Q2 2025 dentalcorp Holdings Ltd Earnings Call

Speaker #1: Good morning and welcome to Dentalcorp second quarter 2025 results conference call. Please note that all lines have been placed on mute to prevent any background noise.

Speaker #1: After the speaker's remarks, there will be a question and answer session. If you would like to ask a estion during this time, simply press the star key, then the number one on our telephone keypad.

Speaker #1: If you would like to withdraw your question, please press star one again. At this time, I'd like to turn the call over to Mr. Nate Tchaplia.

Speaker #1: President and Chief Financial Officer of Dentalcorp, please go ahead, sir.

Speaker #2: Good morning and welcome to the Dentalcorp second quarter 2025 results conference call. Please note that all lines have been placed on mute to prevent any background noise.

Speaker #2: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key, followed by the number one on your telephone keypad.

Speaker #2: If you would like to withdraw your question, please press star one again. At this time, I'd like to turn the call over to Mr. Nate Tchaplia, President and Chief Financial Officer of Dentalcorp. Please go ahead, sir.

Speaker #3: Thank you, operator, and good morning, everyone. Welcome the Dentalcorp second quarter 2025 results conference call. I'm joined today by our Chief Executive Officer, Graham Rosenberg.

Speaker #3: Before we begin, please note all amounts discussed on call are denominated in Canadian dollars unless otherwise indicated. Also, I'd like to remind everyone that certain statements made on this call may include forward-looking statements, information, and future-oriented financial information regarding Dentalcorp and its business.

Speaker #3: These include disclosure regarding possible events, conditions, or results that are based on information currently available to management and reflect management's expectations regarding future growth, results of operations, business performance, prospects, and opportunities.

Speaker #3: Such statements are made as the date hereof, and Dentalcorp assumes no obligation to update or revise them to reflect the required by applicable securities law.

Speaker #3: These forward-looking statements involve significant risks and uncertainties and are not guarantees of future performance or results. A number of these risks and uncertainties could cause results of different materially from results discussed today.

Speaker #3: 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, or MD&A in our earnings press release issued today for additional information.

Speaker #3: For those of you who have dialed into the call, the company has prepared a that's available on the investor relations section of our website in the events and presentations section.

Speaker #3: With that, I'll turn the call over to our Chief Executive Officer, Graham Rosenberg, for opening remarks. Graham?

Speaker #4: Thanks, Nate. And good morning, everyone. We're pleased to be with you today to review Dentalcorp's recent developments as well as our financial and operating results for the three months end of June 30th, 2025.

Speaker #4: For today's call, I'm going to share a number of those developments with you, and I will then hand the call over to Nate Tchaplia, who will discuss our financial results in detail, after which I will provide forward-looking remarks about how our business is trending.

Speaker #4: As highlighted on slide three, you'll see that Dentalcorp operates in a $22 billion fragmented market that's only 7% consolidated. Dentistry is a highly recurring essential cash pay healthcare service, and it is resilient to economic cycles and is related from disintermediation by technologies.

Speaker #4: Our business is particularly recurring with over 90% of our revenue coming from routine dental services such as cleanings, fillings, and basic restorative work. Creating predictable and recurring revenue streams that aren't dependent on discretionary spending or specialized procedures.

Speaker #4: Dentalcorp expects to continue outpacing the board's Canadian dental services market by delivering 4% plus taxes revenue growth. We also have multi-year Canadian dollar supply contracts with our key suppliers, resulting in minimal direct tariff or foreign exchange exposure.

Speaker #4: When combined with our proven and repeatable M&A engine, we have delivered predictable, double-digit growth across all key financial metrics since our IPO in 2021, and we expect to continue to do so moving forward.

Speaker #4: Our confidence in the business is supported by our second quarter results, which demonstrate effective execution of our strategy and reinforce our confidence in the full-year outlook.

