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August 10, 2025
Outperform
TSX: DNTL; CAD 8.19
Price Target CAD 13.00
dentalcorp Holdings Ltd.
Deleveraging and margin expansion continued in Q2 despite CDCP-related deferrals
Our view: DNTL's Q2/25 results were ahead of RBCe but slightly below consensus and company guidance. Performance in the quarter was negatively impacted by CDCP-related deferrals, as the newly eligible 18–64 age cohort began receiving treatment in July. Additionally, some anticipated Q2 acquisitions were finalized in Q3, further weighing on Q2 results. On a positive note, management indicated that the company remains on track to meet or exceed its full-year 2025 guidance. Q3 guidance bracketed estimates. Net leverage improved to 3.65x at the end of Q2 (3.77x in Q1), and adj. EBITDA margins expanded by 20bps y/y to 18.7%.
Key points:
Q2 results ahead of RBCe but below consensus and guidance. Q2 revenue of $435.2MM (+8.9% y/y) was ~0.7% ahead of RBCe ($432.0MM) but ~0.5% below consensus ($437.5MM) and below the guided range ($435.8-439.8MM). DNTL reported same practice revenue growth (SPRG) of +3.3% y/y in Q2, near the lower end of the guided range of +3.0-5.0% y/y, negatively impacted by the CDCP-related deferrals. Adj. EBITDA was $81.2MM (+10.0% y/y) on an IFRS basis, ~1.6% above RBCe ($80.0MM) but ~0.6% below consensus ($81.7MM) and below guidance of $81.5-82.2MM.
2025 outlook – reaffirmed. The company anticipates delivering 10.0%-11.0% y/y revenue growth in FY25 and estimates SPRG of +3-5% y/ y. The 2025 revenue guide of $1,699-1,715.1MM compares to consensus ($1,707.6MM, pre-release) and RBCe ($1,702.3MM, pre-release). The company expects adj. EBITDA margins to expand by 20+bps vs. 2024 to ~18.7%, implying adj. EBITDA of $317.8-320.7MM, bracketing estimates vs. consensus ($319.0MM, pre-release) and RBCe ($317.8MM, pre-release). DNTL expects to acquire $25MM+ in GAAP EBITDA in 2025 (2024: $21.4MM). Management anticipates pre-tax adj. free cash flow per share to grow by 15%+ in 2025 (vs. +16.2% y/y in 2024).
Q3/25 guidance bracketed estimates; Mid-point of guidance below consensus. The company anticipates delivering 10.0%-12.0% y/y revenue growth in Q3 and estimates SPRG of +3.0-5.0% y/y. The Q3/25 revenue guide of $412.9-420.4MM bracketed RBCe ($416.3MM, pre-release) and cons. ($418.9MM, pre-release). The company expects adj. EBITDA margins to increase +20bps y/y to 18.6% and adj. EBITDA of $76.8-78.2MM, which bracketed estimates (RBCe: $77.2MM and cons.: $78.1MM, pre-release). The mid-point of the Q3 revenue and adj. EBITDA guidance was ~0.5% and ~0.8% below consensus, respectively.
Reiterate Outperform with a $13 price target. DNTL is trading at attractive ~8.1x/~8.4x 2026E IFRS/GAAP EBITDA vs. comps that are trading at a median ~13.1x IFRS and ~12.8x GAAP 2026E EBITDA multiple. Our $13 PT is based on an 11.0x multiple applied to our 2026E IFRS EBITDA estimate (12.0x GAAP EBITDA).
