Good day, ladies and gentlemen. Welcome to the WELL Health Technologies Corp. Third Quarter Fiscal 2022 Financial Results Conference Call. My name is Sergio and I'll be your operator for this call. At this time, all participants are in a listen-only mode. We will conduct a question and answer session later in the call, which will be restricted to analysts only. Please note, this conference is being recorded. I'll now turn the call over to Pardeep Sangha, Vice President, Investor Relations. Mr. Sangha, you may begin.
Thank you, operator, and welcome everyone to WELL Health 2022 Fiscal Third Quarter Financial Results Conference Call for three months ended September 30, 2022. Joining me on the call today are Hamed Shahbazi, Chairman and CEO, and Eva Fong, the company's CFO. I trust that everyone has received a copy of our financial results press release that was issued earlier today. Portions of today's call, other than historical performance, include statements of forward-looking information within the meaning of applicable securities laws. These statements are made under the safe harbor provisions of those laws. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies.
Forward-looking statements may involve known and unknown risks, uncertainties, assumptions and other factors, many of which are outside of WELL's control and may cause the actual performance, results or achievements of WELL to differ materially from the anticipated results, performance or achievements implied by such forward-looking statements. These factors are further outlined in today's press release and in our management discussion and analysis. We provide forward-looking statements solely for the purpose of providing information about management's current expectations and plans relating to the future. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based, except if it's required by law.
We may use terms such as adjusted gross profit, adjusted gross margin, Adjusted EBITDA, shareholder EBITDA, adjusted net income and free cash flow on this conference call, which are all non-GAAP and non-IFRS measures. More information on how we define these terms, please refer to the definitions set out in today's press release and in our management discussion and analysis. The company believes that Adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations which the company can use to fund working capital requirements, service future interest and principal debt repayments, and fund future growth initiatives. Adjusted EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS. With that, let me turn the call over to Mr. Hamed Shahbazi, Chairman and CEO. Hamed.
Thank you, Pardeep, and good day, everyone. We hope that you're all keeping safe and healthy. We truly appreciate everyone for joining us today. Third quarter 2022 was an exceptional quarter for Well, achieving best ever results on both the revenue and Adjusted EBITDA lines without even being in our seasonally strongest quarter. These exemplary results once again driven by strong organic growth while maintaining robust operating margins. Some highlights for the quarter include the following. Well achieved 47% year-over-year revenue growth in the third quarter compared to third quarter in the prior year. Company's growth was driven by acquisitions made over the past year as well as solid year-over-year organic growth of approximately 18%. Well also achieved record patient engagements in the quarter with over 1.25 million combined omni-channel diagnostic and asynchronous patient interactions, representing approximately 5 million annual patient interactions.
This demonstrates our continued leadership position as the preeminent end-to-end healthcare company in Canada, while our U.S. businesses continue to exhibit industry-leading growth metrics. Our virtual services revenues were extremely strong this quarter, increasing 191% overall as compared to the previous year and 75% organically. Virtual services are now a, as a category, our largest line of business at 36% of total revenue, larger than CRH and also larger than our Canadian clinics business, both of which are also growing and performing very well. Virtual services growth was driven both by our provider services platform tool segment as well as our virtual patient services segment. As noted in our press release this morning, this includes exceptional growth in the U.S.-based businesses of Circle Medical and Wisp as well.
For the month of September, the combined annualized revenue run rate of Circle Medical and Wisp exceeded $100 million or over CAD 135 million. We achieved this milestone one quarter ahead of our previously announced goal of the end of 2022. Our outlook for the remainder of the year continues to be very positive. Hence, I can very confidently increase our guidance for the annual revenue to exceed CAD 565 million in 2022 compared to our previous guidance of annual revenue exceeding CAD 550 million. Important to note that this is the fourth consecutive quarter where WELL has beat and raised revenue guidance.
In addition, for the next year, I'm pleased to announce that we are expecting to achieve exit run rate revenue approaching CAD 700 million by the end of the year. That would be the end of 2023. The company continues to witness healthy growth across all its business segments, including both on and offline care channels, with minimal impacts due to recession, inflation, supply chain or other macroeconomic effects currently felt by companies in other industries and around the globe. Q3 2022 was a tremendous quarter for the company. Before Eva gets further into the details of the quarter results, I'll provide some background on the company for the benefit of new investors and listeners on this call. WELL provides care and support for the care providers themselves that serve patients. Our business model is very simple.
We aim to align ourselves with care providers and use our technology and operating capabilities to help them operate better patient services businesses. Due to our alignment and exposure to their success, when providers become more efficient and deliver better patient outcomes, WELL also wins. We have created a best-in-class digital platform with significant intellectual property that we call the Practitioner Enablement Platform. This platform aims to digitize, modernize, and support providers and their clinics. Close to one out of every four medical provider in Canada is in some way being supported by our platform. What is unique about WELL is that we are ourselves the biggest users of our own platform, as the vast majority of our own revenue is derived by our own patient services businesses. This is because we found that the best way to support providers is often to help them run their businesses.
