dentalcorp Reports Third Quarter 2021 Results

• Revenue of $250.2 million for the quarter, an increase of 22.2% compared to the third quarter 2020
• Adjusted EBITDA⁽¹⁾ of $46.2 million for the quarter, an increase of 40.2%, and Adjusted EBITDA margins of 18.5%, an increase of 2.4%, in each case compared to the third quarter 2020 
• Acquired $11 million in PF Adjusted EBITDA⁽¹⁾ from the acquisition of 15 practices
• Same Practice Sales Growth⁽¹⁾ of 3.5% for the quarter, compared with the third quarter 2020
• Last-twelve-months PF Revenue⁽¹⁾ and PF Adjusted EBITDA⁽¹⁾ of $1.1 billion and $211.0 million, respectively, for the quarter, resulting in a PF Adjusted EBITDA⁽¹⁾ margin of 19.6%
• Adjusted Free Cash Flow⁽¹⁾ for the quarter of $12.7 million
• Adjusted Net Income⁽¹⁾ for the quarter of $17.5 million

TORONTO, Nov. 15, 2021 /CNW/ - dentalcorp Holdings Ltd. ("dentalcorp" or the "Company") (TSX: DNTL), Canada's largest and fastest growing network of dental practices, announced today its three and nine month financial and operating results for the period ended September 30, 2021. All references to dollar values in this press release are in Canadian dollars, unless otherwise indicated.

"Third quarter 2021 revenue increased by 22.2% compared to the third quarter 2020, despite the adverse impact from ongoing COVID-19 restrictions and variant outbreaks in many of our key markets," said Graham Rosenberg, Chief Executive Officer. "The increase was driven by the strength of our acquisitive growth program, which continues to surpass expectations, solid Same Practice Sales Growth, underpinned by our orthodontic insourcing agenda, and strong performance from our recent acquisition cohorts. Adjusted EBITDA for the quarter increased by 40.2% with margins expanding, driven by the continued realization of operating efficiencies across our business."

"During the third quarter, we acquired 15 practices which are expected to generate $11 million in PF Adjusted EBITDA, and our robust pipeline continues to build." Mr. Rosenberg added.

Third Quarter Financial and Operating Results for the Three Months Ended September 30, 2021

• Revenue for the third quarter 2021 was $250.2 million, for an increase of $45.4 million or 22.2% over the third quarter 2020. The increase in revenue was primarily driven by incremental revenue from acquired practices over the last twelve months to September 30, 2021, underpinned by Same Practice Sales Growth of 3.5%, driven in part by a positive contribution from the Company's orthodontics insourcing agenda.
  
  
•  Adjusted EBITDA increased by $13.2 million to $46.2 million in the third quarter 2021 over the third quarter 2020, an increase of 40.2%; and Adjusted EBITDA Margin increased to 18.5% in the third quarter 2021 from 16.1% in the third quarter 2020, as the Company continued to realize operating efficiencies across its business.
  
  
•  Adjusted Free Cash Flow was $12.7 million for the third quarter 2021 compared to Adjusted Free Cash Flow of ($1.0) million for the third quarter 2020.
  
  
• Adjusted Net Income for the third quarter 2021 was $17.5 million, compared to ($19.8) million for the third quarter 2020.
  
  
• The Company acquired 15 dental practices during the quarter, which are budgeted to generate a total of $11 million in PF Adjusted EBITDA, for total consideration of $74 million. As at September 30, 2021, the Company owned 445 dental practices in Canada compared to 375 practices at September 30, 2020.
  
  
• The Company ended the third quarter 2021 with liquidity of $592 million, comprised of $192 million in cash and $400 million in debt capacity under its $1.3 billion Senior Debt facility (of which $900 million was drawn at quarter end).

______________________

¹ A Non-IFRS measure; see "Non-IFRS Measures" below

Subsequent to Quarter End:

• The Company announced that effective following the close of trading on November 30, 2021, its subordinate voting shares will be added to the MSCI Canada Small Cap Index. The MSCI Canada Small Cap Index is designed to measure the performance of the small cap segment of the Canada market.
• The Company is on track to launch the first phase of its previously announced partnership with Loblaw Companies Limited (TSX: L) in the first quarter 2022. The strategic partnership makes dentalcorp the exclusive provider of dental health services and oral care education for PC Health app users.
• dentalcorp changed its auditor from Deloitte LLP ("Deloitte") to Ernst & Young LLP (Ernst & Young) effective October 7, 2021. The Company intends to continue to work with Deloitte for non-audit services.

