dentalcorp (DNTL) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $399.8M (CAD 399.8M), up 8.6% year-over-year, with Same Practice Revenue Growth of 2.0% and Adjusted EBITDA of $73.9M, up 10.3% from Q2 2023.

• Adjusted Free Cash Flow increased 21.1% to $40.7M, and Adjusted Net Income was $22.5M; net debt to PF Adjusted EBITDA after rent improved to 4.1x.

• Nine new practices were acquired for $41M, expected to generate $6.2M in PF Adjusted EBITDA after rent at 6.6x multiples, 3% lower than prior year.

• Participation in the Canadian Dental Care Plan (CDCP) is increasing, with enrolled practices outperforming others and over 20,000 patients treated since May 1, 2024.

• Acquisition program has been self-funded for five consecutive quarters, supporting continued deleveraging and positive outlook.

Financial highlights

• Last 12 months pro forma revenue was $1,522.8M, with pro forma adjusted EBITDA of $283M (18.6% margin).

• Adjusted EBITDA margin improved to 18.5%, up 0.3pp year-over-year.

• Adjusted Free Cash Flow for Q2 was $40.7M, funding all acquisitions for the fifth consecutive quarter.

• Liquidity at quarter-end was $426M, including $72M in cash and $353M in undrawn debt capacity.

• Adjusted Net Income for Q2 2024 was $22.5M, with a net loss of $11.9M after adjustments.

Outlook and guidance

• Q3 2024 revenue is expected to increase by 8–10% year-over-year ($363.9M–$370.6M), with Same Practice Revenue Growth of 3.5–4.5%.

• Adjusted EBITDA margin for Q3 2024 is expected to remain consistent with Q3 2023.

• Full-year guidance includes 15–20% adjusted free cash flow per share growth and over 20 basis points of adjusted EBITDA margin expansion.

• Anticipates further deleveraging and self-funded acquisitions, with pro forma adjusted EBITDA after rent from acquisitions expected to reach $20M+ in 2024.

• Expects a 50 bps reduction in borrowing costs before year-end.