Q4 2023 dentalcorp Holdings Ltd Earnings Call
After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press. The Star Key then the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again.
Speaker Change: At this time I would like to turn the call over to Mr. Nate Czapla Chief Financial Officer of Dental Corp. Please go ahead Sir.
Speaker Change: Thank you operator, and good morning, everyone welcome to the Dental Corp, fourth quarter and fiscal 2023 results conference call.
Speaker Change: John here by Graham Rosenberg, our CEO.
Before we start we would like to remind you that all amounts disclosed and discussed on this call are denominated in Canadian dollars unless otherwise indicated.
Speaker Change: Please note that the 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 managements' expectations of future growth results of operations business.
Speaker Change: <unk> business prospects and opportunities.
Speaker Change: Such statements are made as the date hereof and demo Corp assumes no obligation to update or revise them to reflect events disclosures or circumstances, except as otherwise required by applicable securities laws.
Speaker Change: 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.
Speaker Change: Given these risks and uncertainties, one should not place undue reliance on these statements and information.
Speaker Change: Please refer to the forward looking statements and information and future oriented financial information section of our public filings without limitations, our MD&A and our earnings press release issued today for additional information.
Speaker Change: For those of you who have dialed into the call. The company's prepared a series of slides to complement our prepared remarks. These slides are available on the Investor Relations section of our website in the events and presentations section.
Speaker Change: I will now turn the call over to our Chief Executive Officer, Graham Rosenberg for opening remarks Graham.
Graham Rosenberg: Thanks, Nate and good morning, everyone. We're pleased to be with you today to review dental clubs recent developments as well as our financial and operating results for three and 12 months ended December 31 2023.
Graham Rosenberg: 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 Nathan who will discuss our financial results in detail after which I'll provide some forward looking remarks about how our business is trending.
Graham Rosenberg: As a reminder, cannot cope operates in a highly recurring essential health care industry and is cash pay resilient through economic cycles and integrated from Kristine <unk> Biotechnologies.
Graham Rosenberg: More importantly, Kellogg coffee expenditures have experienced strong relative growth during periods of higher than average inflation.
Graham Rosenberg: Accordingly, and in the context of the current macro environment, we believe that dental clubs favorable cost structure high margins low commodity risk and negligible capital expenditures provides support for the company's continued delivery of balanced double digit growth in the $22 billion Canadian dental industry.
Graham Rosenberg: Our confidence in the business is supported by our fourth quarter and full year results, which met our expectations and provide a constructive outlook for the coming year.
Graham Rosenberg: I am very pleased with our results for this quarter.
Graham Rosenberg: Well, which our base business results were modestly ahead of expectations and included strong practice level performance underpinned by strong patient volumes with acquisitions that met our expectations for the full year.
Graham Rosenberg: On slide three you will see that this performance has been made possible by our deep and diverse network of nearly 10000 healthcare practitioners across the country. Our teams continue to deliver the highest standards of care during the reporting period supporting more than $2 1 million active patients and managing of a $5 1 million.
Patient visits annually.
Graham Rosenberg: You will see that we completed the fourth quarter ended December 31, 2023, with approximately $1 $5 billion of last 12 months pro forma revenue and $274 million of pro forma adjusted EBITDA.
Graham Rosenberg: On the next slide.
Graham Rosenberg: You will see that we continued with our balanced approach to drive sustained double digit growth and we intend to continue growing our business organically through accretive mergers and acquisitions and by driving overall business efficiencies and operating leverage over the medium to long term.
This is a program that could be particularly as he builds over the last decade and we.
Believe we are able to thrive in any economic climate.
Graham Rosenberg: With respect to M&A, we acquired 12 practices in the fourth quarter for a total consideration of $65 million. These practices I expect it to generate $9 3 million pro forma adjusted EBITDA after rent.
Graham Rosenberg: We're also encouraged to see that practice valuations continued to decline down 6% in the fourth quarter of 2023 over the same period last year and 27% lower in the full year 2023 compared to 2022.
