Q1 2024 dentalcorp Holdings Ltd Earnings Call
Speakers' remarks, there'll be a question and answer session.
Speaker Change: I would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
Speaker Change: 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 Chop Leah.
Speaker Change: Chief Financial Officer of Dental Corp. Please go ahead Sir.
Speaker Change: Thank you operator, and good morning, everyone. Welcome to Delek Corp, first quarter results conference call.
Speaker Change: Joined here by Graham Rosenberg, our CEO.
Speaker Change: Before we start we would like to remind you that all amounts 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 performed.
Speaker Change: <unk> business prospects and opportunities.
Speaker Change: Such statements are made as 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.
Speaker Change: Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results.
Speaker Change: 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 has 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 his opening remarks Graham.
Graham Rosenberg: Thanks, Nate and good morning, everyone. We are pleased to be with you today to review journal clubs recent developments as well as our financial and operating results for the three months ended March 31 24.
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 will discuss our financial results in detail after which I will provide forward looking remarks about how our business is trending.
Graham Rosenberg: As a reminder, total culp operates in a highly recurring essential health care industry that is cash pay resilient through economic cycles insulated from this intermediation by technologies.
Graham Rosenberg: Importantly expenditures have experienced strong relative growth during periods of higher than average inflation.
Accordingly, and in the context of the current macro environment, we believe that telecom favorable cost structure high margins low commodity risk and negligible capital expenditures provide support for the Companys continued delivery a balanced double digit growth and a $22 billion Canadian gallery industry.
Graham Rosenberg: Our confidence in the business is supported by our first quarter results, which met our expectations and provide a constructive outlook for the coming year.
Speaker Change: Overall I am pleased with our results for this quarter as you can see on slide three our results have been made possible by our deep and diverse network of nearly 10000 health care professionals across the country.
Speaker Change: Our teams continue to deliver the highest standards of care during a reporting period supporting more than $2 1 million active patients and managing of a $5 2 million patient visits annually.
Speaker Change: You will see that we completed our first quarter ended March 31, with approximately $1 5 billion of last 12 months pro forma revenue and $274 million of pro forma adjusted EBITDA.
Speaker Change: As you can see on the next slide we continued with our balanced approach to drive sustained double digit growth and we intend to continue growing our business organically through accretive M&A and by driving our overall business efficiencies and operating leverage over the medium to long term leases.
Speaker Change: This is a program that we have meticulously built over the past decade, and we believe we are able to thrive in any economic climate.
Speaker Change: With respect to M&A, we acquired five practices in the first quarter for a total consideration of $17 million. These practices I expect it to generate $2 6 million and pro forma adjusted EBITDA after rent.
Speaker Change: We're also encouraged to see that practice valuation has continued to decline down 10% in the first quarter of 2020 for 2023 as access to financing opportunities continue to tie to inform any buyers across the industry.
Speaker Change: We remain the best positioned in capitalized partner of choice for independent answers and will continue to be disciplined about some practices we acquire.
Speaker Change: On slide five you can see that our business operates with robust and expanding margins low capex requirements and capped interest rate exposure on a 100% of our existing debt outstanding.
Speaker Change: Continue to convert a high steady percentage of our EBITDA into free cash flow in any given period.
Speaker Change: On slide six and as we previously expected we completed the quarter at four three times leverage down <unk> one times from the end of 2023 as we funded all of our acquisitions through free cash flow.
Speaker Change: We continue to pursue our medium term target of under 3.0 times leverage.
Speaker Change: Turning to the next slide you can see a comparison of valuation and free cash flow yield versus our peers. Since IPO. We have seen a decline of 10, four times or 53% and our EV to LTM EBITDA trading multiple and are currently trading at a 42% discount to our total peer group at the same time.
Speaker Change: We are trading at a 10, 6% free cash flow yield compared to our peer group of only two 8%.
Turning now to slide eight I am pleased to report that our business delivered revenue of $372 $4 million in the first quarter of 2024 up three 9% over the same period in 2023 and.
Speaker Change: And adjusted EBITDA of $68 1 million up three 8% over the same quarter last year.
Speaker Change: Adjusted EBITDA margins came in at 18, 3% an improvement of 0.1% of Q4 2023.
