Great discussion with the CEO of Planet DDS, Eric Giesecke and the CEO of Apteryx Imaging, Dr. David Gane on the recent acquisition and its impact on DSOs. This is an audio only podcast.
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FULL TRANSCRIPT
Bill Neumann:
Like to welcome everyone to The Group Dentistry Now Show. I’m Bill Neumann and we’re going to talk about something that’s probably pretty unique in the past six months; an acquisition in the dental industry or an acquisition in any industry, but an acquisition in the dental industry. We have two guests on today. We have Dr. David Gane and he is the CEO of Apteryx Imaging. And we have Eric Giesecke from Planet DDS and he is also the CEO there. This occurred not too long ago and kind of interesting here is, again, acquisition during COVID and in the dental industry and also different countries. One is based in western Canada and that would be Apteryx Imaging. And then, of course, on the west coast as well, but of the United States, we have Planet DDS.
Bill Neumann:
Talk a little bit, give you an introduction, a little bio from both individuals. Eric, who is the CEO of Planet DDS, is responsible for operations, technology, finance, customer success and strategy at Planet DDS. Prior to joining the company, he co-founded District Line Partners, a private investment fund created to acquire and operate a single attractive business in a growing industry. He also ran One Source Water, a bottleless water cooler firm, where he nearly doubled the size of the company in less than three years. Eric has an MBA from Harvard Business School and a bachelor’s of science in mechanical engineering from the University of Virginia. Welcome, Eric.
Eric Giesecke:
Thanks, Bill. Thanks for having me.
Bill Neumann:
You are welcome. And next we have up, Dr. David Gane. And he is, again, the CEO of Apteryx Imaging. Dr. Gane is no stranger dental imaging. He’s a passionate pioneer of the business, having successfully managed the growth of the digital imaging division of Carestream Dental during his 12 years as vice president. He also founded Orbit Imaging, a company that owns and operates cranial facial imaging centers in western Canada, which is where he’s located. His personal startup, Orbit, provides Cone Beam volumetric imaging, digital clinical photography, interoral tomography, panoramic and cephalometric digital radiographs and other standard medical, dental and orthodontic radiograph services. That was a mouthful. David is a member of the Canadian Dental Association, the American Dental Association and the American Academy of Oral and Maxillofacial Surgeons.
Bill Neumann:
Again, welcome both of you. Welcome, David.
Dr. David Gane:
Pleasure to be here, Bill.
Bill Neumann:
Great. David, why don’t we start with you? Can you give us a little bit of background on Apteryx Imaging? A little bit of history of the company, and then we can go from there. And then I’ll ask Eric to fill us in on Planet DDS.
Dr. David Gane:
Sure. I joined a company called LED Medical Diagnostics after I transitioned from Carestream in 2013. And at the time, LED really had only one product. It was the Velscope oral screening device. And it was our goal to grow the company; grow the product portfolio and the services of the company. We had always had our eye on Apteryx Imaging, which was actually an Ohio-based company that was really, we thought, the leader in imaging software in dentistry. They had nearly 100,000 licenses in the market. And I had a personal relationship with the single shareholder/founder of that business. Actually, I tried to buy him a couple of times before but in 2017 we were fortunate in that we were able to acquire their company. And that really changed us from a single product hardware manufacturer to a software company.
Dr. David Gane:
At this point, when Planet acquired us, we had grown Apteryx nicely. We had grown a cloud-based imaging product and we were really both a hardware and a software imaging company in dentistry.
Bill Neumann:
Excellent. Yeah, and not only … I believe Velscope is another product that you have there, right?
Dr. David Gane:
That’s right. That was the initial product when I joined the company; the only product.
Bill Neumann:
Okay. Very, very good. And Canadian-based, offices also in the US in Atlanta, correct?
Dr. David Gane:
That’s right. Currently we have our Vancouver office, the Apteryx offices in Akron, Ohio and our sales and marketing office is in Atlanta, Georgia.
Bill Neumann:
Great. That’s wonderful. Thanks, Dr. Gane. Eric, can you fill us in a little bit on Planet DDS? And you’re based out of … You’re in Newport Beach, California, correct?
Eric Giesecke:
That’s right. Sunny California. Sure thing. Planet DDS was founded in 2006 by a group of longtime professionals in the dental industry, Richard Lee, Jay Kim and some others who probably a lot of people listening to this know. It’s in such a small industry. They really had this vision for an enterprise cloud dental software solution way in advance, I think, of the consolidation and the need for an enterprise solution. They were very forward-thinking, preshon individuals who had built from the ground up a software platform that was really beneficial to any either emerging or existing DSO.