When a provider turns to WELL for support, we provide a fully managed solution. This means we look after all aspects of their business, from front office, patient management, to management of all staff, to back office execution. What we're very good at is giving our providers back their time and allowing them to focus on the care. This is why we take care of the technology and the operation of their businesses. This formula has worked extremely well as providers have had a tough time with the growing number of distractions around them to run a business and provide care. This is why WELL is sometimes referred to as a physician support company. Over the past four years, we have grown both organically and inorganically into a category leader. To our knowledge, we are the category leaders in the following areas.
We're the largest owner/operator of outpatient medical clinics in Canada. We're one of the top three providers of telehealth services in Canada. To our knowledge, we are actually the only profitable telehealth provider in the country. We're one of the top three practice management service providers in Canada, including EMR or electronic medical record software. We are the leading provider of digital patient engagement services, which includes all aspects of connecting patients and doctors digitally. We are the only direct-to-consumer telemedicine offering that allows you to pick your own provider and revisit that provider in order to establish a relationship through our Tia Health service offering. We're the largest provider of revenue cycle and outsourced billing services for doctors in Canada. We're the largest provider of e-referral software services in Canada and currently dominate this business in the province of Ontario.
We operate Canada's only app marketplace for integrated EMR apps, referred to as apps.health. To our knowledge, we deliver more omni-channel patient visits than any other entity in Canada outside of the government. In the US, we are the leading provider of sedation services for colonoscopies in an ambulatory setting. Also in the US, we're one of the fastest-growing specialty telehealth businesses, focusing on areas such as mental health and women's health. WELL is a strongly diversified, fast-growing digital health and tech-enabled healthcare company delivering on a strong ESG platform and building societal value. WELL is a purpose-driven business that aims to transform the world for the better, one provider at a time. With that, I would like to now turn the call over to our CFO, Eva Fong, who will review the financials for the third quarter.
I will then come back and provide further commentary on some of our business units and of course, our future outlook. Eva.
Thank you, Hamed. I'm pleased to report that we had very strong results for the three months ended September 30, 2022. Our third quarter results were as follows. WELL achieved record quarterly revenue of CAD 145.8 million in Q3 2022, compared to revenue of CAD 99.3 million generated during Q3 of last year, an increase of 47% driven by acquisitions during the past year and organic growth. WELL achieved record adjusted gross profit of CAD 78.2 million in Q3 2022, compared to adjusted gross profit of CAD 50 million in Q3 of last year, representing an increase of 56%. WELL achieved adjusted gross margin percentage of 53.6% during Q3 2022, compared to adjusted gross margin percentage of 50.3% in Q3 2021.
The increase in adjusted gross margin percentage is driven by the increase in higher margin virtual services revenue. Adjusted EBITDA was CAD 27.5 million for Q3 2022, compared to Adjusted EBITDA of CAD 22.3 million in Q3 of last year. Adjusted EBITDA was positively impacted in the quarter by higher revenue and healthy EBITDA margins in the company's omni-channel patient services and virtual services businesses. Adjusted EBITDA margin was 18.8% in the third quarter. Adjusted EBITDA attributable to WELL shareholders was CAD 20.2 million for Q3 2022, compared to adjusted EBITDA attributable to WELL shareholders of CAD 16.4 million in Q3 of last year. Adjusted net income was CAD 14.8 million or CAD 0.07 per share in Q3 2022, compared to adjusted net income of CAD 9.8 million or CAD 0.05 per share in Q3 of last year.
In comparison to Q2 2022, adjusted net income declined from CAD 17.5 million, mainly due to higher tax expenses. Free cash flow attributable to WELL shareholders was CAD 11.4 million in Q3 2022, as defined by shareholder Adjusted EBITDA minus cash taxes, minus cash interest costs, and minus CapEx. Free cash flow was lower than Q2 2022, due mainly to timing of cash tax refund and payment between the quarters, higher interest expenses and higher CapEx in Q3 2022. In terms of our segmented reporting, primary care revenues, which includes our primary care clinics, allied health and executive health businesses, increased 24% to CAD 16.6 million in Q3 2022, compared to CAD 13.4 million in Q3 of last year.
Third quarter is generally a weaker quarter for our primary care business due to seasonality in the summer months when doctors take vacation and there tends to be fewer cold, flu and other ailments. However, our primary care revenues were positively impacted by two months contribution from the INLIV acquisition. In Q3 2022, CRH revenue increased 4% to CAD 50.8 million, compared to CAD 48.7 million in Q3 of last year. CRH completed 121,655 anesthesia cases and sold 2,068 O'Regan units in the third quarter. Both anesthesia cases and sales of O'Regan units declined from the second quarter of 2022 due to the impact of Hurricane Ian, as well as a planned EMR cut-over project with one of the company's joint venture partners.
Despite the lower number of anesthesia cases and O'Regan unit sales, CRH achieved record revenue in the third quarter due to the positive currency exchange impact of the strengthening US dollar and an increase in pricing of their O'Regan product earlier this year. We're pleased to report that our clinic staff remained safe during the natural disaster and the clinics are once again functioning as normal. CRH's core business is performing as expected with strong caseloads and stable per unit economics. In Q3 2022, MyHealth achieved revenue of CAD 26.1 million, an increase of 36% as compared to CAD 19.2 million in Q3 of last year. The strong year-over-year growth is due to the MyHealth acquisition being completed during Q3 of last year, resulting in only partial revenues recognized from the acquisition in the quarter.
