Q1 2023 dentalcorp Holdings Ltd Earnings Call
Please.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply press the star key and then number one on your telephone keypad. If you would like to withdraw your question. Please press star one once again.
Speaker Change: I would now like to turn the call over to Mr. Nate <unk> Chief Financial Officer of Dental core. Please go ahead Sir.
Mr. Nate: Thank you operator, and good morning, everyone welcome to the Dental Corp, first quarter 2023 results conference call.
Mr. Nate: I'm joined here by Graham Rosenberg, our CEO and Guy <unk> our president.
Mr. Nate: Before we start we would like to remind you all that amounts discussed on this call are denominated in Canadian dollars unless otherwise indicated.
Mr. Nate: 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 performance business prospects and <unk>.
Mr. Nate: <unk>.
Mr. Nate: Such statements are made as of the date hereof, and dental Corp assumes no obligation to update or revise them to reflect events disclosures or circumstances, except as required by applicable securities law.
Mr. Nate: Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results.
Mr. Nate: A number of these risks and uncertainties that could cause results to differ materially from results discussed today.
Mr. Nate: 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&A and our earnings press release issued today for additional information.
Mr. Nate: 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'll now turn the call over to our Chief Executive Officer, Graham Graham Rosenberg for opening remarks Graham.
Speaker Change: Thanks, Nate and good morning, everyone. We're pleased to be here with you today to review Journal clubs recent developments as well as our financial and operating results for the three months ended March 31 2023.
Speaker Change: Today's call I'm going to share a number of those developments with you and I will then hand, the call over to <unk>, who will discuss our financial results in detail after which I will provide forward looking remarks about how our business is trending.
Speaker Change: As a reminder, dental KOF operates in a highly recurring essential health care industry that is cash pay resilient to economic cycles.
Speaker Change: Insulated from disintermediation by technologies.
Speaker Change: Accordingly, dental expenditures have experienced strong relative growth dream periods of higher than average inflation.
Speaker Change: Accordingly, and in the context of the current macro environment, we believe that dental cops favorable cost structure high margins low commodity risk and minimal capital expenditures.
Speaker Change: Good support for the Companys continued delivery of balanced double digit growth in the $18 billion Canadian dental industry.
Speaker Change: Our confidence in the business. He is validated by our first quarter 2023 results and strong outlook for the second quarter and the remainder of the year.
Speaker Change: I am delighted with our results this quarter during which we delivered record performance across the board as you can see on slide three this performance has been made possible by our deep and diverse network of <unk> thousand 800, plus dentists to 'twenty 400, plus dental hygienist and $5 5000, plus auxiliary dental health professionals.
Speaker Change: A country from coast to coast and health care professionals continue to deliver the highest standard of care during the reporting period supporting more than 2 million active patients and managing more than 5 million patient visits annually.
Speaker Change: Youll see that we completed our first quarter ended March 31, 2023, with approximately $1 $4 billion of LTM pro forma revenue and $260 million of pro forma adjusted EBITDA for the same LTM period.
Speaker Change: Moving onto slide four Youll see that we continued with our balanced approach to drive sustainable double digit growth and we intend to continue growing our business organically through accretive M&A and by driving overall business efficiencies and operating leverage over the medium to long term.
Speaker Change: This is a program that we have finally tuned over the past decade, and we believe that we are able to adapt to any short or longer term shifts in the broader economy.
Speaker Change: With respect to M&A, we continue to leverage our leadership position in the Canadian dental industry by acquiring six practices in the first quarter for total consideration of $35 million. These practices I expect to generate $5 $5 million of pro forma adjusted EBITDA.
Speaker Change: During the quarter and as part of our program to rationalize certain noncore standalone specialty practices.
Speaker Change: The sale of 13, Standalone orthodontic practices, we anticipate that the sale of these assets will have a positive impact on overall, adjusted EBITDA margins, allowing us to allocate resources to higher growth areas of our business.
Speaker Change: We are also encouraged that in the first quarter and so far in the second quarter that practice valuations are beginning to decline in Canada and as access to financing tightens for many buys across the industry, we remain well positioned as the partner of choice and the capitalized partner well capitalized partner.
