Park Dental Partners, Inc. (PARK) Q1 2026 Earnings Call Transcript

Good morning, welcome to Park Dental Partners' first quarter 2026 earnings conference call. Today's call is being recorded, and at this time, all participants are in a listen-only mode. Following the prepared remarks, management will open the call for questions from its analysts. Certain statements made during the call today constitute forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the company's earnings press release issued yesterday and in the company's filings with the SEC. The forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update the forward-looking statements. Today's call will also include certain non-GAAP measurements. Please see the company's earnings press release for the reconciliation of those non-GAAP financial measures. The press release is available on the company's website. I will now turn the call over to Pete Swenson, Chief Executive Officer and Chair of the Board of Park Dental Partners.

Thank you, Tyler. Good morning, everyone, and thank you for joining Park Dental Partners' first quarter 2026 earnings call. Joining me today is our CFO, CJ Bernander. I'll start off by recognizing our doctors and team members across the organization. Our people are our greatest asset. Every day in every practice, you show up with a shared commitment to deliver the best patient experience to every patient every time. That consistency is the foundation of our reputation, our performance, and our ability to grow. I'm grateful for the professionalism and dedication our teams bring to patients and to one another. Our first quarter results were consistent with our expectations and reflect continued execution against the plan we outlined at the time of our IPO. We delivered a solid start to 2026, with revenue increasing 6.2% year-over-year, supported by healthy same-practice growth and continued patient demand across our markets.

Growth in the quarter was driven by a combination of increased patient visits, expanded clinical hours, and continued growth in our provider base. Importantly, patient retention remains strong at just over 90%, reflecting the consistency of care and the relationships our affiliated doctors continue to build with their patients. We continue to execute on our growth strategy by adding providers within our existing practices, selectively acquiring new practices, and identifying future de novo location opportunities. Today, we have 221 doctors across three states, and we believe we can continue to grow that significantly over time. We believe in building market density over time to unlock operating efficiency, expand integrated specialty care services, and to strengthen our brands. Our approach to M&A is disciplined. Our strategy prioritizes cultural fit and focuses on opportunities that we believe have the potential for long-term value creation.

Looking ahead, we intend to continue acquiring and opening de novo practices in existing markets to grow share while entering two to three new markets over the next few years with a land and expand playbook. During the quarter, we completed one acquisition and continue to see a healthy pipeline of opportunities that are aligned with our discipline around cultural fit and long-term value creation. The timing of acquisitions is difficult to predict, and while we strive to have a regular cadence of closings, we will not sacrifice our long-term goals to hit certain short-term metrics. We are patient-centered in everything we do, which leads to that high patient satisfaction and retention, and ultimately, that's what drives long-term value for our shareholders. As expected, our first quarter results reflect continued investment in clinical capacity, including recruiting, resources, staffing, and supporting our affiliated practices.

Underlying performance was consistent with our expectations, and we believe these investments position us well for continued growth. With strong liquidity and a flexible balance sheet, we remain well positioned to continue executing on our growth strategy while maintaining a disciplined approach to capital allocation. I'll conclude my remarks by reiterating something that I hope resonates with all of our stakeholders. We have a patient-first culture. We think long term, and we are committed to keeping doctors at the center of governance and management. We continue to believe this will translate nicely to shareholder returns long term. Before I turn the call over to CJ, I would like to take a moment to recognize one of our clinical leaders and longtime colleague of ours, Dr. Alan Law. Dr. Law recently received the Edgar D. Coolidge Award from the American Association of Endodontists, the national specialty organization representing endodontics.

This award is the AAE's highest honor. It is named after Dr. Edgar Coolidge, one of the pioneers of endodontics and an important figure in the establishment of the association. The award recognizes individuals whose careers reflect extraordinary vision, leadership, and a dedication to the specialty. For those of us at Park Dental Partners, Dr. Law's recognition is not a surprise. Dr. Law's work in the field of endodontics has benefited patients, doctors, educators, and the broader dental profession. It has also benefited Park Dental Partners. He has long represented the best of what it means to dedicate one's life to the profession of dentistry, clinical excellence, humility, service, and a commitment to advancing care for patients and colleagues. We are fortunate to have Dr. Law as a colleague and a leader, and we congratulate him on receiving one of the highest recognitions in his field. With that, I'll turn it over to CJ for the financial update.

