dentalcorp Holdings Ltd.

Hello, operator, and good morning, everyone. Welcome to the Dell Corp first quarter results conference call. I'm joined here by Graham Rosenberg, our CEO. Before we start, we would like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated. Please note that the statements made during this call may include forward-looking statements and information and future-oriented financial information regarding Dental Corp and its business and disclosure regarding possible events, conditions, or results that are based on information currently available to management, which indicate management's expectation of future growth, results of operations, business performance, business prospects, and opportunities. Such statements are made as a date hereof, and Dental Corp assumes no obligation to update or revise them to reflect events, disclosures, or circumstances, except as required by applicable securities law. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause results to differ materially from results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward-looking statements and information and future-oriented financial information section of our public filings. Without limitations, our MD&A and our earnings press release issue today for additional information. For those of you who have dialed into the call, the company has prepared a series of slides to complement our prepared remarks. These slides are available on the investor relations section of our website and the events and presentations section. I will now turn the call over to our Chief Executive Officer, Graham Rosenberg, for his opening remarks. Graham?

Thanks, Nate, and good morning, everyone. We are pleased to be with you today to review Dental Corp's recent developments, as well as our financial and operating results for the three months ended March 31, 2024. For today's call, I'm going to share a number of those developments with you, and I will then hand the call over to Nate, who will discuss our financial results in detail, after which I will provide forward-looking remarks about how our business is trending. As a reminder, Dental Corp operates in a highly recurring essential healthcare industry that is cash pay, resilient through economic cycles, insulated from disintermediation by technologies. Importantly, dental expenditures have experienced strong relative growth during periods of higher than average inflation. Accordingly, and in the context of the current macro environment, we believe that Dental Corp's favorable cost structure, high margins, low commodity risk, and negligible capital expenditures provide support for the company's continued delivery of balanced double-digit growth in a $22 billion Canadian dental industry. Our confidence in the business is supported by our first quarter results, which met our expectations and provide a constructive outlook for the coming year. Overall, I am pleased with our results for this quarter. As you can see on slide three, our results have been made possible by our deep and diverse network of nearly 10,000 healthcare professionals across the country. Our teams continue to deliver the highest standards of care during our reporting period, supporting more than 2.1 million active patients and managing over 5.2 million patient visits annually. You will see that we completed our first quarter end of March 31 with approximately $1.5 billion of last 12 months for former revenue and $274 million of pro forma adjusted EBITDA. As you can see on the next slide, we continued with our balanced approach to drive sustained double-digit growth. and we intend to continue growing our business organically through a creative M&A and by driving overall business efficiencies and operating leverage over the medium to long term. This is a program that we have meticulously built over the past decade, and we believe we are able to thrive in any economic climate. With respect to M&A, we acquired five practices in the first quarter for a total consideration of $17 million. These practices are expected to generate $2.6 million in pro forma adjusted EBITDA after rent. We are also encouraged to see that practice valuations continue to decline, down 10% in the first quarter of 2024 over 2023, as access to financing opportunities continue to tighten for many buyers across the industry. We remain the best positioned and capitalized partner of choice for independent dentists and will continue to be disciplined about the processes we acquire. On slide five, you can see that our business operates with robust and expanding margins, low capex requirements, and capped interest rate exposure on 100% of our existing debt outstanding. We continue to convert a high, steady percentage of our EBITDA into free cash flow in any given period. On site six, and as we previously expected, we completed the quarter at 4.3 times leverage, down 0.1 times from the end of 2023, as we funded all of our acquisitions through free cash flow. we continue to pursue a medium-term target of under 3.0 times leverage. Turning to the next slide, you can see a comparison of valuation and free cash flow yield versus our peers. Since IPO, we have seen a decline of 10.4 times or 53% in our EV to LTM EBITDA trading multiple and are currently trading at a 42% discount to our total peer group. At the same time, we are trading at a 10.6% free cash flow yield compared to our peer group of only 2.8%. Turning now to slide eight, I'm pleased to report that our business delivered revenue of $372.4 million in the first quarter of 2024, up 3.9% over the same period in 2023, and adjusted EBITDA of $68.1 million, up 3.8% over the same quarter last year. Our adjusted EBITDA margins came in at 18.3%, improvement of 0.1 percent of the q4 2023 we are also encouraged that same practice revenue growth was 0.9 percent for the quarter against what was one of the strongest quarters since our inception as the extended 2022 flu season resulted in a higher than normal volumes at the beginning of 2023 as well as from the deferral patient volumes due to the canadian dental care plan I would like to take a moment to discuss the Canadian Dept of Care Plan, also known as the CDCP. As of May 1st, the first cohort of patients became eligible under the CDCP. However, in anticipation of that start date, we experienced a deferral of patient volumes from the first quarter into the balance of the year. We also note General Corps provider enrollment is tracking above the current national enrollment of 20 to 25%, and we expect that number to increase over the coming months. Under the CDCP, we will continue to deliver services at rates consistent with our usual and customary fees. This will ensure the high quality of care that all our patients, both new and returning, expect and rely on. Overall, we regard the CDCP as a favorable development for both the Canadian public and dental professionals, and we expect it to be neutral to slightly positive for Dental Corp. In addition, we have now completed our planned corporate investments, which will help to drive strong practice-level performance in both our base business and our recent acquisition cohorts. The outcome has been strong adjusted free cash flow for the quarter of approximately $35.3 million, enabling us to fund the entirety of our acquisition program with free cash flow. As we look to the second quarter of 2024, we anticipate revenues to increase by 79% of the Q2 2023, while delivering 2% to 3% same-practice revenue growth. We expect adjusted EBITDA margins to be materially consistent with the first quarter of 2024. As we look ahead to the remainder of 2024, we remain optimistic on our same-practice revenue growth returning to the 4% plus range in the second half of the year, along with our previous 2024 guidance of 15% to 20% adjusted free cash flow per share growth and adjusted EBITDA margin expansion of 20 plus basis points. We also anticipate completing acquisitions representing performance after rents of approximately $20 million in 2024. Overall, this aligns with our balance approach to strategic growth. Additionally, we expect to further deleverage our balance sheet as the company continues to self-fund its acquisitive growth. I will now pass the call over to Nate, who will walk us through the details of our financial results, and then I will share some closing remarks before we open the call for questions.