On a sequential quarter-over-quarter basis, MyHealth's revenue increased 1% compared to CAD 25.8 million in Q2 2022. Normally, Q3 would be slightly down from Q2 due to seasonality in MyHealth's business. This quarter, MyHealth benefited from a one-time incremental revenue payment related to billing adjustments, plus MyHealth has resolved some of the staff shortages it was witnessing in the prior quarter, leading to higher billable time for some diagnostic procedures. Virtual Services revenues increased 191% to CAD 52.2 million in Q3 2022, compared to CAD 18 million in Q3 2021. On a sequential quarter-over-quarter basis, Virtual Services revenue increased by 10% when compared to CAD 47.5 million in Q2 2022. Virtual Services revenue growth was driven by the exceptional growth in the U.S.-based businesses of Circle Medical and Wisp.
Virtual Services has now become WELL's largest business unit by revenue, accounting for 36% of total revenue in Q3 2022. WELL ended Q3 2022 with a solid balance sheet. As of September 30th, 2022, WELL had cash and cash equivalents of CAD 52.4 million. WELL continues to be in good standing and fully compliant with all covenants related with its two credit lines, JP Morgan in the United States and Royal Bank in Canada. During the quarter, we paid down $8.4 million US of the JP Morgan line in the US to arrive at a balance of $140.7 million US dollar as of the end of the quarter. In Canada, we paid down CAD 1.8 million to arrive at a balance of CAD 70.9 million.
Keep in mind that US dollar strengthened from an average of 1.29 to 1.37, and as such, due to the higher exchange rate, the total value of our debt as of September thirtieth was approximately CAD 264 million, which is roughly the same overall debt level as the previous quarter. In terms of our share capitalization, as of November ninth, WELL had 246,914,006 fully diluted securities issued and outstanding. WELL also has substantially increased its revenue and EBITDA on a per share basis, indicating that the company's capital allocation and organic growth program is delivering real value to shareholders.
For instance, WELL's revenue per share went from CAD 0.49 per share in Q3 2021 to CAD 0.64 per share in Q3 2022 on an undiluted basis. Meanwhile, Adjusted EBITDA attributable to WELL shareholders per share increased from CAD 0.08 per share in Q3 2021 to CAD 0.09 per share in Q3 2022, reflecting an 11% increase in this all-important metric. Lastly, I will provide an update on our M&A activity during the third quarter. In the first half of the year in 2022, our M&A program slowed down considerably as compared to last year due to the volatility in the capital markets, which caused public and private valuations to drop. Now that valuations have settled, we are finding outstanding opportunities to ramp up our M&A program again, but mainly to focus on smaller clinical assets.
In the third quarter, we completed the acquisition of INLIV and Grand Canyon Anesthesia, and announced the acquisition of certain assets from CloudMD. On August 1, 2022, the company completed the asset purchase agreement to acquire the assets of INLIV Inc., for which we paid approximately CAD 1.6 million in cash after adjusting for deferred revenue. For the twelve months ended April 30, INLIV had revenues of approximately CAD 7.3 million with double-digit Adjusted EBITDA margins. INLIV has over 1,000 customers and over 80% of its revenues are from recurring membership fees. On September 26, 2022, CRH completed the acquisition of Grand Canyon Anesthesia or GCA. This acquisition marks CRH's entry into its 18th state of service.
GCA was purchased for a net of $6.5 million after adjusting for working capital, and it is expected to generate more than $16 million in annual revenue and $2 million in shareholder EBITDA. Subsequent to the end of the third quarter, on November first, the company completed the acquisition of CloudMD's Cloud Practice entity, which includes Juno EMR and ClinicAid billing software applications, as well as three primary clinics located in the province of British Columbia for total consideration of approximately CAD 5.7 million, while contributing more than CAD 9 million in top-line revenues with positive adjusted EBITDA. In addition, the company completed one divestiture in the third quarter. On September first, CRH completed the sale of its 55% stake in West Florida Anesthesia Associates for $12.4 million.
The transaction includes a five year management services agreement, meaning CRH will continue to provide services to these ASCs for the next 5 years for a multimillion-dollar sum. CRH originally purchased its 55% stake back in 2017, and since then, its share of the EBITDA has been approximately $5.1 million. When combined with the sale price, this provides a $3.5 million net positive, not including the five year management contract. When combined with capital allocations made in the same quarter, we believe CRH continues to demonstrate compelling value creation opportunities within its portfolio. That is my financial update, and I now turn the call back over to Hamed.
Thank you, Eva. WELL is a unique company with significant IP driving powerful technology that is industry-leading and has created compelling and relevant links with healthcare providers all over the country. This connectivity allows us to become their prime option when they no longer want to run their own business and instead want to lean on a professional operator. Given recent times where there are challenges with inflation, shortages of healthcare workers and other issues, WELL is seeing dramatically increased relevancy, which is translating into significant growth and interest from care providers who want to join its network. WELL is the largest network of clinics in Canada, which includes over 125 clinics being operated at approximately 80 physical facilities consisting of primary care, allied health, executive health, and diagnostic clinics.
