Industry consolidation in the corporate dentistry sector, and a growing reliance by those firms on cloud-based software services, is leading to more growth for Newport Beach-based Planet DDS.
The privately held firm’s core software platform, called Denticon, is billed as the first and largest cloud-based dental practice management software in the U.S., with about 600 customers.
Planet DDS reported about $12 million in annual sales last year, more than double what it earned two years prior.
The firm ranked No. 41 among midsized companies in last year’s Business Journal listing of fastest-growing private companies.
Company officials project Planet DDS will continue to see 30% to 40% annual revenue growth going forward the next few years. What’s more, they are planning to bring on about 15 people to its headquarters just off MacArthur Boulevard—not far from one of the main offices of Glidewell Laboratories, OC’s largest dental products maker—after relocating from Costa Mesa last year. It currently employs about 55.
“The opportunities are still very much there to grow this [business],” said Chief Executive Eric Giesecke.
Recent new hires include Vice President of Operations Hannah Cohen.
Prior to joining Planet DDS, Cohen was director of group operations at DaVita Inc., one of the nation’s larger managed care providers.
DSO Dominance
Corporate dentistry firms, also known as Dental Support Organizations or DSOs, consolidate and operate multi-location, multi-doctor dental practices under the same corporate umbrella.
Nearly 16% of all dental practices fall under that type of organizational structure now.
Those types of firms “can’t operate with outdated desktop software to run their practices,” said President Blake Rice.
“Having a cloud enterprise solution is almost a must for those folks and that’s what has propelled our growth.”
Denticon helps single practices and multi-location dental groups run day-to-day operations. It handles clinical applications, reporting, patient communications, insurance, digital X-rays, billing, and offers several patient features such as online appointment scheduling and bill pay.
The subscription-based software starts around $300 a month, according to industry reports.
‘Well Positioned’ for Growth
Industry data projects growth in the 15% range for DSO-type practices in the next few years.
That consolidation is clearly helping the bottom line of Planet DDS, company officials said.
In February, existing Denticon customer Mid-Atlantic Dental Partners in Pennsylvania acquired Birner Dental Management Services, which operates 67 offices in New Mexico, Colorado and Arizona.
As part of the transaction, the acquired company is getting an “investment in state-of-the-art technology,” with the rollout of Denticon, Mid-Atlantic said in a statement.
Denticon will provide Birner Dental “with advanced patient-facing, reporting, clinical, and operational tools, while allowing for significant savings in total cost of software ownership.”
The vast majority of dental practices have their software on-site, according to Giesecke. They’re typically older and outdated systems, he said.
“We’re well positioned from a product perspective and industry perspective to take advantage of the growth” in those practices’ technology upgrades, he said.
Orange County’s largest DSO is Irvine-based Pacific Dental Services, which provides a wide assortment of back-end services to dental practice groups, including software, in return for taking an ownership stake in those groups.
It’s one of the country’s three largest DSOs, according to industry trade data.
Pacific Dental earned nearly $1.3 billion last year, and employs nearly 900 people in OC, most of whom are at the company’s Red Hill Avenue headquarters.
Other area companies with large DSO operations include Irvine’s Smile Brands Inc. and Orange’s Western Dental Services.
Planet DDS hasn’t reported working with Pacific Dental, but has other largest DSOs as customers, including Hawaii Family Dental, Hawaii’s largest DSO with 12 locations and nearly 50 dentists.
2015 Acquisition
Richard Lee, an information technology entrepreneur who now runs Irvine-based teledentistry firm Virtual Dental Care, established the company in 2003.
In 2015, Virtual Dental Care was doing about $4 million in revenue when Giesecke and Rice entered the picture.
The duo in 2013 had raised a small $500,000 private equity fund in Washington, D.C. to search for potential acquisition targets. Planet DDS was not initially on their radar.
“The searching process is not super fun to do by yourself,” said Giesecke, who had prior success running a search fund, which typically involves a small group of investors who kick in between $300,000 and $700,000 that’s essentially used to find and analyze a target company to acquire.
The initial round of backing covers related expenses and the hiring of an executive or two, usually the initiators of the fund.
Rice had just concluded his MBA at Harvard University, where Giesecke earned the same degree. They decided against hiring brokers with deep connections to lower and mid-market companies already on the sales block. Their approach centered on cold calling companies not on the market, an elaborate task that included cross referencing data from public filings and social networks, implementing automated marketing and overseas outsourcing, tracking Yelp reviews, and analyzing databases from various markets in the U.S.
Interns played a key role in identifying attractive companies.
“We felt that cold calling and looking for proprietary deals was better because you’re not competing against as many people,” said Rice, a former infantry officer in the U.S. Marine Corps with deployments to Iraq and Afghanistan
“The flip side; it’s a lot harder,” he said.
The process included hundreds upon hundreds of cold calls to find an attractive business, a willing seller, and then convincing investors to fund the buy.
“That we even got something done in retrospect seems miraculous,” Rice said.
The search lasted 16 months. Planet DDS was represented by a small Cleveland investment bank, BellMark Partners LLC.
The bank set up a meeting with the company’s founder; Lee and Rice quickly struck a bond over negotiations. The deal closed within six months.
“We were not looking for tech at all,” said Rice.
Giesecke and Rice moved to Orange County the day after the deal closed.
“We were open to moving anywhere,” Giesecke said.
The majority of the founding team still works at Planet DDS, which helped the transition.
Lee remains involved with the company as a board director and adviser.
“One of the challenges for us is we didn’t have the technology background,” said Rice, who oversees marketing, sales, and business development.
Giesecke is focused on the operations side and technology.
