Earnings call transcript: Dentalcorp’s Q2 2025 results show resilience

Dentalcorp Holdings Ltd. ($1.18B market cap) reported its second-quarter earnings for 2025, showcasing a modest earnings beat with an EPS of $0.16, surpassing the forecast of $0.1558 by 2.7%. The company missed its revenue forecast, reporting $435.2 million against an expected $440.66 million, a surprise of -1.24%. Despite the mixed results, the company’s stock saw a slight pre-market increase of 0.37%. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value estimate, with analysts maintaining a Strong Buy consensus.

Key Takeaways

• Dentalcorp achieved a 9% year-over-year increase in Q2 revenue, reaching $435.2 million.
• Adjusted EBITDA rose by 10% year-over-year, with a margin improvement of 20 basis points.
• The company continues to expand its Video Health AI and Ortho Acceleration Program.
• Dentalcorp’s liquidity remains strong with $428 million available.
• The stock price increased by 0.37% in pre-market trading, indicating positive investor sentiment.

Company Performance

Dentalcorp’s performance in Q2 2025 highlighted its ability to grow revenue and improve profitability despite missing revenue forecasts. The company reported a 9% year-over-year increase in revenue, reaching $435.2 million, while adjusted EBITDA grew by 10% to $81 million. The adjusted EBITDA margin improved by 20 basis points to 18.7%. InvestingPro data reveals a strong free cash flow yield of 10% and projects net income growth this year, suggesting robust financial health. Get access to 6 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Financial Highlights

• Revenue: $435.2 million, up 9% year-over-year
• Adjusted EBITDA: $81 million, up 10% year-over-year
• Adjusted Free Cash Flow: $45.6 million, or $0.23 per share, up 12%
• Net leverage decreased to 3.65x, reflecting continued deleveraging efforts

Earnings vs. Forecast

Dentalcorp’s EPS of $0.16 exceeded the forecast of $0.1558 by 2.7%, marking a positive surprise. However, the company reported a revenue of $435.2 million, falling short of the $440.66 million forecast, resulting in a negative surprise of -1.24%. This mixed performance reflects both the company’s operational strengths and the challenges it faces in meeting revenue expectations.

Market Reaction

Following the earnings announcement, Dentalcorp’s stock price increased by 0.37% in pre-market trading. The stock’s movement suggests investor confidence in the company’s long-term growth prospects, despite the revenue miss. The stock remains within its 52-week range, highlighting stability in its market performance.

Outlook & Guidance

Looking ahead, Dentalcorp projects a 10-12% revenue growth for Q3 2025 and anticipates closing $25-30 million in acquisitions by year-end. The company maintains its full-year 2025 guidance of 3-5% same-practice revenue growth and expects a 20 basis point improvement in EBITDA margin. InvestingPro analysis shows the company’s 5-year revenue CAGR of 15%, demonstrating consistent growth. Discover detailed growth projections and 1,400+ comprehensive Pro Research Reports by subscribing to InvestingPro.

Executive Commentary

CEO Graham Rosenberg emphasized the company’s reliance on routine dental services, stating, "Over 90% of our revenue comes from routine dental services such as cleanings, fillings, and basic restorative work." CFO Nate Chaplia expressed optimism about the Ortho Acceleration Program, saying, "We continue to be bullish in the long term in that program’s rollout."

Risks and Challenges

• Economic downturns could impact discretionary dental spending.
• Integration risks related to acquisitions may affect operational efficiency.
• Regulatory changes in healthcare could alter market dynamics.
• Increased competition in the dental services sector.
• Potential supply chain disruptions impacting operational costs.

Q&A

During the earnings call, analysts inquired about the impact of the Canadian Dental Care Plan, which led to modest patient deferrals in Q2. Questions also focused on the company’s M&A strategy, with management indicating valuations remain in the mid-7x range. Analysts expressed interest in the company’s deleveraging efforts and its impact on future growth.

Full transcript - dentalcorp Holdings Ltd (DNTL) Q2 2025:

Conference Call Operator: Good morning, and welcome to DentalCore’s Second 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’d like to turn the call over to Mr. Nate Chaplia, president and chief financial officer of Dental Corp.