Graham Rosenberg: All driven by <unk>.
Graham Rosenberg: The tightening of access to financing opportunities for many buyers across the industry.
Graham Rosenberg: We remain the best positioned and capitalized.
Graham Rosenberg: Player in the market as the partner of choice for independent dentists and will continue to be disciplined about the practices we acquire.
Graham Rosenberg: Moving to slide five you can see that our business continues to convert a high percentage of EBITDA into free cash flow without acquisitions, our business has the potential to drive our leverage down by a quarter to a half a turn per annum to the mid to high ones over the medium term.
Graham Rosenberg: Yeah.
Graham Rosenberg: On the next slide you can see a comparison of valuation and free cash flow yields versus our peers since our IPO, we have seen a D kind of over 10 times in our enterprise value to LTM EBITDA trading multiple compared to our Canadian consolidated network.
Graham Rosenberg: Consolidated peer group of three three times and our health care peer group.
Graham Rosenberg: Across North America of just under six times at the same time, we are currently trading at a 10, 4% free cash flow yield.
Graham Rosenberg: Our Canadian consolidated peer group of only three 2% yield and our healthcare payer group of only a 4% yield.
Graham Rosenberg: On slide seven I'm pleased to report that our business delivered robust.
Graham Rosenberg: Growth with revenue of $362 2 million in the fourth quarter of 2023 up nine 4% over the same period in 2022, and adjusted EBITDA of $65 8 million up eight 6% over the same quarter last year with adjusted EBITDA margins coming in at 18, 2%.
Graham Rosenberg: We are extremely encouraged that same practice revenue growth was six 7% for the quarter and six and 5% for the year driven by strong patient visits.
Graham Rosenberg: In addition, we have completed the vast majority of our planned corporate investments.
Graham Rosenberg: Which helped drive strong practice several performance in both the base business and our recent acquisition cohorts.
The outcome was a strong adjusted free cash flow for the quarter of approximately $33 9 million compared to $30 1 million in the fourth quarter of 2022, despite increased financing costs driven by the historical rate increases we've experienced over the last 24 months, which are now problem, which we are now protected.
Graham Rosenberg: As 100% of our debt is capped.
Graham Rosenberg: Through May 2026.
Graham Rosenberg: As we look ahead to the full year 2024, we anticipate continued growth with revenues estimated to increase by nine five to 10, 5% same practice revenue growth of 4% plus and adjusted EBITDA margin expansion of 20 plus basis points.
Graham Rosenberg: We are also expecting to complete acquisitions, representing pro forma adjusted EBITDA after rent.
Graham Rosenberg: Oximetry $20 million plus in 2024 continue on a balanced approach of strategic growth and we are expecting adjusted free cash flow per share growth.
Graham Rosenberg: 15% to 20% as.
Graham Rosenberg: As the company continues to self fund a significant parts of our acquisitive growth.
Graham Rosenberg: As we look to the fourth quarter of 2024, we anticipate revenues to increase by four 5% to 5% of our Q1 2023 and same practice revenue growth of two to two 5% as we lap.
Graham Rosenberg: Very strong and robust Q1, 'twenty two 'twenty, three which saw record volumes from a rebound in patient volumes due to a heavy flu season at the end of 2022, we expect adjusted EBITDA margins to remain consistent with those levels, we experienced in 2020 III during that first quarter.
Graham Rosenberg: I will now pass the call over to <unk>, 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 questions.
Graham Rosenberg: Okay.
Graham Rosenberg: Thank you Graham.
Speaker Change: The diversity in our dentist base allowed us to deliver on our quarter quarterly results and demonstrates the strength and predictability of our business.
Speaker Change: Turning to slide eight revenue for the three months period ended December 31, 2023, as Graham mentioned was $362 million compared to $331 million for the corresponding period last year representing.
Speaker Change: An increase of approximately nine 4%.
Speaker Change: The increase is attributable to our strong acquisitive and organic growth, including a positive contribution from the continued strong patient demand as you can see we reported fourth quarter adjusted EBITDA of approximately $65 8 million compared to $60 6 million in the same period last year and reported fourth quarter adjusted EBITDA margins of 18, 2%.