Speaker Change: We are also encouraged that same practice revenue growth was <unk>, 9% for the quarter against what was one of the strongest quarters since our inception as the extended 2022 flu season resulted in a higher than normal volumes at the beginning of 2023 as well as from the deferral of patient volumes due to the Canadian dental care plan.
Speaker Change: I would like to take a moment to discuss the Canadian dental care plan also known as the CVP.
Speaker Change: As of May 1st distressed cohort of patients become eligible under the <unk>. However in anticipation of that start date, we experienced a deferral of patient volumes from the first quarter and for the balance of the year.
Speaker Change: We also note general cost provider enrollment is tracking above the current national enrollment of 20% to 25% and we expect that number to increase over the coming months.
Speaker Change: Under the CDP, we will continue to deliver services at rates consistent with our usual and customary fees. This will ensure the high quality of care that all our patients thus new and returning expect and rely on.
Speaker Change: Overall, we regard the CDP is a favorable development for both the Canadian public and dental professionals and we expect it to be neutral to slightly positive potential Corp.
Speaker Change: In addition, we have now completed our planned corporate investments, which will help to drive strong <unk> performance in both our base business and our recent acquisition cohorts.
Speaker Change: The outcome has been strong adjusted free cash flow for the quarter of approximately $35 $2 million, enabling us to fund the entirety of our acquisition program with free cash flow.
Speaker Change: As we look to the second quarter of 2024, we anticipate revenues to increase by 7% to 9% of Q2 train train three while delivering 2% to 3% same practice revenue growth.
Speaker Change: We expect adjusted EBITDA margins to be materially consistent with the first quarter of 2024.
Speaker Change: As we look ahead to the remainder of 2024, we remain optimistic on our same practice revenue growth returning to the 12% plus range in the second half of the year, along with our previous 2024 guidance of 15% to 20% adjusted free cash flow per share growth and adjusted EBITDA margin expansion of 20 plus basis points.
Speaker Change: We also anticipate completing acquisitions, representing pro forma adjusted EBITDA after rent of approximately $20 million in 2024.
Speaker Change: Overall this aligns with our balanced approach of strategic growth. Additionally, we expect to further deleverage our balance sheet as the company countries Southland, It's acquisitive growth.
Speaker Change: 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: Thank you Graham.
Speaker Change: The diversity in our dentist base allowed us to deliver on our quarterly results and demonstrates the strength and predictability of our business.
Speaker Change: Turning to slide nine revenue for the three months period ended March 31, 2024, as Graham mentioned was $372 million compared to $358 million for the corresponding period last year.
Speaker Change: Representing an increase of approximately 4%.
Speaker Change: The increase is attributable to our continued acquisitive and organic growth offset by lapping a record strong comparable period and the deferral of patient visits from Q1 into the balance of the year due to the anticipated commencement of the CDP.
Speaker Change: As you can see we reported first quarter adjusted EBITDA of approximately $68 1 million compared to $65 6 million in the same quarter last year and reported first quarter adjusted EBITDA margins of 18, 3%, representing 0.1% margin expansion quarter over quarter.
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 our net leverage and liquidity as of March 31 2024.
Speaker Change: On a net debt basis, we are approximately four three times levered at the end of the first quarter deleveraging by 0.1 times over Q4 2023.
Speaker Change: We ended the first quarter 2024 with liquidity of $407 million comprised of $53 million in cash and $354 million in undrawn debt capacity under our senior debt facilities.
Speaker Change: First quarter and last 12 months adjusted free cash flow was $35 and $129 million, respectively, which supports our strong balance sheet position.
On the debt side of the Ledger in January 2024, we increased the hedge portion of our bank debt from 75% to 100% and of that exposure is carrying a fixed SEDAR rate plus margin for an all in cost of approximately $6 six 5%.
Speaker Change: In addition, we continue to see strong interest rate coverage as defined by our LTM pro forma adjusted EBITDAR to rent divided by net interest expense of $3 two times in Q1 2024.
Speaker Change: Turning to the next slide you can see our 2024 capital allocation program. We are committed to continuing to self fund acquisitions using free cash flow and expect little to no debt drawn from our 2020 for acquisition strategy. We self funded the entirety of our acquisitions in the first quarter from cash flow not drawing on any additional debt.