Please go ahead, sir. Good morning, and welcome to the Dental Corp Second 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’d 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. Second Quarter twenty twenty five Results Conference Call. I’m joined today by our Chief Executive Officer, Graham Rosenberg. Before we begin, please note that all amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated.

Also, I’d like to remind everyone that certain statements made on this call may include forward looking information and future oriented financial information regarding Dental Corp. And its business. These include disclosure regarding possible events, conditions or results that are based on information currently available to management and reflect management’s expectations regarding future growth, results of operations, business performance, 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 as as required by applicable securities laws.

These forward looking statements involve significant risks and uncertainties and are not guarantees 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 to speak to financial that are available on the Investor Relations section of our website in the Events and Presentations section.

With that, I’ll turn the call over to our Chief Executive Officer, Graham Rosenberg, for 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 06/30/2025. For today’s call, I’m going to share a number of those developments with you, I and 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, you’ll see that Dental Corp. Operates in a $22,000,000,000 fragmented market that’s 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. Our business is particularly recurring with over 90% of our revenue coming from routine dental services such as cleanings, fillings and basic restorative work, creating predictable and recurring revenue streams that aren’t dependent on discretionary spending or specialized procedures. General Corp expects to continue outpacing the broader Canadian dental services market by delivering 4% plus same store practice revenue growth. We also have a multiyear Canadian dollar supply contracts with our key suppliers, resulting in minimal direct tariff or foreign exchange exposure. When combined with our proven and 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 do so moving forward.

Our confidence in the business is supported by our second quarter results, which demonstrate effective execution of our strategy and reinforce our confidence in the full year outlook. As you’ll see on Slide four, we completed our second quarter ended June 30 with approximately $1,700,000,000 of last twelve months pro form a revenue and approximately $314,000,000 of pro form a adjusted EBITDA. Last twelve months adjusted free cash flow also came in strong at $165,000,000 Our teams continue to deliver the highest standards of care to more than 2,400,000 active patients, 92% 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. Our business continues to operate with robust and expanding margins, lower CapEx requirements and capped interest rate exposure on 100% of our existing outstanding debt.

Our last twelve months free cash flow conversion increased 65% in the quarter, up from 60% in Q2 twenty twenty four, resulting in approximately a 10% year over year adjusted free cash flow per share growth. On Slide five times from the same period last year to 3.65 times at the end of Q2. This marks the seventh consecutive quarter of deleveraging, and we continue to work towards our medium term target band of three to 3.5 times leverage. On the next slide, you will 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 implied a 5.8 times multiple on EBITDA vis a vis enterprise value discount to our peer group.

And at the same time, we are currently trading at a 9.5% free cash flow yield compared to our peer group of 3.9%. On Slide eight, I’m pleased to report that our business delivered revenue of $435,200,000 in the 2025, up approximately 9% year over year with adjusted EBITDA of $81,000,000 up 10% year over year as we continue to realize operating leverage with 20 basis points of margin improvement relative to our adjusted EBITDA at 18.7%. During the quarter, we experienced some deferrals related to the CDCP and when combined with M and A timing had minor impacts to our same practice revenue growth and financial performance. Despite these near term impacts, which were very modest, our underlying business fundamentals remained strong as evidenced by our 92% recurring patient visit rates, reflecting strong predictability and continued demand for routine care across the network. Increased operating efficiency resulted in an adjusted free cash flow of $45,600,000 or $0.23 on a per share basis, representing growth of 12% and approximately 10%, respectively, over the same quarter last year.

This enabled us to fund the entirety of our acquisition program with free cash flow for the ninth consecutive quarter. With respect to M and A, we acquired eight practices in the quarter for total consideration of $24,000,000 These practices are expected to generate $3,800,000 in pro form a adjusted EBITDA after rent. We remain as the best positioned and capitalized partner for independent dentists and we’ll continue to be disciplined about the practices we acquire. Looking ahead, we anticipate third quarter twenty twenty five revenues to increase by 10% to 12% depending on acquisition timing over 2024, while delivering 3% to 5% same practice revenue growth. We expect adjusted EBITDA margin to increase by 20 basis points over the 2024.

