dentalcorp Holdings Ltd
TSX:DNTL
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dentalcorp Holdings Ltd
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Good morning, and welcome to the dentalcorp's Second Quarter 2023 Results Conference Call. [Operator Instructions] At this time, I would like to turn the call over to Mr. Nate Tchaplia, Chief Financial Officer of dentalcorp. Please go ahead, sir.
Thank you, operator, and good morning, everyone. Welcome to the dentalcorp Second Quarter 2023 Results Conference Call. I'm joined here by Graham Rosenberg, our CEO; and Guy Amini, our President.
Before we start, we would like to remind you that all amounts discussed on this call are denominated in Canadian dollars. Please note that statements made during this call may include forward-looking statements and information and future-oriented financial information regarding dentalcorp and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicates management's expectations of future growth, results of operations, business performance, business prospects and opportunities.
Such statements are made as the date hereof, and dentalcorp assumes no obligation to update or revise them to reflect events, disclosures or circumstances, except as required by applicable securities laws. Such statements involve significant risks and uncertainties and are not a guarantee of future performance or results. A number of these risks and uncertainties could cause the results to differ materially from results discussed today. Given these risks and uncertainties, one should not place undue reliance on these statements and information.
Please refer to the forward-looking statements and information and future-oriented financial information section of our public filings. Without limitations, our MD&A and our earnings press release issued today for additional information. For those of you who have dialed into the call, the company has prepared 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. I will now turn the call over to our Chief Executive Officer, Graham Rosenberg, for opening remarks. Graham?
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 3 and 6 months ended June 30, 2023. For today's call, I'm going to share a number of those developments with you, and then I will hand the call over to Nate, who will discuss our financial results in detail, after which I will provide some forward-looking remarks about how our business is trending.
As a reminder, dentalcorp operates in a highly recurring essential health care industry that is cash pay, resilient through economic cycles and insulated from disintermediation by technologies. Importantly, dentalcorp expenditures have experienced strong relative growth during periods of higher-than-average inflation. And accordingly, in the context of the current macro environment, we believe that dentalcorp favorable cost structure, high margins, low commodity risk and negligible capital expenditures provide support for the company's continued delivery of balanced double-digit growth in the $20 billion Canadian dental industry.
Our confidence in the business is reinforced by our second quarter and year-to-date results, which are above expectations and provide a constructive outlook for the third quarter and remainder of the year. I'm delighted with our results this quarter during which we delivered record revenue performance. And as you'll see on Slide 3, this performance has been made possible by our deep and diverse metric of close to 10,000 health care professionals across the country.
Our teams continue to deliver the highest standards of care during the reporting period supporting more than 2 million active patients and managing more than 5 million patient visits annually. You will see that we completed our second quarter ended June 30, 2023, with approximately $1.4 billion of last 12 months pro forma revenue and $266 million of pro forma adjusted EBITDA.
Continuing to Slide 4, you will see that our balanced approach to growth once again drove 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. This is a program and playbook that we have built over the last decade, and we believe we are able to adapt and thrive if there are any short or longer-term shifts in the broader economy.
Moving on to M&A. We continue to demonstrate our leadership position in the Canadian dental industry by acquiring 6 practices in the second quarter for a total consideration of $34 million. These practices are expected to generate $5.6 million in pro forma adjusted EBITDA. What's most exciting for us is that the acquisitions during the reporting period were self-funded using cash on hand and equity consistent with our alignment with dentists through our acquisition model.
During the quarter and as part of the dentalcorp program to rationalize certain noncore stand-alone specialty practices, we also completed the sale of 3 standalone orthodontic and specialty practices. We anticipate that the sale of these assets will have a positive impact on overall adjusted EBITDA margins, allowing us to reallocate resources to higher growth areas of the business. We are also encouraged to see in the quarter and so -- in the second quarter and so far in the third quarter, that practice valuations are declining in Canada as access to financing opportunities tighten up for many buyers across the industry. We remain well positioned and well capitalized as a partner of choice for independent dentists and we'll continue to be disciplined about the practices we acquire.
On Slide 5, you can see that our business continues to convert a high percentage of EBITDA into free cash flow, evidencing our steady deleveraging over the last 3 quarters. Without acquisitions, our business has the potential to drive our leverage down by 0.25 to 0.5x per annum to the mid- to high ones over the medium term.
