Our view: dentalcorp reported Q4/21 revenues of $272.5MM (+8.9% q/ q; +20.6% y/y) marginally ahead of RBCe ($271.1MM) and consensus ($270.9MM). The company had announced 20% y/y revenue growth for Q4/21 in January and had guided Q4/21 adj. EBITDA margins broadly similar to prior quarters. Q4/21 adj. EBITDA of $50.1MM was also slightly ahead of RBCe ($48.7MM) and consensus ($49.6MM). dentalcorp acquired 13 practices in Q4 for a total of $79.0MM (~7.6x IFRS EBITDA multiple) and now has 458 practices across Canada. We expect these results to be slightly positive for dentalcorp’s shares.
First impression
Revenues marginally ahead of RBCe and consensus. dentalcorp reported Q4/21 revenues of $272.5MM (+8.9% q/q; +20.6% y/y) vs. RBCe $271.1MM and consensus $270.9MM. The company had announced ~20% y/y revenue growth for Q4/21 in January. Gross margin of 45.7% in the quarter declined q/q (49.4% in Q3) and was below RBCe (49.3%) and consensus (49.1%). dentalcorp reported same practice sales growth of 4.9% y/y in Q4 aided by positive contribution from the orthodontics insourcing program. The company anticipates to deliver modestly higher results q/q in Q1/22 despite the Omicron-related headwinds in the first 6 weeks of 2022. Ahead of expectations on adj. EBITDA. dentalcorp reported Q4/21 adj. EBITDA of $50.1MM on an IFRS basis, ahead of both RBCe ($48.7MM) and consensus ($49.6MM). The EBITDA margin of 18.4% was down slightly q/q (18.5%) but above RBCe (18.0%) and consensus (18.3%). Adj. FCF for Q4/21 was $24.3MM, strongly up q/q ($12.7MM in Q3).
Acquired 13 practices in Q4 at an implied ~7.6x IFRS EBITDA multiple.
dentalcorp acquired 13 dental practices in Q4/21 for total consideration of $79.0MM. The company expects the acquired practices to generate ~ $10.4MM in annualized adj. EBITDA (implying an acquisition multiple of ~7.6x). This compares to 15 acquisitions at an IFRS EBITDA multiple of ~6.7x in Q3/21. As of the end of Q4/21, dentalcorp owned 458 dental practices in Canada (vs. 397 practices end Q4/20). We view the growth in the number of acquired practices positively.
Sufficient liquidity for future acquisitions. dentalcorp ended the Dec-21 quarter with ~$142MM in cash and ~$400MM in debt capacity under its $1.3B senior debt facility (of which ~$900MM was drawn at quarter-end). Additionally, DNTL completed a bought deal offering for gross proceeds of ~$115.0MM in Jan-22. Management noted that the proceeds from the bought deal are being used to support several accretive larger platforms, all of which are expected to close in H1/22.
Conference call. Today at 8:30AM ET (Dial-in: 416-764-8650 or 1-888-664-6383; Reference Number: 7826-3703; Webcast link here). On the call, we would look for updates on volume recovery following the peaking of the Omicron wave in Canada, acquisitive agenda, organic growth and updates on pricing and margins given inflationary pressures in the broader economy.