INITIATION REPORT | July 30, 2020

WELL Health Technologies Corp.

Daniel Rosenberg, MBA, Analyst | 416.361.6054 | [email protected]
TECHNOLOGY Scott McAuley, PhD, Analyst|416.361.9080 | [email protected]
Sepehr Manochehry, PhD, Associate|416.363.6228 |[email protected]

All figures in C$, unless otherwise noted.

Rating: Buy
Healthy Beginnings, an M&A Machine with a
Initiating Coverage Large Runway for Growth
12-Month Target: $4.10
Investment Thesis
Price $3.42
We believe WELL is in the early innings of establishing itself as a technology leader in
Ticker WELL-T
FYE 31-Mar the digital healthcare sector. For investors it is an M&A compounder which can drive
Potential ROR 20% value within the massive healthcare market that is ripe for digital transformation. WELL
Avg 3-month daily vol. (000s) 766 owns 20 primary healthcare medical clinics, is Canada’s third-largest EMR (electronic
Shares O/S Basic (M) 118
FD (M) 118
medical record) provider, and operates a national telehealth service. The company
Market Cap Basic ($M) 404 invested in a number of other technology assets. Since early 2018, WELL has
FD ($M) 404 completed 15 transactions, including 12 acquisitions and three equity investments
Net Debt at Q1 ($M) 10
driving rapid growth from revenue of zero in 2017 to a current revenue rate of ~$44
PCI Est FY20e FY21e FY22e
million. Leadership has shown an exceptional capabiilty to execute disciplined
Revenue ($M) 43.5 56.4 68.5 accretive M&A and to acquire valuable technology that can scale. Secular changes
previously u/r u/r u/r accelerated by the pandemic are strong tailwinds supporting WELL’s strategy to
Gross Profit ($M) 16.9 22.4 28.2
leverage technology and drive efficiencies in healthcare, in turn improving patient
previously u/r u/r u/r
Adj. EBITDA ($M) -0.5 4.4 6.2 outcomes and generating shareholder value.
previously u/r u/r u/r
Other Data FY20e FY21e FY22e Highlights
Gross Margin 38.8% 39.8% 41.1%
-1.2% 7.8% 9.0%
 Rapid Growth Through M&A; No Signs of Slowing Down | We have seen a
Adj. EBITDA Margin
Adj. EPS ($0.08) ($0.05) ($0.05) highly effective and disciplined approach toward M&A. Recent technology targets
Consensus Est FY20e FY21e FY22e have been acquired at ~3.0x EV/Revenue, and ~5.0x EBITDA for clinical assets.
Revenue ($M) 43.1 58.9 79.6 Structuring its deals with a combination of shares and performance targets has
Gross Profit ($M) 17.3 25.0 32.7
made transactions very accretive. The company’s EMR strategy has been
Adj. EBITDA ($M) -1.2 3.6 6.7
executed particularly well. Consolidating an open-sourced ecosystem and bringing
it toward feature parity with competitors has led to WELL having one of the leading
EMR platforms in Canada, acquired at a fraction of the price when compared to
precedent transactions. Often overlooked by traditional measures is the value of
the company’s captive base of physicians on its EMR platform and growing
technology stack.
 Not Their First Rodeo | Some investors may remember CEO Hamed Shahbazi
from TIO Networks, which was acquired by PayPal in 2017, for $302 million. Mr.
Shahbazi is joined by several ex-TIO personnel who offer significant bench
strength in operations, M&A and capital markets strategy. In addition to a similar
team, we see similarities in strategy: developing valuable and scalable technology
off of a core set of physical hard assets.
 Massive Market Ready for Change | There are 45,000 general practice and
family physicians in Canada, growing 4% year-over-year; nevertheless, five million
Canadians do not have a family doctor. COVID-19 has accelerated the uptake in
Source: FactSet, Company filings, Paradigm Capital Inc.
telehealth solutions. Looking south of the border, we see digitally enabled
Company description: WELL Health Technologies is an
healthcare providers with upwards of 50% of all patient touch-points occurring
acquisition-focused healthcare provider that owns and digitally. While in Canada, pre-pandemic, telehealth was only ~7% of all visits.
operates clinics, while selling workflow-enhancing software There is a large opportunity catch-up by leveraging technology to optimize the
solutions to clinics across Canada. primary care system. WELL is the best positioned player in Canada to capitalize
on this opportunity.
Valuation & Conclusion
We are initiating coverage of WELL Health Technologies with a Buy rating and $4.10
target (7.6x fiscal 2022e EV/Sales), with the stock trading at 5.9x calendar 2022e
versus peers at 6.9x. We view WELL as an attractive way for investors to capitalize on
accelerating trends in digitally enabling healthcare delivery. We see opportunity for the
company to drive shareholder returns through further M&A activity within a massive
healthcare market.

Our disclosure statements are located at the end of this report.

 INITIATION REPORT | July 30, 2020
WELL Health Technologies Corp.

Table of Contents
Canadian Healthcare: Ripe for Disruption ......................................................................................... 3

Company History ............................................................................................................................... 4

Disciplined M&A Activity .................................................................................................................... 5

An Under-digitized & Fragmented Market ......................................................................................... 8

Precedent Transactions & Potential of Telehealth ............................................................................ 9

Secular Tailwinds Accelerate Owing to COVID-19 .......................................................................... 10

Capital Allocation & Profitability ....................................................................................................... 11

Strong Shareholder Backing & Management Alignment ................................................................. 12

Growth Strategy Poised to Strengthen Tech Stack & Help Gain Market Share .............................. 12

Financial Forecast ........................................................................................................................... 13

Valuation ......................................................................................................................................... 15

Risks ............................................................................................................................................... 17

APPENDIX I: Management & Board of Directors ............................................................................ 18

APPENDIX II: Supplemental Figures .............................................................................................. 20

APPENDIX III: Financial Statements ............................................................................................... 22

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WELL Health Technologies Corp.

Canadian Healthcare: Ripe for Disruption

Over 5-million Canadians do not have a family doctor,1 despite a 4% growth in the number of
practicing physicians across both specialty and family medicine in Canada,2 Leveraging new
technologies will allow physicians to see more patients, improve care, and lower the growing
healthcare costs on federal and provincial budgets. The COVID-induced stay-at-home orders, and
ongoing concerns about congregation in healthcare facilities, have helped speed up the shift toward
implementing new technologies in healthcare practices. A more adaptive healthcare model that
manages care through a combination of on-site and remote care, by leveraging technologies, helps
optimize resource allocation and improve healthcare outcomes.

Figure 1: Overview of WELL Health’s Business Divisions

Source: Company filings

Recent surveys of clinicians have shown that the majority are looking to add several types of advanced
digital solutions in the coming 1–3 years.
WELL helps act as the provider of technology solutions for clinics that are increasingly digitizing to
grow their capacity and profitability. The company operates 20 clinics, with ~180 clinicians, but has a
reach that extends across almost 2,000 clinics through its Electronic Medical Records (EMR) platform.
That footprint translates to ~10,000 clinicians. More recently, the company has grown its tech stack
through acquisitions and strategic investments/partnerships with companies delivering high-value
technologies such as Cybersecurity solutions, AI-guided office assistants and telemedicine. The
opportunity to cross sell will help expand margins at its wholly owned facilities and its EMR userbase,
which brings exposure to >10% of Canada’s ~80,000 physicians practicing in medicine,3,4 offers a
captive audience to sell into. Its clinics generate consistent revenue with gross margins of ~30%, while
its SaaS offerings bring high-margin recurring revenue that has upside owing to cross-selling
opportunities. We expect the company to continue full force on both fronts, acquiring clinics at a
purchase price multiple of <1.0x sales or ~5–6x EV/EBITDA, while continuing to diversify its suite of
digital health offerings.

1
https://www.cihi.ca/sites/default/files/document/physicians-in-canada-2018.pdf
2
https://www.cihi.ca/en/physicians-in-canada
3
https://www.statista.com/statistics/831118/canada-family-general-practitioners-by-province/
4
https://www.cma.ca/quick-facts-canadas-physicians

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WELL Health Technologies Corp.

