dentalcorp Holdings Ltd
TSX:DNTL
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dentalcorp Holdings Ltd
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Ladies and gentlemen, good morning, and welcome to dentalcorp's Fourth Quarter and Fiscal 2022 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 Fourth Quarter and Fiscal 2022 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 all that all amounts discussed on this call are denominated in Canadian dollars, unless otherwise indicated.
Please note that the statements made during this call may include forward-looking statements and information and future-oriented financial information regarding Demo Corp and its business and disclosure regarding possible events, conditions or results that are based on information currently available to management, which indicate management's expectation 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 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'll now turn the call over to our Chief Executive Officer, Graham Rosenberg, for opening remarks. Graham?
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 12 months ended December 31, 2022. For today's call, I'm going to share a number of those developments with you, and I will then hand over the call to Nate who will discuss our financial results in detail, after which I will provide forward-looking remarks about how our business is trending.
On Slide 3, you will see that dentalcorp works within an industry that is highly recurring essential health care services and that is cash pay and protected from economic cycles and disintermediation by technologies. Importantly, dental expenditures have experienced strong relative growth during periods of higher than average inflation.
Accordingly, in the context of the current macro environment, we believe that dentalcorp's favorable cost structure, high margins, low commodity risk and minimal capital expenditures provide support for the company's continued delivery of double-digit growth in the $18 billion Canadian dental industry. Our confidence in the business is validated by our fourth quarter results and strong outlook for the first quarter of 2023 and the remainder of the year.
On Slide 4, you will see that we completed the fourth quarter ended December 31, 2022, with approximately $1.3 billion of last 12 months pro forma revenue and $254 million of pro forma adjusted EBITDA, all supported by healthy same practice revenue growth of 2%. This consistent growth has been made possible by our deep and diverse network of 1,800 plus dentists, 2,100 plus hygienists and close to 4,700 auxiliary dental health professionals across the country from coast-to-coast.
Our health care professionals continue to deliver the highest standards of care during the reporting period, supporting more than 2 million active patients and managing more than 4.7 million patient visits annually.
On Slide 5, you will see that we continue to leverage our leadership position in the Canadian dental industry by acquiring 7 practices in the fourth quarter for a total consideration of $32 million. These practices are expected to generate approximately $5 million in pro forma adjusted EBITDA. We are also encouraged to see in the fourth quarter and so far in the first quarter, that practice valuations are beginning to decline in Canada as we suggested previously, as access to financing tightens for most buyers across the industry. We believe we are well positioned in this regard as a capitalized partner of choice for independent dentists and can continue to be judicious about the practices we acquire.
On Slide 6, you will see that we have remained disciplined in our multipronged approach to growth and 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 that we have refined over the past decade, and we are able to adapt to initial or longer-term fluctuations in the broader economy.
On Slide 7, you'll see that our business continues to convert a high percentage of EBITDA into free cash flow and without acquisitions, has the potential to drive our leverage down by 0.25 to 0.5 point per annum to the mid-ones over the medium term.
On Slide 8, I'm pleased to report that our business again delivered robust growth with fourth quarter 2022 revenue of $331 million, up 21.5% over the same period in 2021 and adjusted EBITDA of almost $61 million, up 21% over the same quarter last year, with adjusted EBITDA margins coming in at 18.3%.
We are also encouraged that our same practice revenue growth was approximately 2% for the quarter. The outcome of this was a strong adjusted free cash flow for the year of $125 million, representing a 38% increase over 2021. And for the quarter, adjusted free cash flow was approximately $8 million compared to 2022 in the fourth quarter of 2021, primarily due to changes in working capital, which for the year -- and which drove the $125 million, 38% increase over 2021 was neutral.
With respect to our strategic review process, which we announced in November, the special committee of the Board continues to conduct an extensive review and evaluates a number of potential strategic alternatives available to the company. While there can be no assurance that this process will lead to the approval or completion of any transaction, company does not currently intend to provide any updates with respect to this process unless and until the Board of Directors approves a specific transaction or otherwise concludes to review of strategic alternatives.