Thanks, Pete. Good morning, everyone. For the first quarter, revenue was $62.7 million, representing growth of 6.2% year-over-year. Same practice revenue growth was 4.1%, driven by increased patient visits, clinical hours, and modest fee and reimbursement growth. Our general practice revenue grew 6.4% to $46.1 million, and our multi-specialty practice revenue grew 5.7% to $16.6 million. Overall, revenue growth in the quarter represents a combination of organic patient demand and continued expansion of our provider base. As expected, our first quarter results reflect continued focus on growing clinical capacity, including recruiting, staffing, and supporting our affiliated practices. On a GAAP basis, cost of services increased year-over-year, primarily reflecting higher share-based compensation following our IPO and increased doctor and team member costs aligned with the increased revenue growth.

Restricted shares with IPO vesting triggers drove the higher share-based compensation expense in Q1 as well as the last quarter, Q4. Of note, the expense is recognized using an accelerated method, not a straight-line basis. Thus, share-based compensation related to pre-IPO shares will continue declining over the remaining quarters as they are fully recognized for GAAP purposes. As a reminder, doctor shareholders make up the majority of the share-based compensation expense, accounting for approximately 91% of share-based compensation in the quarter. General and administrative expenses increased modestly, driven by share-based compensation, public company costs, and acquisition-related activity. In the first quarter, on a GAAP basis, we recorded a net loss of $0.4 million or a $0.09 loss per share, compared with net income of $1.6 million or $0.88 per share in Q1 2025, respectively. On a non-GAAP basis, adjusted EBITDA was $4.7 million or 7.6% of revenue.

Adjusted EPS was $0.44 per share. Year-over-year earnings declined due to the share-based compensation and absorbing public company costs, both of which were expected post-IPO and were partially offset by revenue growth and operating leverage. As we previously disclosed, our shares outstanding increased substantially as a result of the IPO. The year-over-year EPS comparisons are also impacted by that factor. Importantly, our expectations of public reporting costs and share-based compensation are consistent with what we have outlined on our last call. Overall, performance in the quarter was consistent with our expectations and we believe we're well positioned for continued growth. Turning to the balance sheet, we ended the quarter with $24.4 million in cash, $11.5 million in total debt, and an undrawn $15 million revolver. Operating cash flow was $5 million for the quarter. Our balance sheet remains a source of flexibility as we continue to invest in growth.

Based on our first quarter performance, we are maintaining our full year 2026 outlook. Results in the quarter were consistent with our expectations. Our outlook continues to reflect solid patient demand and continued focus on expanding clinical capacity to support more patient visits. While we only provide an outlook on a full year basis, I would like to add some color on quarterly seasonality within 2026. For revenue, we expect Q2 to grow at a lower rate than Q1. Q3 and Q4 are expected to track at or above Q1's growth rate. This is driven by the timing of hiring across doctor and hygiene positions, which typically peak in the summer and align with the typical new graduate timing. We also expect acquisitions closed at year-end 2025, and in the first quarter, will be integrated by the second half of the year. Overall, we're pleased with our start to the year and remain focused on high quality, recurring organic growth, disciplined M&A execution, and long-term value creation.

Before I turn it back to Pete, I'd like to highlight two things. First, we will be filing our 10-Q after market close today. Secondly, Park Dental Partners will be attending the following investor conferences in the quarter. On May 27th, we'll be presenting at the Stifel Jaws & Paws Conference in New York. On May 28th, we'll be attending the Craig-Hallum Annual Institutional Investor Conference in Minneapolis, Minnesota. On June 23rd, we'll be participating virtually in the Northland Growth Conference. With that, I'll turn it back to Pete.

Thanks, CJ. We believe the first quarter reflects a continuation of the consistency we've delivered historically and reinforces the strength of our model. We're early in our journey as a public company, and our priorities remain unchanged. We're committed to our patients, our people, and our performance, all of which we believe will lead to long-term value creation for all stakeholders. We appreciate your time today and your continued interest in Park Dental Partners. Tyler, we're ready to take questions.