Nate? Thank you, Graham. The diversity in our dentist base allowed us to deliver on our quarterly results and demonstrates the strength and predictability of our business. Turning to slide nine, revenue for the three-month period ended March 31, 2024, as Graham mentioned, was $372 million compared to $358 million for the corresponding period last year, representing an increase of approximately 4%. The increase is attributable to our continued acquisitive and organic growth offset by lapping a record strong comparable period and the deferral of patient visits from Q1 into the balance of the year due to the anticipated commencement of the CDCP. As you can see, we reported first quarter adjusted EBITDA of approximately 68.1 million compared to 65.6 million in the same quarter last year and reported first quarter adjusted EBITDA margins of 18.3% representing 0.1% margin expansion quarter over quarter. Looking forward, we continue to be confident about our ability to grow the business through acquisitions and organically. Turning to the next slide, you can see our net leverage in liquidity as of March 31st, 2024. On a net debt basis, we were approximately 4.3 times levered at the end of the first quarter, deleveraging by 0.1 times over Q4, 2023. We ended the first quarter 2024 with liquidity of $407 million, comprised of $53 million in cash and $354 million in undrawn debt capacity under our senior debt facilities. First quarter and last 12 months adjusted free cash flow was $35 and $129 million respectively, which supports our strong balance sheet position. On the debt side of the ledger, in January 2024, we increased the hedge portion of our bank debt from 75% to 100%. and the debt exposure is carrying a fixed CEDAW rate plus margin for an all-in cost of approximately 6.65%. In addition, we continue to see strong interest rate coverage as defined by our LTM pro forma adjusted EBITDA after rent divided by net interest expense of 3.2 times in Q1 2024. Turning to the next slide, you can see our 2024 capital allocation program. We are committed to continuing to self-fund acquisitions using free cash flow and expect little to no debt drawn for our 2024 acquisition strategy. We self-funded the entirety of our acquisitions in the first quarter from cash flow, not drawing on any additional debt. Overall, we are pleased with our first quarter 2024 results. We increased organic growth, in part through insourcing efforts, created ongoing operating efficiencies, closed accretive acquisitions, and continue to develop our pipeline. With that, I'll turn the call over to Graham to provide some closing remarks. Graham?