Earnings call transcript: Dentalcorp Q1 2025 shows strong revenue growth

Dentalcorp Holdings Ltd reported robust financial performance for the first quarter of 2025, with revenue and adjusted EBITDA showing significant year-over-year growth. Despite a slight miss in revenue forecasts, the company’s stock rose modestly, reflecting investor confidence in its strategic initiatives and future outlook. According to InvestingPro data, analysts maintain a Strong Buy consensus on the stock, with a potential upside of 42% from current levels. The company currently appears undervalued based on InvestingPro’s Fair Value analysis.

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Key Takeaways

• Revenue for Q1 2025 increased by 10% year-over-year to $409.4 million.
• Adjusted EBITDA grew by 11.5% to $75.9 million, with a margin improvement.
• Dentalcorp’s stock price rose by 0.57% following the earnings release.
• The company plans significant expansion with its Ortho Acceleration Program.

Company Performance

Dentalcorp Holdings demonstrated strong performance in the first quarter of 2025, driven by a combination of organic growth and strategic acquisitions. The company reported a 10% increase in revenue compared to the same period last year, reflecting its robust market position in the dental services industry. This growth aligns with the company’s impressive 15% revenue CAGR over the past five years, as reported by InvestingPro. The adjusted EBITDA margin improved to 18.5%, up from 18.3% in Q1 2024, indicating efficient cost management and growing profitability. The company maintains a healthy current ratio of 1.17, suggesting strong operational efficiency.

Financial Highlights

• Revenue: $409.4 million, up 10% year-over-year.
• Adjusted EBITDA: $75.9 million, an 11.5% increase year-over-year.
• Adjusted Free Cash Flow: $44.3 million, representing a 26% growth.
• Free Cash Flow Conversion: 65%, up from 59% in Q1 2024.

Earnings vs. Forecast

Dentalcorp’s earnings per share (EPS) forecast was $0.1448, with actual figures yet to be disclosed. The revenue forecast was $411.13 million, and the actual revenue came in slightly lower at $409.4 million. Despite this minor miss, the company’s strong overall performance and strategic initiatives likely mitigated any negative investor reaction.

Market Reaction

Following the earnings announcement, Dentalcorp’s stock experienced a 0.57% increase, closing at $8.81. This positive movement reflects investor confidence in the company’s growth prospects and strategic plans, despite the slight revenue shortfall. The stock has demonstrated impressive momentum with a 45.84% return over the past year, while maintaining relatively low price volatility. InvestingPro analysis shows the stock offers a strong free cash flow yield, with a notable 9% yield based on the last twelve months.

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Outlook & Guidance

For the full year 2025, Dentalcorp projects a revenue growth of 10-11% and a 3-5% increase in same-practice revenue. The company anticipates a 20 basis point improvement in EBITDA margins and expects $25+ million in pro forma adjusted EBITDA from acquisitions. The Ortho Acceleration Program is set to expand to 40-50 additional locations, supporting future growth.

Executive Commentary

CEO Graham Rosenberg emphasized the resilience of dental services, stating, "Dentistry is a highly recurring essential cash pay healthcare service and it is resilient through economic cycles." CFO Nate Chaplia expressed confidence in the company’s growth strategy, noting, "We continue to be confident about our ability to grow the business through acquisitions and organically."

Risks and Challenges

• Potential economic downturns could impact discretionary spending on dental services.
• Integration challenges with newly acquired practices may affect operational efficiency.
• Regulatory changes in healthcare policies could influence market dynamics.
• Competition from other dental service providers may pressure market share.

Q&A

During the earnings call, analysts inquired about the impact of the Canadian Dental Care Plan (CDCP), to which executives responded that its effect on revenue projections is minimal. Questions also focused on the company’s M&A pipeline, with management expressing optimism about future acquisitions and continued free cash flow growth.

Full transcript - dentalcorp Holdings Ltd (DNTL) Q1 2025:

Conference Call Operator: Good morning, and welcome to Dental Corp’s First Quarter twenty twenty five Results Conference Call. Please note that all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. At this time, I would like to turn the call over to Mr. Nate Chaplia, President and Chief Financial Officer of Dental Corp.

Please go ahead, sir.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Thank you, operator, and good morning, everyone. Welcome to the Dental Corp. First quarter twenty twenty five results conference call. I’m joined here by Graham Rosenberg, our Chief Executive Officer. Before we start, we would like to remind you that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated.