Eric Giesecke:
Founded in 2006. Today we have approximately 3,000 locations on the platform, including some of the top … the largest DSOs. Mid-Atlantic Dental Partners, DentalOne, Dental Care Alliance and others. With the Apteryx acquisition, we’re about 140 employees and growing. Really just focused on that emerging in group … group in emerging DSO markets, selling a solution that really allows people to be fully in the cloud and benefit from the ability to scale by being in the cloud.
Bill Neumann:
Excellent. Thanks, Eric. Let’s talk a little bit about how this acquisition came about. It’s certainly a unique time to be looking at an acquisition. Let’s talk a little bit about why and then how that acquisition went down because before we started the record, Dr. Gane and I were talking and apparently there were no in-person meetings, so a very unique time.
Bill Neumann:
Why don’t we start with you, Eric?
Eric Giesecke:
We had known … I’d gotten to know Dr. Gane and Lamar Roberts just in the past probably two years when LED acquired Apteryx. But we had known Apteryx for probably 10 years. I think we were the first reseller of … might be incorrect. There might have been someone prior, but I know at least the largest reseller of Apteryx Imaging software in the market. So, we have a deep relationship with the team in Ohio, including from a support and sales perspective. And so, we had gotten to know them and always been interested in that aspect of it. Got to know Dr. Gane, got to know Lamar and the folks over at LED over the last year. And with the recent re-capitalization with Level Equity, which we did last July, we’ve been looking to be inquisitive and grow; look for great software platforms and great companies to be able to partner with.
Eric Giesecke:
Apteryx Imaging has always had what we thought was the best imaging software in the market. We obviously resold it. We integrated deeply with it. And not only that, the team over there that we’ve worked with so deeply, we felt it was a great cultural fit. The folks that we had known and worked with we felt really would fit in well in our organization. So, we reached out … I guess it was probably six months ago … with an email just to take the temperature of the interest. And because the relationship was there and had developed with these guys over the past couple of years and with some of the Apteryx folks prior, we were able to move pretty quickly through the process.
Bill Neumann:
Dr. Gane, you want to add anything to that?
Dr. David Gane:
Yeah. That kind of mirrors, pretty much, what happened there. Planet DDS and Apteryx, as Eric points out, we had a really long-standing relationship. I think it goes back to like 2011-2012. And the two companies were realizing the synergies of the combined product offering, XVWeb and Dentacon, predominately in the DSO space, really long before the acquisition was planned. In fact, Planet DDS was Apteryx’s most productive customer as a distributor/reseller of our imaging service.
Dr. David Gane:
I was fortunate to meet Eric for the very first time at the ADA last year in San Francisco. And then I think it was a month later we entered into an NDA and shortly after that, Eric reached out to our board to explore a transaction at a deeper level. And then, of course, the entire process took place during the pandemic and both sides had to work extremely hard, always on a virtual basis, to consummate the transaction timely, which they did. It didn’t take long; we consummated mid-August. It was definitely interesting to do it all virtually. I hadn’t done many transactions, but this is the very first one we did without actually face-to-face meets or visiting each other’s office in a due diligence process.
Bill Neumann:
It sounds like considering you weren’t actually able to visit in person, it did move rather quickly. Do you feel like being virtual was actually beneficial? Or do you think it hindered things?
Dr. David Gane:
Well, it saved a lot of time, of money on travel. I can tell you that. I think it actually expedited things in some way because you can only be on a Zoom meeting for so long.
Bill Neumann:
Yeah, that’s right. You’re probably a lot more focused on the deal since you weren’t worried about travel arrangements or anything else. I think this is a definite time for organizations to strategize.
Dr. David Gane:
Yeah, that’s right.
Eric Giesecke:
And I think, Bill, on that note, too … I think the fact that the organizations had worked so closely, we knew the business well. They knew us as potential acquirers, so the trust that’s often necessary to create through those face-to-face meetings wasn’t probably as critical in this case. Plus, all the on site diligence that you typically would have to do to understand the business model, the products, we didn’t have to go through that. I think the deep relationship made it possible. And to your guys’ point, I think in some ways probably kept us focused.
Bill Neumann:
Excellent. Eric, I’ll ask you this question. Out of this acquisition, what new capabilities do you see coming to market as a result of being one combined organization?
Eric Giesecke:
Well, I think it’s interesting. We could talk a little bit about some of the AI stuff that Dr. Gane’s been working on for a while. Probably he can explain that a lot better than I since it’s in his wheelhouse. I think there’s a lot of really cool stuff that’s going on that the guys have been working on extensively. I think a deeper integration between Dentacon, which is our software, and Apteryx is in the works although I think our integration with the XVWeb product is pretty deep today. I think most of the benefit that, I think, we’ll see from having a combined entity is the financial strength that exists with Level Equity as our financial sponsor to be able to invest in technology and things like AI. But I think, probably, the AI thing is the most interesting and David, you’d probably speak better to that.