Speaker #4: As you'll see on slide four, we completed our second quarter end of June 30th with approximately $1.7 billion of last 12 months' performance revenue and approximately $314 million of performance adjusted EBITDA.

Speaker #4: Last 12 months' adjusted free cash flow also came in strong at $165 million. Our teams continue to deliver the highest standards of care to more than 2.4 million active patients, 92% of which are recurring, and visit our practices over 5.6 million times annually.

Speaker #4: As you can e on the next slide, we continue convert a high percentage of our EBITDA into free cash flow in any given period and expect this conversion to increase as we continue to deliver and realize network-wide operating leverage.

Speaker #4: Our business continues to operate with robust and expanding margins, low capex requirements, and capped interest rate exposure on 100% of our existing outstanding debt.

Speaker #4: Our last 12 months' free cash flow conversion increased to 65% in the quarter, up from 60% in Q2 2024, resulting in approximately a 10% year-over-year adjusted free cash flow per share growth.

Speaker #4: On slide 3.5 times from the same period last year to 3.65 times at the end of Q2. This marks the seventh consecutive quarter of deleveraging, and we continue to work towards our medium-term target band of 3 to 3.5 times leverage.

Speaker #4: On the next slide, you will see a comparison of valuation and free cash flow yields. This is our peers at the end of the quarter.

Speaker #4: We were trading at a level that implied a 5.8 times multiple on EBITDA vis-à-vis enterprise value discounts to our peer group. And at same time, we are currently trading at a 9.5% free cash flow yield compared to our peer group of 3.9%.

Speaker #4: On slide eight, I'm pleased to report that our delivered revenue of $435.2 million in the second quarter of 2025, is up approximately 9% year-over-year, with adjusted EBITDA of $81 million, up 10% year-over-year.

Speaker #4: As we continue to realize operating leverage with 20 basis points of margin improvement, relative to our adjusted EBITDA at 18.7%. During the quarter, we experienced some deferrals related to the CDCP, and when combined with M&A timing, it had minor impacts on our same practice revenue growth and financial performance.

Speaker #4: Despite these near-term impacts, which were very modest, our underlying business fundamentals remained strong, as evidenced by our 92% recurring patient visit rate, reflecting strong predictability and continued demand for routine care across the network.

Speaker #4: Increased operating efficiency, resulting in adjusted free cash flow of $45.6 million, or 23 cents on the per-share basis, representing growth of 12% and approximately 10% respectively.

Speaker #4: Over the same quarter last year, this enabled us to fund the irety of our acquisition program with free cash flow for the ninth consecutive quarter.

Speaker #4: With respect to M&A, we acquired eight ctices in the quarter for total consideration of $24 million. These practices are expected to generate $3.8 million in performance adjusted EBITDA after rent.

Speaker #4: We remain as the best positioned and capitalized partner for independent dentists, and we'll continue to be disciplined about the practices we acquire. Looking ahead, we anticipate third quarter 2025 revenues to increase by 10 to 12%, depending on acquisition timing.

Speaker #4: Over Q3 of 2024, we are delivering 3% to 5% same-practice revenue growth. We expect adjusted EBITDA margin to increase by 20 basis points over the third quarter of 2024.

Speaker #4: Subsequent to the quarter, we completed the acquisition of seven practices representing $5.5 million of performance adjusted EBITDA after rent, and when combined with signed LOIs and acquisitions, completed as of June 30th, 2025, is greater than our 2025 full-year acquisition target of $25 million of performance adjusted EBITDA after rent.

Speaker #4: I will now pass the call over to Nate who will walk us through the details of our financial results Thank you, Graham. Starting with the CDCP update in March of 2025, the Canadian government expanded eligibility under the program to patients aged 18 to 64 to begin receiving care in July.

Speaker #4: This led to some appointment deferrals in Q2 from eligible patients, creating a modest headwind to same-practice revenue growth. However, we do not anticipate any further deferral impacts on the second half of the year.