On Slide 6, I am delighted to report that our business once again delivered double-digit growth of second quarter 2023 revenue of $368 million, up 13% over the same period in 2022, and adjusted EBITDA of $67 million, up 11% over the same quarter last year, with adjusted EBITDA margins coming in at 18.2%. We are also very encouraged that same practice revenue growth of approximately 5.5% for the quarter was driven by strong patient visits. During the quarter, we also delivered 19.3% growth in the EBITDA of our acquisitions over their -- of our 2022 acquisitions, apologies, over their comparable performance driven by our purchasing efficiencies and the effectiveness of our integration program, including the implementation of our industry-leading technology stack.
The outcome of this was strong adjusted free cash flow for the quarter of approximately $33.6 million compared to $35.7 million in the second quarter of 2022 despite increased financing costs and driven by historic call rate increases in the last 12 months. As we look ahead to the third quarter of this year, we anticipate continued growth with revenues estimated to increase by 9.5% to 10.5%. Adjusted EBITDA margin is materially consistent with the first half of this year and same practice revenue growth of 5% to 6% once again. We are also expecting to complete acquisitions representing pro forma adjusted EBITDA after rent of approximately $10 million through the balance of the year.
I will now pass the call over to Nate, 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. Nate?
Thank you, Graham. We believe that our second quarter results demonstrate the strength, consistency and predictability of our business.
Turning to Slide 7. Revenue for the 3-month period ended June 30, 2023, as Graham mentioned, was $368 million compared to $327 million for the corresponding period last year, representing an increase of approximately 12.6%. The increase is attributable to our strong acquisitive and organic growth, including positive contribution from orthodontic insourcing. As you can see, we reported second quarter adjusted EBITDA of approximately $67 million compared to $60.4 million in the same quarter last year and reported second quarter adjusted EBITDA margins of 18.2%. Same practice revenue growth was 5.5% over the same period in '22. Looking forward, we continue to be confident about our ability to grow the business through acquisitions and organically.
Turning to Slide 8. You can see that our net leverage and liquidity as of June 30, 2023. On a net debt basis, we are approximately 4.38x levered at the end of the second quarter down from 4.44x at the end of Q1 2023. We ended the second quarter 2023 with liquidity of $778 million, comprised of $104 million of cash and $674 million in undrawn debt capacity under our senior debt facilities. Second quarter and last 12 months, adjusted free cash flow was $34 million and $119 million, respectively, which support our strong balance sheet position. On the debt side of the ledger, approximately 75% of our bank debt exposure or $800 million is carrying a fixed CDR rate plus margin for an all-in cost of approximately 6.4%. The remaining quarter of our senior debt facilities remain on a variable rate. As a reminder, every 100-basis point increase in our credit facilities is expected to result in less than 3% impact on our adjusted free cash flow.
With respect to Slide 9, you can see that we met or exceeded our public forecast during our second quarter. Since inception, we have built a strong business that is consistent, predictable and growing, and we anticipate those characteristics will continue as we move forward. Overall, we are pleased with our second quarter 2023 results. We increased organic growth, in part through our in-sourcing efforts created ongoing operating efficiencies, close accretive acquisitions and continue to develop our pipeline. With that, I'll turn the call over to Graham to provide his closing remarks. Graham?
Thank you, Nate. We remain highly confident about our opportunities going forward. Fiscal 2023 continues to be a very strong year for dentalcorp, and we don't anticipate slowing down, thanks to our continued strong same practice revenue growth, disciplined approach to acquisitions and robust market conditions. We believe that this balanced approach to running our business, we'll continue to drive sustained double-digit growth and deleveraging in the third quarter and beyond. 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'm delighted to open the call to questions. Operator?
[Operator Instructions] Our first question comes from Michael Cherny from Bank of America.
This is Hanna Lee on for Mike Cherny. Can you talk about any real-time updates you've been seeing on patient demand and if you've been seeing any improvements in recent weeks.
It's Guy here.Thank for the question. We're seeing continued strength in patient demand, particularly on returning patients. Many of whom, I think, took a step back from the regular frequency of recurring visits to a practice during COVID. As we've intimated on prior calls, we're really seeing a return to, call it, normalized levels and behavior on the patient demand and patient have behavior side. So we're seeing strong demand. Again, a good combination of both new patients as well as strength in our returning patients coming back to the regular habits.
Our next question comes from Brian Tanquilut from Jefferies.