Same practice revenue growth was six 7% over the same period in 2022, and six 5% on a last 12 month basis.
Speaker Change: Looking forward, we continue to be confident about our ability to grow the business through acquisitions and organically.
Speaker Change: Turning to the next slide you can see that our net leverage and liquidity as of December 31 2023.
Speaker Change: On a net debt basis, we are approximately four four times levered at the end of the fourth quarter consistent with Q3 2023.
Speaker Change: We ended the fourth quarter 2023, with liquidity of $392 million comprised of $39 million in cash and $353 million in undrawn debt capacity under our senior debt facilities.
Speaker Change: Fourth quarter and last 12 months adjusted free cash flow was $34 million and 127 million, respectively, which supports our strong balance sheet position.
Speaker Change: On the debt side of the Ledger, we increased the hedge portion of our bank debt from 75% to 100% the debt exposures carrying a fixed day rate plus margin for an all in cost of $6 six 5%.
Speaker Change: Turning to the next slide you can see our 2024 capital allocation program. We are committed to growing on a self funded basis using free cash flow and expect little to no debt drawn for our 2020 for acquisition strategy.
Speaker Change: Overall, we're pleased with our fourth quarter 2023 results.
Speaker Change: We increased organic growth in parts of our in sourcing efforts created ongoing operating efficiencies close accretive acquisitions and continue to develop our pipeline.
Speaker Change: With that I'll turn the call over to Graeme to provide some closing remarks Graham.
Speaker Change: Okay.
Speaker Change: Thanks Nate.
Speaker Change: Going to slide 11, you will see the equity we remain highly confident about our opportunities going forward.
Speaker Change: Fiscal 2024 is shaping up to be an exciting year for dental Copa and we don't anticipate slowing down. Thanks to our continued the same practice revenue growth of over 4% plus and a disciplined approach to acquisitions.
Speaker Change: In tandem with this momentum we are diligently keeping abreast of the developments related to the Canadian dental care plan.
Speaker Change: As we prepare for its rollout in May our team is actively updating our processes and ensuring that our practices are equipped to address patient needs.
Speaker Change: It is important to note. However that there are still several unknowns regarding the specifics of the plan and its full impact on the dental sector. We are monitoring these developments cosi, we're committed to adapting swiftly to ensure that we continue to provide the highest standard of care to our patients and support to our teams across the country.
Speaker Change: We believe that our balanced approach to growth to managing the business will continue to drive sustained double digit growth in revenue EBITDA and free cash flow per share and deleveraging throughout 2024 and beyond.
Speaker Change: Like to thank you all for taking the time to join our call. Today. This concludes the formal part of our presentation and I would like to open the call to questions operator.
Speaker Change: Thank you.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: We'll go first to Brian <unk> at Jefferies.
Speaker Change: Good morning U S policy thoughts on for Brian. Thank you for taking my question. So maybe first just start with the guidance. Obviously, we have to plan for Q1, but maybe if you can talk about the expected cadence of earnings and obviously implied in the guidance. There's a step up in margin expansion I see in the slide deck that you kind of happy three levers.
It out between labor procurement and technology platforms to help drive that maybe if you can talk about the magnitude at each end.
Speaker Change: Where you see the most opportunity for upside.
Okay.
Speaker Change: Thanks for the question and good morning.
Speaker Change: Really what our main driver and focus here on driving operating leverage and let's let's talk about really the last the last 24 months first which will set the base for.
Speaker Change: Or what where do you expect in the future.
Speaker Change: There's two things that really happened over over the last two years. One is you had inflationary cost increases.
Speaker Change: That affected multiple areas of the practice.
Speaker Change: And given the pricing dynamics in the dental industry.
Speaker Change: Price that is received in one year as always with reference to the inflationary.