Please note that statements made during this call may include forward looking statements and information and future oriented financial information regarding Dental Corp. And its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management’s expectation of future growth, results of operations, business performance, business prospects and opportunities. Such statements are made as of the date hereof, and Dental Corp. Assumes no obligation to update or revise them to reflect events, disclosures or circumstances except as required by applicable securities law. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results.

A number of these risks and uncertainties could cause results to differ materially from results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information. Please refer to the forward looking statements and information and future oriented financial information section of our public filings. Without limitations, our MD and A and our earnings press release issued today for additional information. For those of you who have dialed into the call, the company has prepared a series of slides to complement our prepared remarks.

These slides are available on the Investor Relations section of our website and the Events and Presentations section. I will now turn the call over to our Chief Executive Officer, Graham Rosenberg, opening remarks. Graham?

Graham Rosenberg, Chief Executive Officer, Dental Corp: Thanks, Nate, and good morning, everyone. We’re pleased to be with you today to review Dental Corp’s recent developments as well as our financial and operating results for the three months ended 03/31/2025. For today’s call, I’m going to share a number of those developments with you, and I will then hand the call over to Nate, who will discuss our financial results in detail, after which I will provide forward looking remarks about how our business is trending. As highlighted on Slide three, Dental Corp operates in a $22,000,000,000 highly fragmented market that is only 7% consolidated. Dentistry is a highly recurring essential cash pay healthcare service and it is resilient through economic cycles and insulated from disintermediation by technologies.

Dental Corp expects to continue outpacing the broader Canadian dental services market by delivering 4% plus same practice revenue growth and taking advantage of multiyear Canadian dollar supply contracts with our key suppliers, resulting in minimal direct tariff or foreign exchange exposure. When combined with our proven repeatable M and A engine, we have delivered predictable double digit growth across all key financial metrics since our IPO in 2021 and expect to continue to deliver that double digit growth moving forward. Our confidence in the business is supported by our first quarter results, which exceeded expectations and reinforced our confidence in the full year outlook. On Slide four, you will see that we completed our first quarter March ’30 ’1, ’20 ’20 ’5 with approximately $1,600,000,000 of LTM pro form a revenue and approximately $310,000,000 of pro form a adjusted EBITDA for the same period. Last twelve months adjusted free cash flow also came in strong at $161,000,000 Our teams continue to deliver the highest standards of care to more than 2,300,000 active patients, ninety two percent of which are recurring and visit our practices over 5,600,000 times annually.

As you can see on the next slide, we continue to convert a high percentage of our EBITDA into free cash flow in any given period and expect this conversion to increase as we continue to delever and realize network wide operating leverage and efficiencies. Our business operates with robust and expanding margins, low CapEx requirements and capped interest rate exposure on 100% of our existing debt outstanding. And our last twelve months free cash flow conversion increased to 65% in the quarter, up from 59% in Q1 of twenty twenty four, resulting in 16 year over year adjusted free cash flow growth per share. On Slide six, as expected, we reduced our leverage by 0.57 times from the same period last year to 3.77 times. Q1 twenty twenty five marks the sixth consecutive quarter of deleveraging and we continue to work towards our medium term target band of three to 3.5 times.

On the next slide, you’ll see a comparison of valuation and free cash flow yields versus our peers. At the end of the quarter, we were trading at a level that implies a 4.7 times discount to our peer group on an EV to LTM EBITDA basis. And at the same time, we’re currently trading at an 8.7% free cash flow yield compared to our peer group of 3.9%. Turning to Slide eight. I’m pleased to report that our business delivered revenue of $409,400,000 in the first quarter of twenty twenty five, up approximately 10% over the same period in 2024, underpinned by strong same practice revenue growth of 4.6% and a 91.5% recurring patient visit rate, reflecting the strong predictability and continued demand for routine care underlying our business.

Adjusted EBITDA was $75,900,000 up 11.5% over the same quarter last year, with margins coming in at 18.5, an improvement of 0.2% over Q1 of twenty twenty four. Increased operational efficiency delivered adjusted free cash flow of $44,300,000 or $0.22 on a per share basis, representing growth of 26% and approximately 16%, respectively, over the same quarter last year. This enabled us to fund the entirety of our acquisition program with free cash flow for the eighth consecutive quarter. With respect to M and A, we acquired 12 practices in the first quarter for total consideration of $61,000,000 These practices are expected to generate $8,300,000 in pro form a adjusted EBITDA after rent. And we remain as the best positioned and best capitalized partner for independent dentists, and we will continue to be disciplined about the practices we acquire.