Thank you. Our first question comes from Mike Grondahl from Northland. Mike, your line is now open.

Hey, Pete and CJ. Good morning. First question, I'd like to dig into the acquisition pipeline a little bit. How does it look compared to six months ago? Secondly, as we've progressed through 2026, are there any deals that you've lost in 2026, and why potentially? Another question: last summer I think you hired about 10 or 12 recent graduates. Can you remind us what that number was last summer and what the plans look like for this summer for those hires? And lastly, with higher oil prices and a bit of inflation out there, I believe dental appointments and visits might be above that fray relative to consumer spending pressure. Any comment on the market you're in and what you guys are seeing?

Thanks, Mike, and good morning. I feel good about where things stand with regard to the pipeline. If you look at the pipeline today versus a year ago, we have substantially more qualified opportunities that we're investing time into. We're seeing more opportunities of various sizes that are in the pipeline, from solo practices to midsize and some larger groups. Our team is very engaged in the process of evaluating those opportunities, and we're at various stages in the pipeline in pursuing opportunities. In regard to your question about 2026 and whether we have lost any deals, I would say not anything that we felt met all the criteria for us in terms of being a steward of that practice post-close. Things are competitive out there, but I think our model is being received well. It's been a lot of fun meeting people that have built groups and solo practices. There are some terrific people out there. Each of those opportunities is a little bit different, and I'm glad that we have a very experienced team here that can apply their skills and experience to evaluating those opportunities.

Mike, I'll take the new graduate hiring question. I don't know if we've disclosed the exact number, but we have a very strong pipeline process into the universities and the markets that we operate in to hire new graduates into roles. It's one of our capacity growth drivers, and we're excited about that. We continue to operate and act in ways similar to last year. While I can't say we'll see identical levels of doctor growth, we feel good about the team that we have coming in and the new graduates that have signed to join us. We're excited about their additions, and we hope to get a few more. As you know, the number of doctors is critical to a key metric of ours from a growth perspective. We feel like in Q1, we did see that number increase, and we're looking to just continue to expand it in the quarters going forward. There will be a bit of seasonality in that, but we expect to see that number continue to move up and to the right as the quarters roll out.

Mike, we're not seeing any changes in patient behavior at this time. It's something we continue to monitor. There are dynamics in the macro environment, but what we've seen does not indicate material shifts in patient visits or demand.

Thank you.

Thanks, Mike.

Our next question comes from the line of Tollef Kohrman of Craig-Hallum. Tollef, the line is now open.

Hello, thank you for taking the questions. Are there any updates on potential de novo practices you could be opening? With the big leap into Arizona, can you talk about how the integration has been going? Thank you.

CJ, I'll let you take the de novo question first, and I'll answer the Arizona integration question. Our team is very experienced and engaging well with the teams in Arizona. As an example of a milestone we've reached, we're going to be converting both of those practices to our practice management system, so we will have a common practice management system within a couple of weeks. Those teams have been through our training, and things are going smoothly. Integration is a relationship-building endeavor, and one of our values is lifelong learning. Our team carries that at the forefront of their minds as we engage with integration activities. While we're experienced, we're also learning along the way and partnering with those practices.

Tollef, on de novo, similar to M&A, our practice is to announce de novo deals upon their opening. We don't typically provide or disclose future de novo activity. However, when those locations open, we will make that announcement. As we think about the broader market and revenue growth, Pete and I both feel that M&A will be the larger lever from a growth perspective. We're still focused on de novo. We have the capacity to execute that playbook, and we see it as an opportunity to grow and expand our existing markets. We expect de novo to be a smaller overall driver of growth for the next several quarters, with M&A being the larger driver.

Great. Thank you very much.

Thank you.

I am showing no questions at this time. I would now like to turn it back to CJ Bernander for closing remarks.

Thank you for attending our earnings call. We appreciate the time and look forward to our next interaction with you. Have a great day, everyone.

This concludes the program. Thank you for your participation in today's conference. You may now disconnect.