Subjects: EARNINGS, Conference Calls/ Webcasts
HEALWELL AI Reports Q3-2023 Financial Results
NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
- HEALWELL AI (formerly known as MCI Onehealth Technologies Inc.), achieved revenue of $2.8 million from continuing operations in Q3-2023.
- Subsequent to the end of the quarter, HEALWELL completed a strategic transaction with WELL Health Technologies Corp. (TSX: WELL) ("WELL"), resulting in the sale of a significant portion of HEALWELL's clinical assets to a wholly owned subsidiary of WELL and the re-capitalization of the Company. HEALWELL and WELL also entered into a strategic alliance agreement that positions HEALWELL to become a significant player in the multi-billion-dollar data sciences and preventative care industry.
- Subsequent to the quarter end, HEALWELL closed a bought deal private placement for gross proceeds of $8 million which, in combination with the gross proceeds raised on closing of the strategic transaction with WELL, brought in a combined $18 million of new capital into the Company.
- On October 18, 2023, HEALWELL announced the launch of WELL AI Decision Support, in conjunction with WELL, to assist healthcare providers within WELL's network of over 31,000 providers to help with early disease diagnosis and preventative health.
TORONTO, Nov. 15, 2023 (GLOBE NEWSWIRE) -- HEALWELL AI INC. ("HEALWELL" or the "Company") (TSX: AIDX), a data science and AI company focused on preventative care, announces it has filed its interim consolidated financial statements and management's discussion and analysis for Q3 2023, representing the three- and nine-months ended September 30, 2023. The reporting period covered by these financial results pre-dates the significant strategic transaction completed by the Company on October 1, 2023.
Dr. Alexander Dobranowski, HEALWELL's CEO commented, "Q3 was a transformational quarter for the Company in which we announced the strategic transaction with WELL Health Technologies Corp. (TSX: WELL) ("WELL"), which ultimately resulted in the Company rebranding itself as HEALWELL AI INC., and launching itself as a healthcare technology and data science company focused on preventative care, with a vision to improve healthcare and save lives through early identification and detection of disease."
Dr. Dobranowski further adds, "We are extremely excited about the future growth opportunity for the Company. HEALWELL leverages AI to empower patients and doctors to deliver increased access, reduce healthcare costs, and improve patient outcomes. In addition, HEALWELL has entered into a strategic alliance agreement with WELL that positions the Company for newfound growth and expansion opportunities as an emerging AI enabled healthcare technology company. With our recent fundraising, we are well capitalized with sufficient cash and reduced debt on our balance sheet to execute on our organic growth objectives and future acquisition opportunities."
A summary of the Company's financial and operational results is set out below, and more detailed information is contained in the condensed interim consolidated financial statements and related management discussion and analysis, which are available on the Company's SEDAR+ page at www.sedarplus.ca. Financial measures described as "Adjusted" in this news release are non-IFRS financial measures and may not be comparable to other similar measures disclosed by other companies. Please see Non-IFRS Financial Measures below for more information.
Third Quarter 2023 Financial Highlights
Significant financial highlights for the Company's continuing operations during the three months ended September 30, 2023 included:
- HEALWELL achieved quarterly revenue from continuing operations of $2,753,000 during Q3-2023, compared to $3,086,000 generated in the same period of 2022 (Q3-2022).
- HEALWELL achieved Adjusted Gross Profit(2) of $750,000 in Q3-2023 (Q3-2022: $1,085,000).
- HEALWELL achieved an Adjusted Gross Margin(2) percentage of 27.3% during Q3-2023 (Q3-2022: 35.2%).
- During Q3-2023, HEALWELL reported Adjusted EBITDA(1) loss of $2,571,000 (Q3-2022: negative $2,647,000).
- As at September 30, 2023, HEALWELL had $833,000 in cash (December 31, 2022: cash of $1,411,000).
