Dentalcorp Reports First Quarter 2025 Results

National Post

12-05-2025

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Robust revenue growth and continued margin expansion maintain track record of double digit growth in Adjusted EBITDA and Adjusted Free Cash Flow per Share
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Revenue of $409.4 million, an increase of 9.9% from the first quarter of 2024, with Same Practice Revenue Growth ('SPRG') 1 of 4.6%.
Adjusted EBITDA 1 of $75.9 million, an increase of 11.5% compared to the same period in 2024; Adjusted EBITDA Margin 1 of 18.5%, an increase of 20 basis points over the same period in 2024.
Adjusted Free Cash Flow 1 and Adjusted Free Cash Flow per Share 1 of $44.3 million and $0.22, an increase of 25.9% and 15.8%, respectively, over the same period in 2024; Adjusted Net Income 1 of $20.7 million.
Net debt / PF Adjusted EBITDA after rent Ratio 1 of 3.77x, a decrease of 0.57x compared to the same period in 2024.
Acquired 12 new practice locations which are expected to generate $8.3 million in PF Adjusted EBITDA after rent 1 at 7.4x, expanding Dentalcorp's national footprint to 571 locations.
Achieved a 91.5% recurring patient visit rate 1, reflecting strong patient loyalty and continued demand for routine care across the network.
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Second Quarter 2025 Outlook
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Revenue and SPRG 1 for the second quarter of 2025 are estimated to increase by 9.0% to 10.0% (to between $435.8M and $439.8M) and between 3.0% to 5.0%, respectively.
Adjusted EBITDA Margin 1 for the second quarter of 2025 is estimated to increase by 20 basis points from the second quarter of 2024, to 18.7%, and Adjusted EBITDA 1 is estimated to increase to between $81.5M and $82.2M.
Expect to complete acquisitions representing PF Adjusted EBITDA after rent 1 of $6 million+.
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(1) Non-IFRS financial measure, non-IFRS ratio, or supplementary financial measure. For comprehensive definitions and quantitative reconciliations, please refer to the 'Non-IFRS and Other Financial Measures' section within this news release.
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TORONTO — dentalcorp Holdings Ltd. ('Dentalcorp' or the 'Company') (TSX: DNTL), Canada's largest and one of North America's fastest growing networks of dental practices, today announced its financial and operating results for the first quarter ended March 31, 2025, reaffirmed the full year 2025 guidance previously provided in the Company's news release dated March 21, 2025, and announced its outlook for the second quarter of 2025. All financial figures are in Canadian dollars unless otherwise indicated.
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'Our teams across the country delivered another quarter of strong results, with revenue and Adjusted EBITDA growth of approximately 10% and 11%, respectively, over the first quarter of 2024, and setting new highs for both metrics. We continued to realize operating leverage across the business, with first quarter Adjusted EBITDA Margin expanding 20 basis points over the first quarter of 2024 to 18.5%, marking our fourth consecutive quarter of year-over-year Adjusted EBITDA Margin expansion,' said Graham Rosenberg, CEO and Chairman of Dentalcorp.
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'We generated a record $44.3 million in Adjusted Free Cash Flow in the first quarter of 2025, representing an increase of approximately 26% over the first quarter of 2024,' Rosenberg continued. 'This led to continued deleveraging, with our Net Debt / PF Adjusted EBITDA after rent Ratio decreasing to 3.77x, a reduction of 0.57x from the first quarter of 2024, marking our sixth consecutive quarter of deleveraging,' Rosenberg said.
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'Following a strong first quarter of 2025 that exceeded expectations, we're carrying this momentum into the second quarter, anticipating SPRG of 3.0% to 5.0%, revenue growth of 9.0% to 10.0%, and Adjusted EBITDA Margin expansion of 20 basis points over the second quarter of 2024, to 18.7%,' Nate Tchaplia, President and Chief Financial Officer said.
'During the first quarter of 2025, we acquired 12 new practices that are expected to generate $8.3 million in PF Adjusted EBITDA after rent, at an average multiple of 7.4x, and as of today, have closed on or signed LOIs for acquisitions representing 70% of our annual target,' Tchaplia continued.
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'With regards to the federal government's Canadian Dental Care Plan ('CDCP'), we have treated over 95,000 CDCP patients with 95% of our practices currently accepting CDCP patients. During the first quarter of 2025, the federal government announced that the 18-64 age cohort will be eligible to receive treatment under the program as of June 1, 2025. This announcement led to some visit deferrals in the quarter and we expect this to continue until these new eligible patients can begin their treatment,' Tchaplia concluded.