As we've described before on our conference calls, WELL strongly believes in the benefits of an integrated health offering that is bringing together a diverse multidisciplinary offering of providers in the same setting. This benefits both patients and providers. As such, many of these physical facilities have multiple clinics operating in the same location. For example, we could have a primary care and allied health clinic operating out of the same location, or we could have a cardiology clinic and a diagnostic clinic operating out of one MyHealth facility. At over 125 unique clinics across Canada, we own and operate the largest clinic network in the country by a wide margin.
WELL's current clinic M&A pipeline includes five signed LOIs, MOUs, well over 12 additional qualified leads nearing the LOI or MOU phase, and over 100+ early-stage leads as we continue to comb through our proprietary relationships. These transactions continue to be highly accretive in nature as we have witnessed multiple compression evidenced by our recently completed clinic deals. In the United States, WELL continues to expand its clinical presence with anesthesia services now being offered in 126 ASCs or ambulatory surgery centers and GI clinics across 18 states. In addition, the company operates two primary care clinics and six co-working spaces under the Circle Medical brand and three banding clinics providing hemorrhoid treatments using the CRH O'Regan system. I'd like to now provide some commentary on the recent announcements affecting our clinics and the doctors of BC.
As some of you may be aware, the Doctors of BC have approved a new three-year Physician Master Agreement with the province of British Columbia. This new agreement provides for a new payment model, which provides a compelling alternative to the fee-for-service model and instead considers additional factors such as the time the doctor spends with the patient and the number of total patients a doctor supports through their office. We are very supportive of the BC government's proposition of a new payment model to retain family doctors and attract new ones. The new model is expected to be available in February of 2023. Family physicians can choose to continue with the current fee-for-service model or opt for the new one. Please keep in mind that doctors who choose to remain and stay focused on a fee-for-service model will also receive increases in fees.
We anticipate overall government funding to increase by approximately 13%-15% for doctors who choose to opt into the new program. Due to our alignment with BC doctors and the fact that we share revenues with them and support their businesses, we expect the new Physician Master Agreement to have a positive impact to WELL Health, not only in terms of top-line revenue contribution, but more importantly, it will assist us in recruiting and retaining doctors to serve patients. We're currently in the process of evaluating the specific impact as some doctors may choose to remain with the current fee-for-service model. We expect to provide more details on this topic in the new year. Now I'd like to talk a little bit about our outlook for the rest of the year and for 2023.
We're very pleased to report that all our business units are executing very well. Otherwise, it would just not be possible to continually beat and raise as we have been doing for the last several quarters. While the outlook for the remainder of 2022 and into 2023 remains strong and resilient, the company's performance is very positive across all of its business units and for the entire company. The cash flows generated by the company will continue to be reinvested in the business and allocated in a disciplined manner, which may come in the form of further acquisitions, share repurchases, debt repayments or to accelerate organic growth.
As a result of WELL's strong organic growth profile, as noted earlier, the company is increasing its guidance for 2022 annual revenue to exceed CAD 565 million from the previous guidance of exceeding CAD 550 million. Furthermore, WELL expects to generate Adjusted EBITDA of over CAD 100 million in 2022 or approximately 18% Adjusted EBITDA margin compared to our previous guidance for Adjusted EBITDA of approximately CAD 100 million in 2022. As you can see, we're increasing our revenue guidance at a higher rate than our Adjusted EBITDA guidance. There are multiple reasons for that. One, our Circle Medical and Wisp businesses have significantly contributed to the increase in revenue guidance. These businesses are experiencing tremendous revenue growth, and although their contribution to EBITDA is increasing, they are not really designed yet to be significant contributors to Adjusted EBITDA.
Two, in addition, we want to continue to responsibly reinvest in our business units to drive organic growth. Three, furthermore, we're also experiencing some inflationary cost pressures and wage increases. These cost increases are prevalent in all industries today. However, we continue to implement cost savings initiatives and integration across our acquisitions and business units and taking advantage of our shared services infrastructure in order to offset some of these cost increases. We expect our strong organic growth profile to continue into next year, giving us confidence in providing our expectation of approaching CAD 700 million in exit run rate revenue by the end of 2023. This is mainly because or based on our organic growth and a light amount of M&A activity.
In fact, we see a fairly clear line of sight to CAD 1 billion in revenues within three years as we continue our organic growth and highly accretive clinical tuck-in program. As a rule of thumb, the company aims to have the sum of its Adjusted EBITDA margin percentage plus its organic growth percentage to exceed 30 in 2022. This is sometimes referred to as a rule of thirty. For instance, in Q3, we exceeded the rule of thirty with organic growth rate of approximately 18% and the Adjusted EBITDA margin of 18%. The sum of these two percentages is 36%. We introduced our guidance of rule of thirty about one year ago in Q3 2021, as we believe our ability to consistently deliver results is the key to delivering shareholder value.
