dentalcorp Reports Fourth Quarter and Full Year 2021 Results

• Revenue of $272.5 million for the quarter, an increase of 20.6% compared to the same period last year and full year revenue of $1.0 billion, an increase of 54.7% over 2020
• Adjusted EBITDA⁽¹⁾ of $50.1 million for the quarter, an increase of 53.2% compared to the same period last year, and full year Adjusted EBITDA⁽¹⁾ of $191.8 million, an increase of 220.2% over 2020
• Adjusted EBITDA margins of 18.4% for the quarter, an increase of 3.9%, compared to the same period last year
• Adjusted Free Cash Flow⁽¹⁾ for the quarter of $24.3 million and $90.4 million for 2021
• Last-twelve-months PF Revenue⁽¹⁾ and PF Adjusted EBITDA⁽¹⁾ of $1.1 billion and $215.5 million, respectively, resulting in a PF Adjusted EBITDA⁽¹⁾ margin of 19.4%
• Added $43.3 million in PF Adjusted EBITDA⁽¹⁾ from the acquisition of 67 practice locations in 2021
• Same Practice Sales Growth⁽¹⁾ of 4.9% for the quarter and 36.1% for 2021
• Adjusted Net Income⁽¹⁾ of $9.3 million for the quarter and $59.6 million for 2021; Net Loss of $43.1 million for the quarter and $160.4 million for the year

^{(1) Non-IFRS financial measure, non-IFRS ratio or supplementary financial measure. See "Non-IFRS and Other Measures" section of this news release}

TORONTO, March 25, 2022 /CNW/ - dentalcorp Holdings Ltd. ("dentalcorp" or the "Company") (TSX: DNTL), Canada's largest, and one of North America's fastest growing networks of dental practices, announced today its results for the fourth quarter and full year ended December 31, 2021. All references to dollar values in this press release are in Canadian dollars, unless otherwise indicated.

"Our business delivered double-digit growth with fourth quarter 2021 revenue and Adjusted EBITDA increasing by 20.6% and 53.2% respectively compared to the fourth quarter of 2020," said Graham Rosenberg, Chief Executive Officer. "The increases, achieved in a market under significant pressure from Omicron, are attributable to our resilience as an essential healthcare service, the acceleration of our growth program, which continues to surpass our expectations, and strong Same Practice Sales Growth, driven by our insourcing agenda, and the strong performance of new practices to our network."

Mr. Rosenberg added, "We continued to execute on our acquisitive growth strategy, adding 13 practices to our network in the fourth quarter 2021, which are budgeted to generate approximately $10.4 million in PF Adjusted EBITDA. This brings our full year total of acquired practice locations to 67, budgeted to generate $43.3 million in PF Adjusted EBITDA, highlighting the efficacy of our scale, sophistication and repeatable acquisition program. With the most robust pipeline in our history, we are highly confident that we will deliver another year of strong double-digit growth, with expanded margins and strong free cash flow conversion."

Financial and Operating Results for the Three Months and Year Ended December 31, 2021

• Revenue for the fourth quarter 2021 was $272.5 million, an increase of $46.6 million or 20.6% over the fourth quarter 2020. Full year revenue of $1,030.8 million increased by $364.6 million compared to 2020. The increase in revenue for the quarter and year was driven by incremental revenue from new practices in the network over the last 12 months, supported by Same Practice Sales Growth of 36.1%, driven in part by a positive contribution from the Company's orthodontics insourcing agenda.
• Adjusted EBITDA increased by $17.4 million to $50.1 million in the fourth quarter 2021 over the fourth quarter 2020, an increase of 53.2%. Full year Adjusted EBITDA of $191.8 million increased by 220.2% compared to 2020.
• Adjusted EBITDA Margin increased to 18.4% in the fourth quarter 2021 from 14.5% in the fourth quarter 2020, as the Company continued to realize operating efficiencies across its business. Full year Adjusted EBITDA margin of 18.6% increased by 9.6% compared to 2020.
• Adjusted Free Cash Flow was $24.3 million for the fourth quarter 2021 compared to Adjusted Free Cash Flow of ($6.8) million for the fourth quarter 2020.
• Adjusted Net Income for the fourth quarter 2021 was $9.3 million, compared to ($5.7) million for the fourth quarter 2020.
• The Company added 13 dental practices during the fourth quarter 2021, which are budgeted to generate a total of approximately $10.4 million in PF Adjusted EBITDA, for total consideration of $79.0 million. As at December 31, 2021, the Company owned 458 dental practices in Canada compared to 397 practices at December 31, 2020.
• The Company ended the fourth quarter 2021 with liquidity of $541.8 million, comprised of $141.8 million in cash and $400.0 million in debt capacity under its $1.3 billion Senior Debt facility (of which $900.0 million was drawn at quarter end).