Overall, we are pleased with our first quarter 2024 results, we increased organic growth in part through 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.
Graeme: Thanks, Nate turning to slide 12, we remain highly confident about our future opportunities.
Graeme: To return to a 4% same practice revenue growth in the second half of 'twenty 'twenty, four and expect it to deliver on $20 million of acquired EBITDA for training training fall. In addition, we continue to expect to deliver adjusted EBITDA margin expansion of 20, plus basis points and 15th to try and present growth and free cash flow per share while we continue to drive.
Graeme: Leveraging throughout 'twenty 'twenty four and beyond.
Speaker Change: Thank you all for our call today. This concludes the formal part of our presentation and now I'd like to now open the call to questions operator.
Thank you if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
In the interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.
Speaker Change: Our first question comes from George <unk> from Scotiabank. Please go ahead. Your line is open.
Speaker Change: Yeah. Good morning, guys based on your Q2 guidance. So I think we need closer to mid teens revenue growth in the second half. So can you maybe talk a little bit about.
Speaker Change: The building blocks to get there and maybe perhaps the cadence between Q3 and Q4.
Speaker Change: Yeah absolutely.
Speaker Change: Just to take a step back.
Speaker Change: And kind of reiterate.
Speaker Change: The performance in Q1.
Speaker Change: As we got closer through to the end of the quarter.
And there was more information around the CDP.
Speaker Change: And patients began to receive their cards and educate themselves about there the opportunity for participation and it really wasn't just the 65 plus cohort that became eligible may one.
Speaker Change: What we saw as a behavior of all patients that that would become eligible both through the balance of 2024 as well as 2025.
Speaker Change: Begin to defer reschedule their appointments as again they began to apply.
Speaker Change: And understand the benefits of benefits of the program. So in the short term ultimately what we saw is a bit of a change in behavior as it relates to those patients that that would be eligible and again those deferral of volumes from from Q1 through the balance of the year.
Speaker Change: As we see it continue and as we sit here are really roughly 10 days into the program. We are seeing a return back to a trending towards a back to normal levels. We're not we're not all the way there yet.
Speaker Change: And again, there there isn't a call it full participation from the dentist across across the country as mentioned on the call are dentists participation is trending above that 20% to 25% enrollment rate across the national average, but again there is still a still work to do as far as.
Speaker Change: Information to be provided.
Speaker Change: By by the government around the CDP as well as a further enrollment changes that are being put through that will begin in July so as far as.
Speaker Change: As the pacing of growth in the pacing of our expectations through the year.
Speaker Change: And in that 2% to 3% for Q2 and.
Speaker Change: Our expectation is as the program continues to mature as enrollment continues to increase across dentists, and Canada and patient behavior does return to normal for the balance of the year that 4% plus organic growth as is our expectation.
Speaker Change: And we would expect to see more growth in Q4 versus Q.
Speaker Change: It's difficult to say I think depending on on on how the program pushes through this is obviously.
Speaker Change: A program.
Speaker Change: That is new to all.
I think it would it would be reasonable to expect that as the program continues again to mature through the balance of the year are more patients.
Speaker Change: Receive their cards and return back to the office I think that's a that's an expectation that that is true I think as well if if we if we take a step back.
Speaker Change: And look at the total population in Canada that the CDC P would serve a it's obviously a significant increase in the total addressable population for dentistry.
Speaker Change: It is $15 billion of increased funding for the industry.
Speaker Change: So as we get through the balance of 'twenty four and into 25 again, we do look at this positively both from an access to care to patients in Canada as well as for the industry at large.
Speaker Change: Okay. Thanks, and just for my follow up to them.
Speaker Change: Decrease in the gross margin I think you guys called out a higher revenue share and also higher prices and consumables cost can you just can you elaborate a little bit on that and how should we think of a normalization in that margin over the year.
Speaker Change: I think that margin it just trends.
Speaker Change: From quarter to quarter.
Speaker Change: We'll be some some some difference in some movement it really is related to.
Speaker Change: The mix of goods that are purchased are both on the consumable and as well as the types of services that are being provided I think.