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 fourth quarter results demonstrate the strength of our underlying business in a macro environment that is still churning through elevated inflation and escalating interest rates. The results also reflect an early and heavy flu season in Canada, which adversely impacted patient visits and provider availability for the quarter. We've seen our hygiene business return to normal performance, thanks to the removal of many regulatory restrictions largely offsetting the downward pressures from the impact of the flu season.
Turning to Slide 9. Revenue for the 3-month period ended December 31, 2022, was $331 million compared to $273 million for the corresponding period last year, representing an increase of approximately 22%. The increase is attributable to our strong acquisitive and organic growth, including a positive contribution from orthodontic in sourcing.
As you can see, we reported fourth quarter adjusted EBITDA of approximately $61 million compared to $50 million in the same quarter last year and reported fourth quarter adjusted EBITDA margins of 18.3%. Same practice revenue growth was 2%, with adjusted same practice revenue growth of 2.5% over 2021.
Looking forward, we continue to be optimistic about our ability to grow the business through acquisitions and organically. With respect to M&A, we completed the acquisition of 7 practice locations with $4.9 million of pro forma adjusted EBITDA.
Turning to Slide 10. You can see that our net leverage and liquidity as of December 31, 2022. On a net debt basis, we were approximately 4.5x levered at the end of the fourth quarter. We ended the quarter with liquidity of $796 million comprised of $111 million in cash and $685 million in debt capacity under our $1.75 billion senior debt facilities of which approximately $1.1 billion was drawn at quarter-end.
Fourth quarter and year-to-date adjusted free cash flow was $8 million and $125 million, respectively, which supports our strong balance sheet. Looking ahead, we believe that we'll have ample financial resources to achieve our growth goals while maintaining a strong balance sheet. We also locked in a significant portion of our debt cost in the fourth quarter.
Subsequent to quarter-end, we had an additional $300 million of our bank debt. Approximately 75% of our exposure or $800 million is now carrying a fixed CDOR rate plus margin for an all-in cost of approximately 6.4%. The other quarter of our senior debt facilities remain on a variable rate. It is important to note that every 100 basis point rate increase on our credit facilities is expected to result in less than a 3% impact on our adjusted free cash flow.
Overall, we are very pleased with our fourth quarter 2022 results. We increased organic growth in part through our insourcing efforts created ongoing operating efficiencies and closed accretive acquisitions and continue to develop our pipeline.
With that, I'll turn the call over to Graham to provide some closing remarks. Graham?
Thanks, Nate. On Slide 11, you will see that we remain highly confident about our business prospects going forward. Fiscal 2023 is off to a very strong start, with first quarter revenue is expected to grow by 22% to 24% over the same period last year, with same practice revenue growth of 7% to 8% driven by price increases, a rebound in patient visit volumes and reductions in previously imposed regulatory restrictions.
During the first quarter, we expect to acquire approximately $4 million to $5 million of pro forma adjusted EBITDA after rent at acquisition multiples that are 15% to 20% lower than fiscal '22 levels. And we expect adjusted EBITDA margins to expand 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 upgrades we have made to our core information technology systems.
With overall market conditions improving, we expect to again deliver double-digit revenue and adjusted EBITDA growth in fiscal 2023 with corresponding practice margin expansion while generating strong free cash flow and deleveraging of the business. We will continue to execute our disciplined approach to acquisitions, benefiting from decreased valuations of fiscal 2022 levels and expect to deliver strong same practice revenue and same practice EBITDA growth.
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'd like to open the call to questions. Operator?
[Operator Instructions]
We will take our first question from Michael Cherny with Bank of America.
This is Charlotte on for Mike. Just wanted to ask about any real-time update you're seeing on patient demand trends following the flu season? And any improvement you've seen there in recent weeks? And then how this impacted the provider side as well?
Hi, Guy here. I think we saw what we expected to see following the heightened cancellation in Q4 and that often when you do get those heightened moments of cancellation or periods of cancellations, you get a deferral of visits rather than a loss of patients. So we did anticipate having a strong rebound. Demand has been quite strong, certainly since Q3, Q4 last year and that sustained itself into Q1 of this year. We continue to see strong interest in bookings. Our network continues to have a strong request from our patient base to come in into the network. So again, not too shocking to see the rebound in visitation this quarter, especially after last and we expect and hope to see that sustain itself for the course of the year.