Subsequent to Quarter End:

• As previously disclosed, the Company completed a bought deal offering for total gross proceeds of approximately $115.0 million. The proceeds are being used to support several accretive larger platforms, which are all expected to close through the first and second quarters of 2022.
• dentalcorp and Align Technology expanded partnership to bolster the Company's Invisalign^® offering to Canadians nationwide through its Ortho Acceleration Program
• The Company formed a partnership with McGill University's Faculty of Dental Medicine and Oral Health Sciences to drive innovation in digital dentistry through the establishment of the dentalcorp Professorship in Digital Dentistry, the dentalcorp Fellowship in Digital Dentistry and the dentalcorp Research Award in Business Practice Management

Consolidated Financial Results

Consolidated Statements of Loss and Comprehensive Loss		Three months ended Dec 31			Year ended Dec 31
		2021	2020		2021	2020
		$ millions	$ millions		$ millions	$ millions
Revenue		272.5	225.9		1,030.8	666.2
Cost of revenue		148.1	120.6		535.4	344.6
Gross Profit		124.4	105.3		495.4	321.6
Selling, general and administrative expenses		90.5	84.9		343.2	229.4
Depreciation and amortization		42.6	37.6		158.5	138.6
Share based compensation		7.7	0.9		75.2	5.8
Foreign exchange gain		12.1	36.2		115.0	138.7
Net finance costs		–	(68.7)		(76.2)	(31.6)
Change in fair value of derivative instruments		–	57.0		65.9	42.0
Change in fair value of contingent consideration		–	(3.7)		(30.8)	(10.2)
Change in fair value of conversion option		13.4	1.1		15.6	(12.5)
Share of associate loss		0.1	–		0.2	–
Loss before income taxes		(42.0)	(40.0)		(171.2)	(178.6)
Income tax expense (recovery)		1.1	(8.0)		(10.8)	(21.5)
Net loss and comprehensive loss		(43.1)	(32.0)		(160.4)	(157.1)

Other Metrics

Adjusted Net Income^(a)		9.3	(5.7)		59.6	(126.8)
Adjusted EBITDA^(b)		50.1	32.7		191.8	59.9

1. For the definition of Adjusted net income and a reconciliation to Net loss and comprehensive loss, see Non-IFRS measures below.
2. For the definition of Adjusted EBITDA and a reconciliation to EBITDA, see Non-IFRS measures below.

Outlook

The Company expects to benefit from dentistry's resiliency as a highly recurring essential healthcare service, despite experiencing Omicron-related headwinds in the first six weeks of 2022. It anticipates delivering modestly higher results in the first quarter of 2022 compared to its fourth quarter 2021.

Dental expenditures have experienced strong relative growth during periods of higher-than-average inflation. Accordingly, in the context of the current macro environment, management believes dentalcorp's predictable cost structure, high margins, low commodity risk and minimal capital expenditure requirements, provide a constructive backdrop for the Company's continued delivery of double-digit growth.

Conference Call Notification

The Company will hold a conference call to provide a business update on Friday, March 25, 2022, at 8:30 a.m. ET. A question-and-answer session will follow the business update.

LIVE CONFERENCE CALL DETAILS
DATE:	Friday, March 25, 2022
TIME:	8:30 a.m. ET
WEBCAST:	https://produceredition.webcasts.com/starthere.jsp?ei=1533953&tp_key=c57f519a9a
DIAL-IN NUMBER:	416-764-8650 or 1-888-664-6383
REFERENCE NUMBER:	78263703
REPLAY
DIAL-IN NUMBER:	416-764-8677 or 1-888-390-0541
REFERENCE NUMBER:	263703#
WEBCAST:	https://produceredition.webcasts.com/starthere.jsp?ei=1533953&tp_key=c57f519a9a (available for two weeks after the call)

Notice of Annual General Meeting

The Company announced today that it will hold its annual general meeting ("AGM") of shareholders virtually on May 26th, 2022, at 11:00 am ET. The record date for determining a shareholder's entitlement to receive notice of and to vote at the AGM will be April 11, 2022. 

Further information regarding the AGM will be set forth in the Notice of Meeting and Record Date filed on SEDAR on March 17, 2022 and in the management information circular to be filed on SEDAR. 

