The Group Dentistry Now Show: The Voice Of The DSO Industry – Episode 70

Daryl Dudum, DDS and Matthew Haddad, DMD, the Co-CEOs and founding partners of Endo1 Partners – now Specialty1 Partners – join the Group Dentistry Now Show. They discuss the pivot from an endodontic partnership organization to a specialty partnership organization. They introduce the new company name; Specialty1 Partners and the brands under that: Endo1 Partners, OS1 Partners and Perio1 Partners. Daryl and Matthew also discuss their recent capital raise, words of wisdom for emerging dental groups, the growth of their group, the future of their organization and of the dental industry. Endo1 Partners (now Specialty1 Partners) won the Emerging Groups to Watch Award in 2020 – https://www.groupdentistrynow.com/dso-group-blog/emerging-dental-groups-to-watch-in-2020/.  To find out more visit https://endo1partners.com/ or email Daryl Dudum, DDS at [email protected] or Matthew Haddad at [email protected]

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Our podcast series brings you dental support and emerging dental group practice analysis, conversation, trends, news and events. Listen to leaders in the DSO and emerging dental group space talk about their challenges, successes, and the future of group dentistry. The Group Dentistry Now Show: The Voice of the DSO Industry has listeners across North & South America, Australia, Europe, and Asia. If you like our show, tell a friend or a colleague.

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Full Transcript:

Bill Neumann:

Hey, I’d like to welcome everyone to The Group Dentistry Now Show. I am Bill Neumann, and we appreciate everybody listening in today or watching us on YouTube. So whether you’re listening on Spotify or Apple or Google or watching us, we really do appreciate it. Without an audience, we wouldn’t have a show, and of course, without great guests, we wouldn’t have an audience. So we’ve got two guests today. They are co-CEOs of ENDO 1 Partners. So a specialty DSO or partnership organization we’ll let them tell you about that. And they’ve got a couple of big announcements, which I will also let them talk about, but the co CEOs are Daryl Dudum, he is DDS, and we have Matthew Haddad, who is a DMD. And really, they connected when they were an Endodontic Residency at the Boston University Goldman School of Dental Medicine. So I think I have all that right. Did I get that right?

Daryl Dudum, DDS:

You got it, Bill.

Bill Neumann:

All right. Cool. So Daryl, if you want to go into your background a little bit more, I just told everybody you went to Endodontic Residency in Boston, but that’s about it. So feel free to fill in any of the blanks.

Daryl Dudum, DDS:

Yeah. Thanks, Bill. And thanks for having us on the show here. I was born and raised in the San Francisco Bay Area. Grew up there, went down to UCLA where I did my undergraduate training, had a B.A. in Economics, and then went up to San Francisco area, went to University of the Pacific Dental School, and quickly through dental school, realized I wanted to specialize and become an Endodontists. So, went straight over to Boston University, Endodontic Residency. I was out on the East Coast there for two years. That’s where Matt and I met. Our co-residents, became great friends. And, after I finished residency, headed back out to the bay area, I’ve been practicing out here for 11 years ever since. Partnered in a group practice and partnered with my cousin, Darren Richwaen, who’s one of the other co-founders, and Matt I’ll let you take it up from there.

Matthew Haddad, DMD:

Yeah. And Bill again, thanks for having us. Just a brief little background originally from Windsor, Canada, on pretty much a suburb of Detroit. And after my undergrad, I went to Case Western Reserve for dental school in Cleveland, Ohio, and after graduation moved right over to my endodontic residency where, as Daryl said, we met, my brother was also a co-resident of ours overlapping one year there. After we finished our residency in 2010, we went our separate ways. Daryl moved out to the West Coast, partnered with his cousin, and my brother and I moved down to Houston, Texas, in 2010.

Matthew Haddad, DMD:

That’s where we opened our first practice, De Novo practice. And over the next six or seven years, we opened another three so, four total practices. And, over that time, we all stayed really close friends, Daryl and I, our wives, we got married around the same time. We have kids around the same age, really stayed in close contact and also had some investments outside of dentistry and really wanted to work together in the dental space.