Speaker #4: Importantly, 95% of our practices are now enrolled in the CDCP, up materially from the initial participation levels in 2024. Turning to the numbers, our quarterly results reflect strong operational fundamentals and continue to demonstrate the durability and predictability of our business.

Speaker #4: Turning to slide nine, revenue for the three-month period ended June 30, 2025, as Graham mentioned, was $435 million compared to $400 million for the corresponding period last year.

Speaker #4: Representing an increase of approximately 9%. This increase is attributable to our continued acquisitive and organic growth. As you can see, we reported second quarter adjusted EBITDA of approximately $81 million compared to $74 million in the same period last year.

Speaker #4: And reported second quarter adjusted EBITDA margins of 18.7%, representing a 20 basis point expansion of margins year over year, as we continue to realize operating leverage and are fully built out corporate infrastructure.

Speaker #4: Looking forward, we continue be confident about our ility to grow the business through acquisitions and organically. Turning to the next slide, you can see our net leverage and liquidity as June 30th, 2025.

Speaker #4: On a net debt basis, we are approximately 3.65 times leveraged at the end of the second quarter, deleveraging by approximately [insert amount]. Second quarter adjusted free cash flow came in at $46 million, representing growth of 12%, further bolstering our already robust balance sheet.

Speaker #4: We ended the second quarter 2025 with liquidity of $428 million. Comprised of $78 million of cash and $350 million in undrawn capacity under our senior debt facilities.

Speaker #4: This quarter marks the seventh consecutive quarter over quarter increase in our interest coverage. As defined by our LTM performance adjusted EBITDA after rent divided by net interest expense, which currently sits up at four times, up from $3.9 times in Q1 2025.

Speaker #4: Overall, our second quarter 2025 performance demonstrates the strength and resilience of ur business model. We delivered positive organic growth while successfully expanding margins through operating efficiencies.

Speaker #4: We continue to strengthen our financial position by deleveraging the balance sheet, completing a creed of acquisitions, and realizing operating leverage as we continue to expand margins.

Speaker #4: I'll now pass the call back to Graham for closing remarks before we open it up for Q&A. Graham? Thank you, Nate. As seen on slide 11, our second quarter performance reinforces our confidence, enabling us to reaffirm our full-year 2025 guidance of 3 to % same practice revenue growth, a 20 basis point improvement in adjusted EBITDA margins, acquisitions representing performance adjusted EBITDA after rent of $25 million plus, and 15% plus want to thank you all for joining the call today.

Speaker #4: This concludes the formal part of our presentation, and we would now like to open the call to questions. Operator?

Speaker #2: Thank you. We will now begin the question and answer session. If ou have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Speaker #2: If you would like to withdraw your question, simply press star one again. We ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a estion.

Speaker #2: We'll take our first question from Brian Tanquila at Jeffries.

Speaker #5: Hey, good morning, guys. Maybe Nate or Graham, as I think about same-store performance in the quarter coming in below out of the range, what percentage that do you attribute to the CDCP?

Speaker #5: And then how are you thinking about same storage volume performance for the back half of the year?

Speaker #4: Hey, Brian, and thanks for the question. I think if we look to breaking down kind of what percent of our business or what percent of our patients today prior to the secondary rollout of the CDCP were represented by CDCP patients, 'd say roughly call it 4% were CDCP patients in that ind of 65-plus cohort and then 18 and under.

Speaker #4: Our expectation is that the 19 to 64 cohort, that new cohort that began in earnest on July 1st here, will probably be in that 4 to 5 percent range.

Speaker #4: So, call it roughly total CDCP penetration in and around the high single digits, low double digits here. Which ultimately would have that impact as it relates to deferrals in the quarter, above and beyond that 3.3% that we printed.

Speaker #4: One additional note, around the pacing of acquisitions, our acquisitions that we expected to close in the quarter ended up closing in the first couple of weeks in July and then ultimately that would have also had some impact on the overall revenue performance of the business.