Figure 2: Adoption Timeline for Advanced Technology Solutions

Source: 2019 American Medical Association Survey (n=1359) (link)

Company History
WELL is headquartered in Vancouver, British Columbia and was incorporated in 2010 as Wellness
Lifestyles Inc., a company focused on wellness and yoga apparel. The company transitioned to owning
and operating primary clinics in 2018 and changed its name from Wellness Lifestyles Inc. to WELL
Health Technologies. WELL went public in 2016 through a reverse takeover (RTO) with Movarie
Capital. In January 2020, the company graduated from the TSX Venture Exchange to the main TSX
Exchange, resulting in increased exposure and higher trading volumes in WELL’s stock.
WELL has built a scalable business model by structuring the company into five business units with an
over-arching shared services infrastructure to support these business units. Shared services include
finance, HR, IT, corporate development (acquisitions), marketing and investor relations. The five
business units are structured to be able to easily integrate new acquisitions, thereby creating a
scalable acquisition model. The five business units are as follows:
1. WELL Clinic Network: Includes 19 wholly owned primary care clinics and the company’s 51%
majority ownership investments in Spring Medical Centre and SleepWorks Medical. This unit is led
by Dr. Michael Frankel, the company’s Chief Medical Officer.
2. WELL EMR Group (WEG): Includes the company’s EMR assets obtained through the acquisition
of seven EMR vendors. WEG is led by Arjun Kumar who joined WELL through the acquisition of
KAI Innovations in 2019.
3. WELL Digital Health Apps (WDHA): Includes the company’s digital health-related acquisitions
and investments such as Insig Corp. and Phelix.ai. WDHA is led by the recently hired Shervin
Bakhtiari.
4. WELL Cybersecurity: Includes the proposed acquisition of the services division of Cycura. Will
be led by Iain Paterson, who is currently Managing Director at Cycura.
5. U.S. Division: Includes the company’s equity investment in Circle Medical, based in San
Francisco, California.

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WELL Health Technologies Corp.

Disciplined M&A Activity

WELL’s first transaction was the acquisition of six clinics in B.C. in 2018 for $3.5 million, representing
0.4x EV/Revenue and 5.4x EV/EBITDA. Soon after, it acquired an additional 13 clinics for $6.4 million,
representing 0.3x EV/Revenue and 5.3x EV/EBITDA. Today, the company operates 20 clinics, having
since acquired a controlling interest in Spring Medical, a diversified wellness provider based in B.C., as
well as opening a dermatology clinic. The core group of clinics serves as a test bed for the company to
trial new technologies and work streams.

Figure 3: M&A History

Total Purchase
Date Type Target Description Percentage
Price

Expected close in 3Q Tech Cycura cyber security 100% 2,500,000

27-May-20 Tech Phelix.ai messaging minority 250,000
1-Jun-20 Tech Indivica Inc. oscar emr 100% 6,200,000
May 7th, 2020 Tech Insig Corporation telehealth minority 5,940,000
1-May-20 Tech MedBASE billing software 100% 650,000
3-Feb-20 Tech Trinity Healthcare Technologies oscar emr 100% 7,225,000
2-Dec-19 Clinical Spring Medical medical clinic 51% 667,000
2-Dec-19 Tech OSCARwest oscar emr 100% 1,350,000
1-Oct-19 Clinical SleepWorks Medical Inc. specialist clinic 51% 1,134,000
2-Jul-19 Tech Kai Innovations oscar emr 100% 10,750,000
12-Jun-19 Tech OSCARprn oscar emr 100% 876,000
2-Jan-19 Tech NerdEMR oscar emr 100% 2,550,000
1-Nov-18 Clinical Healthcare Clinics in BC medical clinic 100% 6,352,044
12-Feb-18 Clinical Healthcare clinics in BC medical clinic 100% 3,526,000

Source: Company filings

Following the above two large acquisitions in 2018 at <1.0x sales; the company has acquired seven
EMR providers, by paying ~3.0x EV/Revenue on average — a discount to 3.9x seen in the market
(Figure 4). As the third-largest EMR provider in Canada, WELL has looked to expand its suite of digital
health offerings, such as telemedicine, AI-powered virtual assistants and cybersecurity solutions, in an
effort to grow its margins through cross-selling to its existing EMR userbase.
The company has built a very interesting set of technologies that can be leveraged into a fragmented
market of clinics. The reach through some of its technologies gives rise to significant cross-selling
opportunities into a growing footprint (~1,900 clinics currently). With a rapidly growing footprint, many
of these opportunities are dependent on WELL’s continued expansion, which makes them hard to
value at this time. We believe M&A activity will continue to expand this customer base and bring
significant value in cross-selling activity over the long term.

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Figure 4: WELL’s Historical Footprint

Source: Company filings

Our discussions with management indicate that its M&A pipeline has accelarated of late as the
company has grown. Notably, a watchlist of over 100 names in which the company would reach out to
in its early days has now shifted to inbound calls on a daily basis with interest to sell assets. Given
management’s disciplined approach, we expect this increasingly large pipeline to lead to interesting
targets and significant shareholder value creation can be generated as the company continues its
shopping spree.
Transactions have historically ranged from <$1 million to +$10 million. From a balance sheet
perspective, we estimate WELL has $22 million in cash, leaving it with ample dry powder to pursue
potential targets. Larger acquisitions may require additional capital sources. We believe targets will be
other technologies that emphasize remote care, clinics that expand the company’s footprint across
Canada and the few remaining OSCAR-based EMR providers that are not yet on WELL’s platform.

Figure 5: Revenue Multiples in 13 Subsectors of Health IT

Source: Healthcare Growth Partners, Semi-Annual Market Review January 2020 (See Supplemental for table)

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Attractive Digital Assets: There is a large opportunity for the healthcare system and clinicians to
benefit from optimizing resources and saving costs, simply by implementing technology that is already
in existence. Management has outlined a few subsectors of interest, including telehealth, online
booking, automated check-in, billing as a service, cybersecurity, patient portal, precision medical and
clinical assistant. Management has indicated that the company will be launching an OSCAR “app
marketplace” which allows third-party developers and applications to connect to the WELL Network of
over 1,900 clinics and 10,000 physicians. WELL would certify the apps in its marketplace and assist in
selling the apps into its EMR network in return for a revenue share with the app developer. We believe
the OSCAR app marketplace is an ideal “hunting” ground for WELL to make additional acquisitions or
equity investments. The company has already made investments in telehealth though Insig, clinical
assistant through Phelix.ai and announced a cybersecurity investment in Cycura. According to
management, the company is currently testing online booking and automated check-in applications in
its corporate-owned WELL clinics in Vancouver. WELL is also already providing billing-as-a-service to
~30 clinics in its EMR network.

Figure 6: OSCAR App Marketplace

Source: Company filings

Telehealth: In its recent ramp-up of activity, WELL has entered into a strategic alliance agreement
with Insig which allows WELL to commercialize the Insig’s virtual care platform on a private-label basis
under the brand “VirtualClinic+”. Launched in early March, VirtualClinic+ is a web-based telehealth
platform that connects patients to physicians through video, phone and secure messaging without
needing to download an app. Adoption of the solution was accelerated by the COVID-19 pandemic.
The VirtualClinic+ solution has a low-touch registration requirement which enables patients to self-
select their healthcare provider, as opposed to competing app-based platforms that require more
extensive registration documents which they use to auto-match patients with clinicians. WELL’s
platform is flipping this model on its head and giving patients the autonomy to select a clinician with
characteristics that are conducive to their best experience (e.g., language, gender, specialty). The
platform reached a peak of 1,000 appointments per day by May and is hitting that benchmark multiple
times a week. We believe WELL’s VirtualClinic+ is one of the top six telehealth platforms in Canada
along with TELUS, Loblaw, Maple, Dialogue and Tia Health. Incidentally, Tia Health is operated by

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Insig, and WELL is the largest shareholder in Insig, so WELL has two of the top six telehealth
platforms in the country.
While the core patient-base of its owned and operated clinics is ~600,000, WELL stands to gain
access to patients seeking remote care across Canada through its easy-to-use website. It is worth
noting that the adoption of telemedicine can be as high as 50%, as seen in California-based care
manager Kaiser Permanente, who has reported that more than half of all appointments have been
conducted through telemedicine for years prior to the pandemic.5 In contrast, a 2019 Canadian survey
found that only 7% of Canadians had ever connected with their care provider by e-mail, 6% through
SMS or an app, and 4% through video.6
AI-powered Clinical Assistant: Through a strategic investment of $250,000 in Phelix.ai, and a
coinciding alliance agreement, WELL gained broad rights to use and sublicense Phelix.ai’s clinical
assistant automation software aimed at speeding up workflows. 7
Cybersecurity: In announcing its acquisition of Cycura’s services division, WELL indicated that it is
looking to grow the portfolio of products and services under the Cycura brand of healthcare-focused
cybersecurity solutions.8 This is an important factor in clinics looking to digitize. A key barrier is
ensuring proper security around healthcare data.
Circle Medical: In November 2018, WELL announced a strategic investment in Circle Medical. Circle
Medical operates a modern primary care practice in San Francisco. The digitally enabled primary
healthcare practice offers telemedicine and is affiliated with the University of California, San Francisco
(UCSF). The small $200,000 investment into Circle also includes an agreement to explore how
technologies could be leveraged into the Canadian landscape.