Third Quarter 2023 Business and Operational Highlights
Significant business and operational highlights for the Company during the three months ended September 30, 2023 included:
- Strategic Transaction with WELL: On July 19, 2023, the Company entered into definitive agreements with WELL pursuant to which, among other things, the Company would (a) complete a convertible debenture unit financing to raise up to $10,000,000; (b) facilitate the sale of a significant portion of the clinical assets held by the Company's wholly-owned subsidiary, MCI Medical Clinics Inc., to a wholly-owned subsidiary of WELL; (c) execute on a debt resolution and acknowledgement agreement providing for the resolution of its outstanding secured credit facility with The First Canadian Wellness Co. Inc. ("FCW") in the aggregate principal amount of up to $8,500,000; (d) enter into a call option agreement among WELL and certain third parties which may result in a change in control of the Company; (e) enter into an investor rights agreement granting WELL board nomination rights, a pre-emptive right, registration and qualification rights; and (f) enter into a number of ancillary and related agreements with respect to the foregoing (the "Strategic Transaction"). During the reporting period, the Company dedicated significant time and resources to obtaining the necessary approvals to complete the Strategic Transaction, as well as negotiating and documenting the various ancillary and related documents and agreements required to implement the Strategic Transaction. The Strategic Transaction was completed on October 1, 2023, after the end of the reporting period. Additional details on the final terms of the Strategic Transaction are set out in the Company's press release dated October 2, 2023.
- Bridge Financing: On July 20, 2023, in connection with executing the definitive agreements for the Strategic Transaction, $3,000,000 of bridge financing was made available to the Company by WELL through a secured promissory note, to provide the Company with working capital to stabilize its business, continue to operate in the ordinary course and to accelerate the pursuit of its strategic plan during the interim period between signing the definitive agreements for and closing the Strategic Transaction. The note bore interest at a rate of prime plus 9%, which accrued and was subsequently repaid, along with all outstanding principal, on closing of the Strategic Transaction.
- Shareholder Meeting: On September 21, 2023, the Company held an annual general and special meeting of its shareholders for the purpose of (a) completing the standard business of the Company's annual general meeting for the financial year ended December 31, 2022, and (b) obtaining various approvals relating to the Strategic Transaction. The Company had previously obtained an order under the Canada Business Corporations Act extending the time for the Company to hold its annual general meeting for the financial year ended December 31, 2022 until September 30, 2023.
- Change of Name: On September 26, 2023 the Company amended its articles to change its name to "HEALWELL AI INC.".
- Information and Data Analytics: The Company continued to provide data insights as a service to customers in nine categories: rare disease; complex major medical/chronic; patient cohort building; clinical trial recruitment; synthetic health data and bespoke insights. Such services are targeted primarily at pharmaceutical companies, life science companies, precision medicine companies and top-tier university centers.
- Personnel: The Company continued to reduce staff in its head office to streamline the business and reduce costs in advance of narrowing its focus on data-driven healthcare technology and clinical research.
- Revenue Decline: Revenue from continuing operations decreased 11%, or $333,000, in the three months ended September 30, 2023 as compared to the same period last year. The decrease was due to the consolidation of five of the Company's medical clinics in Ontario in late 2022 and early 2023, the sale of its operations in Alberta to WELL on June 1, 2023, and classifying the clinics to be sold to WELL in the Strategic Transaction as discontinued operations.
Events Subsequent to September 30, 2023
Significant business and operational highlights for the Company subsequent to the three months ended September 30, 2023 included:
- Completion of Strategic Transaction: On October 2, 2023, the Company announced the closing of the Strategic Transaction with WELL, and re-launched as an AI and data science focused healthcare technology business. HEALWELL has significantly strengthened its balance sheet by: (1) completing a convertible debenture unit financing for gross proceeds of $10 million led by WELL and a syndicate of investors, and (2) discharging and fully satisfying its secured debt obligations of more than $11 million. HEALWELL and WELL also established a strategic alliance that positions HEALWELL to become a significant player in the multi-billion-dollar data sciences and preventative care industry. HEALWELL expanded its board and management team with several new additions including the appointment of Hamed Shahbazi, Chairman and CEO of WELL, to the board of HEALWELL.
- Bought Deal Financing: On October 17, 2023, the Company closed a bought deal private placement financing of 13,333,400 Class A subordinate voting shares of the Company (the "Subordinate Voting Shares") at a price of $0.60 per Subordinate Voting Share, for aggregate gross proceeds of $8,000,040.
- WELL AI Decision Support: On October 18, 2023, HEALWELL announced the launch of WELL AI Decision Support, in conjunction with WELL, to assist healthcare providers in improving early disease diagnosis and preventative health. WELL's goal is to make AI Enabled Decision Support a core offering to all physicians supported by its fully managed and SaaS platforms which collectively power more than 31,000 physicians and other care providers across Canada and the US.
- Doctorly Investment: On November 8, 2023, HEALWELL announced a strategic investment in doctorly GmbH ("doctorly"), an innovative provider of comprehensive practice management software based in Germany as part of doctorly's recently completed new round of funding. Concurrently, HEALWELL has also entered into a Strategic Alliance Agreement with doctorly which provides HEALWELL with access to doctorly's rapidly growing healthcare provider base and support for provider onboarding onto the HEALWELL clinical decision support platform. This partnership marks HEALWELL's inaugural foray into the European healthcare technology landscape.