Speaker Change: Inflationary growth in the prior period. So 2022 significant inflation 2023 received the price to offset some of that inflationary growth 2023 of course, the inflation, albeit cooled down slightly we were still in a higher elevated inflationary period than what we would otherwise experienced historically that <unk>.
Speaker Change: This doesn't come in until 2024, so as inflation goes down and we continue to benefit from the positive dynamics of the dental industry.
Speaker Change: At the practice level all of those items that you mentioned, whether it be from the procurement technology as well as labor all of those all of those cost items will allow for expansion of margin at the practice level. However, what we're very excited about as well as over the last 24 months, we've made significant investments in our technology.
Speaker Change: <unk> stack with upgrades to our ERP system, our HRS system, which helps us manage our labor pool of 10000, plus individual across the country.
Speaker Change: Those investments now will allow for us to significantly grow the business without any meaningful step ups. So the operating leverage that we're going to be able to drive from a corporate infrastructure is going to be one of the main contributors to the overall margin expansion that will experience at the enterprise level.
Speaker Change: Great really appreciate the color name and then Graham maybe a question for you I know back at our conference we had talked about the opportunity within orthodontics and implants right.
Maybe just an update on where that stands today.
Graham Rosenberg: How much of the opportunity have you realized and how much more runway is there to.
Graham Rosenberg: To realize that.
Speaker Change: Yes, good morning.
Speaker Change: We have significant runway available to us still.
Speaker Change: <unk> takes I would say we have about a third of our practices operating.
Speaker Change: At a reasonable clip in terms of ovarian sourcing agenda. So you've got another two thirds to go.
Speaker Change: We're currently running at around 14.
Speaker Change: Of the $50 million of orthodontic revenue out of our GP practices up significantly.
Speaker Change: Over the last couple of years since we started the program. So we see a.
Speaker Change: Significant upside potential in that regard and at least another $50 million to $80 million plus over the long term.
Speaker Change: At the same time, our and our implants agenda, which has driven a lot by technology advancements, which I'm, making it easier.
For general dentists to provide implant technology to their patients as well as an aging population driving demand.
Speaker Change: For a more permanent solutions.
Speaker Change: Two there to them losing their teeth.
Speaker Change: Is an opportunity that we have just begun to forge our way forward on our training and development programs five dentists.
Speaker Change: And that we are at the very early innings of batch and we think that it is an opportunity over the medium to long term, that's at least equal to the orthodontic opportunity.
Speaker Change: So.
Speaker Change: Early stages, a long runway for growth.
Speaker Change: Thank you.
Speaker Change: Well move next to Allen Lutz at Bank of America.
Speaker Change: Okay.
Speaker Change: Good morning, and thanks for taking the questions one for Nate.
Speaker Change: Same practice growth was two 5% in 2022, and then you. Obviously you saw the big step up in 'twenty three to six 5% and now Youre talking about 4% plus as we think about the drivers of the step up in 2023, you benefited from a strong flu and then I think there was a tailwind there from omicron in 2022 that benefited 2023.
Speaker Change: As we think about this 4% plus number for 2024, you talk about that as an intermediate term driver should we think about 4% plus is kind of the steady state growth outlook for St.
Speaker Change: <unk> practice revenue and then how should we think about the composition of that 4% plus growth between volume and price.
Speaker Change: Hey, good morning.
Speaker Change: Yes.
Speaker Change: 4% plus is the way that we think about it internally.
Speaker Change: Our expectations on a go forward basis.
Speaker Change: It really is the business and the investments we've made in our technology and our playbooks in the maturation of our ability to enhance the training and capabilities of our clinicians across our network that gives us confidence in that figure on a long term basis from a composition perspective.
As mentioned the.
Speaker Change: To a previous question, if we think about how the pricing dynamics work in the industry.
Speaker Change: It's been over over the last 40 plus years, if you draw a line of what CPI is in any one year. The following year, that's really what the price is.
Speaker Change: Is determined to be.
Speaker Change: Inflation was roughly call it in that 3% range in 2023, so think of price being at an approximately around that 3% about 3% level as we look to the.
