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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.