Looking ahead, we anticipate second quarter twenty twenty five revenues to increase by between 910% over Q2 of twenty twenty four, while delivering 3% to 5% same practice revenue growth. We expect adjusted EBITDA margins to increase by 20 basis points over the second quarter of twenty twenty four and anticipate completing acquisitions representing pro form a adjusted EBITDA after rent of approximately $6,000,000 plus. I will now pass the call over to Nate, who will walk us through the details of our financial results, and then I will share some closing remarks before we open the call for

Nate Chaplia, President and Chief Financial Officer, Dental Corp: questions. Nate? Thank you, Graham. In mid March twenty twenty five, the Canadian government communicated that patients between the ages of 18 to 64 will be eligible to receive care under the CDCP in the beginning of 06/01/2025. This led to a deferral of appointments by certain eligible patients late in the quarter and into Q2.

That said, the impact from deferrals has been more muted than 2024 as a majority of this age cohort benefits from employer sponsored dental insurance. Additionally, 95% of our practices are now participating in the program compared to lower adoption during the initial rollout in 2024. Overall, we continue to see the CDCP as a favorable development for both Canadian public and dental professionals and expect it to be modestly positive to Dental Corp. Our quarterly results, which met or exceeded expectations in most respects, demonstrate the durability and predictability of our business. Turning to Slide nine.

Revenue for the three month period ended 03/31/2025, as Graham mentioned, was $4.00 $9,000,000 compared to $372,000,000 for the corresponding period last year, representing an increase of approximately 10%. The increase is attributable to our continued acquisitive and organic growth. As you can see, we reported first quarter adjusted EBITDA of approximately $76,000,000 compared to $68,000,000 in the same quarter last year and reported first quarter adjusted EBITDA margins of 18.5% representing 20 basis points of margin expansion year over year as we continue to realize operating leverage in our fully built out corporate infrastructure. Looking forward, we continue to be confident about our ability to grow the business through acquisitions and organically. Turning to the next slide, you can see our net leverage and liquidity as of 03/31/2025.

On a net debt basis, we are approximately 3.77 times levered at the end of the first quarter, deleveraging by 0.57 times compared to the same period in 2024. First quarter adjusted free cash flow came in at $44,000,000 representing a growth of 25.9% further bolstering our already robust balance sheet. We ended the first quarter twenty twenty five with liquidity of four zero eight million dollars comprised of $58,000,000 in cash and $350,000,000 in undrawn debt capacity under our senior debt facilities. This quarter marks the sixth consecutive quarter over quarter increase in our interest coverage as defined by our last twelve months pro form a adjusted EBITDA after rent divided by net interest expense, which currently sits at 3.9 times, up from 3.6 times in Q4 twenty twenty four. Overall, our first quarter twenty twenty five performance demonstrates the strength and resilience of our business model.

We delivered positive organic growth while successfully expanding margins through operational efficiencies. We continue to strengthen our financial position by deleveraging the balance sheet, completed accretive acquisitions and realized operating leverage as we continue to expand margins. I will now pass the call over to Graham, who will share some closing remarks before we open the call up for questions. Graham?

Graham Rosenberg, Chief Executive Officer, Dental Corp: Thanks, Nate. As you’ll see on slide seven sorry, slide 11, apologies, our strong first quarter performance reinforces our confidence, enabling us to reaffirm our full year 2025 guidance of 10% to 11% revenue growth and 3% to 5% same practice revenue growth, a 20% or 20 basis points improvement in adjusted EBITDA margins, acquisitions representing pro form a adjusted EBITDA affluent of $25,000,000 plus and 15% plus pretax adjusted free cash flow per share growth. I want to thank you all for joining our call today. This concludes the formal part of our presentation, and we’d now like to open the call to questions. Operator?

Conference Call Operator: Your first question comes from the line of Brian Trantolet with Jefferies. Your line is open.