Transfer of Non-Core Assets
The Company has successfully completed the transfer of its debt and equity interests in four healthcare and technology companies to FCW in satisfaction of the principal and accrued fees due to FCW under a loan facility it made available to the Company on May 18, 2023 in the principal amount of $1,500,000. Further to the Company's press release dated July 27, 2023, the transfer of the non-core assets was being completed in stages, with the last transfer having been completed on November 14, 2023. Please refer to the Company's press release dated July 27, 2023 and its amended and material change report dated August 31, 2023 for more information on the transfer of the non-core assets.
Mark Findlay appointed Senior Vice President of Sales and Marketing (Canada):
HEALWELL is also pleased to announce the strategic hiring of Mark Findlay, an experienced pharmaceutical executive, as the new Senior Vice President of Sales and Marketing for Canada. Mr. Findlay's appointment at the Khure Health division of HEALWELL underscores the Company's commitment to preventative medicine, AI-driven healthcare solutions and supporting healthcare providers in early disease diagnosis.
Mr. Findlay has 30 years of pharmaceutical leadership roles in sales, marketing, market access, and government affairs, managing franchises and national teams in multiple therapeutic areas, along with launching blockbuster medicines in Canada and the US. Most recently Mr. Findlay served at Astra Zeneca Canada as Vice President, CVRM (Cardiovascular, Renal and Metabolism) Portfolio, Established Brands and Primary Care. His career is marked by the consistent delivery of exceptional performance and the cultivation of excellence at AstraZeneca, GSK, Pharmacia and Searle.
Don Watts, President of Khure Health commented, "We are incredibly fortunate to welcome Mark Findlay, to the HEALWELL family. Mark's extensive experience and proven leadership in the pharmaceutical industry make him an invaluable addition to our executive team at Khure. We are confident that Mark will play a pivotal role in our journey to transform healthcare in Canada."
Webcast and Conference Call Details:
As previously announced, HEALWELL will be holding a conference call and simultaneous webcast to discuss its financial results on Wednesday, November 15, 2023 at 1:00 pm EST (10:00 am PST). The call will be hosted by Dr. Alexander Dobranowski, Chief Executive Officer, and Scott Nirenberski, Chief Financial Officer. Please dial-in 10 minutes prior to the start of the call.
Date: Wednesday, November 15, 2023
Time: 1:00 PM ET / 10 AM PT
For attendees who wish to join by webcast, the event can be accessed at: https://edge.media-server.com/mmc/p/w8xdq2mi
Attendees who wish to join by phone must visit the following link and pre-register: https://register.vevent.com/register/BIc0c1a6aaab034c1db8f1cd38a2a77869
Selected Financial Information
(in thousands of dollars, except percentages and per share amounts)
| Three months ended | Period over | Nine months ended | Period over | |||||||||||||||||||||
| September 30 | period Change | September 30 | period Change | |||||||||||||||||||||
| 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||
| ($ in thousands except percentages) | ||||||||||||||||||||||||