An Under-digitized & Fragmented Market

In addition to changing payment/reimbursement schemes, governments and medical associations
have encouraged digitization to eliminate waste and increase the capacity of the healthcare system to
deal with rising costs (Figure 7).

Figure 7: Healthcare Spending in Canada

Source: National Health Expenditure Database, Canadian Institute for Health Information

5
https://www.healthcaredive.com/news/virtual-care-moves-toward-the-frontline-of-provider-patient-relationships/516025/
6
https://www.infoway-inforoute.ca/en/what-we-do/news-events/webinars/3786-access-to-digital-health-services-2019-survey-of-canadians-summary-report/view-document
7
https://www.well.company/for-investors/news-releases/well-health-announces-digital-health-investment-and--strategic-partnership-with-phelixai
8
https://www.well.company/for-investors/news-releases/well-health-to-acquire-cycuras-services-division-to-protect-personal-health-information

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WELL Health Technologies Corp.

Across Canada, EMR services have been adopted by 79% of primary care physicians and 73% of
specialists as a key solution for centralizing patient records, scheduling, contact and general workflow
management. Some of the highest adoption rates have been in British Columbia (~90%) and Ontario
(~85%).
The leading platforms available in Canada include:
TELUS Health, which has grown through accretive M&A transactions involving KinLogix (2012), Wolfe
Medical Systems (2012), PS SUITE EMR (2013), Med Access (2014) and Nightingale Informatix
(2016). Telus has a footprint that is in the range of 20,000–25,000 users.
The second-largest platform is from Loblaw, which has been a leader in the space following its 2017
the acquisition of QHR. Loblaw currently has an estimated 15,000–17,000 physicians on its EMR
platform.
WELL’s OSCAR (Open Source Clinical Application Resource) based platform is the third-largest.
Third-party service has developed “forked” versions of this platform and used the initial source code
built custom solutions.
• More on OSCAR EMR: An EMR is like the “operating system” of a medical clinic. It can
help streamline medical practice and helps clinics manage patient data and medical
records more efficiently. OSCAR EMR is an open-source EMR software solution created
by McMaster University’s Department of Family Medicine. With features like patient
records, scheduling and electronic forms (eForms), OSCAR EMR was designed and is
supported by a passionate community of medical professionals, academic institutions
and developers who work to continuously enhance and improve the software. Notably,
when compared to other solutions in market, pricing of OSCAR-based solutions is much
more cost conscious than the incumbents. From a feature perspective, WELL is working
toward a very robust offering that can compete with incumbents and offer a similar level
of functionality.

Precedent Transactions & Potential of Telehealth

When looking at the Canadian landscape, WELL’s solutions bring several precedent transactions to
mind. We find no direct comparable in terms of companies offering the full suite of solutions that WELL
is providing in Canada. Several of its service offerings do however bring some comparables to mind.
As mentioned above, within EMR, QHR is a leading platform in Canada. It was acquired for $170
million and it was reported to have 7,700 healthcare providers on its network, representing about 20%
of the EMR market at that time. On the clinical side, we highlight TELUS Health’s purchase of Medisys
Health Group for $146 million in 2018. The clinics were high-end services that charged annual
membership fees and had a reported 800 health professionals.
Looking to the U.S. offers some insight into the changes in primary care that seem to be accelerating
due to COVID-19. One Medical (ONEM-US) is a U.S.-based healthcare provider that offers a full suite
of digital solutions to its patients and has a brick-and-mortar presence in major cities across the U.S.
An interesting statistic is that digital patient visits account for three times the number of in-office
appointments. The company has ~85 clinics across 13 main markets in the U.S. and partners with
companies to bring their services to employees. It has 455,000 members on its platform and works on
a subscription model. WELL reports over 600,000 patient visits annually in its clinics and more than
15-million registered patients in its digital portfolio.
Teledoc Health (TDOC-US) is a global provider of virtual care solutions in healthcare. It provides
several technologies to support healthcare and telemedicine from critical acute care (intensive care,
neurology, neonatal, etc.) to more standard everyday care (virtual primary care, chronic condition
management). The company delivers its solutions in over 175 countries.
While we recognize the private-payer system is quite different from Canada’s public system, we
believe the end user or patient will ultimately drive the service model. Recent surveys show while in-
person visits are important, telehealth visits represent a large portion of patient preference. The
following chart shows that virtual visits and telephone represent 39% of the modality preference for
Canadians. This is a meaningfully large gap from the 7% reported pre-COVID. We expect telemedicine
usage rates to increase over the next few years in Canada. This theme is the result of many secular
changes which have been accelerated by the pandemic.

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Figure 8: Preference of Modality in Next Healthcare Visit, June 2020

Source: Canada Health Infoway and Leger, 2020

Secular Tailwinds Accelerate Owing to COVID-19

COVID-induced lockdowns have sped up the trends in uptake of digital health solutions like telehealth,
among both patients (Figures 9 & 10) and physicians (Figure 11).
In its response to COVID, WELL Health deployed VirtualClinic+, a web-based telehealth platform that
connects patients to physicians through video, phone and secure messaging without needing to
download an app. In less than two months after launch, the company reported 1,000 patients per day.
Patients: Patients stand to benefit from advances in digital health that are being enabled by WELL’s
solutions for services they receive in the clinic (e.g., enhanced workflows, online scheduling) and
outside the clinic setting (e.g., telehealth, EMR access). Notably, patient use of telehealth has
extended across age groups, and with the elderly increasingly seeking ways to eliminate exposure to
high-risk settings for infection, we believe this trend will continue as the aging of the baby boomer
generation will extend the need for healthcare capacity. In addition to risk of infection, avoiding travel
to clinics is an additional benefit of telemedicine, that goes well beyond the length of a typical
appointment.

Figure 9: Coronavirus Impact: U.S. Adults Who Feel Comfortable Talking to Healthcare Practitioners* About a Health Concern
over the Phone or the Internet**, Nov. 2019 & April 2020 (% of respondents)

Source: November 2019 YouGov Survey (n=1,329); April 2020 YouGov Survey (n=1,274), eMarketer (link)

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Figure 10: Visits per 1,000 patients from March 15 to April 14 in 2019 vs. 2020, by Patient Age and Type of Visit

Source: Epic Health Research Network (link)

Physicians: When it comes to enabling solutions like online booking, EMR access and virtual care,
clinicians seeking to adapt to partly remote operations stand to benefit from enhanced workflows,
reduction in opex (fewer hours or days in office) and tax deductions (i.e. home office deductions),9 all
while reducing no-shows — which typically account for about one-quarter of appointments, between
3% and as high as 80%.10

Figure 11: Ways in Which the Coronavirus Pandemic Has Caused Disruption to U.S. Healthcare Practitioners*, March 2020
(% of respondents)

Source: March 2020 SSCG Media Group report (n=115) (link)

Capital Allocation & Profitability

WELL has grown its revenue rapidly from zero in 2017 to $9.1 million in 2018 and $32.8 million in
2019. Along with the rapid increase in revenue has been a rapid creation of shareholder value that has
led to significant share price appreciation. The company has shown a keen ability to utilize the capital
markets, taking advantage of its increasingly valuable currency.
On May 22, WELL closed an offering of for 6.5-million shares at $2.20 for gross proceeds of $14.3
million. Earlier, on March 12, it closed an $11.0-million convertible debt offering. The debt accrues
interest at 10% and has a conversion of $2.30/share. We are expecting management will force
conversion of this convertible debt offering within the coming months as the company’s share price has
exceeded the $2.80 conversion trigger price. The company has historically prioritized growth over
profitability; however, we have also seen the benefits of the company scaling its technology revenue to
help support margin expansion. Given the attractive economics of its SaaS revenue and its M&A
strategy, re-investment of cash flows into further acquistions should offer significant value creation. We
expect the company to start generating cash flow and remain adjusted EBITDA positive by year-end.