Megan Holt, Analyst, Jefferies: Good morning. This is Megan Holt on for Brian. Congrats on another good quarter. As we look at like Q2 guide and the full year same practice revenue guide as well, can you provide some color of how much is expected to be driven by the CDCP patient volume versus underlying patient demand?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Absolutely. And thanks for the question. So as far as CDCP today, we mentioned in some of the materials, you saw that we’ve seen to date roughly 90,000 patients. If you look at the total number of patient visits which we see in that 5,500,000 plus mark on an annual basis, which comes out from 2,300,000 plus patients. Albeit it is a small amount, it is helpful to our overall growth.

But our expectations today and our Q2 guide as well as our full year guide, we’re not including any additional patient demand or patient growth that’s coming from CDCP.

Megan Holt, Analyst, Jefferies: Okay. Thanks for the color. And then as a follow-up, the 65% free cash flow conversion number that you guys did this quarter, is that sustainable? And how should we be thinking about it for the full year?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Yes. Not only is it sustainable, ultimately our expectation is that’s going to continue to grow. You’ve seen over the last six plus quarters, ultimately we funded all of our growth from our existing free cash flow as we continue to grow both organically as well as acquisitively. Currently our debt has not increased over that six quarter period. And ultimately, free cash flow will continue to grow at that 15% plus range year over year.

Megan Holt, Analyst, Jefferies: Thank you.

Conference Call Operator: Your next question comes from the line of Scott Fletcher with CIBC. Your line is open.

Scott Fletcher, Analyst, CIBC: Hi, good morning and congrats on the quarter. Same practice revenue growth was strong in the quarter at the upper end of the range. Was the strike there largely additional volume after the deferrals in the prior year? Or is there anything else you can call out on that stronger number?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: I think there’s some puts and takes. I think ultimately what we saw is a return to more normalized volume. Obviously last year Q1 twenty twenty four was impacted slightly by the CDCP whereas this year we had that come through, albeit the announcement for the 18 to 64 rollout at the end of the quarter did see some deferrals. What we are seeing overall is strong patient demand, consistency and maintenance of appointment and ultimately strong overall organic growth performance of the business and that continues to be expected in Q2 and then through the balance of the year.

Scott Fletcher, Analyst, CIBC: Okay. Thanks. And then on the deferrals, is it possible to quantify the impact in Q1? Maybe whether you expect the Q2 impact to be more or less? Obviously, there’s some puts and takes in Q2 with start date in June.

So any color there will be helpful.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Yes. I think it’s as we wrap the end of the quarter, I’d say Q1 was limitedly impacted. I’d say we’re seeing a slight increase in overall cancellation rates as we sit here at the midway point in Q2, albeit now by the end of Q2 or by June 1, we’re going to be able to start seeing those patients. Very difficult to predict exactly how the balance of the rest of the month will go. However, we’re very confident in that 3% to 5% range for Q2 as well as for the balance of the year.

Scott Fletcher, Analyst, CIBC: Okay. Appreciate it. Thank you.

Conference Call Operator: Your next question comes from the line of David Kwan with TD Securities. Your line is open.

David Kwan, Analyst, TD Securities: Thanks. Nate, just to clarify, I guess, on your comments or anything like I can’t remember you or Graham had talked about it, but just as it relates to the debt levels, obviously, the actual absolute level of the borrowings has essentially been unchanged, I think, for the last year and a half or so. But just given the, I guess, timing of the cash outlays for M and A and then cash taxes later this year, It sounds like you’re not expecting to need to increase your borrowings against your credit line, even if it’s just temporary?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Nothing. As we look through the end of the year, expectation is we’re going to continue to delever, right? Ultimately our medium term target of three to 3.5 times leverage. We’re sitting at 3.77 times leverage today. That really is our main goal and our main focus.

If through the balance of the year or into 2026, we might see a little bit of incremental debt dollars added. The real focus is driving deleveraging while maintaining that double digit growth.

David Kwan, Analyst, TD Securities: Okay. That’s perfect. And then just secondly, you noted in the presentation about the ortho acceleration program, I think three thirty dental practices at this point up from three ten last year. Can you talk about the expected timing for the rollout to the other not based on specialty practices?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Absolutely. So I think as we sit here today and on the last call, we discussed the revamping of the ortho acceleration program. We’re now at the point where we are going to begin rolling it out to additional practice locations across our network. Through the balance of the year, expectations is to roll it out to an additional 40 to 50 locations and we’ll continue to update on that rollout as we continue through the balance of the year.

David Kwan, Analyst, TD Securities: Great. Thanks.