| Continuing operation | ||||||||||||||||||||||||
| Revenues | $ | 2,753 | $ | 3,086 | $ | (333 | ) | (11 | ) | $ | 8,960 | $ | 10,341 | $ | (1,381 | ) | (13 | ) | ||||||
| Cost of revenue | 2,161 | 2,159 | 2 | NM | 6,638 | 7,061 | (423 | ) | (6 | ) | ||||||||||||||
| Gross profit | 592 | 927 | (335 | ) | (36 | ) | 2,322 | 3,280 | (958 | ) | (29 | ) | ||||||||||||
| Research and development | 911 | 1,836 | (925 | ) | (50 | ) | 3,461 | 5,881 | (2,420 | ) | (41 | ) | ||||||||||||
| Sales and marketing | 320 | 157 | 163 | 104 | 961 | 966 | (5 | ) | (1 | ) | ||||||||||||||
| General and administrative | 4,811 | 3,660 | 1,151 | 31 | 11,278 | 9,721 | 1,557 | 16 | ||||||||||||||||
| Impairment of goodwill and intangibles | - | 200 | (200 | ) | NM | 7,629 | 200 | 7,429 | NM | |||||||||||||||
| 6,042 | 5,853 | 189 | 3 | 23,329 | 16,768 | 6,561 | 39 | |||||||||||||||||
| Net finance costs | 591 | 257 | 334 | 130 | 1,301 | 417 | 884 | 212 | ||||||||||||||||
| Share of comprehensive loss (income) from associate | - | 50 | (50 | ) | NM | - | 237 | (237 | ) | NM | ||||||||||||||
| Loss on settlement of shares-contingent consideration | - | - | - | NM | 677 | - | 677 | NM | ||||||||||||||||
| Impairment of investment in associate | - | - | - | NM | 2,180 | - | 2,180 | NM | ||||||||||||||||
| Changes in fair value of contingent consideration | 1,730 | 75 | 1,655 | NM | 1,693 | 233 | 1,460 | NM | ||||||||||||||||
| Changes in fair value of investments | - | - | - | NM | 134 | - | 134 | NM | ||||||||||||||||
| 2,321 | 382 | 1,939 | NM | 5,985 | 887 | 5,098 | NM | |||||||||||||||||
| Loss before taxes | (7,771 | ) | (5,308 | ) | (2,463 | ) | 46 | (26,992 | ) | (14,375 | ) | (12,617 | ) | 88 | ||||||||||
| Income taxes | (218 | ) | 3,512 | (3,730 | ) | (106 | ) | (1,118 | ) | 1,481 | (2,599 | ) | (175 | ) | ||||||||||
| Net loss-continuing operation | (7,553 | ) | (8,820 | ) | 1,267 | (14 | ) | (25,874 | ) | (15,856 | ) | (10,018 | ) | 63 | ||||||||||
| Net (income)/loss on discontinued operations, net of tax | 190 | 280 | (90 | ) | (32 | ) | (828 | ) | 1,689 | (2,517 | ) | (149 | ) | |||||||||||
| Net loss | (7,743 | ) | (9,100 | ) | 1,357 | (15 | ) | (25,046 | ) | (17,545 | ) | (7,501 | ) | 43 | ||||||||||
| Continuing operation | ||||||||||||||||||||||||
| Adjusted gross profit (1) | 750 | 1,085 | (335 | ) | (31 | ) | 2,797 | 3,755 | (958 | ) | (26 | ) | ||||||||||||
| Adjusted gross margin (1) | 27.3 | % | 35.2 | % | 31.2 | % | 36.3 | % | ||||||||||||||||
| Adjusted EBITDA (1) | (2,571 | ) | (2,647 | ) | 76 | (3 | ) | (6,966 | ) | (7,587 | ) | 621 | (8 | ) | ||||||||||
| Adjusted EBITDA margin (1) | (93.4 | %) | (85.8 | %) | (77.7 | %) | (73.4 | %) | ||||||||||||||||
| Discontinued operation | ||||||||||||||||||||||||
| Adjusted gross profit (1) | 1,457 | 2,743 | (1,286 | ) | (47 | ) | 6,063 | 8,569 | (2,506 | ) | (29 | ) | ||||||||||||
| Adjusted gross margin (1) | 27.8 | % | 28.9 | % | 28.9 | % | 29.5 | % | ||||||||||||||||
| Adjusted EBITDA (1) | (164 | ) | 87 | (251 | ) | (290 | ) | (284 | ) | 20 | (304 | ) | (1,497 | ) | ||||||||||
| Adjusted EBITDA margin (1) | (3.1 | %) | 0.9 | % | 1.4 | % | 0.07 | % | ||||||||||||||||
| Net income/(loss) attributable to Company shareholders | ||||||||||||||||||||||||
| - Continuing operation | $ | (7,553 | ) | $ | (8,820 | ) | $ | (25,874 | ) | $ | (15,856 | ) | ||||||||||||