Looking back, WELL has exceeded our guidance and has averaged a Rule of 36 since Q3 2021. We're very proud of this, and as management, we continue to be focused on generally being in line with the Rule of 30 for the foreseeable future. I'll now provide some commentary on the various business units, starting with the Canadian Clinics business unit. Last quarter, WELL announced the formation of a new legal entity called WELL Health Clinics, which includes the prior company's primary care, allied health and MyHealth specialized diagnostic services, but does not include WELL's tiahealth.com service. WELL's objective is to continue to grow its Canadian Clinics business unit, both organically and inorganically, and continue to demonstrate market leadership as the country's first pan-Canadian clinical network with a highly integrated network of tech-enabled outpatient healthcare clinics across the country.
For the fourth quarter, we're expecting very strong record results from the Canadian Clinics business unit, driven by our strong organic growth and business execution, as well as the recent combination and contribution of INLIV and the clinics from CloudMD. We have a robust pipeline of M&A opportunities in this area at attractive valuations due to the present macroeconomic environment, and we are excited about our growth. More to come. Stay tuned. Now an update on our CRH business unit. As covered by Eva, we're very pleased with CRH's results so far in 2022. CRH continues to benefit from post-COVID pent-up demand for endoscopic procedures and our team's excellent execution in being able to support that elevated demand. Furthermore, CRH continues to execute by unlocking the value of its O'Regan and Hemorrhoid Banding device.
This intellectual property is very key and core to creating a clinical offering that leverages the platform. We have five banding clinics operating in Canada and three banding clinics operating in the United States, with another two banding clinics expected to go live in Q4 in the United States. Based on its performance thus far in the quarter, we're expecting Q4 to be the seasonally best quarter for the company, with increasing volumes, and as such, CRH is on track to achieve record revenue and EBITDA in Q4 of 2022. An update on our virtual services segment, our largest. Virtual services is primarily comprised of two components, our provider solutions platform services and the company's cross-border telehealth offerings.
The company's new provider solutions business unit, announced earlier this year, combines the previous WELL EMR Group, billing and revenue cycle management, and several digital application businesses into one single practitioner enablement platform. This consolidation is designed to simplify the relationship healthcare providers have with WELL and better promote the breadth and depth of WELL's practitioner enablement platform. In the fourth quarter, we acquired Cloud Practice from CloudMD. Cloud Practice is a medical software application company with products including Juno EMR, a cloud-based EMR solution based on OSCAR, the acronym that stands for Open Source Clinical Application Resource, and ClinicAid, a medical billing software used by healthcare practitioners who don't need access to a full EMR. Outside of WELL, who is the largest provider of OSCAR EMR products and services, Juno EMR represented the largest remaining asset and market share available in the OSCAR-based EMR industry.
Both Juno and ClinicAid represent WELL's entrance into the Alberta and Saskatchewan markets for its EMR and medical billing lines of business. Both assets will be integrated into WELL's provider solutions business unit. WELL's US-based virtual patient services businesses, which include Circle Medical and Wisp, continue to demonstrate robust growth in Q3. Circle Medical's year-over-year growth in Q3 was driven by patient visits increasing by almost 200%. The number of practitioners working at Circle Medical in Q3 increased by 76% over the same period. Similarly, Wisp's growth in Q3 was driven by 83% year-over-year increase in asynchronous patient co-consultations. In addition to posting solid top-line growth numbers, Circle Medical and Wisp also individually achieved positive and growing Adjusted EBITDA in Q3. Overall, we're very pleased with the results in Q3 and look forward to delivering even stronger results in the fourth quarter.
In closing, I wanna thank you all for joining us on this call today and thank our shareholders and investors for their continued support. The capital markets have been very supportive of our vision and have provided us with the funding needed to pursue our goals. We hope you're proud of your company. I'd also like to thank WELL's senior management team and all our employees and contractors for their tremendous effort. In particular, I'd like to thank our team of healthcare practitioners and frontline workers who continue to keep our clinics open and provide unbelievable patient care. They remind us why we're here every single day, and we're here to support them. With that, operator, we'd be pleased to take questions.
Thank you. Ladies and gentlemen, we now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be posed in the order they are received. Should you wish to withdraw from the polling process, please press star followed by the number two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question. First question comes from Scott Fletcher from CIBC. Please go ahead.
Hi. Good afternoon, and Ben, thanks for taking the question. I wanted to dig in a little bit on the divestiture in the quarter. Could you just give us some of the logic behind why that happened? Then I did miss some of the numbers, so if you could go back over sort of what the contribution was and maybe what you think that the MSA will retain of the revenue. Thanks.
Sure thing. I'll kind of speak to it at a higher level first. You know, we see opportunities in our CRH portfolio, sometimes for an opportunity to kind of divest it at higher rates and reinvest, and that's kinda what we did this past quarter. We demonstrated that we were able to create some value for shareholders and then reinvest that capital back into lower multiples. In this environment, we think that's important to be resourceful, particularly in opportunities where we can divest and retain a contract where we can continue to serve those locations.