Consolidated Financial Results

Consolidated Statements of Loss and Comprehensive Loss		Three month period ended Sept 30				Nine month period ended Sept 30
		2021		2020		2021		2020
		$ millions		$ millions		$ millions		$ millions
Revenue		250.2		204.8		758.3		440.3
Cost of revenue		126.7		103.6		387.3		224.0
Gross Profit		123.5		101.2		371.0		216.3
Selling, general and administrative expenses		81.5		53.5		252.7		144.5
Depreciation of property and equipment		14.4		11.6		42.6		36.5
Depreciation of right-of-use assets		6.2		5.2		18.3		15.4
Amortization of intangible assets		18.9		16.4		55.0		49.1
Share-based compensation		9.4		3.3		67.5		4.9
Operating income (loss)		(6.8)		11.2		(65.1)		(34.0)
Finance costs		10.9		36.4		103.7		103.9
Finance income		(0.4)		(0.4)		(0.8)		(1.4)
Foreign exchange (gain) loss		(0.1)		(32.5)		(76.2)		37.1
Change in fair value of derivative instruments		(0.5)		24.5		65.9		(15.0)
Change in fair value of conversion option		–		13.2		(30.8)		(6.5)
Change in fair value of contingent consideration		6.0		(2.4)		2.2		(13.6)
Share of associate losses		–		–		0.1		–
Loss before income taxes		(22.7)		(27.6)		(129.2)		(138.6)
Income tax recovery		(4.3)		(2.4)		(11.9)		(13.5)
Net loss and comprehensive loss		(18.4)		(25.2)		(117.4)		(125.1)

Other Metrics

Adjusted Net Income^(a)		17.5		(19.8)		20.4		(121.0)
Adjusted EBITDA^(b)		46.2		33.0		141.5		27.4

(a)	For the definition of Adjusted Net Income and a reconciliation to Net Income, see Non-IFRS measures below.
(b)	For the definition of Adjusted EBITDA and a reconciliation to EBITDA, see Non-IFRS measures below.

Outlook
The Company anticipates that the sequential monthly revenue growth it realized in the third quarter 2021 will continue through the balance of the year and into fiscal 2022. The Company remains confident that its ongoing focus on its core growth strategies – including organic growth driven in part by its insourcing initiatives, acquisitive growth generated from its proven and repeatable acquisition program which continues to exceed expectations, and the realization of ongoing operational efficiencies to achieve further margin expansion – will drive its continued strong performance.

Conference Call Notification
The Company will hold a conference call to provide a business update on Monday, November 15, 2021 at 8:30 a.m. ET. A question-and-answer session will follow the business update.

LIVE CONFERENCE CALL DETAILS
DATE:	Monday, November 15, 2021
TIME:	8:30 a.m. ET
WEBCAST:	https://produceredition.webcasts.com/starthere.jsp?ei=1506202&tp_key=5857ea8455
DIAL-IN NUMBER:	416-764-8650 or 1-888-664-6383
REFERENCE NUMBER:	09145645
REPLAY
DIAL-IN NUMBER:	416-764-8677 or 1-888-390-0541
REFERENCE NUMBER:	145645#
WEBCAST:	https://produceredition.webcasts.com/starthere.jsp?ei=1506202&tp_key=5857ea8455 (available for two weeks after the call)

Non-IFRS 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.

During the period ended September 30, 2021, the Company modified the composition of "Adjusted EBITDA", "Adjusted net income (loss)" and "Adjusted free cash flow". "Adjustment for legacy debt" related to a reduction of cash interest due to lower interest rates on the Credit Facilities and lower overall level of borrowings and non-cash losses related to the refinancing of the Company's borrowings which is no longer applicable to the Company as of the period ended September 30, 2021 and has been removed from "Adjusted net income (loss)" and "Adjusted free cash-flow" so as to improve comparability of such measures between periods. The impact of CEWS, being subsidies received by the Company during the period, is reported as "Canada Emergency Wage Subsidy" in the adjustments to include a reduction in "Adjusted EBITDA", "Adjusted net income (loss)" and "Adjusted free cash flow". Working capital impact of IPO costs is reported as "IPO Costs" as an add back of non-recurring costs related to the IPO in "Adjusted free cash flow" during the period. "Canada Emergency Wage Subsidy" and "IPO Costs" have been added to the above-noted non-IFRS measures in order to present a more accurate view of the Company's operations and performance.