9
http://www.mdtax.ca/blog/physicians/making-home-office-deductions/
10
Xakellis GC, Jr, Bennett A. Improving clinic efficiency of a family medicine teaching clinic. Fam. Med. 2001;33:533–538.
Moore CG, Wilson-Witherspoon P, Probst JC. Time and money: effects of no-shows at a family practice residency clinic. Fam. Med. 2001;33:522–527.
Sharp DJ, Hamilton W. Non-attendance at general practices and outpatient clinics. BMJ. 2001;323:1081–1082.
Ferguson S, Kokesh J. Remote Otolaryngology Services: A Cost Comparison Study. 2005
Rust CT, Gallups NH, Clark WS, Jones DS, Wilcox WD. Patient appointment failures in pediatric resident continuity clinics. Arch. Pediatr. Adolesc. Med. 1995;149:693–695.
Johnson BJ, Mold JW, Pontious JM. Reduction and management of no-shows by family medicine residency practice exemplars. Ann. Fam. Med. 2007;5:534–539
Bennett KJ, Baxley EG. The effect of a carve-out advanced access scheduling system on no-show rates. Fam. Med. 2009;41:51–56.
Dreiher J, Goldbart A, Hershkovich J, Vardy DA, Cohen AD. Factors associated with non-attendance at pediatric allergy clinics. Pediatr. Allergy Immunol. 2008;19:559–563.
Cohen AD, Dreiher J, Vardy DA, Weitzman D. Nonattendance in a dermatology clinic--a large sample analysis. J Eur. Acad. Dermatol. Venereol. 2008;22:1178–1183.
Lehmann TN, Aebi A, Lehmann D, Balandraux OM, Stalder H. Missed appointments at a Swiss university outpatient clinic. Public Health. 2007;121:790–799.

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Strong Shareholder Backing & Management Alignment

Management holds ~17.5% of shares outstanding. All members of senior management have
participated in financings and have a portion of their salary coming from restricted stock units, to
incentivize performance. The CEO, Mr. Shahbazi, owns ~14% of the company, and has his full salary
paid in the form of restricted stock units. He has participated in several of WELL’s financings since its
inception, investing ~$5 million of his own capital. The company’s second-largest shareholder, Sir Li
Ka-shing, owns ~8% of WELL and also participated in several rounds of financing of WELL. Sir Li Ka-
shing is the 35th richest person in the world with a net worth estimated at $29 billion.11 He is known for
several early-stage tech investments such as Skype in 2005 (a year before eBay paid $2.5 billion for it)
and in Siri in 2009, which was bought by Apple a year later. He invested in Spotify and Waze about a
decade ago. Sir Li Ka-shing’s venture capital firm, Horizons Ventures, has also been an active investor
in WELL. We estimate Horizons Ventures’ ownership of ~5% of WELL.

Growth Strategy Poised to Strengthen Tech Stack & Help Gain Market Share
Management has highlighted the following initiatives it is focused on that should help the company
increase its addressable market and penetration.

Cross Selling Advanced Technological Solutions

Management has been clear in discussing its large cross-selling opportunity to help generate higher
monthly recurring revenue (MRR). One of the biggest challenges for clinics is ensuring compatibility of
its suite of solutions, and WELL’s integrated suite of offerings provides a lower barrier to entry for
clinics seeking to bolt-on capabilities like 24/7 online booking, virtual office assistant or telemedicine.
Having years of experience understanding how a clinic’s network of patients compares to others WELL
gains valuable insight that will be helpful for future acquisitions.

Building Strategic Partnerships to Expand Reach and Incentivize Growth

In addition to sourcing acquisition targets among the clinics where its technologies are utilized, WELL
builds partnerships with potential acquisition targets in the technology space, and includes
performance warrants to ensure return on its investment.

Pursuing Accretive M&A

Management is seeking acquisitions that can build upon its tech stack to help clinics bolt-on workflow-
enhancing solutions. Potential targets are clinics that are within its network and revenue-generating
technology companies with <$10 million in revenue. Deals are anticipated to be funded through a mix
of cash and stock. We outline WELL’s future M&A plans according to its business units:
1. WELL Clinic Network: Management has indicated that it is actively seeking to expand its clinic
network into Ontario, Canada’s most populous province. We expect WELL will announce
acquisitions in the metro-Toronto area before year-end. We also expect Montreal and
Calgary/Edmonton to be in the company’s future clinical expansion plans. WELL is following a
hybrid model of care where patients can receive in-clinic as well as virtual care. With the
company’s VirtualClinic+ able to service patients across the country, we believe it is only a matter
of time before WELL builds out a physical clinical network across the country’s four largest centres
to match its national telehealth service.
2. WELL EMR Group: WELL has already consolidated the majority of the OSCAR EMR service
providers in the country. There are only a handful of smaller vendors which the company could
acquire over the next year: OpenHealth, ClearMedica, Avaros, MPeer and Infomedic Systems. We
estimate these remaining vendors constitute ~$500,000 of combined ARR. Beyond OSCAR
service providers, we believe WELL could also acquire smaller non-OSCAR-based EMR
companies and migrate their physicians onto WELL’s OSCAR Pro version.
3. WELL Digital Health Apps: There are numerous digital health software companies in Canada
that could be potential targets for WELL’s future acquisition plans. Integration into OSCAR would
be a key component of any digital health acquisition or investment, hence the company’s future
OSCAR app marketplace is a key component of its digital health app acquisitions. Both Insig’s

11
https://www.bloomberg.com/billionaires/profiles/kashing-li/

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telehealth platform and Phelix.ai are integrated with WELL’s OSCAR Pro software platform. Given
that WELL has now achieved ~15% market share of the EMR market in Canada, we believe
Digital Health Apps will be a major focus area for the company in order to sell additional tools,
software and services into its EMR network of 1,900 clinics and 10,000 physicians across Canada,
thereby unlocking the potential of its EMR customer base.
4. Cybersecurity: We are expecting WELL will close its announced acquisition of Cycura’s services
division by the end of August/early September. We expect the company could announce
additional cybersecurity services or product-related acquisitions in 2021 to complement its Cycura
acquisition.
5. Expansion into the U.S.: The U.S. is a fertile opportunity for WELL with an abundance of
acquisition opportunities and obvious size benefits. We believe an acquisition or investment into a
U.S.-based digitial health technology company would be WELL’s preferred expansion route.

Financial Forecast
Revenue Forecast
On a consolidated basis, we see revenue increasing from $43.5 million in 2020 to $56.4 million in
2021. This represents 30% growth driven by modest single-digit organic growth in the clinic business,
~10% growth from the EMR assets, with the balance from M&A. Our forecast assumes the company
will acquire six additional clinics by mid-2022 and complete four additional technology acquistions. For
fiscal 2022, we forecast revenue of $68.5 million, representing growth of 22% year-over-year.

Figure 12: Revenue Forecast

Source: Company filings, Paradigm Capital Inc.

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Improving Profitability
Gross margin has seen improvement as an increasingly large portion of revenue is SaaS-based tech
revenue. The clinical side of the business is generally stable and we expect margins to remain in the
~30% range for that portion of the business. There is opportunity to expand clinical gross margins with
additional non-insured service offerings such as cosmetic treatments.

Figure 13: Gross Profit Forecast

Source: Company filings, Paradigm Capital Inc.

While WELL will continue to benefit from expanding margins, we expect the company to continue to
prioritize growth over profitablitiy in the near term. We forecast 2020 adjusted EBITDA of ($0.5 million),
$4.4 million in 2021, and $6.2 million in 2022. This represents a slight negative margin of -1.2% in
2020, positive 7.8% in 2021 and improving to 9.0% in 2022.

Figure 14: EBITDA Forecast

EBITDA($Mln) & EBITDA Margin (%)

$55.0 20.0%

15.0%
$45.0
9.0%
7.8% 10.0%
$35.0
5.0%
(1.2%)
$25.0 0.0%
(5.2%)
(5.0%)
$15.0
(11.2%)
$6.2 (10.0%)
$4.4
$5.0 ($1.7) ($0.5)
($1.2) (15.0%)
2020E

2021E

2022E
2018

2019

($5.0) (20.0%)

Adj. EBITDA Adj. EBITDA Margin

Source: Company filings, Paradigm Capital Inc.