Subsequent to the quarter, we completed the acquisition of seven practices representing $5,500,000 of pro form a adjusted EBITDA after rent and when combined with signed LOIs and acquisitions completed as of 06/30/2025 is greater than our 2025 full year acquisition target of $25,000,000 of pro form a adjusted EBITDA after rent. I will now pass the call over to Nate, who will walk us through the details of our financial results.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Thank you, Graham. Starting with the CDCP update. In March 2025, the Canadian government expanded eligibility under the program to patients aged 18 to 64 to begin receiving care in July. This led to some appointment deferrals in Q2 from eligible patients creating a modest headwind to same practice revenue growth. However, we do not anticipate any further deferral impacts in the second half of the year.

Importantly, 95% of our practices are now enrolled in the CDCP, up materially from the initial participation levels in 2024. Turning to the numbers. Our quarterly results reflect strong operational fundamentals and continue to demonstrate the durability and predictability of our business. Turning to slide nine, revenue for the three month period ended 06/30/2025, as Graham mentioned, $435,000,000 compared to $400,000,000 for the corresponding period last year, representing an increase of approximately 9%. This increase is attributable to our continued acquisitive and organic growth.

As you can see, we reported second quarter adjusted EBITDA of approximately $81,000,000 compared to $74,000,000 in the same period last year and reported second quarter adjusted EBITDA margins of 18.7%, representing a 20 basis point expansion of margins year over year as we continue to realize operating leverage and 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 06/30/2025. On a net debt basis, we are approximately 3.65 times levered at the end of the second quarter, deleveraging by approximately Second quarter adjusted free cash flow came in at $46,000,000 representing growth of 12% further bolstering our already robust balance sheet. We ended the second quarter twenty twenty five with liquidity of $428,000,000 comprised of $78,000,000 of cash and $350,000,000 in undrawn capacity under our senior debt facilities.

This quarter marks the seventh consecutive quarter over quarter increase in our interest coverage as defined by our LTM pro form a adjusted EBITDA after rent divided by net interest expense, which currently sits up at four times, up from 3.9 times in Q1 twenty twenty five. Overall, our second quarter twenty twenty five performance demonstrates strength and resilience of our business model. We delivered positive organic growth while successfully expanding margins through operating efficiencies. We continue to strengthen our financial position by deleveraging the balance sheet, completing accretive acquisitions and realizing operating leverage as we continue to expand margins. I’ll now pass the call back to Graham for closing remarks before we open it up for Q and A.

Graham?

Graham Rosenberg, Chief Executive Officer, Dental Corp: Thank you, Nate. As seen on slide 11, our second quarter performance reinforces our confidence, enabling us to reaffirm our full year twenty twenty five guidance of 3% to 5% same price as revenue growth, a 20 basis point improvement in adjusted EBITDA margins, acquisitions representing pro form a adjusted EBITDA after ends of $25,000,000 plus and 15% plus. I want to thank you all for joining the call today. This concludes the formal part of our presentation, and we would now like to open the call to questions. Operator?

Conference Call Operator: Thank you. We will now begin the question and answer session. We’ll take our first question from Brian Tanquilut at Jefferies.

Brian Tanquilut, Analyst, Jefferies: Hey, good morning guys. Maybe Nate or Graham, as I think about same store performance in the quarter coming in below the low end of the range, What percentage of that do you attribute to the CVCP? And then how are you thinking about same storage volume performance for the back half of the year?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Hey, Brian, and thanks for the question. I think if we look to breaking down kind of what percent of our business or what percent of our patients today prior to the secondary rollout of the CDP were represented by call it CDP patients. I’d say roughly call it 4% were CDCP patients in that kind of 65 plus cohort and then 18 and under. Our expectation is that 19 to 64 cohort, that new cohort that began in earnest in July 1 here, we’ll probably be in that 4% to 5% range. So call it roughly total CVCP penetration in and around the high single digits, low double digits here, which ultimately would have that impact as it relates to deferrals in the quarter above and beyond that 3.3% that we printed.