| - Discontinued operation | (190 | ) | (280 | ) | 828 | (1,689 | ) | |||||||||||||||||
| $ | (7,743 | ) | $ | (9,100 | ) | $ | (25,046 | ) | $ | (17,545 | ) | |||||||||||||
| Weighted average number of | ||||||||||||||||||||||||
| Of Share outstanding: Basic and diluted | 53,869,773 | 50,075,202 | 50,090,760 | 50,075,202 | ||||||||||||||||||||
| Net income (loss) per share -Basic and diluted | ||||||||||||||||||||||||
| - Continuing operation | $ | (0.14 | ) | $ | (0.18 | ) | $ | (0.52 | ) | $ | (0.32 | ) | ||||||||||||
| - Discontinued operation | (0.004 | ) | (0.01 | ) | 0.02 | (0.03 | ) | |||||||||||||||||
| $ | (0.14 | ) | $ | (0.18 | ) | $ | (0.50 | ) | $ | (0.35 | ) | |||||||||||||
| Three months ended | Period over | Nine months ended | Period over | |||||||||||||||||||||
| September 30 | period Change | September 30 | period Change | |||||||||||||||||||||
| 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||||||||||
| ($ in thousands except percentages) | ||||||||||||||||||||||||
| Continuing operation | ||||||||||||||||||||||||
| Revenues | $ | 2,753 | $ | 3,086 | $ | (333 | ) | (11 | ) | $ | 8,960 | $ | 10,341 | $ | (1,381 | ) | (13 | ) | ||||||
| Cost of revenue | 2,161 | 2,159 | 2 | NM | 6,638 | 7,061 | (423 | ) | (6 | ) | ||||||||||||||
| Gross profit | 592 | 927 | (335 | ) | (36 | ) | 2,322 | 3,280 | (958 | ) | (29 | ) | ||||||||||||
| Research and development | 911 | 1,836 | (925 | ) | (50 | ) | 3,461 | 5,881 | (2,420 | ) | (41 | ) | ||||||||||||
| Sales and marketing | 320 | 157 | 163 | 104 | 961 | 966 | (5 | ) | (1 | ) | ||||||||||||||
| General and administrative | 4,811 | 3,660 | 1,151 | 31 | 11,278 | 9,721 | 1,557 | 16 | ||||||||||||||||
| Impairment of goodwill and intangibles | - | 200 | (200 | ) | NM | 7,629 | 200 | 7,429 | NM | |||||||||||||||
| 6,042 | 5,853 | 189 | 3 | 23,329 | 16,768 | 6,561 | 39 | |||||||||||||||||
| Net finance costs | 591 | 257 | 334 | 130 | 1,301 | 417 | 884 | 212 | ||||||||||||||||
| Share of comprehensive loss (income) from associate | - - | 50 | (50 | ) | NM | - | 237 | (237 | ) | NM | ||||||||||||||
| Loss on settlement of shares-contingent consideration | - | - | - | NM | 677 | - | 677 | NM | ||||||||||||||||
| Impairment of investment in associate | - | - | - | NM | 2,180 | - | 2,180 | NM | ||||||||||||||||
| Changes in fair value of contingent consideration | 1,730 | 75 | 1,655 | NM | 1,693 | 233 | 1,460 | NM | ||||||||||||||||
| Changes in fair value of investments | - | - | - | NM | 134 | - | 134 | NM | ||||||||||||||||
| 2,321 | 382 | 1,939 | NM | 5,985 | 887 | 5,098 | NM | |||||||||||||||||
| Loss before taxes | (7,771 | ) | (5,308 | ) | (2,463 | ) | 46 | (26,992 | ) | (14,375 | ) | (12,617 | ) | 88 | ||||||||||
| Income taxes | (218 | ) | 3,512 | (3,730 | ) | (106 | ) | (1,118 | ) | 1,481 | (2,599 | ) | (175 | ) | ||||||||||
| Net loss-continuing operation | (7,553 | ) | (8,820 | ) | 1,267 | (14 | ) | (25,874 | ) | (15,856 | ) | (10,018 | ) | 63 | ||||||||||
| Net (income)/loss on discontinued operations, net of tax | 190 | 280 | (90 | ) | (32 | ) | (828 | ) | 1,689 | (2,517 | ) | (149 | ) | |||||||||||
| Net loss | (7,743 | ) | (9,100 | ) | 1,357 | (15 | ) | (25,046 | ) | (17,545 | ) | (7,501 | ) | 43 | ||||||||||
| Continuing operation | ||||||||||||||||||||||||