Additional components, whether it's driving ultimately new patients expansion of services.
And an expansion of frequency that is going to make up an additional call. It 100, and 150 basis points of growth in any given year. So the components, where they would be price plus 100 to 150 basis points, which is comprised of additional services frequency and volumes.
Speaker Change: Great really appreciate that color and then just a quick model question around seasonality.
Speaker Change: <unk> is impacting <unk> I get that are there any other seasonal dynamics between 2023 and 2024 to call out as we think about the model over the course of 2024.
Speaker Change: No no no I think that's exactly that's exactly that's just the.
Speaker Change: The flu from from last year impacting kind of Q1 here. When you when you think about it in that range, but outside of that 2023 was representative from a seasonal perspective.
Great. Thank you very much.
We will go next to George you May at Scotiabank.
Speaker Change: Yeah, Good morning agreement.
Speaker Change: Can you talk a little bit about what with.
Speaker Change: With trends Youre seeing in the labor market when it comes to dentist hygienist and more generally how should we think about cost inflation at the practice level for 24 versus frankly.
Speaker Change: Good morning.
Speaker Change: Look in terms of availability, we're starting to see things move to the positive apartments on the supply side.
Speaker Change: On the.
Speaker Change: Dentists side of things as well as the dental assisting side of things with schools catching up in terms of the graduating classes.
And a lot of programs that we have with those scores are starting to accrue to our benefit.
Hygiene continues to be tight.
Speaker Change: And we continue to find ways to collaborate with schools and and be creative around how we bring those folks and so I'd say on the on the cost side.
Speaker Change: It's in line with where we thought things would be for 2024 hour. We've just put through a price increases in the past couple of weeks.
Speaker Change: We're not we're not sensing a lot of negative feedback in terms of what we proposed and so things are currently in line with our expectations.
Speaker Change: There is still upward pressure.
Speaker Change: On labor costs, which will continue we expect to continue to experience for the balance of the year.
Speaker Change: But are able to manage accordingly, and just just to build on that slightly.
Speaker Change: What what Glen was speaking to primarily around the highest inside of there is many many hygienist left the profession and in around the Covid period.
Speaker Change: And with the hygiene schools and their accreditation taken call. It anywhere between two to four years. So we really are on the tail end now of the replenishment of the hygiene pool across the country. We are seeing time to fill come down significantly we are seeing sequentially now as far as.
Speaker Change: Hourly wage rates go hiring at rates that were lower than the peak that was experienced over the last 24 months I'd say.
Speaker Change: Sitting here today looking back over the last 24 months, where we are in a far better position today than we were at any point in the last 24 month period and quite confident of the continued improvement.
Speaker Change: The labor availability wage rates and time to fill in our business.
Speaker Change: Yeah, Thanks for that and when you look through the pipeline for 2024.
Speaker Change: How would you expect purchase multiples pacing and perhaps composition of deals to be any different if at all to 2023.
Speaker Change: Yes.
Speaker Change: No real difference expectation really that continued balanced approach to our growth.
Focusing on growth being funded through our free cash flow generation.
In the $20 million to $25 million range of after rent EBITDA as it relates to the timing always very difficult to predict when when acquisitions will take place.
Speaker Change: As you saw roughly roughly half of our acquisitions for 2023 took place in Q4.
Speaker Change: So we're very confident that the repeatability and predictability.
Speaker Change: And looking at looking at the pacing of how we how we did it in 'twenty three is not.
It is not going to be too dissimilar from a valuation perspective.
Speaker Change: The market continues.
Speaker Change: To look at us as the partner of choice from a valuation perspective in that seven to seven five times range really what we experienced in 'twenty three.
Speaker Change: As again from a modeling perspective, what what and how we think about it internally.
Again, if I can squeeze in one quick one in here I think the longer term algorithm deleverage 0.1 turns per quarter and I guess just under half a turn a year should we expect that piece in 2024.
Speaker Change: Yes, and again, that's going to be driven from a from an overall total dollar of debt our expectations on all remained consistent maybe with slight drawdowns, but through acquisition of practices being primarily funded through free cash flow that will increase our EBITDA and drive the deleveraging of the business.