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Healthy Balance Sheet

WELL ended Q1 with cash of $17.5 million and total debt of $12.2 million. Subsequent to quarter-end,
the company completed a bought deal financing where it offered 6,534,300 shares at $2.20/share, for
gross proceeds including overallotment totalling $14,375,460. We note that WELL does not invest in
any significant capital expenditure in its operating model.

Figure 15: Financial Summary

WELL Health Technologies ($CAD) 2019A 2020E y/y % 2021E y/y % 2022E y/y %
(December 31 fiscal year-end)
Revenue ($Mln) $32.8 $43.5 32.7% $56.4 29.5% $68.5 21.6%

Gross profit ($Mln) $11.0 $16.9 53.7% $22.4 32.8% $28.2 25.7%
Gross margin % 33.5% 38.8% 39.8% 41.1%
General & Administrative Expenses ($Mln) $12.0 $17.4 $18.4 $22.0
% of revenue 36.5% 40.0% 32.7% 32.1%

EBITDA ($4.4) ($4.1) ($0.3) $1.1

% of revenue -23.8% -21.5% -12.1% -8.9%

Adjusted EBITDA ($1.7) ($0.5) $4.4 $6.2

% of revenue -5.2% -1.2% 7.8% 9.0%
Earnings per Share ($) ($0.08) ($0.08) ($0.05) ($0.05)

Source: Company filings, Paradigm Capital Inc.

Valuation
We are initiating coverage of WELL Technologies with a Buy rating and $4.10 target price (rounded
from $4.09), representing a 5.0x 2022 estimated EV/Revenue multiple on its clinical assets and a
10.0x 2022 estimated EV/Revenue multiple on its technology assets. This represents a 7.6x
EV/Revenue multiple on consolidated revenue.
We credit the company’s strong execution on M&A and assume six clinical acquisitions and four
technology acquisitions in the coming two years. We highlight U.S. healthcare/tech names that are
trading in the teens. We note that should the mix of revenue tilt more toward higher-margin software
business, this could drive multiple expansion for the overall company.
Management has pointed to One Medical as a relevant comparable who operates a network of digitally
enabled primary care clinics across multiple states, by providing digital services and solutions like
online scheduling, virtual visits and EMR. It generates revenue through an annual membership fee as
well as from companies/employers, and insurers. The company has nearly 500,000 members across
~85 medical clinics throughout more than a dozen major markets in the U.S. and partners with
companies to bring their services to employees. WELL reports over 600,000 patient visits annually in
its clinics and over 15-million registered patients in its digital portfolio, thus we believe there is further
upside to our valuation, considering that this notable comparable trades at 11.6x EV/Revenue.

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Figure 16: WELL Health Technologies Comparables Analysis

Shares Revenue EBITDA
Share O/S EV ($) Millions EV/Revenue ($) Millions EV/EBITDA
Company Ticker Price (MM) (MM) 2019 2020 2021 C2019 C2020 C2021 C2019 C2020 C2021 C2019 C2020 C2021
Healthcare Services
Sienna Senior Living Inc. SIA 10.32 67 1,671 666 668 681 2.5x 2.5x 2.5x 138 130 137 12.1x 12.9x 12.2x
Extendicare Inc. EXE 5.65 89 956 1,128 1,073 1,103 0.8x 0.9x 0.9x 93 82 104 10.3x 11.6x 9.2x
NextGen Healthcare, Inc. NXGN 12.07 66 832 536 510 540 1.6x 1.6x 1.5x 90 85 99 9.2x 9.8x 8.4x
Medical Facilities Corporation DR 3.81 39 331 421 339 384 0.8x 1.0x 0.9x 88 61 69 3.8x 5.4x 4.8x
CRH Medical Corporation CRH 3.13 73 285 124 79 125 2.3x 3.6x 2.3x 39 15 34 7.3x 18.8x 8.5x
Viemed Healthcare, Inc. VMD 14.70 40 596 91 117 116 6.5x 5.1x 5.2x 20 35 31 30.3x 17.1x 19.1x
Nova Leap Health Corp. NLH 0.33 62 23 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Average 2.4x 2.4x 2.2x 12.2x 12.6x 10.4x
Average (excluding High/Low) 1.8x 2.2x 1.8x 9.7x 12.9x 9.6x
Healthcare Technology
Veeva Systems Inc. VEEV 259.53 159 39,856 1,091 1,390 1,660 36.5x 28.7x 24.0x 430 528 633 92.8x 75.4x 63.0x
Cerner Corporation CERN 73.41 318 24,430 5,688 5,613 5,939 4.3x 4.4x 4.1x 1,651 1,712 1,925 14.8x 14.3x 12.7x
Teladoc Health, Inc. TDOC 218.25 72 15,781 550 873 1,127 28.7x 18.1x 14.0x 30 79 140 521.3x 199.2x NM
1Life Healthcare, Inc. ONEM 30.56 35 4,924 275 303 425 17.9x 16.3x 11.6x (27) (85) (30) N/A N/A N/A
Inovalon Holdings, Inc. INOV 22.54 149 4,312 641 681 750 6.7x 6.3x 5.8x 213 226 253 20.3x 19.1x 17.1x
Allscripts Healthcare Solutions, Inc.
MDRX 7.43 164 2,199 1,779 1,692 1,756 1.2x 1.3x 1.3x 298 281 313 7.4x 7.8x 7.0x
Health Catalyst, Inc. HCAT 35.85 28 859 153 179 216 5.6x 4.8x 4.0x (29) (25) (15) N/A N/A N/A
Castlight Health, Inc. CSLT 1.10 148 134 143 133 132 0.9x 1.0x 1.0x (11) (10) (6) N/A N/A N/A
CloudMD Software & Services Inc. DOC 0.61 77 50 N/A 17 37 N/A 2.9x 1.4x N/A (2) 3 N/A N/A 17.5x
Vitalhub Corp. VHI 1.60 27 29 10 11 14 2.9x 2.7x 2.1x 2 1 3 15.7x 27.9x 10.1x
Average 11.6x 8.6x 6.9x 112.0x 57.3x 21.2x
Average (excluding High/Low) 9.6x 7.1x 5.5x 35.9x 34.2x 14.3x

Source: Company filings, FactSet, Paradigm Capital Inc.

Figure 17: Valuation Analysis

WELL Health Technologies NAV ($Mln., unless otherwise noted)

FY2020 FY2021 FY2022
Clinical Revenue 33.8 40.1 46.9
Multiple 6.0x 6.0x 6.0x
Value 203.0 240.4 281.4

Tech Revenue 9.7 16.3 21.6

Multiple 11.0x 11.0x 11.0x
Value 106.9 179.4 238.1

Enterprise Value 309.9 419.8 519.5

Net Debt 16.2 18.8 10.2
Minority interest 0.0 0.0 0.1
Equity Value 293.7 401.0 509.3

FD Shares Outstanding 123.0 124.7 124.7

NAV Per Share $2.39 $3.22 $4.09

Implied rev/multiple 7.1x 7.4x 7.6x

Source: Company filings, Paradigm Capital Inc.

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Risks
Reimbursement: Changes in government and reimbursement schemes are a significant source of
uncertainty.
Competing Technologies: From Microsoft to competing digital health companies, many are looking to
grow the breadth of integrated digital health solutions that can be bolted onto our existing healthcare
delivery mechanisms.
Economic Sensitivity: Deteriorating economic conditions could have an adverse effect on many
business areas, including technology spending.