Speaker #4: But as we sit here today and look at the back half of the year, very confident in that 3 to 5 percent range on same practice revenue growth and really returning to call it the midpoint and the high end of the range as we get through Q3 and into Q4.

Speaker #4: Okay, that makes sense. And then Nate, just maybe to that point you made on the M&A side, it looks like you've got at least 25 million under LOI.

Speaker #4: You just had a deal closed in July. So how do we think about the timing of closings for the rest of that LOI? To get to complete a deal within your guidance range, thanks.

Speaker #3: Yeah, I say the pacing of our acquisitions, as far as our overall pipeline and where we're sitting—both signed and closed—is ahead of our expectations.

Speaker #3: I say as we get through the second half of the year, our expectation is that we'll lose 25, if not more than 25 million.

Speaker #3: There's great opportunities here at great valuations. And the market continues to be very robust. So I'd say from a timing perspective, I would expect Q3 to be very strong quarter.

Speaker #3: As far as M&A closings go, just given some of the rollover from Q2 into Q3, ultimately Q4 will continue at that same pace.

Speaker #4: Awesome, thank ou.

Speaker #2: We'll next to Gary Ho at Desjardins.

Speaker #6: Thanks, good morning. Maybe start off with the M&A question. So the eight locations added in the quarter were at a 6.3 times multiple, which is slightly below your historical range.

Speaker #6: Should we re-enter into that? Maybe just talk about the general M&A environment. It's good to see that you've executed on your kind of $25 million acquired EBITDA, signed or closed for the year already?

Speaker #4: Thanks for the question, Gary. And as far as evaluations for the deal this quarter, it's a small sample. Ultimately, as we look through to the balance of the year, and really looking at our full-year valuation metrics, we expect to be in the mid-seven range as initially guided through the piece.

Speaker #4: As far as the overall M&A environment goes, continues to be incredibly robust. Our team is continuing to foster relationships and bring people along through the process in the deal.

Speaker #4: As mentioned, we're now signed and closed above and beyond our 25 million dollars of expected closed deals in 2025. And we expect that momentum to continue.

Speaker #6: Okay, great. And then, while I have you, Nate, it's just good to see the nice step down in leverage. 3.65 times probably have line of sight in hitting that 3 to 3.5 over the medium term.

Speaker #6: Do ou see any pivots to your capital allocation strategy once you're kind of within that range, whether that's speeding up M&A or maybe more buybacks?

Speaker #6: Just want to hear your thoughts on that.

Speaker #4: Yeah, it's a great question, Gary. And yeah, we've done a tremendous job in delivering the business and continuing to take a really balanced approach to growth.

Speaker #4: Given the great opportunities that are before us on the M&A front, as we continue to make our way into our targeted leverage range, any excess capacity ultimately will be put forward to an accelerated growth plan.

Speaker #6: Okay, makes sense. Those are my two. Thank you.

Speaker #2: We'll go next to Daryl Young at Stifel.

Speaker #7: Hey, good evening, everyone. First question is just around the clear aligner space. We've continued to see some challenges there on a global basis and a slowing of case starts.

Speaker #7: So could you just speak what you're seeing in terms of your case starts, your clinical outcomes, and then I guess ability to keep driving growth from this ortho avenue and ortho acceleration program going forward?

Speaker #7: And I asked differently, is the Invisalign adoption meeting your expectations for the program?

Speaker #4: Thanks for the question, Daryl. And just before diving in directly into the Invisalign and orthodontic insourcing, I think what's important to highlight around our business is the significant recurring nature of our .

Speaker #4: Over 92% of our patients are recurring year in and year out, and 90% of our services ultimately, 90% plus of our services are really those nondiscretionary hygiene fillings and other routine type restorative work.

Speaker #4: So our overall exposure as it relates to the higher value, call it discretionary specialty services, is limited. And they continue to be an opportunity for us.