EBITDA

"EBITDA" means, for the applicable period, net loss and comprehensive loss plus (a) finance costs, (b) income tax expense (recoveries), (c) depreciation of property and equipment, (d) depreciation of right-of-use assets, and (e) amortization of intangible assets. We present EBITDA to assist investors in understanding the mathematical development of Adjusted EBITDA. Management does not use EBITDA as a financial performance metric. For more information on how EBITDA is calculated, see below.

	Three month period ended Sept 30			Nine month period ended Sept 30
	2021	2020		2021	2020
	$ millions	$ millions		$ millions	$ millions
Net loss and comprehensive loss	(18.4)	(25.2)		(117.4)	(125.1)
Finance costs, net	10.5	36.0		102.8	102.5
Income tax expense (recoveries)	(4.3)	(2.4)		(11.9)	(13.5)
Depreciation of property and equipment	14.4	11.6		42.6	36.5
Depreciation of right-of-use assets	6.2	5.2		18.3	15.4
Amortization of intangible assets	18.9	16.4		55.0	49.1
EBITDA	27.3	41.6		89.5	64.9

Adjusted EBITDA
"Adjusted EBITDA" is calculated by adding to EBITDA certain expenses, costs, charges or benefits incurred in such period which in management's view are either not indicative of underlying business performance or impact the ability to assess the operating performance of our business, including: (a) net impact of foreign exchange, change in fair value of derivatives, change in fair value of conversion option, and share of associate losses; (b) share-based compensation; (c) external acquisition expenses; (d) COVID-19 costs; (e) Canada Emergency Wage Subsidy; (f) change in fair value of contingent consideration; (g) one-time costs related to the IPO; and (h) other one-time corporate costs (consisting primarily of consulting costs related to our recent enterprise resource planning implementation). Adjusted EBITDA is a supplemental measure used by management and other users of our financial statements to assess the financial performance of our business without regard to the effects of interest, depreciation and amortization costs, expenses that are not considered reflective of underlying business performance, and other expenses that are expected to be one-time or non-recurring. We use Adjusted EBITDA to facilitate a comparison of our operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting our business. Adjusted EBITDA is not an IFRS measure. For more information on how Adjusted EBITDA is calculated, see below.

	Three month period ended Sept 30			Nine month period ended Sept 30
	2021	2020		2021	2020
	$ millions	$ millions		$ millions	$ millions
EBITDA	27.3	41.6		89.5	64.9
Add:
Net impact of foreign exchange, change in fair value of derivatives, change in fair value of conversion option and share of associate losses	(0.6)	5.1		(41.0)	15.7
Share based compensation	9.4	3.3		67.5	4.9
External acquisition expenses^(1)	1.8	2.2		4.5	5.0
COVID-19 costs^(2)	0.5	0.5		2.4	4.5
Canada Employment Wage Subsidy ("CEWS")	-	(17.3)		-	(54.9)
Change in fair value of contingent consideration^(3)	6.0	(2.4)		2.2	(13.6)
IPO costs	1.1	-		14.9	-
Other corporate costs^(4)	0.7	-		1.5	0.9
Adjusted EBITDA	46.2	33.0		141.5	27.4
Adjusted EBITDA Margin	18.5%	16.1%		18.7%	6.2%

1. Represents advisory fees, as well as other expenses paid to third parties, related to acquisition activities which are excluded as these costs are incurred only once in connection with each acquisition by the Company and are not related to underlying business operations of the Company.
2. Represents costs incurred as a result of the COVID-19 pandemic that are not expected to recur, including enhanced employee benefits, retrofitting expenses, payments to safety consultants and retention payments to staff, net of subsidies received under the Canada Emergency Wage Subsidy.
3. Represents the reversal of income (expense) recorded during the period, where such income (expense) resulted from a difference between the actual payment by us during such period under an earn-out and the originally estimated amount of such payment.
4. Represents costs that are not expected to recur related, as applicable, to the implementation of new corporate systems and vendor consolidations.