Conference Call Operator: Your next question comes from the line of Daryl Young with Stifel. Your line is open.

Daryl Young, Analyst, Stifel: Yes. Just following on David’s question on the balance sheet and leverage. I’m just wondering if you’ve seen any opportunities amid the interest rate volatility to maybe consider some alternative longer dated notes or anything at attractive financing rates that you might be considering? And I guess just broadly, how are you thinking about structuring the balance sheet in the future?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Thanks for the question, Daryl. We’re constantly looking at ways to optimize our capital structure and ensure that our overall carry is as efficient as possible. As we sit here today, looking our forward rates to call January 2028 capped at 6%, we have visibility to bring it down an additional 25 basis points if we get below 3.5 times. So thinking about an overall carry somewhere in that 5.75% range on a medium term basis. As we compare it to really other alternatives that are available to the market to us today, we find that this is the most efficient structure for us, most optimal for driving our adjusted free cash flow growth and ultimately supporting our overall continued funding of our acquisitive program.

Daryl Young, Analyst, Stifel: Okay. Thanks. And then on CapEx, I’m splitting hairs a little bit here, but just Q4 and Q1 were maybe a little more elevated than they’ve been recently. Is there anything else going on there or any additional spend we should be aware of?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Slightly elevated, just a few larger projects all on the growth side. Wouldn’t expect that to continue a sustained basis quarter over quarter. But from a CapEx perspective, the way that we still continue to look at the business and model it is roughly $30,000 per practice locations per year on a maintenance side. And frankly over the last number of years it’s coming below that. So just a few projects that have come over come up over the last six months.

These were all discretionary projects. So nothing to update on that.

Daryl Young, Analyst, Stifel: Great. Thanks and congrats on a good quarter.

Scott Fletcher, Analyst, CIBC: Thanks, Daryl.

Conference Call Operator: Your next question comes from the line of Alan Lutz with Bank of America. Your line is open.

Alan Lutz, Analyst, Bank of America: Good morning and thanks for taking the questions. Graham, I want to talk about the visibility into some of the deferrals. As we think about the trend beyond June 1, do you have any visibility into patient scheduling as it relates to appointments that are beyond June 1? And then is it fair to assume that 2Q given the dynamic that we’re seeing today that that’s going to be the lowest quarter for SPRG of the year? Thanks.

Graham Rosenberg, Chief Executive Officer, Dental Corp: Look, as we see it today and we look forward we look at our forward bookings on a consistent basis, we’re not seeing much impact. And we think that the forward looking views on the business are pretty stable and in line with expectations. So not a big impact at all.

Alan Lutz, Analyst, Bank of America: Okay, fair enough. And then as we think about acquisitions in the quarter and the valuations there, they’ve ticked up a little bit over the past few quarters, but they’re still well below where they were a couple of years ago. Just would love the latest on the appetite out there for acquisitions. Are prospects coming to the table more than they were three, six, twelve months ago? Just any update there would be helpful.

Thanks.

Graham Rosenberg, Chief Executive Officer, Dental Corp: Yes. Look, our pipeline remains as robust as it’s ever been. We continue to reaffirm our role in the marketplace as the acquirer of choice, which really comes down to execution and how partnerships and relationships are married are are are managed after after acquisition. Multiples are are pretty balanced, and and there’s there’s a nice balance between supply and demand. And we think that those multiples that we’ve been indicating to will continue to persist as far as we can see for the medium to long term.

Dayton, do have anything?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: I think it’s we’ve had a great couple of years here from an acquisition perspective and from a valuation perspective. Internally, we’ve always guided to that 7.5 times range and we continue to be very confident in that as we continue to do the balance into the year and into 2026.

Graham Rosenberg, Chief Executive Officer, Dental Corp: Great. Thank you both.

Conference Call Operator: Your next question comes from the line of Zachary Evershed with National Bank. Your line is open.

Zachary Evershed, Analyst, National Bank: Good morning, everyone. Congrats on the quarter. So there was one disposal in the quarter. Could you give us an update on how you view your current mix of general versus specialist practices?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Yes. Thanks, Zach. It’s a great question. So the one disposal we had this quarter was part of the stand alone orthodontic group, which we have now almost entirely disposed of. There are two remaining stand alone orthodontic practices, which we continue to work to remove.