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'We are reaffirming our full year 2025 guidance, where we expect to see SPRG of 3.0% to 5.0%, an accelerated pace of M&A with acquisitions representing $25 million+ of PF Adjusted EBITDA after rent, Pre-tax Adjusted Free Cash flow per Share growth of 15%+, and another year of Adjusted EBITDA Margin expansion of 20+ basis points,' said Rosenberg.
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Three months ended March 31,
2025
2024
$
$
(expressed in millions of dollars)
Revenue
409.4
372.4
Cost of revenue
204.4
186.0
Gross profit
205.0
186.4
Selling, general and administrative expenses
131.5
122.9
Depreciation and amortization
51.1
50.8
Share-based compensation
1.5
3.5
Foreign exchange gain
—
(0.3
)
Net finance costs
20.5
25.2
Change in fair value of financial instruments at fair value through profit or loss
8.8
(3.9
)
Other losses
0.9
—
Loss before income taxes
(9.3
)
(11.8
)
Income tax expense (recovery)
0.9
(0.1
)
Net loss and comprehensive loss
(10.2
)
(11.7
)
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Other Metrics
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(a)
Non-IFRS financial measure, non-IFRS ratio or supplementary financial measure. See the 'Non-IFRS and Other Financial Measures and Ratios' section of this release for definitions and quantitative reconciliations.
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Conference Call Notification
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The Company will hold a conference call to provide a business update on Monday, May 12, 2025, at 8:30 a.m. ET. A question-and-answer session will follow the business update.
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Non-IFRS and Other Financial Measures and Ratios
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As appropriate, we supplement our results of operations determined in accordance with IFRS with certain non-IFRS and other financial measures and ratios that we believe these non-IFRS and other financial measures are useful to investors, lenders and others in assessing our performance and highlighting trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Our management also uses non-IFRS measures for purposes of comparing to prior periods; preparing annual operating budgets; developing future projections and earnings growth prospects; measuring the profitability of ongoing operations; analyzing our financial condition, business performance and trends, including the operating performance of the business after taking into consideration the acquisitions of dental practices; and determining components of employee compensation. As such, these measures are provided as additional information to complement IFRS measures by providing further understanding of our results of operations from management's perspective, including how we evaluate our financial performance and how we manage our capital structure. We also believe that securities analysts, investors and other interested parties frequently use these non-IFRS and other financial measures and industry metrics in the evaluation of issuers. These non-IFRS and other financial measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS, may include or exclude certain items as compared to similar IFRS measures and may not be comparable to similarly-titled measures reported by other companies. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. For further information on non-IFRS and other financial measures and ratios, including the most directly comparable IFRS measures, composition of the measures, a description of how we use these measures, an explanation of how these measures are useful to investors and applicable reconciliations, refer to the 'Non-IFRS and Other Financial Measures', 'Non-IFRS Financial Measures', 'Non-IFRS Ratios' and 'Certain Supplementary Financial Measures' sections of management's discussion and analysis of operations for the three months and year ended March 31, 2025, which is available on the Company's profile on SEDAR+ at www.sedarplus.ca.
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'EBITDA' means, for the applicable period, net loss and comprehensive loss plus (a) net finance costs, (b) income tax expense (recovery), and (c) depreciation and amortization. Management does not use EBITDA as a financial performance metric, but we present EBITDA to assist investors in understanding the mathematical development of Adjusted EBITDA and Same Practice EBITDA Growth. The most comparable IFRS measure to EBITDA is Net loss and comprehensive loss, for which a reconciliation is provided below.
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Adjusted EBITDA
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'Adjusted EBITDA' is calculated by adding to EBITDA certain expenses, costs, charges or benefits incurred in such period which in management's view are either not indicative of underlying business performance or impact the ability to assess the operating performance of our business, including: (a) net impact of unrealized foreign exchange gains or losses on non-cash balances; (b) share-based compensation; (c) external acquisition expenses; (d) change in fair value of financial instruments at fair value through profit or loss; (e) other corporate costs; (f) loss on disposal of dental practices; (g) loss on disposal and impairment of property and equipment and intangible assets; (h) loss on settlement of other receivables; (i) impairment of right-of-use assets; (j) post-employment benefits; and (k) short-term benefits. Adjusted EBITDA is a supplemental measure used by management and other users of our financial statements to assess the financial performance of our business without regard to the effects of interest, depreciation and amortization costs, expenses that are not considered reflective of underlying business performance, and other expenses that are expected to be one-time or non-recurring. We use Adjusted EBITDA to facilitate a comparison of our operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting our business. The most comparable IFRS measure to Adjusted EBITDA is Net loss and comprehensive loss.