One additional note around the pacing of acquisitions. Our acquisitions that we expected to close in the quarter ended up closing in the first couple of weeks in July. Then ultimately that would have also had some impact on the overall revenue performance of the business. But as sit here today and look at the back half of the year, very confident in that 3% to 5% range on same practice revenue growth and really returning to call it the midpoint and the high end of the range as we get through Q3 and into Q4.

Brian Tanquilut, Analyst, Jefferies: Okay. That makes sense. And then Nate just maybe to that point you made on the M and A side, it looks like you’ve got at least $25,000,000 under LOI. You just had a deal closed in July. So how do we think about the timing of closings for the rest of that LOI to get to completed deals within your guidance range?

Stephen MacLeod, Analyst, BMO Capital Markets: Yes.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: I would say the pacing of our acquisitions as far as our overall pipeline and where we’re sitting both signed and closed is ahead of our expectations. I would say as we get through the second half of the year, our expectation is that we’ll close 25, if not more than 25. There’s great opportunities here at great valuations and the market continues to be very robust. So I’d say from a timing perspective, would expect Q3 to be a very strong quarter as far as M and A closings go, just given some of the rollover from Q2 into Q3 And ultimately, Q4 will continue at that same pace.

Gary Ho, Analyst, Desjardins: Awesome. Thank you. We’ll go

Conference Call Operator: next to Gary Ho at Desjardins.

Gary Ho, Analyst, Desjardins: Thanks. Good morning. Maybe start off with the M and A question. So the eight locations added in the quarter, 6.3x multiple, that’s slightly below your historical range. Should we read anything into that?

Maybe just talk about the general M and A environment. And good to see that you’ve executed on your kind of $25,000,000 acquired EBITDA signed or closed for the year already?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Thanks for the question, Gary. And as far as the valuations for the deal this quarter, it’s small sample. Ultimately, as we look through to the balance of the year and really looking at our full year valuation metrics, we expect to be in the mid-seven range as guided through the piece. As far as the overall M and A environment goes, continues to be incredibly robust. Our team is continuing to foster relationships and bring people along through the process and the deal.

As mentioned, we’re now signed and closed above and beyond our $25,000,000 of expected closed deals in 2025. And we expect that momentum to continue.

Gary Ho, Analyst, Desjardins: Okay, great. And then while I have you Nate, just good to see that nice step down in leverage 3.65 times. You probably have line of sight in hitting that three to 3.5 over the medium term. Do you see any pivots to your capital allocation strategy once you’re kind of within that range, whether that’s speeding up M and A or maybe more buybacks? Just want to hear your thoughts on that.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Yes. It’s a great question, Gary. We’ve done a tremendous job in delevering the business and continuing to take a really balanced approach to growth given the great opportunities that are before us on the M and A front as we continue to make our way into our targeted leverage range. Any excess capacity ultimately will be put forward to an accelerated growth plan.

Gary Ho, Analyst, Desjardins: Okay. Makes sense. Those are my two. Thank you.

Conference Call Operator: We’ll go next to Daryl Young at Stifel.

Daryl Young, Analyst, Stifel: Hey, good morning, everyone. First question is just around the clear aligner space. We’ve continued to see some challenges there on a global basis and slowing of case starts. Can you just speak to what you’re seeing in terms of your case starts, your clinical outcomes and then, I guess, ability to keep driving growth from this ortho avenue and ortho acceleration program going forward? And I guess, said differently, is Invisalign adoption meeting your expectations for the program?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Thanks for the question, Daryl. And just before diving in directly into Invisalign and orthodontic and sourcing, I think what’s important to highlight around our business is the significant recurring nature of our business. Over ninety two percent of our patients are recurring year in and year out and ninety percent of our services Ultima 90% plus of our services are really those non discretionary hygiene fillings and other routine type restorative work. So our overall exposure as it relates to the higher value call it discretionary specialty services is limited. And they continue to be an opportunity for us.