Speaker Change: Great. Thanks for answers.
We will take our next question from Stephen Macleod at BMO capital markets.
Stephen Macleod: Thank you and good morning, guys.
Speaker Change: Just a couple of follow up questions here.
Speaker Change: Just in terms of.
Speaker Change: Just a follow up on the last question about acquisitions can you give a little color on sort of what you're expecting in Q1 <unk>.
Acquisitions.
Speaker Change: If we think about roughly the that the average pacing of the $20 million.
Speaker Change: Break that down.
Speaker Change: Across across the quarters.
Speaker Change: Generally speaking Q2, and Q4 see slightly increased volumes of acquisition closings. So I'd say, if you take 60% to 65% of acquisitions in Q2, Q4, and then Q1 and Q3 would be call. It in that 35% to 35% range split evenly.
Speaker Change: Okay.
Speaker Change: Paul Thank you.
Speaker Change:
Speaker Change: Just thinking about the Canadian.
Speaker Change: Dental plan I know, Greg you talked a little bit about in your prepared remarks, obviously, obviously some unknowns out there, but just just confirming like would you expect it to be.
Speaker Change: A net positive to the business and I'm wondering if you can just give a little bit of color as to sort of how you expect that to impact.
Speaker Change: Volumes and an earnings going forward.
Look the headlines are that we believe it to be net neutral to modestly positive.
Speaker Change: We have a.
Speaker Change: I'd say about 20% of our patients are 65, plus we don't have any income distributions.
Sorry, I apologize 10%.
65, plus we don't have the income distributions, so that $90000 of headline Apple I wish people have coverage assuming that they don't have employer sponsored coverage.
Speaker Change:
Speaker Change: As we know the insurance piece, but we don't know the income piece. So we're going to have to navigate through that but we think that that is a net positive because it's kind of cost unless they go to the dentist and in terms of folks that don't go to the dentist.
Speaker Change: We think we see it as a net positive so we're in the midst of managing our volumes.
Speaker Change: And our capacity utilization and as we learn more about the plan for which there are still several details are known.
Speaker Change: We will be able to provide more color.
Speaker Change: Okay.
Speaker Change: Great. Thanks Graham.
Speaker Change: And then finally, just nice to see and expectations for EBITDA margin improvement in fiscal 'twenty four leveraging some of those corporate investments.
Speaker Change: And you mentioned in your prepared remarks, you said before.
Speaker Change: Investment that investment plan is largely complete so just confirming is that something we should expect even beyond 'twenty 'twenty four just all of those investments are in place. The infrastructure is built you just know levering and building on that going forward.
Absolutely I think the way to think about it is we're going to grow the business from a from a topline and EBITDA perspective, and double digits year in and year out.
Speaker Change: Of our corporate infrastructure will continue to grow so I'm gonna be static it will grow but at more of an inflationary rate.
Speaker Change: There's going to be significant average on that on that investment that has been made.
Speaker Change: Great. Okay. Thanks, guys appreciate it.
Speaker Change: Next we'll go to jail young at Stifel.
jail young: Hey, good morning, everyone.
Speaker Change: First question, just a bit of a clarification around the free cash flow guide.
Speaker Change: Quite a strong number and I. Appreciate the addition to your guidance.
Speaker Change: Is that a fully baked number after rent expense after working capital and an all in.
Speaker Change: It's fully baked after rent the one comment around working capital as we do report our adjusted free cash flow.
Without the impact of working capital working capital was actually a net benefit of roughly $9 million in cash contribution in 2023.
Speaker Change: So if you were to include working capital our figures are actually be even stronger, but it is fully baked for rent without the impact of working capital.
Speaker Change: Got it thanks, and then just secondly around the federal dental plan.
Speaker Change: Yeah.
Speaker Change: It is going to complicate the operating environment for the independent dentist are you seeing any indications that it could actually be a benefit for your value proposition.
