Minnesota-based Park Dental Partners had an active second quarter, headlined by a $46 million DSO acquisition.
In addition, the company reported more than $66 million in revenue during the second quarter, signaling year-over-year growth.
Here are seven things to know from the company’s second-quarter earnings call, as transcribed by Investing.com.
The Village Family Dental acquisition is the headline story
Park Dental Partners signed a definitive agreement to acquire Village Family Dental, a dentist-owned DSO in North Carolina. Once the deal closes, Village Family will add approximately 48 dentists across 12 locations and give Park its first presence in North Carolina. The deal is structured with $39.1 million in base consideration plus up to $6.9 million in contingent consideration tied to future performance targets and the prior doctor-owners’ continued employment for five years. About 24% of the base consideration will be paid in stock.
The deal is framed around relationships and culture, not mechanics
Pete Swenson, Park Dental Partners’ CEO, discussed the organization’s relationship with Village Family’s leadership that was built over years. That relationship helped Park Dental Partners beat out private equity interest for the acquisition. Mr. Swenson pointed to Park’s “dyad” leadership model, which pairs doctors with operational leaders, and dentists’ direct role in board governance, as the differentiators he believes resonates with dentist-owned groups choosing a partner.
Growth is running on two tracks at once
Village Family isn’t Park’s only deal this year. The company also closed a smaller, in-market acquisition, Zumbro Family Dental in Rochester, Minn., during the quarter. Leadership described its growth strategy as a combination of “smaller and selective larger deals.”
Organic growth moderated, but leadership says it’s on script
Second-quarter revenue rose 5.1% year over year to $66.2 million, while same-practice revenue growth slowed to 2.3% from 3.2% year-to-date. Christopher Bernander, Park’s CFO, attributed the deceleration to provider scheduling shifts and a tougher year-over-year comparison rather than softening patient demand. Patient retention held at 90.3%, and the company raised its full-year organic revenue outlook.
The IPO cost drag is still working its way out of the numbers
Share-based compensation totaled roughly $3 million in the quarter, more than 90% of it attributable to dentists, and remains the largest driver of the gap between GAAP and adjusted results: GAAP net income was $1.3 million versus adjusted EBITDA of $7.4 million, an 11.2% margin. Mr. Bernander noted that prior-year comparison periods still don’t fully reflect stock compensation and public-company reporting costs, meaning the size of that GAAP-to-adjusted gap should narrow as those year-over-year comparisons normalize in coming quarters.
Dentist development is being framed as a governance and retention play
Mr. Swenson highlighted a cohort of 10 providers who completed an 18-month internal leadership program in June, describing it as a way to ensure dentists keep a “meaningful voice” in the company’s leadership as it grows.
The M&A pipeline is focusing on Arizona and the Southeast
Park Dental Partners described its acquisition pipeline as “consistent with last quarter” — already improved from a year earlier — with a specific, ongoing focus on building scale in Arizona, where integration of prior acquisitions is still in the relationship-building and systems-integration phase. Mr. Swenson also noted that Village Family has its own history of growing through acquisition, suggesting Park may lean on Village’s dealmaking experience to pursue further growth in the Southeast once that deal closes.
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