Speaker Change: Four independent and test and will continue to be judicious about the practice as we acquire.
Speaker Change: On slide five Youll see that we continue to convert a high percentage of our EBITDA into free cash flow and without acquisitions have the potential to drive our leverage down by a quarter to a half turn per annum to the mid to high ones over the medium term.
On slide six I am pleased to report that our business once again delivered double digit growth with first quarter 2023 revenue of $358 million up 28% over the same parity in 2022, and adjusted EBITDA of almost $66 million.
Speaker Change: Up 31% over the same quarter last year with adjusted EBITDA margins coming in at 18, 3%.
Speaker Change: We are very encouraged that same practice revenue growth was approximately eight 5% for the quarter driven by a robust rebound in patient visits and the contribution of fee guide increases all of which generated 11, 2% same practice EBITDA growth.
Speaker Change: During the quarter. We also delivered 19, 3% growth in the EBITDA of acquisitions completed in 2022 over their comparable performance driven by our purchasing efficiencies and the rigor of our integration program, including the implementation of a robust technology.
Speaker Change: <unk>.
Speaker Change: The outcome of all this was a strong adjusted free cash flow for the quarter of approximately $33 million compared to $30 million in the first quarter of 2022, despite increased financing costs driven by historical rate increases in the last 12 months.
Speaker Change: I will now pass the call over to Nathan who will walk us through the details of our financial results and then I will share some closing remarks before we open the call to questions Nate.
Speaker Change: Okay.
Nathan: Thank you Graham.
Speaker Change: We believe that our first quarter results demonstrate the strength of our underlying business on slide seven revenue for the three months period ended March 31, 2023 was $358 3 million compared to $282 million for the corresponding period last year.
Speaker Change: Representing an increase of approximately 28%.
Speaker Change: This increase is attributable to our strong acquisitive and organic growth, including a positive contribution from orthodontic and sourcing as.
Speaker Change: As you can see we reported first quarter adjusted EBITDA of approximately $65 6 million compared to $50 1 million in the same quarter last year and reported first quarter adjusted EBITDA margins of 18, 3%.
Speaker Change: Same practice revenue growth was eight 5% over the same period in 2022.
Speaker Change: Looking forward, we continue to be optimistic about our ability to grow our business through acquisitions and organically.
Speaker Change: With respect to M&A, we completed the acquisition of six practices in the quarter expected to generated $5 3 million and pro forma adjusted EBITDA.
Speaker Change: Turning to slide eight you can see that our net leverage and liquidity as of March 31 2023.
Speaker Change: On a net debt basis, we were approximately $4 four times levered at the end of the first quarter down from four five times at the end of 2022 delivering on our commitment to deleveraging.
Speaker Change: We ended the first quarter 2023 with liquidity of $785 million comprised of $111 million in cash and $674 million in undrawn debt undrawn debt capacity under the senior debt facilities.
Speaker Change: Yeah.
Speaker Change: For the first quarter in the last 12 months adjusted free cash flow was 33 and $131 million, respectively, supporting our strong balance sheet position.
Speaker Change: We also locked in a significant portion of our debt costs in the quarter by executing an additional $300 million of interest rate swaps approximately.
Speaker Change: Approximately 75% of our bank debt exposure or $800 million is now carrying a fixed SEDAR rate plus margin for an all in cost of approximately six 4%.
Speaker Change: The remaining quarter of our senior debt facilities remain on a variable rate.
Speaker Change: Overall, we are very pleased with our first quarter 2023 results, we increased organic growth in part through our in sourcing efforts, creating ongoing operating efficiencies close accretive acquisitions and continue to develop our acquisition pipeline.
Speaker Change: With that I'll turn the call over to Graeme to provide some closing remarks Graham.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thanks, Nate turning to slide nine.
Speaker Change: We remain highly confident about our business prospects going forward in fiscal 'twenty to 'twenty three is off to a very strong start to a second quarter revenue is expected to grow by nine five to 10, 5%.