Speaker #4: You might have seen that we've continued to roll out and expand the number of clinics we have in our network that are participating in our ortho acceleration program over the last number of quarters.

Speaker #4: We worked with Align to rebuild and revamp that program for ease of implementation and ultimately enhancement around education. We continue to be bullish in the long term in that program's rollout through our network and in practices that aren't currently not offering that service.

Speaker #4: From a year-over-year perspective, if we look at Invisalign and we look at orthodontic services in general, I think there's absolutely a bit of a slowdown there.

Speaker #4: Across really all discretionary services, but as we continue to roll it out into practices as well as clinicians that previously have not been providing this type of service, our overall network has an opportunity continue to increase the penetration albeit ultimately our focus continues to be on our highly repetitive and highly recurring services.

Speaker #7: Okay, that's helpful, thanks. And then second question is just around your video health and AI. Relationship. Can you just speak to the rollout of those capabilities and then what you're seeing in s of the dentist workflow and maybe any financial benefits you're seeing to date from it or is it more about quality of doctor service?

Speaker #4: It's a great question, Daryl. So still very early days on the rollout. We were just around 250 of our practice locations that have had the video health rolled out into its workflow.

Speaker #4: We are seeing tremendous positive response from clinicians as well as patients as it relates to the garnered as well as the ability now to have a more fulsome patient education as well as treatment acceptance around the care that they're getting.

Speaker #4: Still very early days to describe really what are the metrics around it, but that's ething as we continue to the rollout and have a few periods now where we're going to able to see the performance we're going to develop, we're going to develop that view by the end the year and ultimately we'll are that with you uys.

Speaker #7: That's great, thanks. I'll get back in the queue. Congrats on a good result.

Speaker #4: Thanks, Daryl.

Speaker #2: Next, we'll move to Dagmeem at RBC Capital Markets.

Speaker #8: Yeah, good morning. The question I have just has to do with the letter that was sent by the Canadian Dental Association on, well, it was posted on July 28th.

Speaker #8: Anyway, they're raising escalating concerns about persistent gaps in the CDCP, you know, with pre-authorization, and enhancing public communication about covered services and insurance. I thought it was important that existing employer-sponsored dental benefits are protected.

Speaker #8: And could you expand on this letter and what implications it may have for your business, particularly around the private side concerns they seem to have?

Speaker #8: Thank you.

Speaker #4: Yeah, absolutely. And thanks the question, Doug. I think, listen, I ink since the beginning of the role, I don't know if we get back into our time machine to December of 2023, I think there was a of misinformation and misunderstanding as to how the plan is going to be administered with patients expectations being called full coverage and ultimately as 24 ran through more and more information came , there was more and more patient education that was provided.

Speaker #4: Which, of course, as the rollout was happening, created increased frictions, as well from a patient communication perspective, as well as a patient behavior side.

Speaker #4: I think the plan is still in its infancy, as both practices, patients, as well as the plan administrators are trying to keep up with demand, as well as keep up with process.

Speaker #4: Our expectation is as more time passes, there should be a greater efficiency, greater understanding, and clear expectation around the plan. But I'd say over the last 18 months since the inception of the plan, there absolutely have been speed bumps in the road which ultimately have affected patients, clinicians, and ultimately performance our expectation is as we go and look forward into the second half of the year and into 2026, given now the cycle we've almost gone through a couple of cycles now of patient visits, it'll ome much more smooth and much more efficient on both sides of things.

Speaker #4: As it relates to the call it employer-sponsored insurance and the implications that would be had there, on employers making decisions to cut coverage, it's not something that we've seen take place at all.

Speaker #4: It's ultimately if we take a step back and think about employers' decision-making here, it's a very difficult thing to cut somebody's insurance because you don't know their household income; it's not something that is readily available, is it something that can be asked of an individual to share, nor do you ow that if their spouse or partner has any other type of coverage.