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(a)
Represents professional fees and other expenses paid to third parties that are incurred in connection with individual practice acquisitions and are not related to the underlying business operations of the Company.
(b)
Represents costs associated with the implementation of new corporate technology systems, the undertaking of vendor consolidations, termination benefits and restructuring activities, and professional fees related to the settlement of the management loan program and issuance of preferred shares, executive search arrangements, other non-recurring capital market initiatives and the implementation of the CDCP. Also included are costs associated with the purchase of profit rights held by Associate dentists in the cash flows of our dental practices and losses of dental practices that were disposed of during the period.
(c)
Represents the loss on disposal of dental practices that were disposed of during the reporting period.
(d)
Represents post-employment benefits provided to the Company's former President.
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Adjusted Free Cash Flow
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'Adjusted free cash flow' is calculated by adding or subtracting from cash flow from operating activities: (a) external acquisition expenses; (b) other corporate costs; (c) post-employment benefits; (d) short-term benefits; (e) repayment of principal on leases; (f) maintenance capital expenditure; and (g) changes in working capital. We use Adjusted free cash flow to facilitate a comparison of our operating performance on a consistent basis from period to period, to provide for a more complete understanding of factors and trends affecting our business, and to determine components of employee compensation. The most comparable IFRS measure to Adjusted free cash flow is cash flow from operating activities, for which a reconciliation is provided below.
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Three months ended March 31,
2025
2024
$
$
(expressed in millions of dollars)
Cash flow from operating activities
52.1
46.5
Adjustments:
External acquisition expenses (a)
1.0
1.0
Other corporate costs (b)
1.4
1.0
Post-employment benefits (c)
—
2.3
54.5
50.8
Deduct:
Repayment of principal on leases
(7.0
)
(6.5
)
Maintenance capital expenditure (d)
(4.3
)
(4.7
)
Changes in working capital (e)
1.1
(4.4
)
Adjusted free cash flow
44.3
35.2
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(a)
Represents professional fees and other expenses paid to third parties that are incurred in connection with individual practice acquisitions and are not related to the underlying business operations of the Company.
(b)
Represents costs associated with the implementation of new corporate technology systems, the undertaking of vendor consolidations, termination benefits and restructuring activities, and professional fees related to the settlement of the management loan program and issuance of preferred shares, executive search arrangements, other non-recurring capital market initiatives and the implementation of the CDCP. Also included are costs associated with the purchase of profit rights held by Associate dentists in the cash flows of our dental practices and losses of dental practices that were disposed of during the period.
(c)
Represents post-employment benefits provided to the Company's former President.
(d)
Represents capital expenditures for general maintenance and safety compliance of dental practices for the reporting period.
(e)
Represents the change in non-cash working capital items for the reporting period.
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'Adjusted free cash flow per Share' means Adjusted free cash flow divided by the total number of Shares on a fully diluted basis. Adjusted free cash flow per Share is utilized to determine components of employee compensation.
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'Pre-tax Adjusted free cash flow' in respect of a period means Adjusted free cash flow less cash income tax (recovery) expense. We use Pre-tax Adjusted free cash flow to facilitate a comparison of our operating performance on a consistent basis from period to period, to provide for a more complete understanding of factors and trends affecting our business, and to determine components of employee compensation. The most comparable IFRS measure to Pre-tax Adjusted free cash flow is cash flow from operating activities.
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'Pre-tax Adjusted free cash flow per Share' means Pre-tax Adjusted free cash flow, divided by the total number of Shares on a fully diluted basis. Pre-tax Adjusted free cash flow per Share is utilized to determine components of employee compensation.
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'Adjusted net income' is calculated by adding to Net loss and comprehensive loss certain expenses, costs, charges or benefits incurred in such period which in management's view are either not indicative of underlying business performance or impact the ability to assess the operating performance of our business, including: (a) amortization of intangible assets; (b) share-based compensation; (c) change in fair value of contingent consideration; (d) external acquisition expenses; (e) other corporate costs; (f) loss on disposal of dental practices; (g) change in fair value of preferred shares; (h) loss on disposal and impairment of property and equipment and intangible assets; (i) loss on settlement of other receivables; (j) impairment of right-of-use assets; (k) loss on modification of borrowings; (l) post-employment benefits; (m) short-term benefits; (n) change in fair value of other financial liability; and (o) the tax impact of the above. We use Adjusted net income to facilitate a comparison of our operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting our business. The most comparable IFRS measure to Adjusted net income is Net loss and comprehensive loss, for which a reconciliation is provided below.