Dr. David Gane:
Yeah, yeah. Sure. Definitely, over time, we’ll see a tighter integration of the two technologies and workflow enhancements, expanded reporting functions between Dentacon and XVWeb, certainly as we integrate our development teams together and start having combined meetings. But yeah, the AI is very exciting. We’ve had an R&D project for the past about 14 months just leveraging machine learning and artificial intelligence to provide quality assurance reporting on digital image quality for our DSO customers as well as leveraging AI to really provide a menu of diagnostic decision support tools to aid our customers in diagnosis, treatment planning, as well as treatments of their patients.
Dr. David Gane:
One thing we’re excited about in combining with a dental practice management company … We’re a pure imaging company and now we have a number of new data points that we can incorporate into our AI calls and functions. We hope that some point, be able to use image data, for example, to automatic the charting process; to save time in that workflow. The ability to leverage both information from the patient’s health information, the clinical chart as well as the imaging data is something we weren’t able to do before that we’re real excited about. I think you’ll see a lot of new capabilities going forward as time passes.
Bill Neumann:
That’s certainly exciting. Anytime AI comes up I think it’s … I think every … First off, it’s so broad and AI seems to be involved in just about everything when it comes to even our daily lives. That’s really on the Apteryx side. Is that you, Dr. Gane, that you’re really developing it there? Or is it a combination of the two organizations? Have you been working on that all along?
Dr. David Gane:
Apteryx got it’s started … Like I said, we’ve been working about 14 months and we’ll introduce, obviously, what we’re doing. And we have done that already to Eric and his team. But I think as we start to integrate the companies we’re going to find AI applications also on the practice management side, as well.
Bill Neumann:
Great. Since most of our audience, the majority, are either emerging BSOs with, I’d say, two, three locations all the way up to the largest DSOs, 1,000+ practice count, let’s talk about this acquisition as it relates to group practice. Maybe we can even slice it up a little bit. How does it relate to the large DSOs? How’s it going to benefit them positively? And then, maybe, the emerging groups. What’s in it for them? Eric, we can start with you.
Eric Giesecke:
Yeah. I think it kind of dove-tails into why we were so interested in the acquisition because I think the value proposition of a cloud-based solution and imaging tied very deeply to a practice management system that’s entirely in the cloud is really attractive to groups and emerging DSOs. I think the ability to have a single database of patient records as well as images allows you to scale, allows you to centralize, allows you to do all the things that really allow you to grow and be more efficient. But when we originally thought around why … Getting back a little bit to why the acquisition and why it made sense, the value proposition that we provide as the most preeminent or most available practice management solution for groups and emerging groups is very consistent with what XVWeb, a product that Apteryx has built over the past four, five years, and the cloud provide.
Eric Giesecke:
I think the benefit for both emerging and for groups is, really, to be entirely paperless, to be completely in the cloud, to not have to rely on IT infrastructure, whether it be a self, homegrown system or a bunch of networked, on premise server-based applications. It really allows you to grow quickly.
Bill Neumann:
David, do you have anything you’d like to add to that?
Dr. David Gane:
Yeah. I think, obviously, our combined offering pre-acquisition, some of these features and efficiencies were present. But the main points I think I’d like to make is the combined products of Dentacon and XVWeb … You can’t have your practice management in the cloud and your imaging on prem, so having one source for both imaging and practice management in a single, scalable database, that improves data accessibility. And look how important that was during the pandemic, where practitioners could grab patient information from home or remote location and look at radiographic images. Just being more accessible to all their data, both image and non-image. And of course, that includes both 2D and 3D image files, so CT and optical scan files. It’s a much improved security profile over your data. These cloud repositories are … We’re getting the backup security of big players like Microsoft and it’s a much better security infrastructure than most of these self-hosted or on prem systems would have.
Dr. David Gane:
Let’s remember it gives device interoperability. Our imaging products are device agnostics, so one of the advantages to the DSO is that they became DSOs through Denovo or they made acquisitions so there’s an excellent chance that these DSOs have all types of different hardware … imaging device hardware. And of course, with our solution they can continue to leverage the investment they made in that hardware. They don’t have to refresh it all to a single proprietary-type system. We give them the opportunity to continue to leverage their inventory of imaging devices but also the freedom to choose, going forward, from any manufacturer they want; who’s going to provide them the best support, best service for their particular practice style.
