracted to smaller form deals, obviously not too small, but I think what you'll see us do is kind of focus on big needle movers like a MyHealth or CRH or very EBITDA-rich deals that are smaller in nature.
Got it. And as far as target areas to acquire, would these be on the existing verticals? And also as far as geographic focus, would it be U.S., Canada or maybe abroad?
Yes. So we still -- I mean, the vast majority, I think all of those opportunities today are in the U.S. and Canada. Some of them may have exposure to markets as well outside of those two, but they're essentially based in those markets. And yes, we are evaluating opportunities outside of North America and really want to continue to grow, both on the sort of the clinical and the digital side outside of North America. So we continue to evaluate those types of opportunities.
Your next question comes from David Newman of Desjardins.
Congrats on the Q, a very, very good quarter. And obviously, the model has begun to really flesh out here. So in your LOIs, it's been asked a couple of different ways, but I want to ask it a different way, and it kind of goes back to Adam's question on moving from maybe some DTC towards B2B and B2G, mental health, things like that, to create a little stickiness. So the 80-20 balance sheet you have that -- and I know virtual is also in the omnichannel, but if you look out to create more stickiness, would you look at B2B, B2G, mental health, where is that in the sort of LOI stack today?
Yes. No, great point. Listen, we -- as we look at the practitioner enablement platform and different patient services businesses that we'd like to have exposure to, unquestionably, behavioral health, mental health is a big opportunity. There's a lot going on there. We have a lot of corporate development activity in that area. And it just seems that there's just a surge in demand and a surge in supply of service providers out there trying to meet that demand. There's also sort of specialty telehealth market that's emerging that, I think, is really interesting. I call it narrowcast telehealth, which is this idea that you're using telehealth as a kind of a workflow to address more specific problems like female sexual and reproductive health or men's health concerns, and we're seeing that in sort of the explosion of care providers out there that are going after this area. And what's really neat about this area is that it's not just about earning for providing some kind of consultation, but there's often robust product sales and strong margins related to that. So we're looking at a variety of companies in that sector as well, both here in Canada and in the U.S., and believe that there are great opportunities. And we think that, that will continue to drive the weighting. It's something that I know you look at a lot, David, which is our weighting in digital, it's something that we care about a lot as well, and we think that we could not only continue to drive that weighting and keep the company's virtual services very strong, but also enhance it with new product opportunities.
And with your footprint, Hamed, I mean I look at the footprint you've got, you've got quite an asset base now that you could actually evolve this into really tackling sort of the enterprise market, which obviously is SaaS driven and really recurring revenues, you could take your omnichannel presence and really kind of leverage that into the enterprise or government customers. Are you looking at that at all and really leveraging that asset base?
We are. I think that you're right. I mean if you look at the acquisition that we made in Quebec, that's a strong asset that's providing private care and then, of course, the ExecHealth acquisition in Ottawa. We're looking at other sort of B2B ExecHealth opportunities. We like that -- we like those businesses because they're generally quite profitable and they're very resilient and they're, for the most part, driving recurring revenue because they're mostly subscription type. And yes, we can also retrofit part of our own clinics to provide some of that care, although it is a different competency to some degree, and we'd rather buy assets that are actually already doing that business and achieving very strong results. And then I think to your point, you start to be in a position where you have national footprint and you can start to compete with all those big B2B accounts and B2G accounts. And I think with our physical infrastructure and strong telehealth assets, we could make a real dent. What I look at right now in the B2B market with these telehealth offerings and some of the other providers out there, there seems to be some energy and enthusiasm in that space, but it also just seems really challenged from a profitability perspective. So I don't know if it's just the competition or just people scaling up, but it's something that we watch really carefully. We don't feel like we need to be there unless we're there in a profitable and sustainable manner. That's kind of the way we think.
Yes. And then you don't have to worry about the code as much, whether or not to pull the code because it's all private pay.
Precisely, absolutely.
Ladies and gentlemen, our apologies, due to time restraints, we will no longer take -- be able to take any more questions. I will now turn the conference back over to Mr. Shahbazi for closing remarks.
Thank you very much for all the questions. We really appreciate everyone's engagement and support of WELL. If you kind of look at what happened this quarter, and as I mentioned, in my script, what happens next quarter with the full contribution of CRH Medical and 2.5 months of MyHealth, I think there is phenomenal opportunity to see our results continue to grow. And I think you're going to continue to see explosive growth, frankly, in our financial performance. And we are really, really excited. I wish tomorrow was our Q3 conference call, so I could speak to you about that. So thank you, please tune in. And I think the fall is going to be a really exciting and interesting time for us. And again, we thank you for all of your support. We're grateful. Be well.
Ladies and gentlemen, this concludes your conference for today. We thank you for participating and ask that you please disconnect your lines.