Speaker Change: Okay.
Speaker Change:
Speaker Change: Over the same period last year with same practice revenue growth of 5% to 6% driven by robust patient visits and contribution from peak I've increases.
Speaker Change: The second quarter of 2023, we expect to acquire approximately $45 million and pro forma adjusted EBITDA after rent at acquisition multiples consistent with the first quarter.
Speaker Change: We expect adjusted EBITDA margins to remain consistent over the same period last year with solid practice level performance offsetting the significant investments we have made in our marketing and talent teams and the upgrade to our core information technology systems. We once again expected to deliver double digit revenue and adjusted EBITDA growth for the year with corresponding practice margin expansion.
Speaker Change: While generating strong free cash and deleveraging of the business through our balanced approach to growth.
Speaker Change: With respect to our strategic review process. The Special Committee conducted an extensive review and evaluation of several alternatives available to the company. The Special Committee provided its final report to the board on May 11, 2023, and based on the Companys strong outlook and prospects for future growth as well as the fact that none of the alternatives.
My third parties reflected a fair value of the company. It was recommended that it would be in the best interest of the company given <unk> regard to the interest of the company's shareholders and other stakeholders to continue to pursue its existing business strategy, which contemplates the achievement of our bounds growth through organic and acquisitive and balance sheet de leveraging initiatives under the leadership of the companies.
Speaker Change: Existing senior management team.
Speaker Change: Today, we also announced acceptance by the tier sacks of general clubs notice of intention to make a formal cost issue in normal course issuer bid pursuant to the NTSB general coffee intends to purchase for cancellation up to three and a half million subordinate voting shares in the capital of the company representing approximately 2% of countertops issued.
<unk> outstanding subordinate voting shares as at May 12, 2023.
We believe that the market price of our shares do not from time to time to effect the underlying value of our business and growth prospects I think the right conditions, we believe that the repurchase of our shares under our share buyback program could be opportunistic in an appropriate and desirable use of our available cash.
The decision to repurchase any of our shares will be measured against our other organic and inorganic growth opportunities and leverage guidelines and our overall objective of creating long term value for all of our stakeholders.
Speaker Change: I'd like to thank you all for taking the time to join our call today that 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 ask that you. Please limit yourself to one question and one follow up question, we will pause for just a moment to compile the Q&A roster.
Speaker Change: And we will take our first question from Michael Cherny with Bank of America. Your line is open.
Michael Cherny: Hi, good morning, congratulations on the strong quarter.
Michael Cherny: Maybe Graham if we could dive in on the <unk>.
Michael Cherny: Evaluation on M&A I think you took a very prudent approach pulling back on some of the excuse me deals given the financing environment that being said there was a.
Michael Cherny: Push and pull on the fact that essentially valuations are going to come through especially as we move forward. What are you expecting to see from ongoing changes to valuations and how does that impact that.
Michael Cherny: Base of growing but growing prudently given the current financing environment.
Michael Cherny: Alright.
Speaker Change: That's a great question. So look we have stated our desire to continue to grow through a balanced approach.
Speaker Change: <unk> organic and inorganic initiatives.
Speaker Change: We are pleased to see that acquisition multiples have come down 27% over last year.
Speaker Change: I think we continue to evaluate against the returns on invested capital that we're able to drive from our acquisition activity.
Speaker Change: You saw that despite higher multiples last year, we're able to drive close to plus 20% increases in EBITDA for the comparable period.
Speaker Change: Four acquisitions, we completed last year and.
Speaker Change: We continue to feel good about our ability to drive strong returns on invested capital through our Playbooks for growth technology stack.
Speaker Change: And the strength of our information platform when we make those acquisitions.
Speaker Change: So again a balanced approach.
Speaker Change: We feel that.
Speaker Change: You know 5 million plus a quarter for now is the right number.
Speaker Change: And we have the ability to flex up and increase Apopyle last year, where it was a quiet plus a $50 million of EBITDA.
Speaker Change: So it's $5 million next colectomy I apologize.
Speaker Change: $55 million of EBITDA.