Speaker #4: So albeit it's a risk that has been raised, it's not something that we have seen come to fruition, nor do we expect it to for the reasons just mentioned.

Speaker #8: Okay, perfect. That's good for me. Thank you.

Speaker #2: We'll go next to David Kwan at TD Callen.

Speaker #9: Hey, guys. Nate, just on the M&A and the quarter, you talked about, I guess, a small sample set as to why you look, you got a better deal, looks like relative to what you've seen historically.

Speaker #9: The practices were also looked at as being, on average, smaller than what you've typically bought. Is that one of the reasons?

Speaker #4: That's you're a great ective. Absolutely. It's a sample and the age practice size is smaller.

Speaker #9: Okay. And then it looks like for the Q3 acquisitions that you noted, it looks like you were also kind of paying below that range.

Speaker #9: Was it also because they were typically smaller too? You know.

Speaker #4: Some of the ones in Q3 were actually some larger groups. Really, it's just coming down to the mix. As you continue to forecast through the year and you look at the full year of over $25 million, again, valuations will be in that mid-seven range.

Speaker #4: At any point in time, it might be a little bit higher; it might be a little bit lower. But the way that we look at it, because, again, it's very difficult to predict on a deal-by-deal basis, a full basket in the mid-sevens is where our expectations are.

Speaker #9: Okay, perfect. And just one more, just on the cash taxes, are you still expecting to accrue them in the second half of this year and then start paying them out next year?

Speaker #4: Yeah, I think if you look on our Q2, we have a tax payable amount of, I think, roughly $17.9 million that's on our financials today.

Speaker #4: Our expectations are to kind of accrue in the back half of this year. Those cash taxes that'll called in the low to mid-20s for the year, that's an estimate here.

Speaker #4: And the cash will flow out in 2026.

Speaker #9: Great, thank you.

Speaker #2: We'll go next to Alan Lutz at Bank of America.

Speaker #7: Taking the estions. I want to ask a question on gross margins. They've been charted up for a uple of quarters now. And the sequential from one Q to two Q, was really, really strong given the seasonality you've en historically.

Speaker #7: Can you talk about what's driving the gross margin? And guess especially the incremental gross margins, and how we should think about that into the second half of the year.

Speaker #7: Thanks. You know.

Speaker #4: It's the gross margin; it really is a truly variable figure. If we look at the components of what comprise our COGS, the largest portion is dental revenue, where dentists are earning an average commission rate of 40% on what they bill.

Speaker #4: It's hourly hygiene rates, again, highly variable based on what they put through. It's the lab costs that are inputs into the dental work, as well as the consumables which are going into the delivery of the care.

Speaker #4: I'd say from a dental draw perspective, hygiene as well as lab, obviously those are quite consistent. One of the areas where we continue to get leverage just given overall our size and scale as well as our very strong partnerships with some of the industry's largest and best suppliers, we're able to continue to draw and expand our efficiencies on that front.

Speaker #9: That's helpful. And then from my follow-up on SPRG into the second half of year, what gets ou to the low and the high end of that guide?

Speaker #9: Is there anything that's driving that other than the relative CDCP patient flow? Thanks, guys. You know.

Speaker #4: I think the only difference that we saw in Q2 that brought us to the lower end was the headwind that we experienced from the CDCP.

Speaker #4: I think now that's been fully digested. Now work forward with normally scheduled programming, we expect to be at the midpoint or above; however, there really isn't.

Speaker #4: Anything else that drove that Q2 decline, right? If we look Q3 of 2024, which was in the mid-fours, if we look at Q1 of '25 again in the mid-fours, those were operating, I'd say, in more normal environments, and that's really our ectations for Q3 and Q4.

Speaker #2: We'll move next to Zachary Evershed at National Bank Financial.

Speaker #10: Good morning, guys. Thanks for taking my question. This is a estion. Just a follow-up on the capital allocation question. You said that as you move down into your three to 3.5 times leverage target, excess capacity will go to accelerated growth.