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APPENDIX I: Management & Board of Directors

Management
Hamed Shahbazi — Chairman & CEO: Mr. Shahbazi has 20+ years of experience as a technology
focused operator. In 1997, he founded TIO Networks, a kiosk solution provider and transitioned it into
a multi-channel payment solution provider, specializing in bill payment and other financial services. In
July 2017, TIO Networks was acquired by PayPal for C$304 million. Over his career, Hamed has
gained extensive experience in strategic mergers, acquisitions and divestitures, both as an operator
(e.g., TIO) and board member (e.g., BBTV, WELL) with more than a dozen successful transactions. He
counts the CEO of EngHouse, Steve Sadler, as one of his mentors who shaped his vision for WELL as
an acquisition-focused growth vehicle.
Eva Fong — Chief Financial Officer: Ms. Fong has 20+ years of experience which includes Fortune
500 public company management, M&A, corporate strategy development, risk and compliance, and
finance and business-shared services programs. She has held senior leadership positions in various
high-tech sectors including PayPal, TIO Networks, SAP and 360networks where she led business
units and built best-in-class corporate culture. Eva is a Chartered Professional Accountant (CPA, CGA)
in Canada and holds a fellowship at the Association of Certified Chartered Accountant (FCCA) in the
U.K. She also holds a Bachelor’s Degree in Hospitality Management from Florida International
University.
Amir Javidan — Chief Operating Officer: Mr Javidan has 15+ years of experience in key,
technology-driven leadership roles in companies such as Avigilon Corporation, where he served as
Vice President of IT and Customer Service, TIO Networks, where he served as COO, and most
recently at PayPal. Amir oversees all aspects of clinic operations, including management of clinic
managers and staff, facilities, clinic vendor and clinic-shared services operations. He holds a Computer
Engineering degree from the University of British Columbia.
Arjun Kumar — Chief Information Officer: Mr Kumar has 10+ years of experience in healthcare
administration and technology operations. He co-founded KAI Innovations in 2012 and led the
company as CEO. Prior to this, he worked as a cardiac and ultrasound technician for over seven
years, and currently sits on McMaster University’s Board of Directors for OSCAR EMR. In 2017, KAI
won Canada Health Informatics Association’s Award for Innovation and Care Delivery, and in 2015,
won Start-Up of the Year from Canadian Business Magazine. He attended the University of Toronto,
the University of Waterloo, and Ryerson University for Health, Technology, and Business disciplines.
Dr. Michael Frankel – Chief Medical Officer: Dr. Frankel has practiced medicine for several
decades. He owns and operates a portfolio of primary healthcare facilities and continues to practice as
a physician. He has worked in the Pediatric Oncology departement at the B.C. Children’s Hospital.
Prior to moving to Canada in 1990, he completed his medical internship at Addington Hospital in
Durban, Couth Africa. He is a graduate of the University of the Witwatersarand in Jahannesburg,
South Africa.

Board of Directors
Mr. Shahbazi, the Chair, is joined by the following board members:
John Kim — Independent Director: Mr. Kim is a Toronto-based businessman and award-winning
Institutional investor for 20+ years with an extensive capital markets network. His investment focus has
included companies from a variety of sectors, including technology, healthcare and resources at
various stages of development, ranging from early start-ups to Fortune 1000 Companies. John has
both public and private company board experience and has participated in the WELL’s prior financings
with his own personal capital.
Ken Cawkell — Independent Director: Mr. Cawkell co-founded Cawkell Brodie LLP and has been a
member of the B.C. Bar Association for 30 years. For 25+ years, he has been involved in various
industries within public, private and venture capital sectors. He is also a founder of Neurodyn Life
Sciences Inc., a private biotech company focused on developing natural-based products to treat
Alzheimer’s and other neurodegenerative diseases.
Tara McCarville — Independent Director: Tara is Principal of Brighton Group, a health industries
solution firm. Previously, she was Partner and the National Health Industries Leader for PwC Canada

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and served as a board member with OntarioMD, Canada’s only certification body for EMR companies
from 2017 to 2019. Tara also previously held an executive role with Trillium Health Partners from 2013
to 2016 and as Principal/Practice leader with TELUS Health from 2011 to 2013 where she led a
number of important initiatives and strategies.
Tom Liston — Independent Director: Mr. Liston has extensive board experience. He sits on the
board of Mogo Finance Technology Inc. He served as a director for QHR Technologies Inc., which was
sold to Loblaw Companies Limited. Mr. Liston spent over 15 years as a top-ranked technology
research analyst for Yorkton Securities, Versant Partners and Cantor Fitzgerald in Canada. He is a
managing partner at Difference Capital Financial.

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APPENDIX II: Supplemental Figures

Figure 18: Revenue Multiples in 13 Subsectors of Health IT

Source: Healthcare Growth Partners, Semi-Annual Market Review January 2020

Figure 19: Post-Money Private HealthTech Companies ($550+ million)

Source: PitchBook, SVB Mid-year HealthTech Report

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Figure 20: Per-capita Health Expenditure

Source: Forbes, Organization for Economic Co-operation and Development, OECD Health Statistics

Figure 21: How Is Canadian Healthcare Funded?

Source: Effective Public Healthcare Panacea Project

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APPENDIX III: Financial Statements

Figure 22: Income Statement Summary

Model Sheet Currency : $C millions Q1-2019 Q2-2019 Q3-2019 Q4-2019 FY2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 FY2020 FY2021 FY2022
Income Statement - - - - - - - - - - - -
Revenue 7.4 7.4 8.2 9.8 32.8 10.2 9.9 10.7 12.7 43.5 56.4 68.5
Physicians fees - - - - - - - - - - - -
Medical supplies and other - - - - - - - - - - - -
Cost of operations 5.1 5.2 5.3 6.2 21.8 6.3 6.1 6.5 7.8 26.7 34.0 40.3
Gross profit 2.3 2.3 2.9 3.6 11.0 3.9 3.8 4.2 5.0 16.9 22.4 28.2
General and administrative 2.4 2.7 3.2 3.7 12.0 3.9 4.5 4.5 4.6 17.4 18.4 22.0
Depreciation and amortization 0.4 0.4 0.4 0.9 2.2 0.7 0.6 1.1 1.3 3.7 5.6 6.9
Stock-based compensation 0.7 0.5 1.0 0.7 2.9 0.6 0.6 0.7 0.8 2.7 3.5 4.2
Expenses 3.5 3.6 4.7 5.3 17.1 5.2 5.7 6.2 6.6 23.8 27.6 33.1
Income (loss) from operations (1.2) (1.4) (1.8) (1.7) (6.1) (1.3) (1.9) (2.0) (1.7) (6.9) (5.1) (4.9)
Goodwill impairment - - - - - - - - - - - -
Change in contingent consideration - - - - - - - - - - - -
Business investment loss - - - - - - - - - - - -
Interest income 0.0 0.0 0.1 0.1 0.2 0.1 - - - - - -
Interest expense (0.2) (0.3) (0.6) (0.4) (1.4) (0.5) (0.4) (0.2) (0.1) (1.2) (0.5) -
Time-based earn-out expense (0.1) (0.1) (0.1) (0.6) (0.9) (0.3) (0.2) (0.2) (0.2) (0.9) (0.8) (0.8)
Income tax expense - (0.1) (0.1) 0.1 (0.0) (0.1) (0.1) (0.1) (0.1) (0.4) (0.4) (0.4)
Other income 0.1 0.1 0.1 (0.1) 0.2 0.0 - - - - - -
Special warrants related expenses - - (2.5) 2.7 0.2 - - - - - - -
Net income (loss) from continuing operations (1.5) (1.7) (4.8) 0.2 (7.7939) (2.0144) (2.5) (2.6) (2.1) (9.3) (6.8) (6.1)
Net income (loss) from discontinued operations - - - - - - - - - - - -
Net income (loss) attributable to WELL Health Technologies Corp. (1.5) (1.7) (4.8) 0.2 (7.7939) (2.0144) (2.5) (2.6) (2.1) (9.3) (6.8) (6.1)
Net income (loss) attributable to NCI - - - 0.0 0.0 0.0 - - - - - -
Net income (loss) (1.5) (1.7) (4.8) 0.2 (7.8187) (2.0411) (2.5) (2.6) (2.1) (9.3) (6.8) (6.1)
- - - - - - - - - - - - -
EPS (0.02) (0.02) (0.05) 0.00 (0.08) (0.02) ($0.02) ($0.02) ($0.02) ($0.08) ($0.05) ($0.05)
- - - - - - - - - - - - -
Shares Outstanding - WAB 86.3 94.5 97.8 110.1 96.9 118.1 124.7 124.7 124.7 123.0 124.7 124.7
Shares Outstanding - WAD 86.3 94.5 97.8 110.1 96.9 118.1 124.7 124.7 124.7 123.0 124.7 124.7