Speaker Change: Through an integrated flawless flawless and we're able to generate strong results, 20% up again over there.
Speaker Change: That comp results from last year or so.
Speaker Change: We'll continue to evaluate those opportunities in the context of the.
Speaker Change: The overall macros are cost of capital.
Speaker Change: There's a cash.
Speaker Change: Thanks, and then just thinking about the strategic review, obviously anytime a company goes through you think through everything as you go forward with.
Speaker Change: System strategy anything that you plan to change on the operational side that came out a strategic review any other learnings that you had that allow you to establish the go forward pathway is the strong Standalone company you are.
Speaker Change: No.
Speaker Change: Pretty much status quo. We did note that we sold certain standalone specialty practices, primarily orthodontic practices in the quarter.
Speaker Change: And we will continue to refine our strategy to focus primarily on general practices.
Speaker Change: Where we have the right.
Lisa: Lisa Playbooks for growth and obviously it represents a substantial majority of our business.
Lisa: Yeah.
Speaker Change: We will take our next question from Sohail <unk> with Royal Bank of Canada. Your line is open.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Hey, Thanks for taking my question this is for Doug.
Speaker Change: Doug.
Speaker Change: My first question is on the orthodontics.
Speaker Change: Clinics that you have decided to divest what was the rationale behind that and how much revenue are they contributing on a pro forma basis.
Speaker Change: Yeah. So the the purpose of the divestiture was really just as Graham mentioned to focus on that.
Speaker Change: The core business, which is really supported by general practices.
Speaker Change: The divestiture ultimately again drives accretion in our margin and allows us to focus our resources on our general practice, which again is 95% plus of our overall business as far as the revenue contribution of those practices, that's not something that we've discussed.
Speaker Change: Okay and then my second question is on the.
Speaker Change: On the capital allocation, how would you prioritize between deleveraging and Wassa shared backpack share buyback that you have announced today.
Speaker Change: If you look at the quantum of the shares so roughly three 5 million shares.
Speaker Change: That are under that in CIB and the volume in which that we would.
Speaker Change: Centrally acquire over a period of time.
Speaker Change: It would be a nominal impact to our overall leverage.
Speaker Change: I have a nominal impact to our ability to continue.
Speaker Change: To execute both on our organic and inorganic growth strategies.
Speaker Change: Yeah.
Speaker Change: And we will take our next question from Stephen Macleod with BMO capital markets. Your line is open.
Good morning, guys.
Speaker Change: Just on the on the strategic review just wondering if you're able to give any color around.
Speaker Change: Sort of.
Speaker Change: Some of the other alternatives that you reviewed and why they didn't work.
Speaker Change: We looked at we looked at every option.
Speaker Change: You would expect I was a comprehensive review.
Across the board.
And have concluded that based on the outlook for the business.
Speaker Change: The strong performance in Q1, a positive outlook for Q2, and the rest of the year and beyond.
Speaker Change: And the fact that most of the views that we had expressed last year around which way the market is going to live business performance in a clean quarter in a clean operating environment versus where we were.
Speaker Change: Over the last few years since being public.
Speaker Change: And the performance of business coming through we've decided to maintain SaaS cloud and continue to pursue our strategy of growth in a balanced way.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: Okay. Thank you.
Speaker Change: And then and then maybe just maybe just secondly.
Speaker Change: Can you talk a little bit about your margin outlook on a consolidated basis for the full year I know you talked about the practice level margins.
Speaker Change: Creasing, but you also noted some infrastructure investment so I'm just trying to get a handle on sort of where you expect reported <unk>.
Speaker Change: <unk> margins to be maybe this year and then over the long term, where you expect them to trend towards.
Speaker Change: Yeah, It's a good question.
As far as.
The second quarter outlook on margin.
Speaker Change: Notice that call. It consolidated margin would remain consistent with what we saw in the prior year and prior year was roughly 18 18 point to 18, 3%, so really consistent with what we've seen over the last couple of quarters here.
Speaker Change: With the expectation that that's going to continue.
Speaker Change: Through through the balance of 2023.