Speaker Change: Hum.
Speaker Change: In the long term, we expect it to continue to be well within that within the range that we've seen historically.
Speaker Change: Great. Thanks for answering my bottom line.
Speaker Change: Our next question comes from Gary Ho from <unk> Capital markets. Please go ahead. Your line is open.
Speaker Change: Thanks, Good morning, and efficacy you self fund your acquisitions here.
Thank you for your capital allocation with shares where they are.
Speaker Change: How do you balance between putting the next incremental dollar into buying back stock versus purchasing another practice.
Speaker Change: Just refresh us how you think about the economics there.
Speaker Change: Yeah absolutely.
Speaker Change: So really it's two parts here.
Speaker Change: Here as to how we think about it one as we look to the.
Speaker Change: The individual economics.
Of a deal we look to it as far as.
Speaker Change: The return on invested capital that we're able to drive.
Speaker Change: And we continue to drive return on invested capital that's in excess of our cost of capital and in the mid teens as we look at it we're able to from a from a valuation perspective, given our purchasing power negotiated contracts as well as the revenue synergies and efficiencies and programs, we're able to bring.
Speaker Change: Buyback multiple multiple down fairly quickly within that first 12 month period. So on a standalone basis unit economics on an acquisition do drive positive returns and that is how we evaluate it.
Speaker Change: Further to that as we look to it.
Speaker Change: In the long term.
Speaker Change: Acquisition ultimately continues to build our terminal value as mentioned on the call by Graham we are trading at a significant discount to our peers are from from both an EBITDA valuation multiple we're trading up nearly an 11% free cash flow yield.
Speaker Change: So from an intrinsic value.
Speaker Change: Our view is to continue to build the business continue.
Speaker Change: To maintain our leadership position in our significant leadership position as the partner of choice.
For for dental in Canada.
Speaker Change: And as we look to each allocation of dollar for acquisition versus share buyback.
We don't look at one call it.
Speaker Change: I'm taking away from the other we reiterated our $20 million of plus acquisitive growth in 2024, and we will continue to stay on that path to $6 million of what we acquired in Q1.
Speaker Change: And by the end of H, one expect again to continue on a pace that will provide us that pathway to $20 million.
Okay. Thanks, Thanks for that and then my second question a.
Speaker Change: Follow up to the last question.
Speaker Change: There just in terms of what you are seeing sounds like you're seeing some re bookings in Q2 Q3 last quarter, you've given us a nine and a half to 10, 5% target.
Speaker Change: Full year revenue growth in 2024, I guess with these deferrals does that lower that range bet or no thats more of a timing.
Speaker Change: I think from a from a full year from a full year perspective, it would lower it given our given.
Speaker Change: Given the reduction in volumes in Q1, and two the deferral into the balance of the year.
Speaker Change: So if we look to the 0.9% in Q1.
The 2% to 3% in Q2 with a balanced with the balance being in that 4% plus range.
Speaker Change: That would drive a slightly slightly lower total annual year over year.
Speaker Change: Okay, Great those are my questions.
Speaker Change: Our next question comes from it comes from Stephen Macleod from BMO Capital markets. Please go ahead. Your line is open.
Stephen Macleod: Thank you good morning, guys.
Stephen Macleod: Just looking at the CD CP impact in Q1.
Speaker Change: You know in Q1 same practice revenue growth came in slightly below the guidance range.
Speaker Change: Would that would that all be attributed to the CD CP.
Speaker Change: Yes.
Speaker Change: It's totally.
Speaker Change: Fully attributed to the CDP.
Speaker Change: Let's say, the 4% to 4% plus without without.
Speaker Change: The deferrals of those patients that would otherwise not be eligible and now have become eligible it has changed their behavior as they await their.
Speaker Change: Their their participation cards as well as.
Speaker Change: Their clinics participation in servicing their program.
Speaker Change: So there's full confidence on our end as it relates to the return back to that pacing and frankly and increased our potential for our organic growth given the opportunity for for that new patient growth, but in the short term. It has to it has changed a little bit of the behavior and created that deferral.
Speaker Change: Volumes from one period into another.
Speaker Change: Okay, that's great. Thanks Nate.