Great. And then just another one, could you provide a little color or update on your enforcing initiatives and specifically an update on your Ortho Acceleration Program?
Yes. We continue to deploy the program across our network. Our rate of new practice onboarding remains consistent with the pace you would have seen last year. And so expectation should be the same for the course of this year. Given the variability in patient visits as a result of both those restrictions and heightened flu season, you will see some ebbs and flows as practices also make sure they prioritize getting patients back in for the routine care; their annual checkups, any sort of more urgent related care that needs to be done given patients were unable to come in as much as they'd like to last year. So you'll see some variability over the course of save months or a quarter. But our expectations are we to see similar continued deployment of the program across our network with results consistent with prior periods.
And we will take our next question from Brian [indiscernible] with Jefferies.
So I guess, my first question for you. As I think about the guidance on acquisition contribution this year. Maybe taking a step back and looking at what the M&A environment looks like? I know you said that valuations are starting to come down, but just curious what deal flow looks like and maybe interest level that you're seeing from more medium-sized assets to sell at this point?
Thanks for the question, Brian. As far as the pipeline, it continues to remain strong and robust, consistent with really what we saw throughout 2022. What I can say as it relates to the valuation environment, as we're seeing the interest rates digest themselves through the market and really the individual dentist who is trying to buy a practice and working with their local professional lending group, they're now being asked to put in equity. And when they're running the math, they're not able to make it work as far as the debt carrying cost.
And really, that individual dentist is the #1 buyer for dental practices across the country, albeit we may be the single largest buyer of dental practices, it's still very much supported by that individual. So as that now is becoming a reality, we're seeing valuations normalize to pre-COVID levels in that 15% to 20% range lower than what we experienced in 2022, and again, as you see printed today in our quarter.
So we're optimistic as to driving the volume of acquisitive growth that we spoke to at the end of Q3 in that $20 million to $25 million on an [indiscernible] EBITDA, and the pipeline is definitely there to support it.
I appreciate that. And then, I guess, as I think about rate increases -- or potential rate increases, what are you seeing in terms of the provinces approving -- or approving recommendations for rate adjustments for 2023 and 2024, maybe as well?
So just to make sure we're answering the question, you're seeing rate increases as it relates to fee guides, the dental rates?
Yes, that's right. Yes.
Yes. And so what's your question specifically around the provinces?
What rate growth are we seeing the fee guide going up by for '23?
For 2023?
Yes.
Yes. So just to level set those on the call, each of the -- within each province, primarily the dental boards, whether it's the associations or some semblance of dental professionals will on an annual basis produce what are called fee guides. So the province or government bodies themselves don't have a purview on this. It is sort of industry set by the dental representatives within each province. So those have all been released and have been set for the year.
If you look at the mix of services within our network, which is probably fairly representative of the mix of services of an average general dentistry clinic, the price increase, again, depending on sort of where you are in the country and depending on specifics around your volume composition or your mix composition are in around 6% to 7%.
And we'll take our next question from Stephen MacLeod with BMO Capital Markets.
Just wanted to talk a little bit about leverage. And just wondering if you can provide any updates if it's changed at all. Just you're deleveraging targets on an annual basis in terms of net debt-to-EBITDA?
Yes. So thanks for the question, Stephen. As we look to the medium term, our leverage targets are still in the high 2s to low 3s. As we look through to the balance of the year, a deleveraging pace of roughly 0.25 to 0.5 turn by the end of 2023.
Okay. That's great. And then maybe just on the fundamentals. I was just wondering if you could give a little bit of color around sort of what you're seeing in terms of like same practice revenue growth. I know you have -- you called out a very strong number for Q1. I'm just wondering if there's anything unusual in there outside of just a rebound in patient visits from what was a slower Q4?
It's Guy here. I don't know if you want to call it unusual. Again, I think there was a portion of pent-up demand from Q4 given just a ramp in flu season. And so you've got a whole bunch of patients who otherwise would have come in, in the quarter that didn't. So you obviously saw some of that in Q1. I think beyond that, it looks and feels more like a normal operating environment for the first time since COVID. But beyond that, again, I think we're seeing continued sustained demand. That's not surprising given the nature of dentistry. Plus when you combine, call it, a more normalized environment as it relates to both COVID and regulatory restrictions as a result thereof, the nature of demand obviously seems in line with our expectations.
