Post by
retiredcf on May 10, 2022 1:01pm
CIBC
Also have a $20.00 target. GLTA
EQUITY RESEARCH
May 10, 2022 Flash Research
DENTALCORP HOLDINGS LTD.
Q1/22 First Look: Mid-market Acquisitions Drive M&A
Acceleration
Our Conclusion
dentalcorp’s headline Q1/22 results were a slight beat on the top line and
adjusted EBITDA was in line with expectations. Annualized acquired EBITDA
of $25 million was substantially above our forecast of $14.7 million due to the
closing of multiple mid-market practices in the quarter. Due in part to the
larger acquisitions, the average acquisition multiple of 8.8x was higher than
the longer-term average of 6.5x-7.0x. Same-practice sales growth was down
sequentially from 4.9% to approximately -3%, driven by Omicron-related
provider absences and appointment cancellations. Adjusted for the Omicron
impact, same-practice sales growth would have been 2.7%.
Key Points
Q1/21 Results: dentalcorp reported revenue of $280.2 million, 2% above
consensus and our estimate ($275 million/$274 million) and up 13.4% Y/Y.
Adjusted EBITDA of $50.1 million was in line with consensus and our
estimate ($49 million/$50 million), with adjusted EBITDA margins of 17.9% in
line with Street expectations. Rent expenses were $9 million, leading to
Pre-IFRS 16 EBITDA of $41.1 million, at margins of 14.7%. Adjusted
EBITDA margins were lower sequentially (Q4/21: 18.9%) due to the
same-practice sales pressure in the quarter. There were no COVID-19-
related adjustments to EBITDA in Q1, compared to $8.7 million booked in
Q4/21, which translated to 320 bps of impact.
Mid-market Acquisition Update: dentalcorp completed 16 acquisitions in
the quarter, leading to 42 acquired practices. Practices acquired in the
quarter are expected to generate annualized adjusted EBITDA of $25 million.
dentalcorp paid $220 million in total consideration, implying an average
multiple of 8.8x, ahead of our estimate of 7.6x. The implied EBITDA per
acquired practice is ~$600K, down from $800K in the previous quarter.
dentalcorp ended Q1 with $514 million in liquidity, comprising $164 million in
cash and $350 million in debt capacity. The $115 million raised in the
January bought deal has been fully deployed.
Same-practice Sales Growth: dentalcorp reported same-practice sales
growth of approximately -3% due to Omicron-related appointment
cancellation and provider absences. Adjusted same-practice sales growth
was 2.7%, and management has noted that the unadjusted same-practice
sales growth in April and early May is in line with the adjusted number in Q1
of 2.7%.
Leverage: With pro forma adjusted EBITDA (after rent) of $234 million and
net debt of $1,059 million, we calculate leverage in the range of 4.0x on a
post-rent basis. Leverage is down slightly from 4.2x in the prior quarter given
the equity raise completed in the quarter.
Comment by
Karren411 on May 10, 2022 1:02pm
good info, thanks for the post