You've got Taji on for Brian. So first is going to be on M&A. So this year, you talked about digesting some of the deals that you completed last year, right, shifting this over to deleveraging and driving organic growth. Just curious if the multiples are down 30%. How are you thinking about the sustainability of the current acquisition opportunity in terms of just deal valuations? And is that maybe pushing you to raise capital allocation expectations for this year to really capitalize on the opportunity in terms of just lower practice prices?
Nate here. As far as the pipeline goes, it remains consistent over the last number of years. Our business development team that is located across the country in their local markets, building those relationships and ensuring that stability and predictability is really coming through. Ultimately, last year was a banner year from acquisitions and we continue to be very confident to be in line with expectations for our M&A activity for the balance of this year.
We are very pleased with where valuations are at, and we're very pleased at the performance of our 2022 acquisitions, as you see in the remarks this morning. So again, very, very confident that the continued pacing pipeline and performance of our M&A program.
Great. And just a follow-up. I know that you had mentioned in the press release that margins were down slightly because of continued inflationary labor pressure. And I know that you expect margins to be consistent in the back half with the first half, right? So just curious on the update on the labor environment I guess, what does your fill rate look like in terms of your clinical and nonclinical need in your practices?
It's Guy here. I just want to make sure I'm answering the question specifically. When you say fill rate, what do you mean?
Sorry, I mean it -- I guess it means the amount -- do you have -- essentially how much demand can you fill with your current labor force, right? Or how much more incremental...
Are we at under staff? Is that what you're getting at?
Sure, yes.
Yes. Let me give you some broad color on the labor environment. It's not dissimilar, I think, from any other industry, north or south of the border, particularly health care. We've seen strain on the availability of dental professionals for quite some time now, and that strain was obviously materially exacerbated over the last several years. we've seen some positive trends this year. I think we're certainly looking at a better labor environment than we were last year, albeit still not a perfect one or one where there's an abundance of dental professionals.
We're very fortunate that our retention rates, particularly for our docs are at, call it, all-time highs on a year-over-year basis. In particular, we're seeing real strong retention rates of the clinical staff. Similarly with dental hygienist and assistants are key to being able to meet, obviously, patient demand. Are we able to meet all of the patient demand and minimize wait times, unfortunately, not as much as we'd like. We're still seeing obviously some tightness, particularly as it relates to dental hygienist. The positive tailwind in our networks favor is, again, strong retention rates. We don't have a ton of vacancies and we're doing our best to retain our staff, keeping them happy. And thankfully, the base business is performing well enough for us to be able to do that while obviously mitigating the pressure on the margins.
Our next question comes from Stephen MacLeod from BMO Capital Markets.
I just wanted to circle around on the margins. You've guided to flat back half margins versus the first half just with some inflationary pressures. Are you seeing some of those pressures? Or do you have visibility in some of those pressures easing into 2024? And if so, how do you sort of see margins progressing exiting 2023 sort of beyond over the next couple of years?
Yes. Thanks for the question, Stephen. As we look to margins, they've been fairly consistent really through 2022 and into 2023 and we have a positive outlook of consistency through '23 with expansion in '24. Ultimately, the -- from an industry perspective, the pricing that is set across the Canadian dental industry is done at the beginning of the year as it relates to the fee guides. And that's always with reference to the prior period's CPI.
So really, the pricing that we're looking at receiving and we're experiencing in 2023 really relates to the 2022 cost increases. And unfortunately, 2023, we're still in an elevated inflationary environment where ultimately, pricing will be taken into account in 2024. So as we look to the return of stability and inflationary environment and the overall macros, that is when, ultimately, we'll retain, call it, that stability and that opportunity for continued margin expansion. What we're also happy to report is we continue to see efficiency in our investments in our corporate infrastructure both from our people as well as our technologies as we continue to grow, and we'll start seeing that operating leverage come through.
Okay. That's great. So we should expect some -- potentially some operating leverage in 2024 on the margins, I guess? And then maybe just secondly, with respect to deleveraging, you talked about the ability to deleverage kind of 0.2 to 0.5x ithout acquisitions. Just curious with the acquisition program that you do have in place and your expectations, how do you see leverage potentially being reduced over the next -- like on an annual basis?