Matthew Haddad, DMD:

But, geography was a limiting factor there. And so, we noticed a change in the consolidation of the dental space, more of this affiliation type model. And, we noticed it was happening, but not really in the dental surgical specialties, i.e. Endodontics, Periodontics and Oral surgery, mostly in the general dentistry space, a little bit in Pediatrics and Orthodontics. And so we thought, this is probably something that’s going to eventually make its way into our specialty. And so we were paying attention. We talked to a lot of the larger affiliate groups out there that focus on general dentistry, but also, we’re trying to, get into the specialty space a little bit. And we realize, there was nothing really out there that met the needs that we had. And we know that, whatever needs that we had as dental surgical specialists, a lot of our colleagues probably felt the same way. So we just felt like there was a gap in service. There was an opportunity in the industry and that’s basically the Genesis of how ENDO 1 formed.

Bill Neumann:

Okay. So you were west coast and south west, I guess, right, Texas. And what, were there any issues when you initially partnered up being on one coast and basically being in Texas and California?

Matthew Haddad, DMD:

I would say, not really because when, even though we were only, eight locations at the time, we weren’t that big. We always envisioned the company as a national platform. Eventually it was going to get to a national scale. So it was going to be, maybe there was some, integration challenges or what not, but we figured these were challenges we were going to meet eventually anyways. So we welcomed them with open arms and, kind of tackled some of those issues along the way and figured things out. So I would say in short, no, not really.

Bill Neumann:

Okay. So yeah, I know that’s one of the issues that you hear, we want to be geographically close together and maybe adjoining states, but I guess because of your relationship and the fact that you already had your practice is pretty much established. It was relatively easy. So what year was ENDO1 Partners officially formed.

Daryl Dudum, DDS:

Yeah, we launched in the fall of 2019 officially.

Bill Neumann:

Okay. So just some interesting facts here. I mean, I’ve been trying to get Matthew and Daryl on the podcast for a couple of times now. And so we’re thinking that really the DSO, the group was just formed in 2019 and they had been busy expanding. And was it… How many locations when you first started? What was the total number?

Matthew Haddad, DMD:

Eight locations.

Bill Neumann:

Eight combined. Okay. So eight combined locations in 2019, where do things stand right now as we speak? Because again, it’s a couple of times trying to get this and you were doing deals or trying to get funding or a combination of the two. So finally he got you both back at home base for an hour or so we could have this conversation.

Matthew Haddad, DMD:

Yeah.

Daryl Dudum, DDS:

Yeah. So we were eight locations when we initially launched out in the fall of 19. And, like you said, we’ve been very active, when a lot of transactions and partnerships through the year of 2020, we ended 2020 with 37 locations across the country. And really just kind of continued to ramp up and see a lot more activity along the way. So we stand today with 85 locations, part of the network across 15 states.

Bill Neumann:

Wow. So in ’19 837 and 2020 and 84, is that what you said? 85, 85 right?

Daryl Dudum, DDS:

Now, 85.

Matthew Haddad, DMD:

Looking to be about, I would say, probably hit the hundred and 15 to 120 by the end of this year. Okay. A lot of deals slated to close before the end of the year.

Bill Neumann:

So, maybe before we kind of the big, big news, there’s some, it was big news a couple of weeks back, but let’s talk about the funding that you just received, because I think that’s going to help you accelerate some of that growth. And then we can talk about, the other big thing going on, talk a little bit about that funding you just received and, and, and how you’re going to use it and what kind of impact that’s going to have.

Daryl Dudum, DDS:

Yeah. I think if you look at kind of what we’ve been able to do, I think throughout the entire growth that we’ve had, we’ve been able to grow consistently with, with debt and have had a lot of great debt partners along the way that have supported our growth and really appreciated the quality of the practices and the partnerships that we bring on to the organization. And while we’ve been doing that, we’ve had a debt syndication earlier this year, and we just close on another one, a quarter billion dollar syndication late last month, which is amazing and is really just going to solidify us and allow us to continue to grow for the foreseeable future and really bring on quality partners as we continue to grow the network.