Dr. David Gane:
Yeah. It really provides an end to end solution with a low barred entry and includes all updates and support. It’s a really strong solution for a DSO.
Bill Neumann:
Excellent. It sounds like right now Apteryx is sensor agnostic. I’ll ask Eric because I think Dr. Gane was already leading us down that path. Are things going to remain that way? Is Apteryx going to continue to support all sensors? Is there any thought of just aligning with one company or are you going to continue to do that? Eric?
Eric Giesecke:
We’ll continue to remain sensor agnostic. I think Dr. Gane laid out the value proposition to groups very clearly in terms of the ability to be able to buy the sensor that best fits your needs. We will continue to offer our software through distributors and potentially to other practice managements. We currently have some relationships with existing practice management and we intend on maintaining to the extent that there’s interest there … those relationships. And continue to be completely sensor agnostic.
Bill Neumann:
Excellent, yeah. That’s great news. And I think when you look at … To Dr. Gane’s point, when you’re a DSO and you’re acquiring practices and maybe pulling in sensors that are from different manufactures and also a comfort level for the practitioners at those locations; the ability to continue to use what they’re comfortable with and grown accustomed to and not having to switch that. The cost of conversion, the training. And then, quite frankly, some smaller groups might not even do that because of the cost and you’re actually … And there’s less value in the business because you have organizations using different systems. So, the fact that you don’t have to use those one-system sensors is really a huge benefit.
Eric Giesecke:
Yep.
Bill Neumann:
Great. Eric also mentioned distribution network. Dr. Gane, I’ll let you start with this one. Any changes to the existing Apteryx distribution network?
Dr. David Gane:
No. We don’t really have any plans to make any changes to our current distribution network. Prior to the acquisition, we distributed our Velscope products both domestically and internationally, so that would be the Velscope device as well as Velscope infection control consumables. They’ll be no change in that whatsoever. And we also did actually distribute our software, XrayVision, on a private label basis as well as XVWeb, our cloud product, on an OAM basis to certain distributors. There’s no immediate change in any of that.
Bill Neumann:
Excellent. I don’t know if there’s anything there that you want to add, Eric?
Eric Giesecke:
No, I think that’s right. I think a practice management solution acquiring imaging is always a little maybe disconcerting to the market or to the industry itself, but I think that’s right. We did not buy Apteryx to shut out any potential partners. I think we believe in the software. We think Dentacon plus Apteryx is a unique value proposition for certain folks and we think that having other options out there from the practice management perspective plus Apteryx makes sense for the market, as well.
Bill Neumann:
Great. Let’s talk a little bit about the future of Planet DDS now that you’re one organization. What does that look like? And then, let’s talk about what that looks like with the DSOs and the groups. What are you looking to do? We talked a little bit about the AI that Dr. Gane and his team are developing, but what else? Tell us a little bit of any specifics, any you can mention that might be happening in the next couple of quarters that we should be excited about.
Eric Giesecke:
Yeah, sure. Great question. In addition to some AI, we’re also internally looking at some AI around data sets and machine learning internally, but mostly around predictive stuff. Maybe some clinical diagnostic stuff long-term, but we’re early in some of those conversations. I think one need that we found as we’ve continued to work with in both groups and solo offices … Although we build software primarily for the group and emerging DSO market, we also have a number of clients out there in the single location market that use Dentacon and use it effectively. But I think there is a need that we’ve learned in all of our conversations with our clients, both group and solo, is that the control of workflows within the office is super key. It is difficult to get standardization in terms of how people use the software, particularly when there’s turnover at the office level.
Eric Giesecke:
One of our big initiatives in 2021 is thinking about ways where we can maintain enough flexibility in the software for people to be able to do what they need, particularly with unique use cases, but also give either a doctor/owner or someone in the executive team at a DSO the control to ensure that that new person at the front desk that’s never used Dentacon before is going through and making sure that they check all the boxes in order to check in or check out a patient. Or that all the aspects of what somebody needs to do from a billing, collecting an EOB and posting is done correctly. This is feedback we’ve gotten from both groups and solo from a lot of our product meetings, is that there really is a need in the market for a software to be smarter than the individual. And so, in 2021 that’s going to be a big focus of what we do.
Bill Neumann:
Excellent. Dr. Gane?
Dr. David Gane:
Yeah, for me the most exciting part is really working partly just in a private company. For the last eight or nine years we’ve been working in a public company and a lot of your time and energy is spent on non-product related, non-development related things. And it’s just going to be wonderful to work in a private company again. And really excited to work with Planet DDS. I think one of the reasons the transaction went so quickly is that everybody on our side was real excited about the transaction. To work with a dedicated team, to work together to create a preeminent true cloud comprehensive digital workload solution. And also, I really like working in the growing DSO space. It’s really, in a lot of ways, the future. And it’s a very vibrant and exciting market to work in.