Speaker Change: And then my second question just on the on the margins.
Speaker Change: You talked about having the infrastructure you need to drive incremental growth. So just wanted to get some sense of visibility into the margin in Q2 with the guidance, we've given as well as the back half leading to that full year margin of.
Speaker Change: 20 basis points or more.
I just wanted to get a sense of visibility into that.
Speaker Change: Absolutely.
Speaker Change: We're seeing very strong margins at the practice level continue continue to to be provided.
Speaker Change: And further our corporate leverage now with that fully invested base.
Speaker Change: We've we've returned roughly 50% of our expectation on margin expansion in Q1 at that 18, 3% margin level. So I feel very strongly about achieving that 18, 4% through the balance of the year.
Speaker Change: Great. Thanks, guys.
Speaker Change: Our next question comes from Scott <unk> from CIBC. Please go ahead. Your line is open.
Speaker Change: Good morning, I wanted to ask a question on the acquisition pipeline, we've got we've seen.
Speaker Change: There's changes to the capital gains rate in the 'twenty budget and rates staying higher for longer are you seeing any change in sort of willingness of sellers or sellers behavior in the pipeline.
Speaker Change: Thanks for the question Scott.
We have and.
Speaker Change: The the change to the capital gains rate.
Speaker Change: Is obviously something with dentist, all being small business owners and being sensitive to it.
Speaker Change: It has been a catalyst for for conversation.
Speaker Change: It's been a catalyst again sport for them thinking about.
Speaker Change: Crystallizing their value.
And in thinking about that.
Speaker Change: Their future outcomes.
Speaker Change: So it has absolutely been I'd say a positive driver here ultimately from a from an overall pacing.
Speaker Change: We continue to say, we can do more than the $20 million plus and we displayed the ability to do so but we'll continue to focus on our balanced approach to growth.
Speaker Change: Really around organic growth around acquisitive growth.
Speaker Change: And really focusing on driving free cash flow and deleveraging. So don't expect to really drive our acquisitive pacing above that 20 $20 million level.
Speaker Change: Taking a step back from an overall pipeline perspective.
Speaker Change: <unk> to be very strong conversations continue to build.
Speaker Change: And given our strength dominance as well as balance sheet strength and ability to transact we continue to be the partner of choice and be the acquirer of choice in the industry.
Okay.
Speaker Change: Great. Thanks, and then to push that one step further on the multiples you called out sort of down 10% year on year and quarter over quarter is there anything specific to the quarter or do you think that that can sort of continue at those those numbers going forward.
I think I think we continue to find great opportunities with great partners.
Speaker Change: I do believe that valuations will be in that seven to seven five times range over over the medium term.
Speaker Change: Across the board, obviously valuations on any given quarter might might move up and down a little bit. It was only it was five five transactions this quarter.
Speaker Change: But expectations internally over again, the medium to long long term is in that seven to seven five times range.
Speaker Change: Great. Thank you.
Our next question comes from Brian <unk> from Jefferies. Please go ahead. Your line is open.
Speaker Change: Hey, good morning.
Speaker Change: Maybe just as I think about your comments on the cadence for sort of same store revenue growth.
Speaker Change: As we considered that the.
Speaker Change: Quinn.
Speaker Change: Canadians Denver planned rollout.
The contemplated that there is a little more delaying that happens in Q2 and some.
Speaker Change: Procedures might be pushed into Q3 into that commentary just curious.
Yes, I think absolutely I think so.
Speaker Change: Program launched in May one.
Not all of those that are eligible from a patient perspective received their cards, obviously, there's administrative constraints on the government side and pushing that through so they deferred their appointments and until ultimately they they did receive their ability to participate further to that as it relates to the enrollment on the dental side, which has.
That's complexities are the enrollment across the country not unique to dental Corp is in that 20% to 25% range. So even if those patients are eligible and do have their cards, if their dentists and signed up then they're deferring until ultimately they do.
Speaker Change: The government put a new pathway for.
Speaker Change: For servicing patients that will begin July 8th which will reduce some of the administrative.
Straight of complexity around it so absolutely there'll be some deferral from Q1 into Q2 and more so beyond into the second half. So the way that I would look at it is it's really a tale of two halves whereby through Q1 and Q2.