Speaker #10: Do you consider your excess territory right below 3.5 times, or would you expect a bigger acceleration to prevent you from dipping below three times?

Speaker #10: Like when do you kick it into gear?

Speaker #4: Great question, Zach. And listen, I think given the opportunities before us, and the pace of our growth here, right now, even at 3.65 times, we continue to room and lowest leverage aggregator in the althcare space.

Speaker #4: Should there be opportunities that we view as highly accretive and consistent with our growth objectives, we would continue even at the rate and at the rate of leverage that we're at today.

Speaker #4: We do have a continued focus to bring it down into that 3% to 3.5% range, but it's not going to be at the expense of growth.

Speaker #10: Understood, thanks. And then any wood left to chop on specialty practice disposals?

Speaker #4: So we divested our last standalone orthodontic practice in the arter. So we no longer have any standalone orthodontic practices in the network. So I'd say from that perspective, no.

Speaker #4: And I wouldn't expect any more dispositions in the near term.

Speaker #10: Thanks very much. 'll turn it over.

Speaker #2: We'll go next to Tania Armstrong, Canaccord Genuity.

Speaker #11: Hi, guys. Most of my questions have been asked now. It's just a couple for me. I guess to start, it's great that you reaffirmed your 2025 guidance.

Speaker #11: Could you remind me, you provide an actual revenue number apart from just the same practice revenue growth and the M&A? I don't know if there was a range given for revenue number for the full year.

Speaker #4: It was 10 to 11 percent, Tania.

Speaker #11: Perfect, thank you. And then on the practices, you mentioned divesting one standalone orthodontic. Just doing some calculation here based on your 575 number up from 571, in Q1, and ou acquired eight.

Speaker #11: Were there some closures as well?

Speaker #4: No, no closures. The difference is all related to consolidations or planned consolidations. Even certain practice acquisitions that we acquired in this quarter are going to be tucked in or consolidated with other practices that we currently have in the network.

Speaker #4: So we have not closed any practices.

Speaker #11: Got it, perfect. And then kind of following on from the last question, seeing as you've already hit your M&A targets based on signed LOIs, I guess how comfortable would you be?

Speaker #11: Like where is a good number for us to settle out at? You're not going to obviously do nothing in Q4. So how far would you feel comfortable taking that M&A target?

Speaker #4: So just to be clear, the 25 signed and closed, the expectation is not all 25 million will be closed by the end of Q3.

Speaker #4: The signed and closed, the signed deals will ultimately close through the back half of the year. I would say confidently, our acquisitive pacing will be in the 25 to 30 million range for the balance of 2025.

Speaker #11: Perfect, all right. Thanks, guys.

Speaker #4: Thanks, Tanya.

Speaker #2: And we'll go next to Stephen McLeod at BMO Capital Markets.

Speaker #12: Thank you. Good morning, guys. Lots of colors so far, so thank you. But I just had two follow-up questions. The first one relates to just the margin.

Speaker #12: Growth that you've en, you know, another quarter of nice operating leverage in Q2. And just wondering if there's any reason to expect that to not continue as we turn the page into 2026.

Speaker #4: Appreciate the questions. I think as we go through the back half of the year, our expectation is we'll continue at that same pacing of 20 basis points of margin expansion over the same period last year.

Speaker #4: And ultimately, if we take a step back and really unpack the components of the margin expansion, it's ally driven predominantly by operating leverage on our invested corporate infrastructure.

Speaker #4: So, as we continue to grow, as we continue to execute on our M&A program, and as the velocity of our acquisition pacing continues to increase, ultimately that margin expansion, given there's a greater installed base of practices operating and being supported by the same size corporate infrastructure, is going to lead to an increase in our overall margins.

Speaker #4: And ultimately, the pacing of our margin expansion. So nothing today that would detract from that. And that 20 basis points through 25, and ultimately into 2026 at a 20 basis points plus velocity.