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Three months ended March 31,
2025
2024
$
$
(expressed in millions of dollars)
Net loss and comprehensive loss
(10.2
)
(11.7
)
Adjustments:
Amortization of intangible assets
29.2
26.9
Share-based compensation
1.5
3.5
Change in fair value of contingent consideration (a)
0.1
3.3
Change in fair value of other financial liability (b)
0.1
—
Change in fair value of preferred shares (c)
(0.3
)
(0.2
)
External acquisition expenses (d)
1.0
1.0
Other corporate costs (e)
1.4
1.0
Loss on disposal of dental practices (f)
0.9
—
Loss on modification of borrowings (g)
—
2.3
Post-employment benefits (h)
—
2.3
23.7
28.4
Tax impact of the above
(3.0
)
(3.7
)
Adjusted net income
20.7
24.7
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(a)
On acquisition, and at each subsequent reporting date, obligations under earn-out arrangements are measured at fair value with the changes in fair value recognized in the condensed interim consolidated statements of loss and comprehensive loss.
(b)
The Company has several De novo practices whereby the Company has issued certain put and call options over the Associate Dentists' profit rights, which have been classified as a financial liability at FVTPL. At each reporting date, changes in fair value are recognized in the condensed interim consolidated statements of loss and comprehensive loss.
(c)
At each reporting date, the Company's investment in the Management Preferred Shares, which are classified as a financial asset at FVTPL, are revalued with changes in fair value recognized in the condensed interim consolidated statements of loss and comprehensive loss.
(d)
Represents professional fees and other expenses paid to third parties that are incurred in connection with individual practice acquisitions and are not related to the underlying business operations of the Company.
(e)
Represents costs associated with the implementation of new corporate technology systems, the undertaking of vendor consolidations, termination benefits and restructuring activities, and professional fees related to the settlement of the management loan program and issuance of preferred shares, executive search arrangements, other non-recurring capital market initiatives and the implementation of the CDCP. Also included are costs associated with the purchase of profit rights held by Associate dentists in the cash flows of our dental practices and losses of dental practices that were disposed of during the period.
(f)
Represents the loss on disposal of dental practices that were disposed of during the reporting period.
(g)
Represents the loss on modification of the Company's outstanding credit facilities upon entering into an amended and restated credit agreement.
(h)
Represents post-employment benefits provided to the Company's former President.
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PF Adjusted EBITDA
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'PF Adjusted EBITDA' in respect of a period means Adjusted EBITDA for that period plus the Company's estimate of the additional Adjusted EBITDA that it would have recorded if it had acquired each of the dental practices that it acquired during that period on the first day of that period, calculated in accordance with the methodology described in the reconciliation table in 'Reconciliation of Non-IFRS Measures'. Both creditors and the Company use PF Adjusted EBITDA to assess our borrowing capacity, which management believes, given the highly acquisitive nature of our business, is more reflective of our operating performance. We also use PF Adjusted EBITDA to determine components of employee compensation. The most comparable IFRS measure to PF Adjusted EBITDA is Net loss and comprehensive loss.
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(a)
Represents the additional Adjusted EBITDA that we estimate would have been recorded if the Company's dental practice acquisitions had occurred on the first day of the applicable reporting period. These estimates are based on the amount of Practice-Level EBITDA budgeted by us to be earned by the relevant practices at the time of their acquisition by us. There can be no assurance that if we had acquired these practices on the first day of the applicable reporting period, they would have actually generated such budgeted Practice-Level EBITDA, nor is this estimate indicative of future results.
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'PF Adjusted EBITDA after rent' in respect of a period means PF Adjusted EBITDA less interest and principal repayments on leases and lease interest and principal repayments on acquisitions. Both creditors and the Company use PF Adjusted EBITDA after rent to assess our borrowing capacity, which management believes, given the highly acquisitive nature of our business, is more reflective of our operating performance. The most comparable IFRS measure to PF Adjusted EBITDA after rent is Net loss and comprehensive loss.
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PF Revenue
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'PF Revenue' in respect of a period means revenue for that period plus the Company's estimate of the additional revenue that it would have recorded if it had acquired each of the dental practices that it acquired during that period on the first day of that period. Given the highly acquisitive nature of our business, management believes PF Revenue is more reflective of our operating performance. We use PF Revenue to determine components of employee compensation. The most comparable IFRS measure to PF Revenue is revenue.
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'Net debt / PF Adjusted EBITDA after rent Ratio' means non-current borrowings divided by PF Adjusted EBITDA after rent. We use Net debt / PF Adjusted EBITDA after rent Ratio to assess our borrowing capacity.
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Same Practice Revenue Growth
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'Same Practice Revenue Growth' in respect of a period means the percentage change in revenue derived from Established Practices in that period as compared to revenue from the same dental practices in the corresponding period in the immediately prior year.