Speaker Change: Working through some of the Kinks in the program on both sides in Q3, and Q4 are having a greater greater availability and our ability to service that patient base.
Speaker Change: I appreciate that and then maybe.
Speaker Change: Think about that.
Speaker Change: At the end of the day right. There's still expands the Tam. So is there anything that you guys need to do in terms of investment.
Speaker Change: Try to capture a greater share of the new lives coming into market.
Speaker Change: Yeah, No it's and that's a that's a that's a great point I think just given given our our our national scope.
And and scale of our business I think we will be able to capture a greater share we've created channels of of education channels of communication.
Speaker Change: Two are those patients that will be eligible to ensure.
Speaker Change: They understand where to go how to go in and how we can service them and it's something that we as a network are excited about.
Speaker Change: As the program more so and it's early days rolls out I think it's it's creating that slight disruption, but in the long term. This is absolutely something that in our view will be additive.
Our overall growth and ultimately additive to the Canadian population has access to care, which is again something that we're very excited about and happy to see.
Speaker Change: Thank you.
Speaker Change: Our next question comes from David Kwan from TD Cowen. Please go ahead. Your line is open.
David Kwan: Good morning.
Speaker Change: Wanted to talk again about the CDC key.
Speaker Change: I was wondering for some of these patients.
Speaker Change: That had been deferring their appointments or whatnot.
Speaker Change: And you've talked about it I guess the uptake of your debt.
Speaker Change: Chest.
Speaker Change: For a patient goes to a dentist that haven't signed up for it yet.
Speaker Change: Have you seen any material.
Data points.
Speaker Change: Yes.
Speaker Change: These patients might look to go somewhere else and those situations are you telling your dentist that haven't signed up to use direct billing option with sunlight.
Speaker Change: Yeah. So we haven't seen much of that Ah I think it's it's a it's an open and trusting dialogue and again, the beauty of dentistry and the relationships that that dentists have with their patients is it's high trusts. It's it's it's very sticky.
Speaker Change: Ultimately the cohort of patients here that are eligible and that 65 plus range I've been seeing there there are their provider for years and years and years. So there really isn't that desire to change I think it's an open and honest dialogue on both ends as to what they are working through into how how they can support them and given given our network scale.
Speaker Change: If there is a a current call it dentist practice that hasnt enrolled but theres a practice. That's nearby that has then there'll be referrals across to ensure that the patients are being able to access care as quickly as timely as they can.
So really haven't seen it.
Speaker Change: Any significant attrition at all it's more so deferral again of those appointments from those patients into from one period into the next.
Speaker Change: No. Thanks Nate.
Speaker Change: Just to confirm because the governments I think.
Speaker Change: The coverage is somewhere between 80% to 90% is kind of what the market rate is.
Speaker Change: Is the plan still to have patients paid for that difference and has that been.
Speaker Change: And can make it to the patients that qualify for the plant.
Speaker Change: Absolutely so that that bounds billing and really building towards what the practice would otherwise would otherwise bill under their customary fees.
That is that is how the program is being administered a really across Canada and it's a it's how the dental associations have also communicated to all their constituents across each province as to how to administer it. So that's not a that's not a dental corp approach that is a national approach that is being <unk>.
Speaker Change: Conveyed.
And coached and educated by the Dental Association.
Speaker Change: That's great. Thanks.
Speaker Change: Next question comes from Daryl Young from Stifel. Please go ahead. Your line is open.
Speaker Change: Good morning, everyone.
Speaker Change: Question is just around some of the in sourcing agendas and I guess more cosmetic services.
Speaker Change: I think invisalign as called out.
Speaker Change: Some green shoots and recovery in demand for some of the cosmetic ortho services and just curious what youre seeing here in Canada.
Speaker Change: Grassroots level here on the on demand for more cosmetic services in ortho and sourcing.
Speaker Change: I think I think it's a great question Daryl.
The board if we look at our in sourcing initiatives.
Speaker Change: With ortho as well as again that the early days on the on the implant side we.
Speaker Change: We are seeing significant uptake significant uptake on those fronts.