Yes. So as you see, the business has a very high free cash flow conversion in the last 6 months, roughly $120 million in free cash flow. And when we look at on a basis without acquisitions, we would delever, again, call it, in that 0.5x plus on an annual basis. So you'd see significant deleveraging. But of course, that doesn't take into account our M&A activity. As we see it today with a balanced approach to our capital allocation, we're going to be able to delever by roughly, call it, 0.05 to 0.1 on a quarterly basis, albeit at the same time, continuing to execute on our accretive acquisitions through the balance of the year and into 2024.
Our next question comes from Douglas Miehm from RBC Capital Markets.
I just want to, I guess, maybe ask a final question with respect to these margins. But specifically focusing on the gross margin side, where we saw fairly significant drop off relative to Q1 coming into Q2. Was there anything specific that caused that? And how can we think about that gross margin changing? Could it stay flat from what we just saw in Q2? Or would we expect that to rebound through the remainder of the year?
Thanks, Doug, for the question. From a gross margin perspective, the one, call it, contributing factor there is our distribution of our practices across the Canadian geography. Certain markets will have a little bit of an elevated draw versus others. And specifically, in the Quebec market, dentists receive a certain compensation on certain hygiene services.
So if you look at the dental draw that a dentist in Quebec receives compared to other provinces, it is elevated and a significant number of our acquisitions in 2022 were in the province of Quebec, which is one where we continue to grow and expand, which did have that impact on gross margin. So nothing that is systemic overall in the margin. It's just a matter of the geographic dispersion of our practices.
Excellent. Okay. And then just as a follow-up, what has been going on with respect to the government program that's being put in place. I know that we had existing ones, and this was just a bit of an add-on. But is it having any impact on your business? Or is it just negligible and nothing really to talk about.
It's Guy here. Thanks for the question. So it's a multiphase as much as we know as much as government has expressed, it's a multi-phased over multiple years program that every year is supposed to expand onto itself. So for all they have done is just what they did last year, which was to provide a, I call it, a reimbursement for a particularly narrow set of eligible Canadians who if they went out and got dental services, the government reimburse them to the tune, I think, about 600-some-odd dollars. We didn't see virtually any impact, any incremental patients. The utilization of that benefit was relatively limited.
The next phase as the government has previewed as reliable as that maybe is sort of an expansion of eligibility for Canadians, which is supposed to come into place by the end of this year or early next year. We've been doing our best lies with the various agencies involved. And I think they're scrambling if I'm being honest, I'm trying to get this program off the ground. So our expectation wasn't to see any impact, obviously, not negative, but even discounting a positive impact from incremental volumes. So we'll have to wait and see on the expanded eligibility if we're going to see some more patients through our doors.
Again, we see real strength in the average Canadian dental patient who about 75% of them across the country today have dental benefits provided by their employer. That number is north of 90% when you factor in children. And so there's already a significant proportion of the Canadian population with coverage, and that continues to be the driver of the overall industry.
Our next question comes from Scott Fletcher from CIBC.
Same practice revenue growth was in line with the guidance, but the total revenue growth was slightly above that, which I think implies more contribution from the acquired practices than you've been expecting. Is there anything specific that drove that in the quarter? Or things -- or should be -- and can we expect that going forward potentially?
Yes. Thanks for the question, Scott. You saw the strong performance of our prior acquisitions come through. Ultimately, our integration playbook is one that we're very proud of, and that's what we're able to drive those efficiencies from our acquisitions. So ultimately, our expectation is that we're able to realize that growth post acquisition, both in the near and long term. So nothing specifically to report on outside, again, the normalized environment and strong performance from our prior year acquisitions.
Okay. And then I wanted to ask a question on demand, particularly for the clear aligner and the more discretionary spend categories. Have you seen any changes over the course of 2023 in demand there?
Not during the course of '23. I think if you look at commentary from Align and even some other of the large dental suppliers who've got into the clear aligner game. They've seen a bit of a drop off from, call it, pre-COVID demand, a lot of people at home, a lot of people have disposable income. A lot of people had mask over their face and could invest in the complexities of having trades in their mouth. So we've seen sort of a drop-off from that peak, but it's been relatively consistent with the course of '23.
Our next question comes from Gary Ho from Desjardins Capital Markets.
I just want to touch on the corporate infrastructure comments, maybe for Nate. When does that taper off? And maybe you can walk us through as you implement these technologies? What are some of the concrete benefits that you're seeing?