| Adjusted gross profit (2) | 750 | 1,085 | (335 | ) | (31 | ) | 2,797 | 3,755 | (958 | ) | (26 | ) | ||||||||||||
| Adjusted gross margin (2) | 27.3 | % | 35.2 | % | 31.2 | % | 36.3 | % | ||||||||||||||||
| Adjusted EBITDA (1) | (2,571 | ) | (2,647 | ) | 76 | (3 | ) | (6,966 | ) | (7,587 | ) | 621 | (8 | ) | ||||||||||
| Adjusted EBITDA margin (1) | (93.4 | %) | (85.8 | %) | (77.7 | %) | (73.4 | %) | ||||||||||||||||
| Discontinued operation | ||||||||||||||||||||||||
| Adjusted gross profit (1) | 1,457 | 2,743 | (1,286 | ) | (47 | ) | 6,063 | 8,569 | (2,506 | ) | (29 | ) | ||||||||||||
| Adjusted gross margin (1) | 27.8 | % | 28.9 | % | 28.9 | % | 29.5 | % | ||||||||||||||||
| Adjusted EBITDA (1) | (164 | ) | 87 | (251 | ) | (290 | ) | (284 | ) | 20 | (304 | ) | (1,497 | ) | ||||||||||
| Adjusted EBITDA margin (1) | (3.1 | %) | 0.9 | % | 1.4 | % | 0.07 | % | ||||||||||||||||
| Net income/(loss) attributable to Company shareholders | ||||||||||||||||||||||||
| - Continuing operation | $ | (7,553 | ) | $ | (8,820 | ) | $ | (25,874 | ) | $ | (15,856 | ) | ||||||||||||
| - Discontinued operation | (190 | ) | (280 | ) | 828 | (1,689 | ) | |||||||||||||||||
| $ | (7,743 | ) | $ | (9,100 | ) | $ | (25,046 | ) | $ | (17,545 | ) | |||||||||||||
| Weighted average number of | ||||||||||||||||||||||||
| Of Share outstanding: Basic and diluted | 53,869,773 | 50,075,202 | 50,090,760 | 50,075,202 | ||||||||||||||||||||
| Net income (loss) per share -Basic and diluted | ||||||||||||||||||||||||
| - Continuing operation | $ | (0.14 | ) | $ | (0.18 | ) | $ | (0.52 | ) | $ | (0.32 | ) | ||||||||||||
| - Discontinued operation | (0.00 | ) | (0.01 | ) | 0.02 | (0.03 | ) | |||||||||||||||||
| $ | (0.14 | ) | $ | (0.18 | ) | $ | (0.50 | ) | $ | (0.35 | ) | |||||||||||||
(1), (2) Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA and Adjusted EBITDA Margin are non-IFRS measures.
Selected Statement of Financial Position Data
| September 30, 2023 | December 31, 2022 | |||
| $ in thousands | ||||
| Cash | 833 | 1,411 | ||
| Accounts receivable | 932 | 5,627 | ||
| Other assets | 1,686 | 1,493 | ||
| Assets classified as held for sale | 4,928 | - | ||
| Liabilities associated with assets classified as held for sale | (3,824 | ) | - | |
| Accounts payable and accrued liabilities | (7,438 | ) | (9,227 | ) |
| Bank loan | (1,340 | ) | (1,685 | ) |
| Lease liabilities | (5,324 | ) | (10,420 | ) |
| Other liabilities | (3,060 | ) | (130 | ) |
| Related party loan | (7,853 | ) | (5,315 | ) |
| Non-controlling interest redeemable liability | (1,305 | ) | (1,305 | ) |
| Liability for contingent consideration | (1,730 | ) | (1,637 | ) |
Non-IFRS Financial Measures
The terms Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit and Adjusted Gross Margin used in this document do not have any standardized meaning under IFRS, may not be comparable to similar financial measures disclosed by other companies and should not be considered a substitute for, or superior to, IFRS financial measures. Readers are advised to review the section entitled "Non-IFRS Financial Measures" in the Company's management discussion and analysis for the quarter ended September 30, 2023, available on the Company's SEDAR+ page at www.sedarplus.ca, for a detailed explanation of the composition of these measures and their uses.