Speaker Change: Been working with a line to update and continue to improve our in sourcing initiatives and training programs in support programs for our network. So really excited about launching that that next phase through the balance of this year, we are continuing to see call it that stable strength across <unk>.
Speaker Change: Work in reiterating here that really only 300.
Speaker Change: Or so of our practices are participated in our Invisalign acceleration program.
Speaker Change: And as we as we continue to rollout that next phase are not only are we going to see call. It practice on practice organic invisalign growth as they continue to become more comfortable as the technology continues to improve and it rolls out through their patient base as we add on additional additional locations to the program very excited to see how how that.
Speaker Change: Through.
Speaker Change: As well from our from our implant side we're.
Speaker Change: We're gonna be continuing with our our cohorts of education here. So expecting are expecting a good number of of practices and practitioners to begin rolling through the program in the second half of the year, which is something that we'll be sure to update you on.
Speaker Change: Terrific. Thanks, very much guys.
Speaker Change: Our next question comes from Allen Lutz from Bank of America. Please go ahead. Your line is open.
Good morning, and thanks for taking the questions I want to follow up on the last question on the specialty side on clear liners implant.
Speaker Change: What's embedded in the updated guidance did anything change there from the guidance last quarter and do you need to see any improvement in utilization a change in order to hit the updated guidance around the specialty side. Thanks.
Speaker Change: It's a good question is as it relates to the updated guidance.
Speaker Change: The change is solely attributable to the CDC P.
Speaker Change: And in the patient deferrals of appointments from from Q1 to Q2, so ultimately first half into second half as it relates to the specialty penetration.
Speaker Change: And the performance of both dental and hygiene in the normal course, there has been no change and no no no expectation for that through the balance of them.
Speaker Change: Great. Thank you very much.
Speaker Change: Our next question comes from Tanya Armstrong Whitworth from Canaccord Genuity. Please go ahead. Your line is open.
Speaker Change: Thank you.
Speaker Change: Another question on the C. D C. P. I'm just wondering since it doesn't cover all prissy Jeri do you anticipate the rollout what kind of shift your service next says near C. D C patients enter your network.
Speaker Change: Will this have an effect on your ultimate EBITDA margin.
Speaker Change: It's a great question Antonio so to start with the second part of the question just given given the approach to to billing and ultimately from the patients will be covered and charge. The same fees as is customary in each practice there will be there will be no no effect on margin a it'll be.
Speaker Change: It'll be margin consistent as it relates to really the types of services that are being provided for the most part a b C. D. C. P is quite comprehensive Theres, a few specialty services that would be outside of the scope of the CDC P. But otherwise it's a it's a it's a very robust program Ah that as Frank.
Speaker Change: Has has a has more coverage.
Then certain provincial programs that may be these patients were previously eligible for so if anything that would actually increase the pace of services that they would otherwise be able to consume and provide them with better access to care from what is for US a margin margin neutral to maybe slightly margin positive Ah patient growth.
Speaker Change: Okay, Perfect and then as my follow on.
Speaker Change: The thing on margin again, I'm wondering I think it was a bit of a change.
Good morning management circular about how you guys are paying so theres more of a focus being put on adjusted free cash flow instead of <unk>.
Speaker Change: Pro forma adjusted EBITDA acquired.
Ken: Ken Let me take this too.
Speaker Change: I mean that you are becoming much more focused on driving margin expansion and operational efficiencies versus just growing the top line with M&A.
Speaker Change: I think that's I think that's exactly it I think we're looking at Holistically as to the drivers of value are.
Speaker Change: And what we're very excited about and happy to see in Q1.
Speaker Change: Is that increase in our adjusted free cash flow is that expansion of margin and ultimately deleveraging. So as we focus on driving the free cash flow and the growth in the free cash flow per share ultimately that that too will drive all of the other leavers for for value creation.
Speaker Change: That doesn't take away from our continued focus on acquisitive growth being in that 20 million plus range and really focusing on that balanced growth throughout.
Speaker Change: Okay. Thank you guys.
Speaker Change: Yes.
Speaker Change: Our comprehensive.
Speaker Change: Thanks.
Speaker Change: Savi creation gloves and capital deployment.
Speaker Change: We have no further questions. This will conclude today's conference call. Thank you for your participation you may now disconnect.