Yes. So thanks for the question, Gary. As far as the tapering up, our expectation of our large-scale technology investments, will be fully implemented through by the end of 2023. As it relates to specifically the efficiencies that we're able to garner from a corporate system with industry-leading ERP systems as well as our people management systems allow us to be in greater contact with our teams of 10,000 -- of approximately 10,000 ensure that we're able to provide them with all the necessary information, training and really use our scale most efficiently across the Canadian geography and the local markets.
From a practice perspective -- practice level perspective, those efficiencies is what sets us apart and what allows us to continue to deliver care to patients. From a corporate perspective, we're able to ultimately continue to service our teams and our practices to a much greater degree -- with a much greater degree of efficiency and capability.
Okay. Great. And then my other question, just in terms of practices that you sold, maybe just walk us through your process here. Have these practices generating subpar growth, support margins? Is this a regular exercise that you look at all your practices? Or is this more of a one-off? And would multiples be similar to the ones that you're buying practices that?
So we -- the practices that we've sold both in Q1 and Q2 are specifically standalone orthodontic practices. As far as general practices, we have never sold one. We are looking at and we have been looking at our overall network and with our focus being on general practices, our ability to drive patients as well as expanding the services provided, the standalone orthodontic practices were not part of our go-forward strategy.
As far as ultimate the growth and the margins, they were both subpar to our GP business. Overall, the representation of the stand-alone ortho practices was sub-5%. So a very small portion of our business and ultimately now even significantly smaller than that.
Our next question comes from Endri Leno from National Bank.
I just wanted to continue a bit on the ortho divestitures. I was just wondering like how many more are left in your network? And would you consider eventually or over time test in all of them? Or would you retain some.
There are very few number of remaining stand-alone ortho practices in our network. We continue to evaluate the opportunity, both of continuing as well as divesting and reallocating those resources both from a corporate cost and time perspective, as well as an overall capital allocation perspective. So it's possible there will be further divestitures. But again, I really want to highlight that it's a very small portion of our business.
The other one, I mean, still a bit on the ortho, but more -- any update on your ortho insourcing program? I mean, have you rolled it out to any new clinics or any updates that you can share there?
It's Guy. Steady as she goes, continuing to expand the penetration of that program across our practices. We are on plan with respect to a number of new practices. We've put through the trading protocols to be able to deliver clear aligner therapy. So all things continuing forward and sort of right on plan from our perspective.
Great. And last one from me for Nate actually. Just a quick one on the fixed interest rate of 6.4% as you highlighted, how long is that good for?
Yes. So our hedges of the full $800 million are through to the maturity of our current deal. So roughly May 2026 or end of May 2026. Just to highlight that those hedges are currently in the money, north of $20 million, so significantly ahead of where the market otherwise -- where we would otherwise be in a variable rate situation.
Our next question comes from Tania Armstrong-Whitworth with Canaccord Genuity.
On the outlook, you provided some medium-term guidance. First, just wondering when you see medium term, over what time frame is that? And then secondly, the 4% plus in practice growth you highlight, can you break that down in terms of price, volume and sourcing initiatives like you usually do?
Yes. So I'll take the first part of the question, and I'll hand over the breakdown of our future same practice revenue growth to Guy to discuss. As it relates to medium term, generally speaking, that's 3 to 5 years. Is there a specific point of the outlook that you're referencing? Or just trying to understand what the medium-term target looks like.
No, that was it. Just trying to look at whether that was like a 2-year time frame or a 5-year time frame, so that's helpful.
Yes, 3 to 5. Over to Guy.
Yes, just on the 4%. So if you look at call it, the last 3 decades of dentistry in Canada in a normalized environment, you tend to get 1% to 2% price increase in the form of those annual fee guides. Obviously, this year, we've been the benefit of a higher CPI amount since it tracks CPI, it was a little higher this year. But if you factor in a steady state of 1% to 2% in a normalized environment, that gets you to one portion of that 4%. We anticipate about a 1% increase in volume year-over-year and then about 0.5% to 1.5% expansion of services that drive growth that gets you to 4% plus.
Okay. Excellent. And that -- I'm assuming that doesn't take into consideration 2024, which still might be some outsized price increases?
Yes. Yes. We won't know that until obviously, of course, at the end of the year, beginning of next year, but that's probably a fair assumption.
Our next question comes from David Kwan from TD Securities.