In terms of the actual specific numbers, let me just find those for you quickly here. Eva, if you've got them handy, you can provide them as well.
We quoted for cash of $4 million, and then with about, you know, CAD 5 million again, which is reflected on our financial statement.
Right. Any idea on how much of the revenue you were retaining? Just trying to figure out how much, you know, what the impact is on the top line into 2023.
Sure, yeah. I mean, over the next five years, we're retaining about CAD 3 million of the revenue. I think what's important to note here is that we'd already received a significant return on our investment since first buying that 55% stake back in 2017. We'd already received, you know, the majority of our return on that investment. Then we were able to, you know, divest at a significant multiple to a partner that we work with extensively. That partner retained us for the management contract. Then we were able to subsequently allocate that capital directly into another significant deal.
In our view, this is the type of portfolio pruning and management that I think is going to demonstrate the resourcefulness of our team and create value for shareholders.
Okay, thanks. That's helpful. Maybe on a similar vein, in terms of of where the debt levels are right now, are you sort of with future acquisitions, do you anticipate sort of taking the absolute debt number up, or is it sort of you going to keep looking at repayments like you've done, you know, in the last couple of quarters?
Given that we're roughly levered around 3x our shareholder EBITDA, you know, we think we're appropriately levered. We, you know, like this level. We don't want to go too much higher than this. Obviously as our EBITDA improves, that gives us an opportunity to also increase our funded debt. That's something we keep an eye on. You know, we're also aware that we're in a hiking cycle. That's why you're seeing some meaningful contributions to reducing debt as well.
I think that's kind of how we're balancing it right now, is we continue to allocate capital, but in very highly accretive circumstances while we are mindful of our debt, and especially with increased carrying costs and continue to make, you know, contribution and improvements to those debt levels.
Okay, thanks. I'll pass the line.
Thank you. Your next question comes from Allen Klee from Maxim Group. Please go ahead.
Good afternoon. You talked about Grand Canyon Anesthesia. You expect to generate CAD 16 million annual revenue, CAD 2 million in shareholder EBITDA. Can you talk about, and maybe it could be more generally, but just the type of synergies that you try to obtain when you acquire an anesthesia group such as Grand Canyon. Thank you.
Sure. Just as with any provider-centric business, we're doing everything that we can to apply technology and improve those businesses. You know, our view is that digital health isn't just virtual care. It's all aspects of ameliorating a healthcare business or asset, you know, whether it's front office, whether it's back office, whether it's revenue cycle management, whether it's business intelligence. We've made great gains with CRH since owning them, even though this hasn't been a significant period of time, just in terms of what we've done with the revenue cycle management. That was a huge undertaking. You know, management there has been doing a great job with now dramatically improving the business intelligence data availability, you know, their credentialing management.
I mean, there's just so many aspects of the operation. Again, you know, we try to apply software and workflow to everything that we do. The DNA of the business is tech. Again, you know, we see ample opportunities to continue to improve that, in essentially any provider business that we get involved with.
Thank you. My last question is, you noted you had free cash flow in the quarter of CAD 11.4 million. This is kind of theoretical question, but if we assume that annualize is around CAD 40-ish million of free cash flow, how do you think about how much revenue you could potentially acquire from acquisitions in a given year if you were generating CAD 40-ish million in free cash flow and you wanted to maintain the same approximate 3x leverage ratio?
Yeah, it's a great question, and I think it just depends on whether or not we'll continue to see the types of attractive multiples we're seeing today. It also depends somewhat on our, you know, deferred acquisition expense. 2022 was a year where we had, you know, elevated deferred acquisition expense because of acquisitions made in previous years. This is the reason why we did the offering earlier this year, because we wanted to make sure that while our cash flow was enough to cover those deferred acquisition expenses, we were able to continue to be aggressive. You know, I think we noted that we wanted to improve our offense and defense. Well, next year, we'll have much lower deferred acquisition expense.
It gets pretty exciting because we'll have meaningful free cash flow that we can put back into new assets without needing any kind of funding event. We're very bullish on the future and our guidance, you know, that we gave today on where we'll end up in terms of the exit revenue for next year doesn't have a lot of M&A. With the improving cash flows, you know, we do believe that. You know, look, on the clinical side, we've been buying at less than 0.5x revenue, and comfortably buying it at less than 4x EBITDA lately.
You know, you know, again, depending on how much debt we pay down, and you know, depending on how many good deals we find, you know, we think that could result in tens of millions CAD in new revenue.
Thank you so much.
Thank you. Your next question comes from David Kwan from TD Securities. Please go ahead.
Good morning. Congratulations on the great quarter, and nice to see the increased guidance. I guess on that, Hamed, you provided, in particular, I guess I'm interested in the 2023 target on the exit revenue run-rate there. You talked about some of the key drivers behind it and mentioned some slight contribution from M&A. I was wondering if you could quantify what you're expecting in that close to CAD 700 million number expected to come from future M&A.