EBITDA
Net income (loss) (1.5) (1.7) (4.8) 0.2 (7.8) (2.0) (2.5) (2.6) (2.1) (9.3) (6.8) (6.1)
Currency translation adjustment - - - - - - - - - - - -
Depreciation and amortization 0.4 0.4 0.4 0.9 2.2 0.7 0.6 1.1 1.3 3.7 5.6 6.9
Income tax - 0.1 0.1 (0.1) 0.0 0.1 0.1 0.1 0.1 0.4 0.4 0.4
Interest income (0.0) (0.0) (0.1) (0.1) (0.2) (0.1) - - - - - -
Interest expense 0.2 0.3 0.6 0.4 1.4 0.5 0.4 0.2 0.1 1.2 0.5 -
EBITDA (0.9) (1.0) (3.8) 1.3 (4.4) (0.9) (1.5) (1.2) (0.6) (4.1) (0.3) 1.1
Rent expense on finance leases (0.4) (0.4) (0.5) (0.4) (1.6) (0.5) - - - - - -
Stock-based compensation 0.7 0.5 1.0 0.7 2.9 0.6 0.6 0.7 0.8 2.7 3.5 4.2
Net loss from discontinued operations - - - - - - - - - - - -
Special warrants related expenses - - 2.5 (2.7) (0.2) - - - (0.2) - - -
Time-based earn-out expense 0.1 0.1 0.1 0.6 0.9 0.3 0.2 0.2 0.2 0.9 0.8 0.8
Transaction and restructuring costs expensed 0.1 0.2 0.2 0.2 0.7 0.1 - - - - 0.4 -
Adjusted EBITDA (0.3) (0.6) (0.5) (0.3) (1.7) (0.2) (0.6) (0.3) 0.2 (0.5) 4.4 6.2

Source: Company filings, Paradigm Capital Inc.

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Figure 23: Balance Sheet Summary

Model Sheet Currency : $C millions Q1-2019 Q2-2019 Q3-2019 Q4-2019 FY2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 FY2020 FY2021 FY2022
Balance Sheet
Current Assets
Cash and cash equivalents 3.4 6.7 19.4 15.6 15.6 17.5 21.5 12.8 9.8 9.8 4.7 10.2
Restricted cash 0.0 5.8 0.6 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Accounts and other receivables 1.3 1.3 1.6 2.1 2.1 1.9 2.7 2.9 3.5 3.5 4.5 5.4
Prepaid expenses - - - - - - - - - - - -
Deferred financing cost - - - - - - - - - - - -
Income tax asset - - - 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Lease receivable 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3
Other current asset 0.3 0.3 0.3 0.7 0.7 1.1 1.1 1.1 1.1 1.1 1.1 1.1
Inventory - - - - - - - - - - - -
Assets held for sale - - - - - - - - - - - -
Total Current Assets 5.4 14.5 22.4 18.9 18.9 21.0 25.7 17.2 14.8 14.8 10.7 17.2

Non-Current Assets
Financial assets at fair value through profit or loss 0.3 0.3 0.3 0.3 0.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3
Investment accounted for using equity method - - - - - 3.8 3.8 3.8 3.8 3.8 3.8 3.8
Property, plant, equipment 12.8 12.5 13.4 12.5 12.5 14.0 13.9 13.4 12.8 12.8 9.9 6.5
Lease receivable 2.3 2.2 2.2 1.8 1.8 1.7 1.7 1.7 1.7 1.7 1.7 1.7
Other non-current assets 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Goodwill 10.4 11.3 22.3 24.9 24.9 32.0 38.2 40.7 40.7 40.7 50.7 60.7
Investment - - - - - - - - - - - -
Total Non-Current Assets 26.0 26.5 38.4 39.6 39.6 54.1 60.2 62.1 61.5 61.5 68.7 75.3
Total Assets 31.4 40.9 60.8 58.5 58.5 75.1 85.9 79.3 76.3 76.3 79.4 92.4

Current Liabilities
Accounts payable and accrued liabilities 1.5 1.8 2.5 3.0 3.0 3.1 1.9 2.1 2.4 2.4 3.1 3.7
Deferred revenue 0.2 0.3 0.6 0.4 0.4 0.9 0.9 0.9 0.9 0.9 0.9 0.9
Current portion deferred acquisition costs 0.4 0.3 3.2 2.4 2.4 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Lease liability 2.1 2.2 2.3 1.5 1.5 1.7 1.7 1.7 1.7 1.7 1.7 1.7
Income tax payable - - 0.1 - - - - - - - - -
Special warrants - - 15.9 - - - - - - - - -
Other current liabilities 0.2 0.3 0.6 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.1 1.1
Contingent consideration - - - - - - - - - - - -
Current portion loans - - - - - - - - - - - -
Total Current Liabilities 4.4 4.9 25.3 8.4 8.4 8.7 7.5 7.6 8.0 8.0 8.7 9.2

Non-Current Liabilities
Deferred acquisition costs 0.4 0.3 0.4 0.4 0.4 0.8 0.8 0.8 0.8 0.8 0.8 0.8
Convertible debentures - 8.9 8.9 4.7 4.7 12.2 12.2 12.2 12.2 12.2 12.2 12.2
Lease liability 13.3 13.0 13.8 13.0 13.0 13.9 13.3 12.7 12.1 12.1 9.7 7.3
Other non-current liabilities 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1
Deferred tax liability - - - - - - - - - - - -
Loans - - - - - - - - - - - -
Total Non-Current liabilities 13.8 22.2 23.2 18.1 18.1 26.9 26.3 25.7 25.1 25.1 22.7 20.3
Total Liabilities 18.2 27.1 48.5 26.5 26.5 35.7 33.9 33.4 33.2 33.2 31.4 29.6

Shareholders' Equity
Share capital 22.0 23.1 25.3 45.4 45.4 53.8 66.5 61.3 58.9 58.9 62.4 77.2
Subscription receivable - - - - - - - - - - - -
Contributed surplus 1.9 3.2 4.4 3.7 3.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7
Accumulated other comprehensive income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Deficit (10.8) (12.5) (17.3) (17.1) (17.1) (19.2) (19.2) (19.2) (19.2) (19.2) (19.2) (19.2)
Total SE 13.2 13.8 12.3 32.0 32.0 39.3 52.1 46.9 44.5 44.5 48.0 62.8
NCI - - - 0.0 0.0 0.1 - - - - - -
Total Liabilities & SE 31.4 40.9 60.8 58.5 58.5 75.1 85.9 80.3 77.7 77.7 79.4 92.4

Source: Company filings, Paradigm Capital Inc.

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 INITIATION REPORT | July 30, 2020
WELL Health Technologies Corp.