Adjusted EBITDA Margin
"Adjusted EBITDA Margin" means Adjusted EBITDA divided by revenue. Adjusted EBITDA Margin is not an IFRS measure.

PF Revenue
"PF Revenue" in respect of a period means revenue for that period plus the estimated impact of the COVID-19 related closures on the Company's revenue for that period plus the Company's estimate of the additional revenue that it would have recorded if it had acquired each of the practices that it acquired during that period on the first day of that period, in each case calculated in accordance with the methodology described in the reconciliation table below.

	LTM, Sept 30, 2021
	(expressed in millions of dollars)
Revenue		984.2
Add:
COVID-19 adjustment^(5)		4.0
Acquisition adjustment^(6)		87.7
PF Revenue		1075.9

5.

Revenue for the LTM ended September 30, 2021 was impacted by the global COVID-19 pandemic. Beginning on March 15, 2020, most practices within the Company's network were limited to emergency-only services. The Company estimates that the impact of the COVID-19 related closures on its revenue for LTM ended September 30, 2021 was $4.0 million. For more information on the methodology used by the Company to estimate this impact, see the Company's MD&A for the three and nine-month periods ended September 30, 2021 filed on SEDAR.

6.

The Company regularly acquires dental practices and estimates that if it had acquired each of the practices that it acquired during the LTM period ended September 30, 2021, it would have recorded additional revenue of $87.7 million. These estimates are based on the amount of revenue budgeted by the Company to be earned by the relevant practices at the time of their acquisition by dentalcorp. There can be no assurance that if the Company had acquired these practices on the first day of the applicable fiscal period, they would have actually generated such budgeted revenue, nor is this estimate indicative of future results.

PF Adjusted EBITDA
"PF Adjusted EBITDA" in respect of a period means Adjusted EBITDA for that period plus the estimated impact of the COVID-19 related closures on the Company's Adjusted EBITDA for that period plus the Company's estimate of the additional Adjusted EBITDA that it would have recorded if it had acquired each of the practices that it acquired during that period on the first day of that period, in each case calculated in accordance with the methodology described in the reconciliation table below. PF Adjusted EBITDA is utilized by certain financial institutions to measure borrowing capacity.

		LTM, Sept 30, 2021
		($ millions)
Adjusted EBITDA		174.2
Add:
COVID-19 adjustment^(7)		13.7
Acquisition adjustment^(8)		23.0
PF Adjusted EBITDA		210.9
PF Adjusted EBITDA Margin		19.6%

7.

Adjusted EBITDA for the LTM ended September 30, 2021 was impacted by the global COVID-19 pandemic. Beginning on March 15, 2020, most practices within the Company's network were limited to emergency-only services. The Company estimates that the impact of the COVID-19 related closures on its Adjusted EBITDA for LTM ended September 30, 2021 was $13.7 million. For more information on the methodology used by the Company to estimate this impact, see the Company's MD&A for the three and nine-month periods ended September 30, 2021 filed on SEDAR.

8.

The Company regularly acquires dental practices and estimates that if it had acquired each of the practices that it acquired during the LTM period ended September 30, 2021, it would have recorded additional Adjusted EBITDA of $23.0 million. These estimates are based on the amount of Practice-Level EBITDA budgeted by the Company to be earned by the relevant practices at the time of their acquisition by dentalcorp. There can be no assurance that if the Company had acquired these practices on the first day of the applicable fiscal period, they would have actually generated such budgeted revenue, nor is this estimate indicative of future results.

Same Practice Sales Growth
"Same Practice Sales Growth" in respect of a period means the percentage change in revenue derived from Established Practices (other than Legacy Specialty Practices) in that period as compared to revenue from the same practices in the corresponding period in the immediately prior year. A practice will be deemed to be an "Established Practice" in a period if it was operating as part of dentalcorp for the entirety of the relevant period and for the entirety of the corresponding period in the immediately prior year. A "Legacy Specialty Practice" means a practice acquired prior to mid-2014 using a legacy deal structure that is no longer utilized today.

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 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]