As think about that business itself, our standalone orthodontic business now is de minimis and frankly nonexistent. What we do have is ultimately 25 standalone specialty practices, which represent less than 5% of our total business. The way to think about our strategy on a go forward basis is general practice family dentistry, which is consistent with our strategy of insourcing our strategy of continuing to drive education for general dentist practitioners across the full gambit of modalities. So very small practice that was disposed of a couple of more that might come over time, but immaterial overall.

Zachary Evershed, Analyst, National Bank: Great color. Thanks. And then it sounded pretty clear, but I’ll just check-in and harp on that again. A little bit of noise given the CDP launch date. But checking in on the overall macro environment, we did see unemployment tick up to 6.9% in April.

Are you feeling any pressure on that front?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: It’s not something that we’ve seen come through overall on the patient demand side. It’s something that we do watch very closely. One thing to highlight as we think about CDCP and unemployment as they do go hand in hand, CDCP does become a bit of a natural hedge to the unemployment figure as we think about medium term patient behavior as they’ll become eligible for the CDCP if they don’t have important sponsored insurance. But nothing really to report on. Very strong organic performance in Q1 as we look at our forward bookings into Q2 and beyond, we’re seeing levels that are at or above levels that we have expected, but something that we’ll continue to monitor and report on.

Zachary Evershed, Analyst, National Bank: Thank you very much. I’ll turn it over.

Conference Call Operator: Your next question comes from the line of Tanya Armstrong with Canaccord Genuity. Your line is open.

Tanya Armstrong, Analyst, Canaccord Genuity: Hey, good morning, gentlemen. Congrats on the quarter. Following up on some of the other questions on M and A, you guys have just done a really good job executing Q1 and I think the commentary was that you’re through 70% of your acquisition target for the year. Just wondering why not take that number up for the full year? Is this just an effort to be conservative if you do want to focus on paying down debt?

Like looking at Q3, Q4, it’s pretty light in terms of M and A. How likely are we to exceed that ’25 target?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Thanks for the question, Tanja. So as we looked at our M and A performance, ’24 was just over $20,000,000 This year, brought it up to 25,000,000 And as mentioned, pipeline is frankly as strong as it ever has been. Our position in the market as the partner of choice has now been cemented. So we do have the opportunity to bring that up. I think as we sit here today with just over 70% signed and closed, we continue to have the confidence as we continue through the balance of the year, but there is opportunities to increase our acquisitive pacing as if we so choose.

So ultimately as we stand here today, our expectation is to be in that $25,000,000 plus range and we’ll continue to update on our progress around our pipeline as we continue through the balance of the year.

Tanya Armstrong, Analyst, Canaccord Genuity: Okay, great. Thanks guys. That’s all from me.

Conference Call Operator: Your next question comes from the line of Nevan Yushim with BMO Capital Markets.

Nate Chaplia, President and Chief Financial Officer, Dental Corp0: You got Nevan on for Steve today. Hoping we can touch on margins, your target for 20 bps expansion this year. Would you expect that to be spread out evenly through the remainder of the year? And then can you provide some thoughts around your long term margin target?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Absolutely, and thanks for the question. Expectation as far as it being spread across, there’s some slight seasonality as you know in the business where Q2 and Q4 are stronger performers from a total And ultimately that provides operating leverage on our fixed cost infrastructure. But outside of that, that seasonality impact, we do expect the 20 basis points margin expansion to be consistent quarter over quarter as we go through the year. As we think a little bit more long term, expectation is we’re going to continue to drive that operating leverage from our fixed cost infrastructure as well as some modest margin expansion at the practice level.

And the reason being why it’s modest is given the highly variable cost structure that dental practices do benefit from. So as we think about it in 2026 going forward, that 20 plus basis points of margin expansion year over year is something that we expect over that medium term, which ultimately we define as a three to five year period.

Nate Chaplia, President and Chief Financial Officer, Dental Corp0: Great. Thanks, Nate. And then maybe just on taxes. My understanding is you guys could become taxable sometime later this year. Are you able to provide an update there on just your expected timing?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Yes. I think it’s the timing remains consistent. We should become taxable in the back half of twenty twenty five. Ultimately from an actual cash layout, those that cash layout won’t happen until early twenty twenty six. But ultimately, we do become taxable by the second half of the year.

Nate Chaplia, President and Chief Financial Officer, Dental Corp0: Perfect. Thank you.

Conference Call Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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