Non-IFRS and Other Measures 

As appropriate, we supplement our results of operations determined in accordance with IFRS with certain non-IFRS financial measures that we believe are useful to investors, lenders and others in assessing our performance and which highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Our management also uses non-IFRS measures for purposes of comparison to prior periods, to prepare annual operating budgets, for the development of future projections and earnings growth prospects, to measure the profitability of ongoing operations and in analyzing our financial condition, business performance and trends, including the run-rate of the business after taking into consideration the acquisitions of dental practices. As such, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective, including how we evaluate our financial performance and how we manage our capital structure. We also believe that securities analysts, investors and other interested parties frequently use these non-IFRS measures and industry metrics in the evaluation of issuers. These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and may include or exclude certain items as compared to similar IFRS measures, and such measures may not be comparable to similarly-titled measures reported by other companies. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These measures which are used in this earnings release include: 

• Non-IFRS Measures: Adjusted EBITDA, Adjusted free cash flow, adjusted net income (loss), EBITDA, PF Adjusted EBITDA, PF Revenue
• Non-IFRS Ratios: Adjusted EBITDA Margin
• Supplementary Financial Measure: Same Practice Sales Growth

For information on the most directly comparable IFRS measures, composition of the measures, a description of how we use these measures and an explanation of how these measures provide useful information to investors, refer to the "Non-IFRS and Other Measures" section of our management discussion and analysis as at and for the year ended December 31, 2021, available at on the Fund's profile on SEDAR at www.sedar.com, which is incorporated by reference into this news release. 

Reconciliation of Non-IFRS and Other Measures

The following table shows the reconciliations of net loss and comprehensive loss to Adjusted EBITDA, Adjusted EBITDA Margin, EBITDA, PF Adjusted EBITDA, and the reconciliation of revenue to PF Revenue.

	Three months ended,								Year ended,
	December 31,				December 31,				December 31,				December 31,
	2021				2020				2021				2020
	(expressed in millions of dollars)
Net loss and comprehensive loss	$	(43.1)			$	(32.0)			$	(160.4)			$	(157.1)
Add:
Finance costs, net		12.1				36.2				115.0				138.7
Income tax recovery		1.1				(8.0)				(10.8)				(21.5)
Depreciation and amortization		42.6				37.6				158.5				138.6
EBITDA		12.7				33.8				102.3				98.7
Add:
Net impact of foreign exchange, change in fair value of derivative instruments, change in fair value of
conversion option, and share of associate losses		0.1				(15.4)				(40.9)				0.2
Share-based compensation		7.7				0.9				75.2				5.8
External acquisition expenses		3.1				4.9				7.6				9.9
COVID-19 costs		8.7				5.6				11.2				10.0
Canada Emergency Wage Subsidy		—				—				—				(54.9)
Change in fair value of contingent consideration		13.4				1.1				15.6				(12.5)
IPO costs		0.8				—				15.7				—
Loss on disposal of property and equipment		—				0.7				—				0.7
Other corporate costs		3.6				1.1				5.1				2.0
Adjusted EBITDA		50.1				32.7				191.8				59.9
Adjusted EBITDA Margin		18.4	%			14.5	%			18.6	%			9.0
Adjusted EBITDA		50.1				32.7				191.8				59.9
Add:
COVID-19 adjustment		—				13.7				—				62.9
Acquisition adjustment		2.3				1.6				23.7				15.6
PF Adjusted EBITDA		52.4				48.0				215.5				138.4
PF Adjusted EBITDA Margin		18.7	%			20.3	%			19.4	%			14.6
PF Adjusted EBITDA		52.4				48.0				215.5				138.4
Subtract:
Interest and principal repayments on leases		(8.7)				(8.0)				(34.0)				(27.4)
Lease interest and principal repayments on acquisitions		(0.2)				(0.2)				(2.3)				(2.1)
PF Adjusted EBITDA after rent		43.5				39.8				179.2				108.9
Revenue		272.5				225.9				1,030.8				666.2
Add:
COVID-19 adjustment		—				4.0				—				215.0
Acquisition adjustment		7.1				6.6				82.7				66.5
PF Revenue		279.6				236.5				1,113.5				947.7

The following table shows the reconciliations of adjusted net income (loss): 

	Three months ended,								Year ended,
	December 31,				December 31,				December 31,				December 31,
	2021				2020				2021				2020
	(expressed in millions of dollars)
Net loss and comprehensive loss	$	(43.1)				(32.0)				(160.4)				(157.1)
Add:
Amortization of intangible assets		20.9				17.0				75.9				66.1
Share-based compensation		7.7				0.9				75.2				5.8
Change in fair value of contingent consideration		13.4				1.1				15.6				(12.5)
External acquisition costs		3.1				4.9				7.6				9.9
COVID-19 costs		8.7				5.6				11.2				10.0
Canada Emergency Wage Subsidy		—				—				—				(54.9)
IPO costs		0.8				—				15.7				—
Other corporate costs		3.6				1.1				5.1				2.0
		15.1				(1.4)				45.9				(130.7)
Tax impact of the above		(5.8)				(4.3)				(16.0)				3.9
Adjustment for legacy debt, net of tax impact		—				—				29.7				—
Adjusted net income (loss)		9.3				(5.7)				59.6				(126.8)