(1) The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net income (loss) for the three-months ended September 30, 2023 and September 30, 2022:
| Three months ended | Nine months ended | ||||||||||||
| September 30 | September 30 | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| $ in thousands | |||||||||||||
| Total Revenue | |||||||||||||
| - Continuing operation | $ | 2,753 | $ | 3,086 | $ | 8,960 | $ | 10,341 | |||||
| - Discontinued operation | 5,248 | 9,501 | 20,919 | 29,080 | |||||||||
| $ | 8,001 | $ | 12,587 | $ | 29,879 | $ | 39,421 | ||||||
| Net (loss) income | |||||||||||||
| - Continuing operation | $ | (7,553 | ) | $ | (8,820 | ) | $ | (25,874 | ) | $ | (15,856 | ) | |
| - Discontinued operation | (190 | ) | (280 | ) | 828 | (1,689 | ) | ||||||
| $ | (7,743 | ) | $ | (9,100 | ) | $ | (25,046 | ) | $ | (17,545 | ) | ||
| Add back (deduct) | |||||||||||||
| Continuing operation | |||||||||||||
| Depreciation and amortization | 917 | 925 | 2,703 | 2,208 | |||||||||
| Net finance charges | 591 | 257 | 1,301 | 417 | |||||||||
| Share of comprehensive loss (income) from associate | - | 50 | - | 237 | |||||||||
| Loss on settlement of shares-contingent consideration | - | - | 677 | - | |||||||||
| Impairment of investment in associate | - | - | 2,180 | - | |||||||||
| Impairment of goodwill and intangibles | - | 200 | 7,629 | 200 | |||||||||
| Changes in fair value of contingent consideration | 1,730 | 75 | 1,693 | 233 | |||||||||
| Changes in fair value of investments | - | - | 134 | - | |||||||||
| Share-based payment expense | 1,398 | 1,089 | 2,518 | 3,224 | |||||||||
| Acquisition related expenses | 564 | 71 | 1,293 | 246 | |||||||||
| Expected (recovery) provision of credit losses | - | (6 | ) | (103 | ) | 23 | |||||||
| Income taxes recovery | (218 | ) | 3,512 | (1,118 | ) | 1,481 | |||||||
| Discontinued operation | |||||||||||||
| Depreciation and amortization | 2 | 482 | 674 | 1,669 | |||||||||
| Net finance charges | 24 | 74 | 139 | 227 | |||||||||
| Recovery of expected credit losses | - | - | (55 | ) | - | ||||||||
| Gain on disposal of subsidiary | - | - | (2,016 | ) | - | ||||||||
| Gain on subleases | - | (190 | ) | - | (187 | ) | |||||||
| Impairment charges | - | - | 146 | - | |||||||||
| Adjusted EBITDA | |||||||||||||
| - Continuing operation | $ | (2,571 | ) | $ | (2,647 | ) | $ | (6,966 | ) | $ | (7,587 | ) | |
| - Discontinued operation | (164 | ) | 86 | (284 | ) | 20 | |||||||
| Adjusted EBITDA Margin | |||||||||||||
| - Continuing operation | (93.4 | %) | (85.8 | %) | (77.8 | %) | (73.4 | %) | |||||
| - Discontinued operation | (3.1 | %) | 0.9 | % | (1.4 | %) | 0.07 | % | |||||
(2) The following table reconciles Adjusted Gross Profit and Adjusted Gross Margin to revenue and cost of sales for the three-months ended September 30, 2023 and September 30, 2022:
| Three months ended | Period over | Nine months ended | Period over | |||||||||||||
| September 30 | period Change | September 30 | period Change | |||||||||||||
| 2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||||||
| ($ in thousands except percentages) | ||||||||||||||||
| Revenue | ||||||||||||||||
| - Continuing operation | 2,753 | 3,086 | (333 | ) | (11 | %) | 8,960 | 10,341 | (1,381 | ) | (13 | %) | ||||
| - Discontinued operation | 5,248 | 9,501 | (4,253 | ) | (45 | %) | 20,919 | 29,080 | (8,161 | ) | (28 | %) | ||||
| Cost of revenue | ||||||||||||||||
| - Continuing operation | 2,161 | 2,159 | 2 | - | 6,638 | 7,061 | (423 | ) | (6 | %) | ||||||
| - Discontinued operation | 3,790 | 6,758 | (2,968 | ) | (44 | %) | 14,857 | 20,512 | (5,655 | ) | (28 | %) | ||||
| Less: | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| - Continuing operation | (158 | ) | (158 | ) | - | (475 | ) | (475 | ) | - | ||||||
| - Discontinued operation | - | - | - | - | - | - | ||||||||||
| 2,003 | 2,001 | 2 | - | 6,163 | 6,586 | (423 | ) | (6 | %) | |||||||
| 3,790 | 6,758 | (2,968 | ) | (44 | %) | 14,857 | 20,512 | (5,655 | ) | (28 | %) | |||||
| Continuing operation | ||||||||||||||||
| Adjusted gross profit | 750 | 1,085 | (335 | ) | (31 | %) | 2,797 | 3,755 | (958 | ) | (26 | %) | ||||
| Adjusted gross margin | 27.3 | % | 35.2 | % | 31.2 | % | 36.3 | % | ||||||||
| Discontinued operation | ||||||||||||||||
| Adjusted gross profit | 1,458 | 2,743 | (1,285 | ) | (47 | %) | 6,062 | 8,568 | (2,506 | ) | (29 | %) | ||||
| Adjusted gross margin | 27.8 | % | 28.9 | % | 28.9 | % | 29.5 | % | ||||||||
Alexander Dobranowski
Chief Executive Officer
HEALWELL AI Inc.