Speaker Change: With continued slight margin expansion as we as we roll through and start getting the benefit of the operating leverage on the significant investments that we've been making in our corporate infrastructure specifically again.
Speaker Change: Our marketing teams.
Speaker Change: And strategies as well as the significant investments in our underlying technologies and systems.
Speaker Change: We will take our next question from Daryl Young with TD Cowen Securities. Your line is open.
Speaker Change: Hey, good morning, everyone.
Speaker Change: First question just around the the ortho asset sale.
Speaker Change: Wanted to clarify that that has no implications for your Invisalign program, but I think this is one program that would be on the on the.
Speaker Change: General dentist network.
Speaker Change: No it does not.
Speaker Change: We have a very healthy and robust program of insourcing.
Speaker Change: Clearly, indicating with our implant programs and it has no impact whatsoever.
Speaker Change: Just to just to build on that.
Speaker Change: With a focus on our general practices and specifically the insourcing again.
Orthodontic acceleration programs on the Empire programs that.
Speaker Change: We're working on today.
That is the core focus now where these standalone specialty practices obviously.
Speaker Change: Obviously, we're not we're not core to our go forward strategy So no impact.
Speaker Change: Got it.
Speaker Change: And then just in terms of the current rate environment.
Speaker Change: Does this open the door potentially for maybe a shift to organic build out of practices as opposed to acquisition or would there be any.
Speaker Change: Our focus on that or expanding existing practices through through new exam or facilities.
That's a great question.
Speaker Change: Given given obviously the significant white space that still remains in the Canadian market with the consolidation only call it in roughly that 6% to 7% range.
Speaker Change: Our our acquisitive strategy, we remained quite quite bullish on it and continue to remain very bullish on it.
Speaker Change: 2023.
Two experienced call it $20 million to $25 million of acquired acquired EBITDA.
And again, we feel really good about that in the long term as well as far as a de novo build out strategy. That's something that of course, we we do continue to explore and continue to build that capability.
Speaker Change: And it could be.
Speaker Change: Arm or an additional arm of growth for us that we haven't seen to date.
Speaker Change: We will take our next question from Gary Ho with Desjardins capital markets. Your line is open.
Gary Ho: Thanks, Good morning.
Gary Ho: Question for Graham to the extent that you can comment on it on the strategic review, where most of the interested parties, maybe looking to participate in buying a stake in the company. So L. Catterton yourself kind of rolling your stake or were there kind of larger players that could buy the entire franchise.
Speaker Change: We considered all options.
Speaker Change:
Speaker Change: And can't get into specific detail.
Speaker Change: Okay.
Speaker Change: Okay. That's fair and then the second one.
Speaker Change: Sorry, the second question just on the new same store adjusted EBITDA growth outpaced the same store sales growth.
Speaker Change: Good to see.
Speaker Change: We expect that looking out.
Speaker Change: And see continued EBIT and margin expansion as a result.
Speaker Change: Uh huh.
Speaker Change: The if we look to the economics of a dental practice roughly 75% of the cost in a dental practice are variable. So what we're seeing here is given the strong organic growth performance were seeing the leverage on the fixed cost base, which we were very pleased pleased to see.
Speaker Change: As we continue to grow.
Speaker Change: The practices from a from a topline perspective, yes, our expectation is to continue to see margin expire expansion at the practice level of course that supports our continued growth and investment.
Speaker Change: In our corporate infrastructure, which will see the operating leverage start to come through through the balance of 2023, and then into 2024.
Speaker Change: Yes.
Speaker Change: We will take our next question from Justin <unk> with Stifel. Your line is open.
Speaker Change: Hi, good morning, Thanks for taking my call.
Speaker Change: On the strategic review, concluding I'm wondering if this.
Speaker Change: Perhaps eliminates a bit of an overhang for for M&A and acquiring new practices.
Speaker Change: That was a consideration at all for selling dentist given that the ownership may have been changing hands.
Speaker Change: Yeah.
Speaker Change: I think that's as far as the impact on selling dentists, it's not something that we experienced in our discussions really since the beginning of the strategic review.