Nate, you commented, I guess, on the M&A this quarter being self-funding and how you guys did increase the withdraw on the bank debt. I guess at least maybe looking on an annualized basis, is that kind of a strategy going forward here that you're just going to spend within your free cash flow generation? Or could you see times where you might spend differently?
Thanks for the question, David, as we look to 2023 specifically, as we entered, the strategy this year was on a balanced approach of driving deleveraging, continuing our accretive acquisitions, and that remains consistent to the balance of the year. We continue to evaluate our opportunities, our pipeline, again, continues to be very robust and we will evaluate on a case-by-case basis whether and how we allocate our capital. What I can assure you is that deleveraging remains a significant priority to the business as well as does our growth, and we'll continue to ensure that we deliver on both those metrics.
That's helpful. And you've been buying back stock as well, I guess, after the [indiscernible] ended. Can you comment how that fits in to your strategy, especially where the shares are trading right now?
Yes. I think it's no surprise that we feel that our shares are significantly undervalued. And we used the NCIB quite sparingly again, with a balanced approach to share buybacks acquisitions as well as deleveraging, but we do see significant value in our equity and ultimately did exercise under the NCIB at the beginning of the quarter.
And just one last question, just on the costs and the labor inflation. Like is there anything else that you're experiencing outside of kind of the labor inflation that's kind of holding back your margins at least for what you're expecting for the balance of the year? And also maybe -- just to the extent that maybe the tight labor market, are you seeing that having any kind of material impact on your clinic performance?
It's just going to throw your question back, I got to make sure that we got it. Are you saying are we seeing pressure on other line items over and above labor and are seeing some expansion of margins with respect to those line items? And to what extent is the labor pressure effect in clinical performance. Are those -- did I get it right?
Yes, it is.
Yes. So thankfully, given our scale, largest provider in the country, we've been able to garner significant economies of scale and price efficiencies on consumable supplies, et cetera. So we've seen continued strength on that line item, which is a material one. So relatively steady, if not expansion of margins as it relates to some other line items across the P&L, which are helping us mitigate those labor pressures. To the extent that it's affecting clinical performance, obviously, you've got the pressure of labor wage rate inflation on those clinics. But again, given the strength in demand, given the continued strength on the top line of our clinics, broadly speaking, we've been able to mitigate it.
In addition, obviously, as we continue to deploy our playbooks across the practices, we're able to garner some efficiencies as it relates to staffing, scheduling and those things also help as well.
Our next question comes from Justin Keywood from Stifel.
The press release mentioned acquiring clinics in the quarter at 6.8x EBITDA, 30% lower from last year, and I believe that's below a target range of 7 to 9x EBITDA. My question is how sustainable is this multiple range to continue to acquire at low multiples.
Thanks for the question, Justin. And we too are very pleased with seeing the valuations come down to this level. What is driving it mostly is, albeit we are the single largest acquirer of dental in Canada and are the partner of choice. The greatest number of transactions still take place between an individual dentist buying into in part or in whole into another practice. And that market has always been supported by the capacity of the professional lending groups at our banks here to lend -- to fund these acquisitions.
Obviously, with higher interest rate costs and greater cost of carry, the individual's ability to acquire has significantly come down. And we're seeing some of the benefits of that decline in demand and valuations coming down to, call it, pre-COVID levels and then frankly, even lower. As far as our outlook here on valuation we expect to, again, continue to be in that 7 to 8x range. But however, there's opportunity for outperformance as you've seen in this quarter.
Is there an opportunity to maybe lever up the balance sheet just in the near term to make acquisitions at much lower multiples or is the focus continuing to be on delever? Because it seems like it may be a bit of a unique opportunity to acquire some clinics [indiscernible] multiples here.
I think that there is an opportunity. However, we're committed to our balanced approach to growth, while both showing the deleveraging as well as completing our accretive acquisitions.
Our next question comes from Endri Leno from National Bank.
Just had a quick one for me. I mean on the U.S. side as well, but there's been some FDA investigation on some dental devices on expanders -- fixed expenditure. Are you guys seeing anything like that? Or do you use them at all? Or is it just a blip if it were something?
No, we're not seeing anything in that front.
I will now turn the call over to Graham Rosenberg for closing remarks.
Thanks, operator, and thanks, everyone, for taking the time today. We look forward to reporting a strong Q3 and I guess it's in November -- early November and enjoy the rest of the summer. Thanks.
Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.