Matthew Haddad, DMD:

Yeah. And I think ENDO1 being able to get a debt syndication of that size is basically, to us, it’s a huge badge of honor because these banks who are letting this type of money, they know what they’re doing. They’re very risk adverse. And they took a strong look at our company and saw the strength of the company and what we were trying to do. And they understood the vision. And they said, Hey, here’s a quarter billion dollars to continue to drive your vision, continue to partner with best in class dental, surgical specialists and invest in technology and infrastructure within the company. And they really see the vision and what we’re trying to do, and it all makes sense to them. So I think it was a huge accomplishment.

Bill Neumann:

Some great points there. So this is not just about investment for acquisitions, right? It’s not just MNA, you talked about investing in technology, the infrastructure side of things, anything that you feel like you really need, or some things that you are investing in currently, it’s going to build as you grow, what are you doing on the support side?

Matthew Haddad, DMD:

Yeah, I think, from the support side, obviously people is important as we continue to scale and grow. Our support team be continues to become more sophisticated. We’re bringing in top level executives from other DSOs who have a significant amount of experience in the space, even though ENDO1s only been around for two plus years, we have people on our team who have been in the industry for 15, 20 years and bring with them a wealth of information. So continuing to add to that support team, continuing to build out our support center, we have have a large support center that we’re already moving into our second one in the Houston area. So continuing to build that out, and then at the practice level as well, continuing to invest in technology, expanding some of our locations, renovating some of our locations that need that need some capital infusion. So again, just across the board, making ourselves not just a bigger, but a better organization altogether.

Daryl Dudum, DDS:

Yeah. And I think additionally also supporting our partners, if they’re wanting to grow within their markets, whether that’s a De Novo location or whether that’s another add-on to their existing platform in their markets. So just continuing to support our partners in multiple ways.

Bill Neumann:

So Daryl though, the way you say that, I mean, it’s, you talk about them as partners. So talk about the model a little bit, because it might be different then what most people think of when they think of a DSO.

Daryl Dudum, DDS:

Yeah. I think when we were putting into one together, one thing that we thought was very important was the fact that it was a partnership model. So if you look at our current company, we’re over 140 specialists, a part of it, and over 70 of them are partners in the company. And I think that that really drives the success and the strength of our organization, because we want partners. We want people invested in the company to have a voice in the company with what we’re doing. And I think it really strengthens it long term when you have so many people involved within the equity and the growth.

Bill Neumann:

So let’s talk a little bit about some of the things that you, you decided to do as you kind of look to the future of the organization. It started out as an endodontic specialty partnership organization, and now you’re, you’re going beyond that. So Daryl or Matthew, I’ll let one of you to kind of take this one cause it’s big news and it strategically it makes a lot of sense.

Matthew Haddad, DMD:

Yeah. So we started with ENDO1 Partners that that was a company that has seen all success. And about four months ago we talked a lot to our partners. Again, we look at this as a partnership organization, we consulted with a lot of them, we got some feedback and we had some ideas for growth that made sense conceptually, but we want to make sure that it made sense for everyone. And that is, extending not only into endodontics, but into the dental surgical specialties and, and defining what those are. And to us, those are periodontics and oral surgery. So currently, now we have OS 1; oral surgery one partners, PERIO 1 periodontics one partners. And up above those three specialty brands, we have SPECIALTY 1 Partners. So SPECIALTY 1 Partners is the parent company.

Matthew Haddad, DMD:

And the great thing about that is all our partners, whether they’re ended on us, oral surgeons are periodontists everybody’s equity. That is a partner with us is held in the special SPECIALTY 1 parent company. So what that means is anytime we add a practice, whether it’s in any of those three specialties that will increase the value of everyone’s equity in the company. So it’s a benefit that it can be seen across the board. And it’s not just, oral surgeons, aren’t just stuck together by themselves. And that company is independent of its own. It’s all one big happy family. And it’s really unique to do it in that fashion. What you’ll see out there in the marketplace is, there’s a lot of general dentistry, DSOs affiliate models, that want specialty practices and they’re out there buying, partnering with them, but, as specialists ourselves and we’re out in the marketplace, talking to all these specialists, they know that their practices are unique.