Speaker Change: Increased number of dentists looking to sell.
Speaker Change: I wouldn't say, it's going to be.
Speaker Change: As a driver for vendors to make that move I think it will be a benefit for our network.
Speaker Change: Just given some of the call. It additional administrative changes that would need to take place right, there's going to be a learning curve as to how to implement this plan and how to.
Speaker Change: Sure that.
Speaker Change: And the patients have the best service and operate in the most efficient manner, given again, our corporate infrastructure and the teams that we have deployed across the country to support our practices. We do feel very confident in our ability to get our practices up the curve.
Speaker Change: When the time is right to do so and to serve the.
The patient base that ultimately this plan would benefit so are our positioning our infrastructure and our teams gives us that advantage, but I don't I don't see this having such a negative impact on Idaho, where it would drive vendors too to start looking to sell their business.
Speaker Change: Got it.
Speaker Change: That's good color, thanks, guys and congrats on a good finish to the year.
Speaker Change: Thanks, Daryl thank you.
And our next question comes from Scott Fletcher at CIBC.
Speaker Change: Hi, Good morning, a clarification question on the guidance.
Speaker Change: The full year 'twenty four guide, calling for nine five to 10, 5% revenue growth, which would sort of equal to the total growth and 23 at the midpoint, but you have the acquired EBIT. The total in St practice sales growth slightly slightly down year on year.
Speaker Change: So is the dynamic there largely just due to the timing of M&A with 2023 being back loaded in terms of M&A or is there any alpha displaying explained the top line growing at the same rate, but slightly lower on the M&A and the same practice itself. Yes. There is two things impacting obviously the.
Speaker Change: The number that you're multiplying the growth against those larger right given given the growth that we experienced 23 over 22, so that figure that starting point figure is larger.
Speaker Change: Second to that as you know that.
Speaker Change: The growth in from an acquisition perspective.
Speaker Change: Was backloaded in 'twenty three so the contribution of reported revenue and reported EBITDA wasn't wasn't as large as obviously the total acquisitiveness.
Speaker Change: But no nothing to nothing really too.
Speaker Change: To discuss other than those those two points.
Speaker Change: Okay. Thanks that helps.
Speaker Change: And then just a question it looks like you repaid you actually made a repayment on the credit facility in the quarter.
Speaker Change: Doesn't look like that through the capital allocation priorities in 'twenty four.
Speaker Change: Should we expect sort of is that a one off in the quarter or should we expect any repayments.
Speaker Change: That was just a one off.
Speaker Change: We're sitting with some excess cash and obviously looking to minimizing all financing expenses.
Speaker Change: And obviously, we just paid.
Paid down some debt as.
Speaker Change: As we see opportunities to limit our total our total debt carrying costs, we will do so and as you saw we just refinanced again in January gave back some capacity, which lowered our standby fees.
Speaker Change: And decreased our total finance charges on an annual basis by roughly 2 million plus.
Speaker Change: And locked in our interest expense over over the next while until May 26th So very very focused on again driving that free cash flow and doing doing all things possible to optimize our capital structure and spend.
Speaker Change: Great. Thank you.
We'll go next to David Kwan at TD Securities.
Speaker Change: Hey, guys.
Speaker Change: Wanted to ask a clarification on the on the guide for Q1, when you're talking about the adjusted EBITDA margin guidance being in line with 2023 are you talking about Q1 2023 for the full year I know, we're kind of splitting hairs here, but just wanted to get a clarification.
Speaker Change: Yes.
Speaker Change: We're talking about rounding differences David.
Speaker Change: It would be to address.
Speaker Change: It would be on a full year basis.
Speaker Change: Okay perfect.
Speaker Change: And then.
Speaker Change: As it relates to the M&A plans.
Speaker Change: You talked about kind of bookings and within your free cash flow.
Speaker Change: Are there any scenarios like multiples fell below that target range of seven to seven five times, where you might get more aggressive on M&A, frankly and draw down on your credit facility.
