Post by
retiredcf on Mar 18, 2022 9:07am
CIBC
EQUITY RESEARCH
March 17, 2022 Earnings Update
DENTALCORP HOLDINGS LTD.
Q4/21 Preview
Our Conclusion
With dentalcorp pre-releasing Q4 results in January, takeaways from the
quarter will be more focused on the 2022 outlook as the business deals with
the impact of Omicron while looking to deploy the proceeds from the January
equity raise to accelerate mid-market practice acquisitions. We have updated
our model to reflect the impact of Omicron in Q1/22, with the weakness
expected to be isolated to the first quarter, and demand returning over the
course of 2022. We retain our Outperformer rating and $20 price target.
Key Points
Pre-released Q4 Results: Q4 revenue is expected to have grown 20% over
the prior year, and EBITDA margins are expected to be in line with recent
quarters, implying revenue of ~$271 million and adjusted EBITDA of
~$50 million. The business added $43 million in pro forma EBITDA through
acquisition in 2021, implying ~$11.9 million in acquired EBITDA in Q4.
Omicron Hits Hard But Demand To Rebound: The Omicron wave will
have a significant impact on Q1/22 results, with the variant’s high
transmission rate resulting in staffing shortages and rescheduled
appointments. Shortages and cancelled/rescheduled appointments are
believed to have acted as up to a 10% headwind to normal volumes. We are
forecasting Q1 revenue to be flat Q/Q at ~$272 million, down from our
previous forecast of $306 million. While the impact to the first quarter is a
concern, management does expect the majority of missed appointments to
return as pent-up demand over the course of 2022. We have, therefore, not
made any major changes to our estimates for the remainder of the year and
our full-year revenue estimate declines by only 2.6%. We will be looking for
additional information on the Omicron impact during the conference call.
M&A Program Remains Resilient: After raising $115 million in a January
bought deal, we expect dentalcorp to have been active on mid-market
acquisitions in the first quarter. We will be looking for an update on both the
mid-market deals in Q1 and the standard acquisition program in Q4 as
commentary from management has consistently suggested that M&A has
been relatively unimpacted by COVID-19. We are forecasting $48.5 million in
acquired EBITDA in 2022E, a 13% increase over 2021E totals. We are also
forecasting 60% of the acquired EBITDA to be added in the first two quarters
of 2022 given the likely closing of mid-market acquisitions.
Inflation Impact: We will be looking for commentary on the impact of cost
inflation and the extent to which increased pricing and additional
higher-margin insourced revenue will be able to offset inflationary pressure.
Conference Call Details: dentalcorp will report fourth-quarter earnings
before the open on March 25 with a conference call at 8:30 a.m. ET on the
same day. Dial-In: 416-764-8650. Passcode: 7826703