Dr. David Gane:
We’re really excited. I’m excited to shed a lot of these non-product related tasks that I’ve been doing for a while and get back to my roots and get more involved in the AI project on the imaging side.
Bill Neumann:
Excellent. I don’t have this question written down but hopefully you guys can … you’ll both be able to answer this. I’m just kind of curious, and I appreciate that. I think there’s a lot of opportunity and I agree with you, Dr. Gane. And Eric knows this from being in the space. The DSO group practice space is dynamic; it’s changing, it’s growing. I’m just wondering, from both your perspectives, with the advent of this pandemic, with COVID, do you feel that the industry will consolidate more rapidly because of it? When I talked to our reader … When we listen to our readers, we here, get emails … Everybody wants to know how this is going to affect the space; the dental industry as a whole. Do we feel like this is going to continue? Is consolidation going to rapidly continue? And if so, any predictions on what that’s going to look like? I’ll let you start, Dr. Gane.
Dr. David Gane:
I do think it’s going to accelerate consolidation. You see a lot of dentists, I would think, near retirement age and it’s just going to take a little pandemic to not only shut them down but make them think about retirement and transitioning on. The cost of dentistry is going up. Staff are afraid, in many ways. We got a lot of issues. The cost of PPE. You’ve got all kinds of new things that didn’t exist before and I think the cost of dentistry is increasing, so any practices that were marginally profitable or thinking about retirement or things like that, I think, would be good candidates to sell to a DSO. I’m sure there’s DSOs out there actively recruiting. They’re always recruiting, but I think this is a good time for them to add practices to their groups.
Bill Neumann:
Yep. Great. All valid points. Eric, what about you? Are you hearing anything from some of your customers?
Eric Giesecke:
I think it’s wait and see mode. I think David’s points are correct, from people we’ve talked to in terms of … I like the way you said it. It just takes a little pandemic sometimes to get people thinking about what’s next. But I think part of that has to do with access to capital. Lending rates are super cheap right now although I think the lending market is a little bit wait and see, too, in terms of how much they’re willing to provide in terms of leverage. I think leverage goes down, multiples go down, interest to sell probably goes down because expectations may now change. But I think the uncertainty makes it hard to say. I think long-term, all of the demographic stuff … I mean, this could just be a blip. That’s not going to change. A lot of dentists are getting older and needing an exit opportunity. And I think the DSO market is always good for that.
Eric Giesecke:
I think there’s big benefits to consolidation and scale, particularly when it comes to payer pressure and things like that. I don’t think the fundamental things driving the consolidation are changing. I think this is just probably a weird couple of months as everyone figures out what’s next.
Bill Neumann:
Very good points. I’ll just say, in spite of that, you were able to get an acquisition done. Kudos to you. And it can be done. If you can do it, certainly DSOs an acquire as well.
Eric Giesecke:
Thanks.
Bill Neumann:
Well, thanks gentlemen. I appreciate the insight and it sounds like you’ve got things under control there and eventually you’ll be able to get out and see … One will be able to go Canada, one will be able to come down to the United States. You’ll be able to get together and see each other in person. But congratulations on the acquisition, Eric. And Dr. Gane, congratulations to you, as well. Anything else we should know? What’s the branding going to look like? Is Planet DDS and Apteryx … Are they are going to be separate companies? Is one going to be a brand under the other? What’s that going to look like?
Eric Giesecke:
I think we’re early in the evaluation of that. I think Apteryx does have a strong brand in the market. Maybe, arguably, a stronger brand than Dentacon does or Planet DDS because they’ve been around longer and selling to more folks. I think we will figure out the best way to leverage that. I think there’s a lot of pride in the Apteryx brand, too, so we want to maintain that, as well. Just trying to figure out a way to be consistent and concise. But I don’t think there’s any … There’s no plans to rebrand Apteryx anytime soon.
Bill Neumann:
Great. All right. Well, thank you both. Thanks again to Planet DDS and Apteryx for being on The Group Dentistry Now podcast. And actually, if you have any questions about this merger we just did an article, which is published on Group Dentistry Now. A little more in depth Q&A than we’ve done here on the podcast. A little bit different. But if you have any questions, feel free to reach out to us. We’ll have Eric’s contact information, Dr. Gane’s contact information, and you can find out more about the new organization. Again, thanks to you both.
Dr. David Gane:
Thanks, Bill, for having us.
Eric Giesecke:
Thank you, Bill.