The other thing that we can point to as a driver of the strong start to the year is, if you recall, we made significant investments over the last year particularly around our core infrastructure, including on the marketing side. So really sophisticated marketing engine that drives patient acquisition. We significantly invested in that engine last year and obviously, in the back half of the year. You're seeing the dividends being paid with your typical patients booking an appointment that takes some time for them to get into the system. We're seeing the benefit of those investments that we made in the back half of last year show their -- bear their fruit in the first half or at least the start of this year.
We'll take our next question from Doug Miehm with RBC Capital Markets.
Nate, with respect to the margins, we have prices increasing 6% to 7%. I'm just curious on the cost side of your business, and what the impact you see for margins throughout 2023, not necessarily specific to Q1?
Yes. So just to come back to the price and obviously, the list prices again that are shown by the provinces as we look to it from an internal perspective from a pricing, the way that we look at it is in that 4% plus range. You have to look at it from an overall mix perspective, which, again, as you overlay the volumes is what is driving our strong Q1. From an inflationary period, again, the pricing that we receive is always a year late, right? So it looks to the inflationary environment driven from the prior year.
And as we look into quarter and the year ahead, we're going to be able to drive pricing and drive growth that is in excess of the inflationary period or the inflationary environment that's before us. From a margin perspective when taking into consideration the additional investments that we're making in our overall infrastructure, we feel really good about continuing to maintain and slightly expand margins throughout 2023.
Okay. Perfect. And then my second question just has to do with the loans that are -- have changed, I think, over the last little while with respect to management. Could you expand on that and just tell us what the implications might be?
Sure. It's Graham here. So over the last 9 years, Guy and Nate have each played increasingly instrumental roles in the growth and development of the company, and in various roles, including today as President and CFO, respectively. The Governance and Comp Committee and the Board have determined it was in the best interest of the company to further align their interests with those of the shareholders for the long term and restructured some management loans [indiscernible] the description and that's more -- that's set out in more detail in the press release.
We will take our next question from Scott Fletcher with CIBC.
In last quarter's results, you've talked about doing between $5 million to $7 million in acquired EBITDA in Q4 and over the course of '23. With Q4 at the lower end of that range in Q1 -- the Q1 guide also at the lower end, are there plans to maybe accelerate that in the back half of the year to get to the midpoint of that range? Or are you comfortable staying at the lower end as the year goes on?
I think at this point, we're comfortable with the lower end of the range. We'll continue to evaluate both the macro as well as the strategic initiatives and plans for the business, and we'll update -- we'll provide updates as necessary.
Okay. And obviously, government health care funding has been a big topic at the start of the year. I'm just wondering if you're hearing anything or if you have any insights or updates on the approach to dental funding? And if there's any sort of changes on the horizon to what's already been announced?
No. We haven't heard anything other than they continue to work on the program. Obviously, you saw its first iteration last year that was launched in October. Frankly, we didn't see any real impact one way or the other, including as it relates to call it, incremental volume, which is, again, we would anticipate that we'll see minimal impact of this program on our network. But there's no reason to believe government has changed its intentions, and we haven't heard anything to the otherwise.
We will take our next question from Tania Armstrong-Whitworth with Canaccord Genuity.
Firstly, on the guidance provided for Q1, at 7% to 8%, I know the pricing increases that we got across some of the provinces are quite large. I guess how much of that is volume growth versus price growth? Because it seems like your commentary is mentioning that most of this is around volume growth?
Yes, we did see a significant amount of volume growth, again, highlighting, one, the dynamic of Q4's artificially depressed volumes because of the flu season. So we did see a significant rebound in volume. Again, I'll point to our programs, particularly around the investments we've made in marketing and technology capability, which drove, again, even greater volumes than we would have seen otherwise just a testament to the infrastructure that we continue to build out.
Again, I think if you look at those fee guides produced by the dental boards across each province, there's a real distinction that needs to be drawn between the quoted fee guide increase and what it applies to -- or what it means when it's applied to your mix of services for your practices? And so again, I think the short answer to your question is we saw significant volume uptick in the beginning of the quarter, but continue to be valued by price increases, which sufficiently offset the inflationary environment.