You might have seen that we’ve continued to roll out and expand the number of clinics we have in our network that are participating in our Ortho Acceleration Program over the last number of quarters. We worked with Align to rebuild and revamp that program for ease of implementation and ultimately enhancement around education. We continue to be bullish in the long term in that programs rollout through our network and in practices that are currently are not offering that service. From a year over year perspective, I think if we look at Invisalign, we look at orthodontic services in general, I think there’s absolutely a bit of a slowdown there across really all discretionary services. But as we continue to roll it out into practices as well as clinicians that previously have not been providing this type of service, our overall network has an opportunity to continue to increase the penetration albeit ultimately our focus continues to be on our highly repetitive and highly recurring services.

Daryl Young, Analyst, Stifel: Okay. That’s helpful. Thanks. And then second question is just around video health and AI relationship. Can you just speak to the rollout of those capabilities and then what you’re seeing in terms of the dentist workflow and maybe any financial benefits you’re seeing to date from it or is it more about quality of doctor service?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: It’s a great question, Daryl. So still very early days on the rollout. We’re just around two fifty of our practice locations that have had the video health rolled out into its workflow. We are seeing tremendous positive response from clinicians as well as patients as it relates to the as well as the ability now to have a more fulsome patient education as well as treatment acceptance around the care that they’re getting. Still very early days to describe really what are the metrics around it.

But that’s something as we continue to roll out and have a few periods now where we’re going to be able to see the performance, we’re going to develop that view by the end of the year and ultimately we’ll share that with you guys.

Daryl Young, Analyst, Stifel: That’s great. Thanks. I’ll get back in the queue. Congrats on a good result.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Thanks, Daryl.

Conference Call Operator: Next, we’ll move to Doug Meade at RBC Capital Markets.

Doug Meade, Analyst, RBC Capital Markets: Yes. Good morning. Question I have just has to do with the letter that sent by the Canadian Dental Association on well, it was posted on July 28. Anyway, they’re raising escalating concerns about persistent gaps in the CDCP with preauthorization, enhancing public communication about covered services and ensure and I thought this was important that existing employer sponsored dental benefits is protected. And could you expand on this letter and what implications it may have for your business, particularly around the private side concerns they seem to have?

Thank you.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Absolutely. Thanks for the question, Doug. Think listen, I think since the beginning of the rollout, if we get back into our time machine to December 2023, I think there was a lot of misinformation and misunderstanding as to how the plan is going to be administered with patients’ expectations being, call it, full coverage. And ultimately, as 2024 ran through, more and more information came out, there was more and more patient education that was provided, which of course, the rollout was happening, created increased frictions as well from a patient communication perspective as well as a patient behavior side. I think the plan is still in its infancy as both practices, patients as well as the plan administrators are trying to keep up with demand as well as keep up with process.

Our expectation is as more time passes, there should be a greater efficiency, greater understanding and clear expectation around the plan. But I’d say over the last eighteen months since the inception of the plan, there absolutely have been speed bumps in the road, which ultimately have affected patients, clinicians and ultimately performance. Our expectation is as we go and look forward into the second half of the year and into 2026, given now the cycle, we’ve almost gone through a couple of cycles now of patient visits, it will become much more smooth and much more efficient on both sides of things. As it relates to call it employer sponsored insurance and the implications that would be had there on employers making decisions to cut coverage. It’s not something that we’ve seen take place at all.

It’s ultimately, if we take a step back and think about employer decision making here, it’s a very difficult thing to cut somebody’s insurance because you don’t know their household income. It’s not something that is readily available nor is it something that can be asked of an individual to share nor do you know if their spouse or partner has any other type of coverage. So albeit it’s a risk that has been raised. It’s not something that we have seen come to fruition nor do we expect it to for the reasons just mentioned.

Doug Meade, Analyst, RBC Capital Markets: Okay, perfect. That’s good for me. Thank you.

Conference Call Operator: We’ll go next to David Kwan at TD Cowen.