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This release includes forward-looking information and forward-looking statements within the meaning of applicable Canadian securities legislation, including the Securities Act (Ontario). Forward-looking information includes, but is not limited to, statements about the Company's objectives, strategies to achieve those objectives, our financial outlook, and the Company's beliefs, plans, expectations, anticipations, estimates, or intentions. Forward-looking information includes words like could, expect, may, anticipate, assume, believe, intend, estimate, plan, project, guidance, outlook, target, and similar expressions suggesting future outcomes or events.
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Our forward-looking information includes, but is not limited to, the information and statements under ' First Quarter 2025 Highlights ' and 'Second Quarter 2025 Outlook' relating to our goals for the second quarter of 2025 for Revenue, Same Practice Revenue Growth, Adjusted EBITDA Margin, PF Adjusted EBITDA after rent attributable to practices acquired in 2025 and our medium-term expectations regarding Same Practice Revenue Growth and Net Debt / PF Adjusted EBITDA after rent Ratio. Such forward-looking information relating to these metrics are not projections; they are goals based on the Company's current strategies and may be considered forward-looking information under applicable securities laws and subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management.
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The purpose of disclosing such forward-looking information is to provide investors with more information concerning the financial results that the Company currently believes are achievable based on the assumptions below. Readers are cautioned that the information may not be appropriate for other purposes. While these targets are based on underlying assumptions that management believes are reasonable in the circumstances, readers are cautioned that actual results may vary materially from those described above.
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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 management as of the date on which the statements are made, are inherently subject to significant business, economic and competitive uncertainties and contingencies which could result in actions, events, conditions, results, performance or achievements to be different or materially different from those projected in the forward-looking statements. Forward-looking information is based on many factors and assumptions including, but not limited to, the impact of, and the enrollment of patients in, the CDCP; expectations regarding the Company's business, operations and capital structure; that the Company's acquisition program continues as it has historically, including the Company maintaining its ability to continue to make and integrate acquisitions at attractive valuations including a reduction in acquisition purchase multiples as compared to prior periods; the Company's ability to realize pricing increases, materially driven by Provincial fee guides; a continued increase in patient visit volumes through patient recall and insourcing initiatives that drive the expansion of service offerings and frequency of visits to contribute to optimal patient care; the impact of the investments the Company has made in its corporate infrastructure and teams, and the upgrades to its core information technology systems; the Company's ability to mitigate anticipated supply chain disruptions, geopolitical risks, inflationary pressures and labour shortages, and generate cash flow; no changes in the competitive environment or legal or regulatory developments affecting our business; and visits by patients to our Practices at or above the same rate as current visits.
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Actual results and the timing of events may differ materially from those anticipated in the forward-looking information as a result of known and unknown risk factors, many of which are beyond the control of the Company, and could cause actual results to differ materially from the forward-looking statements. Such risks include, but are not limited to, the Company's potential inability to successfully execute its growth strategy and complete additional acquisitions; its dependence on the integration and success of its acquired dental practices; its dependence on the parties with which the Company has contractual arrangements and obligations; changes in relevant laws, governmental regulations and policy and the costs incurred in the course of complying with such changes; risks relating to the current economic environment, including the impact of any tariffs and retaliatory tariffs on the economy; risk associated with disease outbreaks; competition in the dental industry; increases in operating costs; litigation and regulatory risk; and the risk of a failure in internal controls and other factors described under 'Risk Factors' in the Company's Annual Information Form for the year ended December 31, 2024 and in this release. Accordingly, we warn readers to exercise caution when considering statements containing forward-looking information and caution them that it would be unreasonable to rely on such statements as creating legal rights regarding the Company's future results or plans. We are under no obligation (and we expressly disclaim any such obligation) to update or alter any statements containing forward-looking information or the factors or assumptions underlying them, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. All of the forward-looking information in this release is qualified by the cautionary statements herein.
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Dentalcorp is Canada's largest and one of North America's fastest growing networks of dental practices, committed to advancing the overall well-being of Canadians by delivering the best clinical outcomes and unforgettable experiences. Dentalcorp acquires leading dental practices, uniting its network in a common goal: to be Canada's most trusted healthcare network. Leveraging its industry-leading technology, know-how and scale, Dentalcorp offers professionals the unique opportunity to retain their clinical autonomy while unlocking their potential for future growth. To learn more, visit dentalcorp.ca.
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Contacts
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For investor inquiries, please contact:
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Investor Relations
Nick Xiang
Vice President, Corporate Finance
[e-mail]
[phone] x 866
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