Okay. And on the impact of flu season in Q4, are you able to quantify it in dollar terms, how much you think it removed from your revenue line?
Yes. That's not something that we would for purposes of this call. But again, I can tell you that from a patient cancellation provider availability dynamic, it wasn't unlike what we saw in January of last year for a shorter period of time. But again, we saw a pronounced change in patient behaviors. I think, normally during what would normally be a flu season in terms of its spread, you would have still seen patients coming in or providers saying, "I'll go to work, not feeling well."
I think given the change in behavior post pandemic or at least as a result of pandemic, if people have the sniffles, they stay home, and unfortunately, a lot of people had this sniffles in Q4. So we had significant uptick in cancellation rates, significant absence of provider availability. And I think that's a big driver of what we saw in the quarter in terms of volumes.
Okay. And then just lastly, I don't know if you can answer this, but in terms of the type of business loans that individual dentists have to run their practices today, do you know if they're mostly on variable rate loans or on fixed loans and if these interest rate increases are hitting them and maybe propelling them to sell sooner than they otherwise would?
That's a great question, Tania. And most are on variable term loans that also do have cash amortization throughout the tenure of those loans. So absolutely, they are being impacted by the current macro, both those that are current owners with leverage as well as those that are looking to acquire new practices.
We will take our next question from Daryl Young with TD Cowen.
My question is just around the patient volumes and I guess the trends in terms of churn of patients maybe moving from urban offices to suburban offices and whether you've seen a stabilization of that kind of patient churn as work-from-home dynamics have started to stabilize. And then second to that, has that movement at all indicated how you plan to attack M&A in the future? Are you may be targeting more suburban areas than historical?
It's news to me that work-from-home dynamics have stabilized. I think every company, I know there's a headline the other day about RBC moving to more strict requirements for in-office. Obviously, some of the large tech companies in the U.S. are making significant alterations to their company philosophy on work from home. So I think there's still a great state of flux on worker-employer-employee behaviors, and that drives sort of where they're spending their time between Monday to Friday.
And obviously, as we know, you go to a dentist [indiscernible] work. And so I'd still say we find ourselves in a state of flux, particularly in the financial district of say, Toronto, Calgary, even Montreal areas where we've got a good mix or a good healthy mix of downtown or core practices. So we haven't seen a stabilization there quite yet. I think we're seeing continued flux. I wouldn't say our patient churn rate drastically increased in any meaningful way as a result. It's more about frequency behaviors that are causing some noise in your overall volume numbers.
As it relates to your second question, strategically, again, we've always targeted stable practices in great overall geographies, whether they're sort of core or suburban. We continue to see great opportunities even in suburban practices, and those will always sustain themselves and be areas where we can drive continued growth. So I don't think it's required us to have a material deviation in overall strategy as it relates to acquisitions.
But we are mindful in this environment, at least for now, of practices that are sort of true, true financial core if we're not able to have a sustained view or a prolonged view of their own patient base. It does inform how we think about the acquisition opportunity.
And we'll take our next question from Gary Ho with Desjardins Capital Markets.
I just have a question on the adjusted free cash flow. It was $7.6 million. So just wondering if there's any seasonality in that number. I think Q3 was also a little bit light versus the kind of the first half of this year. Maybe you can elaborate on that working capital change as well?
Yes. So for the full year basis, the adjusted free cash flow was $125 million, which we're very pleased with, again, given the turbulence both in the COVID environment as well as the macroeconomic environment. As we look quarter-over-quarter and period-over-period, dentistry in general is a flat to potentially negative working capital business over the year.
The swings in our net working capital were nominal and the impact of working capital was very minimal on a full year basis. There will be some timing differences quarter-over-quarter and period-over-period, which you see here in Q4. But again, the full year of $125 million is something that as a management team and the company are very pleased with.
But Nate, there's no seasonality like first half being higher than second half, et cetera?
There is some seasonality in the quarters with Q2 and Q4. Again, it's minimal. Some of it comes down to, again, timing of operations and timing of certain events that occur.
Okay. And then my second question, Slide 12, you provided some additional disclosure on the U.S. market. Maybe for Graham, are you still looking at international expansion? Or is that kind of on pause just given the strategic review?