The following table shows the reconciliation of cash flow from operations to adjusted free cash flow: 

	Three months ended,								Year ended,
	December 31,				December 31,				December 31,				December 31,
	2021				2020				2021				2020
	(expressed in millions of dollars)
Cash flow from operating activities	$	23.6				(10.7)				55.1				(35.2)
Add/deduct:
External acquisition costs		3.1				4.9				7.6				9.9
COVID-19 costs		1.5				5.6				4.0				10.0
Canada Emergency Wage Subsidy		—				—				—				(54.9)
Working capital impact of IPO Costs		—				—				—				—
IPO costs		0.8				—				15.7				—
Other corporate costs		3.6				1.1				5.1				2.0
		33.6				0.9				87.5				(68.2)
Deduct:
Repayment of principal on leases		(5.4)				(4.8)				(21.2)				(15.2)
Maintenance capex		(2.9)				(2.9)				(9.7)				(8.6)
		24.3				(6.8)				56.6				(92.0)
Adjustment for legacy debt, net of tax impact		—				—				33.8				—
Adjusted free cash flow		24.3				(6.8)				90.4				(92.0)

Forward Looking Statements

This news release includes forward-looking information and forward-looking statements within the meaning of applicable Canadian securities legislation, including the Securities Act (Ontario) (collectively, "forward-looking statements"), which reflect management's expectations regarding the Company's future growth, results from operations (including, without limitation, future expansion and capital expenditures), performance (both operational and financial) and business prospects, future business plans and opportunities. Wherever possible, words such as "plans", "expects", "scheduled", "budgeted", "projected", "estimated", "timeline", "forecasts", "anticipates", "suggests", "indicative", "intend", "guidance", "outlook", "potential", "prospects", "seek", "strategy", "targets" or "believes", or variations of such words and phrases or statements that certain future conditions, actions, events or results "will", "may", "could", "would", "should", "might" or "can", or negative or grammatical versions thereof, "be taken", "occur", "continue" or "be achieved", and other similar expressions, have been used to identify forward looking statements. Such forward-looking information includes, but is not limited to, the forward-looking information related to the Canadian dental industry; addressable markets for the Company's services; expectations regarding its revenue and its revenue generation potential; its business plans and strategies; and its competitive position in its industry. 

Forward-looking statements are necessarily based upon management's perceptions of historical trends, current conditions and expected future developments, as well as a number of specific factors and assumptions that, while considered reasonable by management as of the date on which the statements are made, are inherently subject to significant business, economic and competitive uncertainties and contingencies which could result in actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking statements. Such factors and assumptions include, but are not limited to, the Canadian dental industry; the Company's ability to retain key personnel, its ability to maintain and expand geographic scope; its ability to execute on its business plans and strategies; its ability to obtain and maintain existing financing on acceptable terms; changes in laws, rules, regulations and global standards; the extent of the impact of COVID-19 and inflation on its operations and overall financial performance and other factors listing under the heading Risk Factors in the Company's supplemented PREP Prospectus dated May 27, 2021. While the Company considers these assumptions to be reasonable, many assumptions are based on factors and events that are not within its control and there is no assurance that they will prove to be correct. 

By their nature, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. Known and unknown risk factors, many of which are beyond the control of the Company, could cause actual results to differ materially from the forward-looking statements. Such risks include, but are not limited to, the Company's potential inability to successfully execute its growth strategy and complete additional acquisitions; its dependence on the integration and success of its acquired dental practices; the potential adverse effect of acquisitions on its operations; its dependence on the parties with which the Company has contractual arrangements and obligations; changes in relevant laws, governmental regulations and policy and the costs incurred in the course of complying with such changes; competition in the dental industry; increases in operating costs; the risk of difficulty complying with public company reporting obligations; and the risk of a failure in internal controls. 

Although the Company has attempted to identify important factors that could cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events, conditions, results, performance or achievements to differ from those anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management's expectations and plans relating to the future, as at the date they are provided. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law. Accordingly, investors should not place undue reliance on forward-looking statements. All of the forward-looking statements are expressly qualified by the foregoing cautionary statements.

About dentalcorp

dentalcorp is Canada's largest and fastest growing network of dental practices, committed to advancing the overall well-being of Canadians by delivering the best clinical outcomes and unforgettable experiences. dentalcorp acquires leading dental practices, uniting its network in a common goal: to be Canada's most trusted healthcare network. Leveraging its industry-leading technology, know-how and scale, dentalcorp offers professionals the unique opportunity to retain their clinical autonomy while unlocking their potential for future growth. To learn more, visit dentalcorp.ca. 

SOURCE dentalcorp Holdings Ltd.

For investor inquiries, please contact: 416.558.8338 x 116, [email protected]