Figure 24: Cash Flow Statement

Model Sheet Currency : $C millions Q1-2019 Q2-2019 Q3-2019 Q4-2019 FY2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 FY2020 FY2021 FY2022
Cash Flow Statement
CFO
Net income (loss) from continuing operations (1.5) (1.7) (4.8) 0.2 (7.8) (2.0) (2.5) (2.6) (2.1) (9.3) (6.8) (6.1)
Interest income (0.0) (0.0) (0.0) (0.0) (0.1) (0.0) - - - - - -
Interest expense 0.2 0.2 0.6 0.4 1.4 0.5 0.4 0.2 0.1 1.2 0.5 -
Depreciation and amortization 0.4 0.4 0.4 0.9 2.2 0.7 0.6 1.1 1.3 3.7 5.6 6.9
Stock-based compensation 0.7 0.5 1.0 0.7 2.9 0.6 0.6 0.6 0.6 2.5 - -
Unrealized foreign exchange - 0.0 (0.0) 0.0 0.0 (0.0) - - - - - -
Special warrants related expenses - - 2.5 (4.0) (1.6) - - - - - - -
CFO before WC (0.1) (0.6) (0.4) (1.8) (3.0) (0.3) (0.9) (0.6) (0.1) (2.0) (0.7) 0.7
Accounts and other receivables (0.1) (0.0) (0.2) (0.4) (0.7) 0.3 (0.8) (0.2) (0.6) - - -
Other current assets (0.2) 0.0 (0.1) (0.3) (0.5) (0.4) - - - - - -
Other non-current assets (0.0) (0.0) 0.0 (0.0) (0.0) (0.0) - - - - - -
Deferred financing - - - - - - - - - - - -
Accounts payable and accrued liabilities (0.2) 0.1 0.5 0.6 1.0 0.1 (1.2) 0.1 0.4 (0.6) 0.7 0.6
Deferred revenue 0.2 0.1 (0.1) (0.2) (0.1) 0.2 - - - - - -
Income tax payable - - 0.1 (0.1) - - - - - - - -
Income tax assets - - - (0.0) (0.0) (0.1) - - - - - -
Other current liabilities 0.0 0.1 (0.0) 0.6 0.6 (0.3) - - - - - -
Other non-current liabilities (0.0) 0.0 - (0.0) (0.0) 0.0 - - - - - -
Net CFO (0.4) (0.4) (0.1) (1.7) (2.6) (0.5) (2.9) (0.7) (0.2) (2.6) (0.1) 1.3
- - - - - - - - - - - - -
CFI - - - - - - - - - - - -
Release (increase) of cash held in escrow 0.1 (5.7) 5.2 0.4 - 0.0 - - - - - -
Transaction costs of investment under equity method - - - - - (0.0) - - - (0.0) - -
Acquisitions - - - - - (3.9) (6.2) (2.5) - (12.6) (10.0) (10.0)
Debt investment at fair value through profit for loss - - - - - (2.0) - - - (2.0) - -
Acquisition of NerdEMR, net of cash acquired (1.2) - - 0.0 (1.2) - (0.3) - - (0.3) - -
Acquisition of OSCARprn, net of cash acquired - (0.6) - (0.0) (0.6) - - - - - - -
Acquisition of OSCARwest, net of cash acquired - - - (0.7) (0.7) - - - - - - -
Acquisition of KAI, net of cash acquired - - (5.6) - (5.6) - - - - - - -
Acquisition of SleepWorks, net of cash acquired - - - (0.5) (0.5) - - - - - - -
Acquisition of Spring Medical - - - (0.3) (0.3) - - - - - - -
Acquisition of property and equipment (0.1) (0.1) (0.1) (0.2) (0.5) (0.5) (0.5) (0.5) (0.6) (2.2) (2.8) (3.4)
%rev - - - - - - 5% 5% 5% - - -
Acquisitions 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% - - - - - -
Divestiture - - - - - - - - - - - -
Deferred acquisition costs (0.1) (0.1) (0.1) (1.1) (1.4) (1.2) - - - - - -
Cash received on purchase of clinics - - - - - - - - - - - -
Acquisition of initial 6 clinics, net of cash acquired - - - - - - - - - - - -
Deposit for acquisition 13 clinics - - - - - - - - - - - -
Acquisition of 13 clinics, net of cash acquired - - - - - - - - - - - -
Investment into Circle Medical Technologies Inc. - - - - - - - - - - - -
Restricted cash - - - 0.1 0.1 - - - - - - -
Cash from discontinued operations - - - - - - - - - - - -
Net CFI (1.3) (6.4) (0.7) (2.3) (10.7) (7.6) (6.9) (3.0) (0.6) (17.1) (12.8) (13.4)

CFF
Private placements 2.7 - - - 2.7 - - - - - - -
Proceeds on issuance of common shares - - - - - - 14.4 - - 14.4 - 20.0
Share issue costs (0.0) - - (0.0) (0.0) - - - - - - -
Convertible debentures - 10.5 - - 10.5 11.0 - - - 11.0 - -
Debt issuance costs - (0.6) (0.0) (0.1) (0.8) (0.8) - - - (0.8) - -
Special warrants - - 15.0 - 15.0 - - - - - - -
Special warrants issue costs - - (1.1) 1.1 - - - - - - - -
Payment of interest on convertible debentures - - - (0.4) (0.4) (0.0) - - - (0.0) - -
Subscriptions receivable - - - - - - - - - - - -
Options exercised 0.1 - - - 0.1 0.0 - - - 0.0 - -
Agent warrants exercised 0.0 0.1 0.1 0.0 0.2 0.4 - - - 0.4 - -
Shareholder warrants exercised 0.4 0.5 - 0.0 1.0 - - - - - - -
Loan proceeds - - - - - - - - - - - -
Loan payments - - - - - - - - - - - -
Finance lease payments (0.5) (0.5) (0.6) (0.5) (2.1) (0.6) (0.6) (0.6) (0.6) (2.4) (2.4) (2.4)

Source: Company filings, Paradigm Capital Inc.

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 INITIATION REPORT | July 30, 2020
WELL Health Technologies Corp.

DISCLAIMER SECTION
Company Ticker Disclosures

WELL Health Technologies Corp. WELL-T 3

Note: Please refer to above table for applicable disclosure numbers.

1. The analyst has an ownership position in the subject company.
2. Paradigm Capital Inc. has assumed an underwriting liability for, and/or provided financial advice for consideration to the subject companies during the
past 12 months.
3. Paradigm Capital Inc. expects to receive or intends to seek compensation for investment banking services from the subject companies in the next 3
months.
4. Paradigm Capital Inc. has greater than a 1% ownership position in the subject company.
5. The analyst has a family relationship with an Officer/Director of subject company.
6. A partner, director, officer, employee or agent of Paradigm Capital Inc. is an officer or director of the issuer.
Paradigm’s disclosure policies and research distribution procedures can be found on our website at www.paradigmcap.com. Paradigm Capital Inc.
research is available on Bloomberg, CapitalIQ, FactSet and Thomson Reuters or at www.paradigmcap.com. Issued by Paradigm Capital Inc.
Research Rating System
Paradigm Capital Inc. uses the following rating recommendation guidelines in its research:
Number of Percentage
Recommendation Companies Breakdown
Buy 95 61% Buy – Expected returns of 20% or more over 12 months.
Spec. Buy 39 25% Speculative Buy - Expected returns of 20% or more over the next 12 months on high-risk development
or pre-revenue companies, such as junior mining and other early stage companies.
Hold 16 7% Hold - Expected returns of less than +/- 20% over the next 12 months. Includes companies Under Review.
Sell* 3 2% Sell - Expected returns of -20% or more over the next 12 months.

Total 153
*Includes companies with a "Tender" recommendation

About Paradigm Capital Inc.

Paradigm Capital Inc. (PCI) is a research-driven, independent, institutional equity investment dealer focused on sectors and companies that have
attractive long-term secular growth prospects. PCI’s research is available on our website at www.paradigmcap.com. Please speak to your Sales or
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The analyst (and associate) certify that the views expressed in this report accurately reflect their personal views about the subject securities or issuers.
No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations expressed in this research report.
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is determined by revenues generated directly or
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 INITIATION REPORT | July 30, 2020
WELL Health Technologies Corp.

RESEARCH SALES
Diversified Industries John Bellamy (Head of Sales) 416.361.6032
Corey Hammill (Head of Research) 416.361.0754 David Roland 416.216.6844
Alexandra Ricci 416.361.6056 Daniel Carthew 416-216-3583
Naomi Ebata, CFA 416.364.9764
Healthcare Adriaan Kruger 416.361.5987
Scott McAuley, PhD 416.361.9080 Wolfgang Rosner 514.447.8950
Sepehr Manochehry, PhD 416.361.6228
TRADING
Technology Peter Dunlop 416.368.6557
Daniel Rosenberg 416.361.6054 Tom George 416.360.3579
Matthew Green 416.364.7988
Energy Services
Jason Tucker 403.513.1031 OFFICES
Toronto
Metals, Mining & Agriculture 95 Wellington Street West, Suite 2101, PO Box 55
David Davidson 416.360.3462 Toronto, Ontario M5J 2N7
Jeff Woolley, CFA 416.361.9557 General Line 416.361.9892
Gordon Lawson 416.363.5476 Fax Line 416.361.6050
Jamie Carmichael 416.365.5297
Calgary
Gold and Precious Metals 110-9th Avenue SW
Don MacLean 416.360.3459 Suite 500
Don Blyth 416.360.3461 Calgary, Alberta T2P 0T1
Lauren McConnell 416.366.7776 General Line 403.513.1025
Fax (Research) 403.265.8721
Industrial Products
Marvin Wolff, CFA 416.361.3376 STOCK RATING SYSTEM
Buy: Expected returns of 20% or more over 12 months.
Quantitative & Technical Analysis
Speculative Buy: Expected returns of 20% or more over the next 12
Aazan Habib, CFA, CMT 778.237.2607 months on high-risk development or pre-revenue companies, such as
junior mining and other early stage companies.

Hold: Expected returns of less than 20% over the next 12 months.
Sell: Expected returns of -20% or more over the next 12 months. .

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