A turnaround story is nice, but it’s even better when you have the original players back in the game for round two. Irvine-based Smile Brands Group Inc., with Chief Executive Steve Bilt back at the helm, is shopping for dental practices.
Bilt, who co-founded Smile Brands, was reappointed to the role when San Francisco-based middle-market private equity firm Gryphon Investors bought it in August 2016. Bradley Schmidt was named chief financial officer, a position he held in his previous tenure there.
Bilt said the company is no longer limited to opportunities in the Western U.S., a strategy it said last year it would embrace. It’s now looking to buy operations nationwide.
“The Western thing is dated,” he said. “We are national. [We are] now looking for visible dental practices in mid- to major markets.”
Smile Brands buys dental practices but not real estate, and provides comprehensive business services, including recruiting, billing and collection, and equipment management.
Smile Brands’ competitors are Heartland Dental, Pacific Dental Services, Aspen Dental and Western Dental.
It expanded its footprint this year via acquisitions, including three announced transactions that grew its presence in northern California and the Central Coast: A+ Dental Care, OneSmile Silicon Valley and Johnson Family Dental.
Investment criteria focused on practices in retail centers or other highly trafficked locations that can accommodate multiple dentists and specialists. Patients want convenient locations in clean, simple facilities where they can access all dental services under one roof, the company said.
It accelerated growth by adding generalists and specialty providers for expanded hours and service capabilities, and it invested in technologies to enhance its Invisalign business. Bilt said the business in clear, custom-made aligners used in place of traditional braces or retainers—a business more akin to Smile Brands’ traditional business—is up 50% so far this year.
But the company plans to diversify with a One Smile Dental Plan to provide preventative dental care coverage for individuals. Bilt said coverage costs are 20% to 30% below the marketplace rate.
“We think it will be meaningful for people to access care and stay in care if they’ve been out of care,” Bilt said. He said more than half of the population who haven’t visited a dentist for the past two years say affordability is a major deterrence.
The One Smile plan recently rolled out in San Antonio, Florida and Southern California.
Back Up Again
Bilt, who was a 2011 Business Journal Excellence in Entrepreneurship Award winner, said the company was the largest national provider of business support services to dental groups for a decade ending in 2013 in terms of number of locations. It’s now the fourth-largest behind Heartland, Pacific and Aspen. It grew from 35 offices in California to nearly 400 offices in 17 states in 2013 under his leadership.
Bilt co-founded Smile Brands in 1998 as Bright Now Dental Inc. with three West Coast support services organizations. It grew through the acquisitions of Monarch Dental Corp. in 2003 and Castle Dental Centers Inc. in 2004.
He said that from 2013 to 2016, when he left the company—“because investors wanted to take the company in a different direction.”—Smile Brands stopped performing, because it “just stopped emphasizing its culture: ‘smiles for everyone.’” He said it also had too much debt, which prevented it from growing earnings. Over 100 employees left during the time, and office count was down to about 350.
“[The business] had a tough couple of years. We brought in a new balance sheet and refocused on the culture that has been our key to success from the start.”
Gryphon led a primary equity financing round that raised more than $100 million. Proceeds were used to pay down debt and support working capital.
Bilt said the company now generates enough revenue to sustain operations and support future acquisitions. It doesn’t plan to raise additional equity. He noted Smile Brands is back to its 2013 position, with about 380 locations in 17 states and 4,500 employees.
“Revenue is up 20% [year-to-date], and we expect to end the year with $550 million in sales.”