Matthew Haddad, DMD:

They’re a little bit different and they don’t want to be lost in the shuffle and be tied into this big general dentistry platform that may not know how to take care of their specific needs and the subtle nuances that come from day to day operations of a dental surgical specialty platform. So us being focused on that kind of checks the box of, Hey, we understand your specific needs. And then on the other end of the spectrum, there is these endodontic focus platforms or oral surgery focus. And even though they can check that box and take care of their specific surgical needs, the growth might be a little bit limited because they don’t have the opportunity to grow into those other two specialties. So being a partnership model, you are investing real dollars into who you decide to partner with. So we feel like we can provide this unique opportunity for significant amount of growth and equity value, but also understanding your needs as a dental surgical specialist.

Bill Neumann:

So under the different brands, OS 1 and PERIO 1, we know ENDO1. So do you have strategic partners already established and people that can kind of almost head up that specialty so you can, they’re the experts, they kind of head that up and everybody works together?

Daryl Dudum, DDS:

Yes, we do. So we have a clinical and its board for the endodontics for ENDO1. And we are currently in the process of building out our, our governance board for oral surgery, which is pretty much close to full. And then also in periodontics. And I think the important thing is we’ve seen such a growth in these other specialties already because we have a lot of our partners, who’ve been with us for six months, year, 18 months, who are extremely happy about the way that the partnership has been. And it’s just allowed us to talk to other groups. It’s allowed us to talk to other specialties and really get a positive feedback as to what it’s like to be a part of ENDO1 or OS 1 or PERIO 1. And so we’ve already had oral surgery practices that have joined the SPECIALTY 1 brands and, and have period practices that are joining very soon. So it’s been pretty amazing how fast the other specialties have really kind of been joining since we’ve launched.

Bill Neumann:

Talk a little bit about the ideal practices or group that you’d be looking to, to partner with. So, whether it’s very similar across all specialties or a little bit different, I think the audience would like to know we’ve got a lot of our audience is really made up of what I would call the DSO curious dentist, right? I’ve got one practice and I may want to join, or maybe I want to start my own DSO, all the way up to some of the bigger platforms, but for somebody that, maybe is wondering whether they’d be a fit for your organization. Talk a little bit about what you look for.

Matthew Haddad, DMD:

Yeah. I think from day one, the vision that we’ve had, the four founders was everything is dependent upon partnership, selection. Us being practitioners, ourselves, understanding that we felt like, the dentist, the dental specialists are the most important part of the organization. So that’s why we didn’t want to live in ourselves by geography, staying in a regional area. We want to partner with the best of the best specialty dentist. And then once you partner with the best of the best, it’s a small community, they understand that. And then not only do they see who the partners are, but they also, if they’re happy within the organization, they tend to refer their colleagues and friends and that culture, that mindset tends to snowball. And I think that’s exactly what we’ve accomplished over the last two years.

Bill Neumann:

Yeah. Great point. And you mentioned geography there, so talk a little bit about the geography of those 85 practices.

Daryl Dudum, DDS:

Yeah. I mean, we’re currently in 15 states with those 85 practices. I think our largest markets are the states that we started in California and Texas. And then our first, our third markets, first one out of those two states was Florida, which we have a large market as well. And I think, for us, we’re geographically agnostic. I mean, it’s not really, if you’re in our market or not, it’s not necessarily, what’s important to us. I think Matt kind of hit on it. It’s the partnership selection. If we feel that you’re a great fit for your organization and are a huge value add to the company. I mean, that’s really what we’re looking to do is to partner with quality practitioners who quality practices and really that’s the key. So just whether or not you’re in our market or not is really not the reason why we want to partner.

Bill Neumann:

So let me ask you this. I mentioned the makeup of our groups some very small one location do all the way up to the larger platforms. We also have a lot of those, what I would call the emerging groups three, 10, 15, any words of wisdom for these groups as they, as you start to scale up, maybe any, anything that you expected that didn’t happen or maybe some pitfalls that you were able to avoid?