Speaker Change: We obviously operated over the last 11 years of under under many different ownership structures and capital structures and have been able to successfully execute on both our again, our organic and inorganic strategies.
So no no real impact expected from.
Speaker Change: Either positive or negative from the from.
Speaker Change: From the conclusion of the strategic review ultimately it's business as usual and continue to execute upon our $20 million to $25 million of acquired EBITDA. This year.
Speaker Change: Understood and then just a clarification on the NCI.
Speaker Change: Think in the opening remarks, it alluded to some discretion on when to utilize but within the NCD might be language. There is also an automated feature so just hoping to clarify if it is automated or if it is by discretion.
Speaker Change: For dental.
Speaker Change: It's both automated as well as by discretion, depending on the period in which.
Speaker Change: It is being it is being used right. So if it's in a call. It a blackout period than the automated feature would come in.
Speaker Change: Okay.
Speaker Change: We will take our next question from Andrew <unk> Leno with National Bank Financial Your line is open.
Speaker Change: Hi, Yes. Good morning, Thanks for taking my question I'm going to leave the techniques of great deal alone.
Speaker Change: I guess my kind of question, but.
Speaker Change: Earlier recently there was some.
Speaker Change: The federal government in Canada, and introducing a dental plan in several industry body expecting a patient following the implementation in California, If you can talk a little bit.
Speaker Change: Like what are your thoughts on it than I might have a fall off depending on how you answered that.
Speaker Change: So can you just repeat the last half of that question because you just don't want to general thoughts on that.
Speaker Change: Program.
Speaker Change: Yes.
Speaker Change: There are new if you'd looked at either Canadian Dental Association and the federal government as well I mean, they expect new patient I'd like to just kind of how do your views kind of square against those expectations.
Yeah, I think that number they quote is about 9 million Canadians.
Speaker Change: As we've stated in the past that 75% of Canadians have dental.
Speaker Change: Dental benefits primarily employer sponsored.
Speaker Change: 85, plus percent of Canadians here, Dennis at least once a year or so.
Speaker Change: As that.
Speaker Change: As a country a population is extremely compliant.
Speaker Change: Avid visitors to the dentist I think that number's, probably a little overstated I think that number just based on those who don't have employer sponsored benefits new city all of them.
Speaker Change: Sure.
Speaker Change: Don't see the debt is today I think a good chunk of Canadians, whether or not they've got a benefit from employer will still see the Dennis given its essential nature of care.
Speaker Change: I think I think those who would avail themselves of the program.
Speaker Change: Probably and more predominantly at risk communities and both geographically and socio economically.
Speaker Change: So it'll be interesting to see just how often or to what degree utilization has increased.
Speaker Change: As we stated also in the past every province today has dental benefits subsidy programs for at risk.
Speaker Change: Low income children senior communities and you don't see extremely high utilization for a myriad of complicated reasons. So again I think the estimates are probably overstated, but from our perspective, the more Canadians you can access oral care the better for everyone, particularly those who don't have access today.
Speaker Change: We're encouraged by the support the government is putting into this program, but what we've stressed.
Speaker Change: Including in our discussions with that with those who are architects of the program is the need for government to ensure that we've got sufficient amount of dental professionals to take on.
Speaker Change: We'll likely be more patient seeing a dentist over the next several years and they've committed.
Speaker Change: Obviously to addressing that as as they obviously need to address just broader.
Speaker Change: Broader health care professional needs that we have here in the country. So I'll also say is where our expectations are probably a little bit more muted, but generally were encouraged to see more canadians be able to see a dentist.
Speaker Change: That's great. Thanks, Hi, Mike.
Speaker Change: My other question is that flipping through the presentation.
Speaker Change: This data target practice.
Speaker Change: Practice growth up four plus percent.
Speaker Change: I was just wondering if you can talk a little bit about that in that if we're expecting price increases. This year, 4% then likely somewhere in that range next year.
Speaker Change: Yes.
Speaker Change: Can you help me kind of bridge to volume growth. If we're looking at only 4% plus part of our policy and practice.