Yeah. Thanks, David. You know, when I say light, I mean, I think it's. We're probably thinking a clinic or two a quarter. To us, that's pretty light. We are still thinking of elevated organic growth, you know, across next year. You know, it depending on how things go with organic growth, you know, we could end up doing a lot better than that, but we think that's a reasonable and not too prudent level of guidance right now, demonstrating that management's willing to kinda go out on a limb and say, "Look, organic growth looks strong, and we feel good about it." That's really what that message was about today.
Should we read into that you expect kind of like this very, very strong growth rates at Circle Medical and Wisp to continue into 2023, then?
You know, we are continuing to see strong performance there. You know, we'll see what happens in 2023. I think on a and what the sequential growth could look like. We think on a year-over-year growth perspective, you know, those businesses are demonstrating, again, you know, strong resilience and ability to grow. You know, there are likely gonna be some changes next year due to, at some point, the ending of the public health emergency, which will likely have a little bit of an impact on Circle. You know, I think management's done a great job preparing for that and, you know, we still expect to have elevated growth levels for the year.
Okay. Last question, I guess somewhat related to that. Obviously, we've seen a pretty strong move in the US dollar in particular, which is providing a nice tailwind for you guys. Given most of your businesses in the US and the fastest-growing parts are obviously Circle and Wisp, how much of a stronger US dollar is baked into that guidance?
That's a good question. I think we're not expecting any kind of strengthening. I think we're probably thinking that it comes off a little bit next year at some point in time. I think the bank forecasts estimate that it probably peaks at some time in the first half of the year and then comes off. Eva, did you have a you know, forecast rate for next year's budget for USD?
We're assuming pretty much the similar level as you know Q2 Q3 average which is about you know 1.34-1.35.
Thank you.
Of course, we're gonna continue to monitor and yeah.
Excellent. I'll leave it there. Thank you.
Thank you. Your next question comes from Christian Sgro from Eight Capital. Please go ahead.
Hey, good afternoon, and thanks for taking my questions. The first one, I want to thank you guys in sort of pointing us toward a revenue guide for 2023, the approaching CAD 700 million. I'm just curious on your thoughts on profitability. You know, how maybe you would think about profitability next year on a margin basis, maybe using this year as a baseline. Would you be motivated to invest more in the business, or do you expect to see scale and some margin growth for the full year next year?
Yeah. Thanks, Christian. I think that's why my script was probably a bit longer today. I really wanted to give some color around our thinking there. You know, as I mentioned, you know, Circle and Wisp are not yet really designed to be major profitability drivers. They are designed to be growing profitability drivers, but not meaningful. This is why we think that it's still prudent to speak to our rule of 30. We think that's an excellent disposition and a great way to be able to provide the street with a predictable, you know, level of performance from the company.
This also comes from the belief that there's, you know, a related kind of view of how organic growth and operating margin sort of, you know, the relationship between those two metrics. We do believe that if, you know, growth comes off, hopefully we'll start to see some improved profitability and vice versa. Look, we've been fairly consistent at around 18% in terms of our operating margins. You know, we set out to achieve rule of 30, we've been at rule of 36. You know, we think, again, as the numbers grow, it's gonna be harder and harder to maintain that, but we feel still very good about maintaining rule of 30 or better.
That's all helpful context. For my second question here, I wanted to dig into maybe a smaller part of the business, but on the virtual services side, the Practitioner Enablement Platform. I was just curious on any underlying trends there, if there's any change in what you're offering, your go-to-market strategy, and the ways you're going to practitioners with that solution in the market.
No, it's very good. Look, I think this is an exciting business for us. I think at some point in the next 3-4 years, this is a CAD 100 million business on its own. The team there has just done a fantastic job. You know, the biggest change probably is all the integrated benefits. I don't think we get enough credit for the work that we're doing there. I don't mind saying, like, we are doing a great job integrating those businesses. Now there's very much a focus on bundling and a bundled offer to the providers. This makes the providers' jobs a lot easier too.
They don't wanna deal with multiple different companies. You know, we're seeing good, strong growth from that business. It is contributing to the growth of our virtual services division. I think you're gonna see some nice, strong wins come out of that group, and we hope to get some more news out over the next few months.
That's perfect, Hamed. Thanks for the context, and thanks for taking my questions.
Thank you.
Thank you. Your next question comes from Rob Goff from Echelon. Please go ahead.
Thank you very much for taking the question. As for the others, congratulations on very strong results.
Thank you, Rob.
As for the others, perhaps a question on the growth at Wisp and Circle Medical. Can you talk to the growth there? Is it gated in any way by the availability of practitioners? Is it really just a CAC versus lifetime revenue hurdle that you're looking at?
Yeah. Rob, you're right in that both of those businesses are finely tuned to trying to understand and improve constantly the whole relationship between CAC and LTV. Both businesses have sort of different strengths and weaknesses associated with them. The way to think about how these businesses are different, apart from the general specialty areas that they support, is that Circle is very focused on synchronous care. When you see a provider on the Circle side, you know, you have a session with them. You have a discussion with them, often through video. On the Wisp side, it's asynchronous.
You're going through some kind of chat relationship, you know, software and workflow kind of chat interaction with them sometimes. In some states, you have to also engage in a synchronous interaction. You know, the asynchronous side tends to be a lot more scalable. Also, Wisp has a subscription-based business model, so if you need a product or service from them, once it's prescribed for you can engage in a subscription. More than half the revenue comes from subscribed products. There's some nice predictability there.