Daryl Dudum, DDS:

I think just it’s a small community, and you’ve got to treat people right from the beginning. I think we’ve done a great job of that. And I think, just looking at it from a partnership aspect and really working with people that come on board and trying to do what’s right the entire time. I think it will just grow naturally. It’s a small community. I mean, dentistry specialty, even more so is small. And I think bad press, if you will, or bad things kind of move quickly, I think just treating the people you work with right. And in the proper way, I think just goes a long way to building a good organization. And I mean, that’d be my top thing. Matt what do you think.

Matthew Haddad, DMD:

Yeah. I would say to the emerging groups, there’s these benchmarks or areas of inflection points where you really have to invest in infrastructure. And so if you’re looking at profitability of a company, you kind of get to a certain point, whether you’re three, four, five locations. And if you want to take that next step and go to 10 to 50, you’re going to see a dip in profitability. So you’re almost committing to hitting that next tier. So I think as a business owner, you understand when you reach that point, but understanding and knowing that you want to commit to take that next step, or is it, Hey, have I grown my organization to the point where now I’m ready to affiliate, or do I want to take that step back, invest in infrastructure, lose profitability, knowing I’m in it for the long haul over the next three years. So understanding those benchmarks, inflection points, and where they are and what you’re committing to when you decide to take that leap.

Bill Neumann:

Yeah. Great, great point about that. You hear that often where you tend to go backwards in profitability and I think some people at that point maybe want to affiliate, right. Or they don’t want to make that next step because they don’t don’t want to lose that profitability. Yeah.

Daryl Dudum, DDS:

Yeah. And with that, I mean, we see many practices that are, like you said one or two locations that are more profitable than groups that are, five or six locations. So just the pure number of locations, number of doctors isn’t necessarily what drives profitability as well. I think those don’t always go hand in hand.

Bill Neumann:

Absolutely. Yep. Yep. Just because you have a high practice doesn’t mean you’re doing better than somebody that has one location that’s cooking. Well, good. So couple last questions here. You, I kind of always get the crystal ball out and little prediction on what you think is the future, and I first off, what do you think the future holds for your group? And maybe we can look at the next couple of years out to five years, you’ve got some solid funding now, so you can do things the right way. So to speak, you’ve got enough investment money where put done correctly. I think you could grow it the way you want. So talk a little bit about what that may, may look like.

Matthew Haddad, DMD:

Yeah. And I would say I’d like to actually start with, obviously we’ve seen a significant amount of growth over this last couple years. And obviously we’re going to kind of get out with crystal ball and tell you where we think we’re going to be in the next year or two. But really I think a large part of the growth is, is attributed to kind of the unique way this company was formed. If you look across all the dental surgical specialties, traditionally you’ll have an investor who comes in and finds a few founding practices. Inserts their management team, continues to grow, packages it up and then sells it to the next investor. And quite frankly, that’s in the dental surgical specialty space, it’s basically solely how it’s been done.

Matthew Haddad, DMD:

Where with us, we came together as four practicing endodontists, put our practices together, created the company, found a minority investor because there is some value add and they are a necessary. A tool for growth and they provide a ton of value. But at the same time, they allow us to run our company. We are the CEOs of the company. We sign the documents. We control the management team. We have complete control, which does not exist in our space right now. Some people claimed it exists, but it really does not. And so the endodontists kind of being in charge and leading the growth of the company and also just the way the company was formed. So when, whenever that time does come and we do transition to a next investor, the whole company doesn’t completely change hands and management shifts. It’s almost transitioning to a more sophisticated investor where the management team stays around Daryl and I plan to be here 15, 20 years.

Matthew Haddad, DMD:

This is our baby. We’re not going anywhere when the new investor comes in. So I think that unique approach and quite frankly, the unique formation of the company is a large part of the reason we’ve been so successful over the last two years. And then to your question, I see with us having SPECIALTY 1 and having three avenues for growth. And when you look at locations, probably we’re looking to add about 120 to 150 locations per year seems like that’s the pace we’ve been at over the last six or so months. And it’s probably going to continue with the funding you mentioned. And just with the growth, not only in the amount of offices we have, but the amount of support we have and experience we have across the DSO network, that’s going to allow us to continue to build on that.