David Kwan, Analyst, TD Cowen: Hey guys. Nate, just on the M and A in the quarter, you talked about, I guess, a small sample set as to why you look you got a better deal looks like relative to what you’ve seen historically. The practices also look to be on average smaller than what you’ve typically bought. That one of the reasons?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: You’re a great detective. Absolutely. A small sample and the average practice size is smaller.

David Kwan, Analyst, TD Cowen: Okay. And it looks like for the Q3 acquisitions that you noted, it looks like you were just also kind of paying below that range. Was it also because they were typically smaller too?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Some of the ones in Q3 were actually some larger groups. Really, it’s just coming down to the mix. As you continue to forecast through the year and you look at the full year of $25,000,000 plus, again, valuations will be in that mid-seven range. At any point in time, it might be a little bit higher, might be a little bit lower. But the way that we look at it, again, it’s very difficult to predict on a deal by deal basis from a on a full basket in the mid-7s is where our expectations are.

David Kwan, Analyst, TD Cowen: Okay, perfect. And just one more, just on the cash taxes. Are you still expecting to accrue them in the second half of this year and then start paying them out next year?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Yes. I think if you look on our Q2, we have a tax payable amount of, I think, roughly $17,900,000 that’s on our financials today. Our expectations are to kind of accrue in the back half of this year. Those cash taxes that will be called in the low to mid-20s for the year. That’s an estimate here.

And the cash will flow out in 2026.

David Kwan, Analyst, TD Cowen: Great. Thank you.

Conference Call Operator: We’ll go next to Alan Lutz at Bank of America.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Taking the questions. I want to ask a question on gross margins. They’ve been trending up for a couple of quarters now and the sequential from 1Q to 2Q was really, really strong given the seasonality you’ve seen historically. Can you talk about what’s driving the gross margin? And I guess especially the incremental gross margins and how we should think about that into the second half of the year?

Thanks. Gross margin, it is a truly variable figure. If we look at the components of what comprises our COGS, it really is the largest portion is dental revenue, where dentists are earning a 40% on average commission rate for what they bill. It’s hourly hygiene rates, again highly variable based on what they put through. It’s the lab costs that are inputs into the dental work as well as the consumables, which are going into the delivery of the care.

I’d say from a dental draw perspective, hygiene as well as lab, obviously those are quite consistent. One of the areas where we continue to get leverage just given overall our size and scale as well as our very strong partnerships with some of the industry’s largest and best suppliers, we’re able to continue to draw and expand our efficiencies on that front. That’s helpful. And then for my follow-up on SPRG into the second half of the year, what gets you to the low and the high end of that guide? Is there anything that’s driving that other than the relative CDCP patient flow?

Thanks guys. I think the only difference that we saw in Q2 that brought us to the lower end was the headwind that we experienced from the CDCP. I think now that’s been fully now work forward with normally scheduled programming. We expect to be at the midpoint or above. However, there really isn’t anything else that drove that Q2 decline, right?

If we look at 2024, which was in the mid-4s, if we look at 2025, again in the mid-4s, those are operating, I’d say, in more normal environments. And that’s really our expectations for Q3 and Q4.

Conference Call Operator: We’ll move next to Zachary Evershed at National Bank Financial.

Gary Ho, Analyst, Desjardins: Good morning, guys. Thanks for taking my questions. Just a follow-up on the capital allocation question. You said that as you move down into your three to 3.5 times leverage target excess capacity will go to accelerated growth. Do you consider you’re in excess territory right below 3.5 times?

Or would you expect a bigger acceleration to prevent you from dipping below three times? Like when you kick it into gear?

Graham Rosenberg, Chief Executive Officer, Dental Corp: Great

Nate Chaplia, President and Chief Financial Officer, Dental Corp: question, Zach. And as I think given the opportunities before us and the pace of our growth here, right now even at 3.65 times we continue to and was levered aggregator in the healthcare space. Should there be opportunities that we view as highly accretive and consistent with our growth objectives, we would continue even at the rate of leverage that we’re at today. We do have a continued focus to bring it down into that 3% to 3.5% range, but it’s not going to be at the expense of growth.