You know, on the Circle side, you know, what's really great about that business is the LTV tends to be quite a bit stronger because once you come in through one of the specialty on-ramps, the team has had a fantastic record of being able to convert you into a longer-term longitudinal care customer and patient. That is really key. We're not just kinda helping you with whatever your issue is that day, be it, you know, a depression, anxiety, ADHD, sleep, whatever the case may be. You've come to us because of your concern there. We've dealt with your ailment or your concerns in a competent manner, and now you've become a longitudinal care patient. That drives LTV quite a bit.
I think that's been a lot of the secret sauce, if you will, of Circle and how they've been able to just, you know, have these fantastic metrics.
With both having grown so quickly and achieved significant scale, are there considerations of various partnership models for go-to-market strategies?
Well, listen, I think a lot of it has to do with focus. I think a lot of it has to do with those teams doing a very good job, you know, scaling product market fit, and being very efficient and performant in their marketing. You know, most specialty telehealth businesses are two-sided networks. It's about being able to acquire patients and then service them with a supplied physician. So not enough credit goes to, you know, the ability, let's say, on Circle Medical's end, to be able to have found as many and recruited and onboard as many physicians as they have. That is really hard to do. No matter how many customers you acquire, if you can't service them, it's not gonna work.
They've just done, I think, an incredible job driving both sides of that two-sided network. I think that's where that's why what they're doing is not easy to replicate, and that's why you don't see this type of growth all the time. You know, marketing effectiveness can go up and down, but not everyone has a supply of physicians to support, you know, that growth and acquisition. I think in Circle's case, they also have a very deep platform that is allowing providers to be successful and what's keeping them there.
That's great color. Appreciate it.
Thank you. Your next question comes from Adam Buckham from Scotiabank. Please go ahead.
Good afternoon. Thanks for taking my question, and congrats on the quarter. I just had one on the sort of vision for the Pan-Canadian sort of clinic network. If you think about some of these segments historically that are gonna make up this business, they've been a little more siloed in terms of their operation. As you sort of kinda integrate them and add acquisitions and sort of look at utilization and grow that, I'm just wondering, from a margin perspective, what's the white space there? You know, some of these assets were maybe a 20% Adjusted EBITDA margin historically. Just curious if there's any insight you can add there.
Yeah. Adam, thanks for the question. I think you're right. You know, this is what we're finding is the better the integration, you know, we're seeing, you know, that sort of driving operating margins and helping our growth. If you think about the clinical business, you know, especially primary care, the margins aren't so great, you know. Even with these, you know, spiffs that are coming from the government to try and stay in line with CPI, it's a tough business. The way WELL, I think has clearly exceeded, you know, anyone in this industry in Canada here is by bringing together more integrated benefits.
You know, primary care is valuable because of the orchestration of your healthcare journey. Your healthcare journey begins with primary care and after that, you may need to see a kinesiologist or a mental health expert or you know, some kind of specialist. For us to be able to provide more and more of those services internally, and you know that. We can't tell our physicians where to refer and how to refer, but what we can do is create a really compelling platform that gives them confidence. That's what we try to do.
We try to create the environment where they can, you know, fulfill more and more of those needs internally, where they get, you know, really great data back, where they feel that confidence as opposed to sending those referrals outside of the network.
Okay. Thanks for the color. That's it for me.
Thank you. Your next question comes from Justin Keywood from Stifel. Please go ahead.
Hi. Thanks for taking my call. I'm just wondering how WELL's preparing for the change in telehealth guidance within Ontario, Canada, in that unattached patients need to see their doctor in order to receive virtual care, and if this is a challenge or opportunity for Well ahead.
Thanks for the question, Justin. I think it's both. I think it's a challenge and an opportunity. I think it's increasingly an opportunity for WELL because it does have you know, brick-and-mortar infrastructure and a growing clinical network. I think most telehealth businesses will have a tough time meeting these demands. Having said that, I think it's good guidance and good policy from Ontario to want to see more of a focus on longitudinal care. Look, we've always said that we think the right care model is not just telehealth, it's a combination of on and offline support. As you're likely aware, our primary care network is stronger in BC than it is in Ontario, but we're growing and improving in Ontario.
I think with time, this benefits us.
Could there perhaps be some assets that come up for potential acquisition, given this change in guidance? Maybe some really good technology with a patient base that WELL may look at.
Possibly. Yeah, that's a good point. I mean, we try to keep our ears close to the ground and see what's available out there. I think you're right. You know, this type of regulation has a way of creating new opportunities. You know, we haven't seen anything big come up lately, but you can be sure that we'll be focused on that.
Understood. Thank you for taking my questions.
Thank you, Justin.
Thank you. Mr. Shahbazi, there are no further questions. Please proceed.
Well, thank you, everyone who attended the call today, especially the analysts, and their questions. We really, again, appreciate, you know, everyone's engagement with our story and the support that we've received, and we look forward to speaking with you again on our next conference call. We hope you have a wonderful day.