Speaker Change: Yeah No of course, so it's really the movement.
Speaker Change: Over over the last couple of years at the time of IPO.
Speaker Change: What our expectation was a was a 3% plus obviously given given the environment that we're in today.
Speaker Change: And the fee guide increases as well as the volume increases that are returned.
Speaker Change: Our expectations are.
Speaker Change: We have increased to that 4% plus range. So if we think about it I don't have a crystal ball as far as what the future holds but ultimately you can expect that 4% plus to breakdown.
Speaker Change: Roughly one third between price one third between.
Speaker Change: Increased volume.
Speaker Change: An additional third thats going to be driven by our in sourcing initiatives, specifically, our orthodontic acceleration program as well as the rollout of our implant and sourcing programs, which we expect to start seeing by the end of the year.
We will take our next question from Tanya Armstrong Whitworth with Canaccord Genuity. Your line is open.
Speaker Change: Good morning, gentlemen, on the competitive landscape now that it's been some time since the ultimate.
Speaker Change: Like Q3 in dental.
Speaker Change: Nigeria was announced or are we seeing more competition from them that player yet.
Speaker Change: No we arent seeing any more competition frankly again as far as.
Speaker Change: The market continues to be again highly fragmented and we continue to have.
Speaker Change: The ability to execute upon.
Speaker Change: The acquisitions that we feel to be most opportune.
No no change and no impact from that from that merger.
Speaker Change: Okay, and then a quick follow up.
Speaker Change: The diary.
Speaker Change: Standalone specialty practices, and you're selling them or are they competitors are they something completely different and Mikael.
Speaker Change: They're not competitors, but we obviously can't disclose who resolve them too.
Speaker Change: Yeah.
We will take our next question from Douglas <unk> with RBC capital markets. Your line is open.
Speaker Change: Yeah. Thanks, So joined a little late.
Speaker Change: I guess my first question is on the source of sales is recommended.
Speaker Change: Recommended I believe as part of the strategic review can you at least tell us if the multiple.
Speaker Change: That was paid by the buyers for us.
Speaker Change: Above or below or in the range of where you are buying practices right now.
Speaker Change: Okay.
Speaker Change: Just to clarify the sale of those noncore Standalone specialty orthodontic practices were unrelated to the strategic review.
Speaker Change: So theres no real correlation there.
Speaker Change: But we're not going to disclose the multiple.
Speaker Change: Okay and second question is maybe for Graham just as we think about this process did the nature of the discussions change from the point. Thank you.
Speaker Change: <unk> strategic review too.
Speaker Change: It actually ended given what was happening in the broader market.
Speaker Change: And why do you think there was such a big disconnect at the end of the day between what you think the company's worse than.
Speaker Change: With these.
Jeremy This alternative where we're contemplating.
Speaker Change: Yeah.
Speaker Change: <unk>.
Speaker Change: Look I don't want to get into too much specificity, but as you know.
Speaker Change: The markets.
Speaker Change: Financing market overall.
Speaker Change: At a significant deterioration from from November to today.
Speaker Change: That along with.
Speaker Change: With.
Speaker Change: Other factors clearly not outperformance given the strength of Q1, and I mean, I think for Q2 et cetera.
It was more extraneous factors that may have impacted it but can't get into more specifics.
Speaker Change: Obviously you.
Speaker Change: You do know that the financing market has significantly deteriorated over the last six months.
Speaker Change: Okay.
Speaker Change: And there are no further questions at this time I will now turn the call back to Mr. Graeme Rosenberg for closing remarks.
Speaker Change: Thanks, operator.
Speaker Change: I appreciate everybody being on the call. We're delighted with the strength of Q1, and the Opex for Q2, which you'll see a continuing into Q2 and beyond for the rest of the year.
Speaker Change: We continue to execute on our balanced approach to growth both.
Both organically acquisitive, Lee and balance sheet optimization by deleveraging.
Speaker Change: And look forward to reporting on our results at the end of next quarter.
Speaker Change: And ladies and gentlemen. This concludes today's conference call. We thank you for your participation you may now disconnect.