I think you'll see us this year focus with rigor on our same-store growth and a disciplined approach acquisitions in the Canadian market.
We will take our next question from Andre Bodo with National Bank.
Andre sitting in for Endri Leno. I was just wondering if you could provide some more color on labor costs and any trends you're seeing over there?
We'll start with again with the nature of rates in dentistry. You do get a bit of a lag. So this year's rates will reflect the inflationary environment we saw last year that the industry sort of unfolds. So again, we're appreciative and encouraged that the rate increases we were able to take this year more than offset the pressures we saw last year. To the substance of your question, I'd say it's still a challenging labor environment, I think, across the board for any industry, health care, in particular.
That said, there are encouraging signs that we can point to internally that give us confidence that this year will be more manageable than last year, particularly as it relates to the timing of those rate increases. So again, 2 points to take away; 1, rate increases that we're able to take in our network that more than offset the inflationary pressures from last year, and 2, encouraging signs that the labor market is slowly but hopefully surely flying, if that's the analogy.
Great. And I was wondering if you could comment on the interest of dentists to sell at the lower multiples that you're seeing? And if your pipeline has any specific weightings towards one province over another?
Yes. So as far as the valuations that we're seeing here come through again in Q4 and what we expect to come through in Q1, these valuations are one that the market experienced for a significant period. The increase in valuations that we incurred through 2022 is really driven by a couple of factors. One was the mix of the types of deals that we completed in the early part of the year, weighing more towards the mid-market opportunities and the larger practices as well as some of the behavior of our market participants, again, in those early couple of quarters.
That has subsided, and the valuations reverted back to normal. And from a dentist perspective or a vendor perspective, these are normal and expected levels that they expect to transact upon. So we're not seeing a significant amount of friction there.
As far as it relates to the geographic dispersion of our pipeline, we have a national business development team that's located in every province across the country. Their task with again, building those relationships and maintaining a pipeline of conversations in those local markets. So we look to continue to grow in a manner which is consistent with the past, very proportional to both the population of dentists across the country as well as the population of Canadians.
We'll take our next question from Justin Keywood with Stifel.
Just had a question on the newly merged entity. Has there been any change in competitive dynamics there and do you anticipate any developments in 2023?
I think as we had intimated when the deal was announced, it's never easy to combine any too materially sized businesses or even businesses of those 2 sizes. So I think unsurprisingly, as expected, what we can tell is they continue to focus on ensuring integration goes successfully given -- again, given the significant premium paid for that merger. And so as far as we can tell from market activity, they're far more focused on successful integration than they are proactively or aggressively seeking new positive opportunities.
And then maybe just a question for Nate. If we can have the net debt-to-EBITDA, what does the business ended up for Q4?
Sorry, you just cut out there for me was the question around what the Q4 net debt was?
Net debt to EBITDA, yes.
It was at 4.5x.
We have a follow-up question from Stephen MacLeod with BMO Capital Markets.
I just had a follow-up question. In the past, you've given some distinct color on how many practices are in your Ortho Acceleration Program. Just wondering if you have that number for the end of the year?
Yes. It's 268 practices that are in the program.
And there are no further questions at this time. I will now turn the call back to Mr. Graham Rosenberg for closing remarks.
Thanks, operator, and thanks, everybody, for taking the time. We look forward to reporting on a very strong Q1 and balance of the year. We're finally in a normalized -- what feels like a normalized operating environment, which gives us cause for optimism. With price increases off, and I want to just specify this and make sure everyone's care, of roughly 4% plus offsetting inflationary pressures from previous years and volumes returning, including from last year's flu season, but more importantly from the significant investments we've made in our technology, infrastructure, HRIS, ERP systems, marketing and talent teams.
We expect a really strong performance in Q1 with a consequential drop through to practice level EBITDA. We look forward to reporting those results in Q1 and intend to expand our reporting to provide more detail of practice level performance and network performance, including at practice level of our same-store and recent acquisitive program and the performance of those acquisitions. So again, strong Q1 coming up, and I look forward to speaking to you all in May. Thanks.
Ladies and gentlemen, this concludes today's conference call, and we thank you for your participation. You may now disconnect.