Gary Ho, Analyst, Desjardins: Understood. Thanks. And then any wood left to chop on specialty practice disposals?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: So we divested our last standalone orthodontic practice in the quarter. So we no longer have any standalone orthodontic practices in the network. So I’d say from that perspective, no. And I wouldn’t expect any more dispositions in the near term.

Gary Ho, Analyst, Desjardins: Thanks very much. I’ll turn it over.

Conference Call Operator: We’ll go next to Toni Armstrong, Canaccord Genuity. Hi, guys. Most of my questions have been asked now. Just a couple for me. I guess to start, it’s great that you’ve reaffirmed your 2025 guidance.

Could you remind me, did you provide an actual revenue number apart from just the same practice revenue growth and the M and A? I don’t know if there was a range given for the revenue number for the full year.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: It was 10 to 11%, Tanya.

Conference Call Operator: Perfect. Thank you. And then on the practices, you mentioned divesting one standalone orthodontic. Just doing some like calculation here based on your $575,000,000 number up from $571,000,000 in Q1 and you acquired 8,000,000 Were there some closures as well?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: No, no closures. The difference is all related to consolidations or planned consolidations. Even certain practice acquisitions that we acquired in this quarter are going to be tucked in or consolidated with other practices that we currently have in the network. So we have not closed any practices.

Conference Call Operator: Got it. Perfect. And then kind of following on from the last question, seeing as you’ve already hit your M and A targets based on signed LOIs, I guess how comfortable would you be? Like, is a good number for us to settle out at? You’re not going to obviously do nothing in Q4.

How far would you feel comfortable taking that M and A target?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: So just to be clear, the 25,000,000 signed and closed, the expectation is not all $25,000,000 will be closed by the end of Q3. The signed and closed the signed deals will ultimately close through the back half of the year. I would say confidently our acquisitive pacing will be in the 25,000,000 to $30,000,000 range for the balance of 2020.

Conference Call Operator: Perfect. All right. Thanks guys.

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Thanks, Tanya.

Conference Call Operator: And we’ll go next to Stephen MacLeod at BMO Capital Markets.

Stephen MacLeod, Analyst, BMO Capital Markets: Thank you. Good morning, guys. Lots of color so far, so thank you. But I just have two follow-up questions. The first one relates to just the margin growth that you’ve seen, another quarter of nice operating leverage in Q2.

And just wondering if there’s any reason to expect that to not continue as we turn the page into 2026?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: Appreciate the questions. I think as we go through the back half of the year, our expectation is we will continue at that same pacing of 20 basis points of margin expansion over the same period last year. And ultimately, if we take a step back and really unpack as the components of the margin expansion, it’s really driven predominantly by operating leverage on our invested corporate infrastructure. So as we continue to grow, as we continue to execute on our M and A program and the velocity of our acquisition pacing continues to increase, ultimately that margin expansion by given there’s a greater installed base of practices operating and being supported by the same size of corporate infrastructure, we’re going to have an increase in our overall margins and ultimately the pacing of our margin expansion. So nothing today that would detract from that in that 20 basis points to 25 basis and ultimately into twenty twenty six at a 20 basis point plus velocity.

Stephen MacLeod, Analyst, BMO Capital Markets: Okay. No, that’s great. I was curious about the 20 basis points plus. That’s good to hear. And then maybe just my final question is just on the CDCP.

Do you is there any discernible difference in the patient behavior for a CDCP patient versus a non CDCP patient in terms of revenue per visit or the number of services that they might have?

Nate Chaplia, President and Chief Financial Officer, Dental Corp: I think in the early days here, really our sample is related to predominantly the 65 plus cohort. We only really have one month of data. If we look at the 65 plus cohort, their behaviors and ultimately the services that they’re consuming are really consistent with their non CDCP peers.

Stephen MacLeod, Analyst, BMO Capital Markets: That’s great. Thanks, Nate. Appreciate it.

Conference Call Operator: And that completes the question and answer session. This will conclude today’s conference call. Thank you for your participation. You may now disconnect.

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