About HEALWELL
HEALWELL is a health care technology company focused on AI and data science for preventive care. Its mission is to improve health care and save lives through early identification and detection of disease. As a physician-led organization with a proven management team of experienced executives, HEALWELL is executing a strategy centered around developing and acquiring technology and clinical sciences capabilities that complement the company's road map. HEALWELL is publicly traded on the Toronto Stock Exchange under the symbol AIDX. To learn more about HEALWELL, please visit: https://healwell.ai/.
Forward Looking Statements
Certain statements in this press release, constitute "forward-looking information" and "forward looking statements" (collectively, "forward looking statements") within the meaning of applicable Canadian securities laws and are based on assumptions, expectations, estimates and projections as of the date of this press release. Forward-looking statements include statements with respect to the go-forward business of the Company following completion of the Strategic Transaction, the strategic alliance between the Company and WELL, the intention for the Company to white label new AI-enabled healthcare technologies, and the statements regarding the Company having sufficient working capital for future operations. The words "result", "launch", "vision", "improve", "grow", "leverage", "outcome", "position", "expand", "emerge", "facilitate", "execute", "obtain", "implement", "provide", "stabilize", "pursuit", "streamline", "reduce", "satisfy", "to become", "assist", "goal", "commitment", "intend", "generate", "accelerate", "continuing to", "potential", "future", "result in", "increasing", "anticipates", "deliver" or variations of such words and phrases or statements that certain future conditions, actions, events or results "will", "may", "could", "would", "should", "might" or "can", or negative versions thereof, "occur", "continue" or "be achieved", and other similar expressions, identify forward-looking statements. Forward-looking statements are necessarily based upon management's perceptions of historical trends, current conditions and expected future developments, as well as a number of specific factors and assumptions that, while considered reasonable by the Company as of the date of such statements, are outside of the Company's control and are inherently subject to significant business, economic and competitive uncertainties and contingencies which could result in the forward-looking statements ultimately being entirely or partially incorrect or untrue. Forward looking statements contained in this press release are based on various assumptions, including, but not limited to, the following: the Company's ability to maintain its relationships and to successfully implement its strategic alliance with WELL; the Company's future access to debt and equity financing; the Company's plans for future cost reduction; the availability of working capital and sources of liquidity; the Company's ability to achieve its growth and revenue strategies; the demand for the Company's products and fluctuations in future revenues; the availability of future business ventures, commercial arrangements and acquisition targets or opportunities and the Company's ability to consummate them and to effectively integrate future acquisition targets into its platform; the Company's ability to grow its customer base; the effects of competition in the industry; the requirement for increasingly innovative product solutions and service offerings; trends in customer growth; the stability of general economic and market conditions; currency exchange rates and interest rates; the Company's ability to comply with applicable laws and regulations; the Company's continued compliance with third party intellectual property rights; and that the risk factors noted below, collectively, do not have a material impact on the Company's business, operations, revenues and/or results. By their nature, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct, and that objectives, strategic goals and priorities will not be achieved.
Readers are encouraged to review the "Liquidity and Capital Resources" section of the Company's MD&A, together with Note 2(c) of the Company's condensed interim consolidated financial statements, for the period ended September 30, 2023, which indicate the existence of material uncertainties that cast significant doubt on the Company's ability to continue as a going concern. The Company's ability to continue as a going concern was, as at September 30, 2023, dependent on, among other things, its ability to meet its financing requirements on a continuing basis, to sell certain assets to generate short-term liquidity, to have access to financing and to generate positive operating results. The Company's ability to satisfy its financing requirements and ultimately achieve necessary levels of profitability and positive cash flows from operations, to raise additional funds, to sell assets and to improve operating results were and are dependent on a number of factors outside the Company's control, and while the Company has successfully sold a number of assets and raised significant financing since September 30, 2023, there can be no assurance that the Company will continue to be successful in these endeavors in the future.
Known and unknown risk factors, many of which are beyond the control of the Company, could cause the actual results of the Company to differ materially from the results, performance, achievements or developments expressed or implied by such forward-looking statements. Such risk factors include but are not limited to those factors which are discussed under the section entitled "Risk Factors" in the Company's annual information form dated March 31, 2023, which is available under the Company's SEDAR+ profile at www.sedarplus.ca. The risk factors are not intended to represent a complete list of the factors that could affect the Company and the reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management's expectations and plans relating to the future. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law. All of the forward-looking statements contained in this press release are qualified by these cautionary statements.
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