Speaker Change: I wouldn't say that we would we would become more aggressive in drawdown on our credit facility I would say if multiples if multiples go down.
And we continue.
Speaker Change: To support valuations, obviously coming down is is thats going to drive return on invested capital for us, but we would be able to acquire more at lower valuations.
Speaker Change: Right now our focus.
Speaker Change: Our strategy is to continue to drive our acquisitive growth funded predominantly from our free cash flow.
Speaker Change: And we're going to stick to that through through 2024.
Speaker Change: Okay.
Speaker Change: It is that the plan going forward and to kind of spend within free cash flow.
Speaker Change: I think you hit it.
Speaker Change: Historically, okay. Okay.
Speaker Change: And last question.
Speaker Change: Great and you talked about some details as it relates to the Canadian dental care plan could you.
Speaker Change: Talk about what some of those key details are that you are unaware of like my understanding is I think pricing is at least you expect to be in line with the non insured health benefits program, but I don't know what other key key things that are still up in the air.
Speaker Change: Okay.
Speaker Change: In particular around administration of the plan.
Speaker Change: And our connection between the intermediary and the administrative for the plan, which is Sun life.
Speaker Change: And so we're just working through some of those gatehouse, which which are yet.
Speaker Change: The covenants, we have quicker with this program.
Speaker Change: And.
Speaker Change: There is a little bit behind in certain areas in particular around administration. So we're working closely with the various parties to make sure that we're.
Speaker Change: In sync.
Speaker Change: For the big demand from alongside the program, which is still scheduled to be at the gamut.
Speaker Change: That's great. Thank you.
Speaker Change: We'll go next to Gary Ho at Deutsche <unk> capital market.
Gary Ho: Thanks, Good morning, gentlemen.
So when I look at your revenue guidance for 'twenty, four and assume you cheat or 18, 4% EBITDA margin.
Gary Ho: That implies a 10% to 15% EBIT growth, but you did provide a 15% to 20% free cash flow per share guidance growth just wondering.
Gary Ho: Five percentage point Delta, how you're able to better converting EBITDA to free cash flow or is there some kind of one time in the prior year free cash flow should normalize just wanted your thoughts on the faster free cash flow per share growth versus EBITDA growth.
Speaker Change: Look it's off a lower number and as we kind of our EBITDA.
Speaker Change: Cost of carrying that remains the same.
Speaker Change: In terms of pure dollars.
Speaker Change: Does that take numbers remaining factor using free cash flow to fund acquisition activity.
Speaker Change: You can't leverage JV.
Speaker Change: So you get a multiplier of factory or free cash flow per share.
Speaker Change: Okay.
Speaker Change: Okay and then my other question is when I look at your.
Speaker Change: Q1 outlook comment just remind me do you get all your within your practices when you put through your New guide.
Speaker Change: All of those come through on Jan one.
Speaker Change: Or are they implemented throughout January and February just wanted to gauge that two to two and a half.
Speaker Change: Sent same practice revenue growth can you wondering if you can break down the pricing versus volume that you've seen so far in Q1.
Speaker Change: Yeah. That's that's a good question so no not all not all provinces are implemented Jan one I'd say roughly 30% to 35% do begin in February.
Speaker Change: What I will say is as you come in you come through the holidays.
Speaker Change: And the prices and put it in January.
Speaker Change: Ultimately it doesn't really start probably until the third week of January as well. So I'd say again 30, 30% to 35% would be from February forward and that would be call. It a midpoint in February implementation.
Speaker Change: With the.
Speaker Change: Call it 65% to 70% of the other provinces is really happening at the end of January so really being in place for roughly two thirds of the quarter.
Speaker Change: So as we stand today all your practices would have put through the <unk>.
Speaker Change: The guidance yes.
Speaker Change: So as we stand as we stand today here in March.
Speaker Change: March would be call. It the first month that all the practices will have increased the increased pricing.
Speaker Change: Okay perfect. Thanks, those are my queue.
Speaker Change: And that does conclude today's question and answer session and today's conference call. Thank you for your participation you may now disconnect.