Bill Neumann:

Sounds like there’s a lot of interest in the model, even before you had the funding, right? So you were busy running around. So now I think you just have the opportunity to do things without having to hesitate as much. I forgot to mention you were the 2020 emerging groups to watch winners. So at that point you were babies. So to speak, as far as a dental partnership organization goes, let’s talk a little bit, maybe Daryl can speak to this. We talked about the future of your organization, but what do you think the future of the industry looks like. We see obviously more consolidation models seem to be vastly different. You’ve got some of the more traditional DSO models, and then you have partnership organizations and seems like there’s a little bit of everything in between. What about the solo? Is there still an opportunity out there? Just your thoughts on the tree as whole?

Daryl Dudum, DDS:

Yeah, I think overall you’ll continue to see strong consolidation over the next five to 10 years. I think there’s so many groups coming up and emerging and there’s ones such as ours that are getting significantly larger, but I think ultimately there’ll always be a place for the solo single practitioner. I don’t think that’ll ever go away. I think think being a part of a group will be much more common and you’ll start to see these, I think more of these partnership groups kind of like what we’ve built, because I think it’s a very attractive model to be an equity holder in the company as it grows.

Daryl Dudum, DDS:

But I think we’ll see a little bit of everything in the future. I think you’ll see groups like ours continue to, to grow. You’ll see some of the traditional DSOs, as you mentioned, continue to grow, but there’ll still be a lot of single practitioners out there. I think they’ll, I don’t think they’ll ever go away and they’ll be very successful as they’ve always been. And they’ll retire and sell to graduates who want to a single practitioner type of group. I think that’ll always be there, but I do think the amount of them will dwindle over time. For sure.

Bill Neumann:

Yeah. Absolutely. So I’ll let you have any final thoughts before I sign off here. I do want to ask both of you, if you wouldn’t mind, give me your email addresses because we have some people that watch the show and so they could see it. We’ll make sure we have it posted in the show notes, but just for the folks listening and Matthew, you mind just shouting at your email address, anybody wants to reach out and find out what it takes to be a partner. Yeah,

Matthew Haddad, DMD:

Sure. M as in Matthew, Haddad, H a D as in David, D as in David, a D as in David @endo1partners.com. That’s the number 1.

Bill Neumann:

Okay. Daryl.

Daryl Dudum, DDS:

Yeah, similar, my first initial D last name Dudum D U D U [email protected]

Bill Neumann:

Excellent. And so eventually, I guess this will be a specialty, there’ll be a specialty1partners.com. website and an email address I’m guessing.

Daryl Dudum, DDS:

You’re correct. It’s

Matthew Haddad, DMD:

In the works. Yes.

Bill Neumann:

Sounds good. Well, we’ll make sure we announce it on Group Dentistry Now. We appreciate you sharing this information. I didn’t want to call it breaking news, but it’s pretty much breaking news, so it’s pretty cool. Thanks. Thanks for letting us be the ones to do that. Any final thoughts before we sign off?

Daryl Dudum, DDS:

Yeah, I just, Hey, thanks for having us on the show bill. It’s great to kind of talk about, our story and where we’ve come over the 24 months and excited to kind of see, not only where SPECIALTY 1 goes, but as you said, the whole industry and, and kind of how things are changing, so appreciate you having us on. Yeah,

Matthew Haddad, DMD:

Absolutely. Yes. And, and thank you for the time Bill. And as you mentioned, being a emerging group to watch and I know we’ve had a bunch of conversations and got to meet at some conferences there. And so I appreciate you taking the time to sit and chat with us and look forward to the next time.

Bill Neumann:

Yeah, absolutely. I’m sure there’ll be big news in the future again. So we appreciate you including us and including our audience. And until the next time I’m Bill Neumann, and this is the Group Dentistry Now Show. We appreciate you watching and listening.

 

 

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