Ryan Mingus 00:02

Good evening, everyone. Thank you all for joining. We see a few folks trickling in here, but we’ll get started here shortly. Okay, looks like we’re ready to kick things off. Thank you again, everyone for spending an hour of your evening with us here tonight, joined by my colleague, Connor Jorgensen, Director here at TUSK, and I’ll be your host this evening, Ryan Mingus, I’m the managing director and a partner here at TUSK Practice Sales, and we’re here tonight to discuss the hard truths about selling your dental practice in 2025. It’s certainly been a bit of an interesting start to 2025 and we’re definitely going to unpack all of that this evening and ultimately what that means for the future, for the rest of the year, and how things were hopefully going to get rounded out. But as I mentioned, I’m joined here by my colleague, Connor Jorgensen. Connor, do you mind introducing yourself here?

Connor Jorgensen 01:01

Yeah, no, great to be here this evening. Connor Jorgensen, I’m a director at TUSK practice sales. My job at TUSK really is more educational focused, where I work with doctors every day to help understand and identify their transition pathways and opportunities and really what’s best for them, their family, their patients, their staff, and what opportunities are there. Spent over a decade in the dental industry really focusing on M&A activity, value creation, and operational excellence, so plenty of dental experience, but excited to be here tonight.

Ryan Mingus 01:35

Thanks, Connor, it’s been awesome having you on the team, having somebody, a second person, in our organization, on the buy-side, especially one with more recent experience, such as yourself. So, you know, all the value that you continue to add to our organization and our clients is much appreciated. As I mentioned before, Ryan Mingus, managing director here, I’ve spent the entirety of my professional career in the healthcare sector, most recently in Dental. However, started in the traditional healthcare space, in capacities largely around business development, strategy, and mergers and acquisitions. I’ve been at TUSK for over five years now and have really seen a lot of changes in the dental world. And I’m excited tonight to speak about where we sit in 2025 relative to other periods, and ultimately, hopefully taking some learnings from the five years, six years that I’ve been here, and trying to bust out the crystal ball and hopefully give a good overview of where things are going to be by the end of 2025. Some quick housekeeping items before we get kicked off—we do have an opportunity for you all to submit questions in the chat bar. If we’re not able to get to those this evening, we will absolutely follow up with you in very short order over email to get those questions addressed. But with that, going to give a quick overview of TUSK for those of you that that aren’t familiar with who we are. So, we are 15 fully dedicated team members here. We’re headquartered in North Carolina, but have folks spread throughout the country. Collectively, we’ve got over 75 years of investment banking and private equity experience. We cover 100% of all dental specialties, and we’ve done over a billion dollars’ worth of dental transactions since TUSK’s inception, and then collectively as a group, we worked on over 200 transactions in our lifetime. So, the 1 billion is TUSK-specific, the 200 transactions is an accumulation of deals that we did at various jobs and organizations we worked at before joining TUSK and with TUSK, this is a really good slide that shows an overview of all of the breadth of experience that we bring as an organization to our clients’ businesses. On the left, you’ve got finance, investment banking, private equity, and mergers and acquisitions. A lot of large logos here in these organizations. And then you know of those on the right, it’s dental, DSO and healthcare specific. So collectively, these things really bring to bear a great deal of experience, both from a clinical perspective and the background and understanding of what your businesses are like on an operational level, within your four walls, and then also all of the finance and background that comes along with these deals, we ultimately bring to bear for our clients each and every time, our differentiation is we are exclusively a sell side advisor, so we do not represent buyers. We never have and that’s a very important distinction, that we have one client and one client only. We’re a fully dedicated tip to tail team that represents the entirety of our client’s transaction both, you know, Connor on the front end, with business development, and then handing it off to our analytics team that is all done in house, additionally developing the marketing materials, the pitch books, etc., and. then our actual M&A deal team. It’s certainly not the case with all groups, but we definitely feel that it provides the best service and best outcomes for our clients. We do, do a quality of earnings in house, premarket. This is certainly a differentiator from a general ledger detail perspective, to ensure that we aren’t caught by surprise during a Q of E process, during a closing process. We feel that this ultimately creates the greatest amount of confidence for buyers to move swiftly and confidently through a marketed process. If you’ve been in the space at all, there’s a term that goes around that time kills all deals. Doing a lot of work on the front end will alleviate a long, drawn-out process. So, we feel that that’s an important distinction, customized go to market strategy, truly white glove. Each and every business is different. Each and every market is different, and we do the same thing for each and every one of our clients. We don’t always do it the exact same way so they all get the same level of service, but we might need to spend more time in one area and less time in another, or customizing our go to market process, because the wishes and goals of each individual client are unique, and we understand that our job is to bring a full diversified list of buyers to the table, and that might include financial buyers. It might include strategic buyers, etc. And then, on average, when folks come to us and meet Connor with an offer in hand, we have a success of 40% on average, increasing over those unsolicited offers. And then presentation post LOI representation throughout the quality of earnings and closing process. You know, not all groups are there till the end. Some groups are really good at getting LOI’s signed and then waiting around for the check to clear. You know, getting an LOI signed is just the beginning. I would say that it’s largely 50% of the way to getting a deal closed. Most deals fail post LOI. So, it’s important to have somebody that’s going to be with you to steward you through it the entire way. So now it’s time to start to get into the meat of the conversation here and focus on the dental market overview. Today’s dental market for the top of the sector, so that’s businesses that are greater than $40 million of EBITDA. These are businesses that are already private equity backed. They might be on their first turn, second turn, third or fourth turn, but really this is an indicator at the lowest level of what’s going on in the markets. And we think it’s important to start here. But essentially, what we’ve had, you know, kind of leading into 2025 there was a large backlog of deal activity at the top of the market. So specifically, 2023 and 2024 I’ll show you some trends in a minute. There was not a lot of transactions happening, and a lot of that was because of interest rates. A lot of that was because of inflationary environment. There were a multitude of reasons, but the most of which being inflationary environment and higher interest rates. What that ultimately created was this backlog of deals. What we started to see that backlog clear out late in 2024 and deals continue to get closed in early 2025 which is really great news for the market. So, the three green icons there are deals that got done, and then the yellow ones are ones that are on standby, or under LOI that we know are imminently going to be closing in, you know, Q2 or perhaps even in Q3 and then you’ve got a bunch of groups out there that are probably waiting for these deals to trade in order to go to market. And then you’ve got another contingent of selling DSOs looking to recapitalize that had a failed process in ‘22, ‘23 or even ‘24 that will ultimately be coming back into market. So, what this ultimately is leading up for is a very active marketplace at the top of the funnel that hopefully will have a very positive impact on the marketplace. Because we all want to see liquidity in the space. The more deals that we see get done, the more folks get that second or third bite of the apple, the better off the entire industry is. So, this is that trend that I’ve mentioned before. Starting in the upper left, you see 2021 is the call out that was a unicorn year for mergers and acquisitions activity in healthcare and beyond, but specifically in healthcare and specifically in dental. In 2022 you saw a little bit of a drawdown, and then in 2023 was really where a lot of deals were getting taken out of market or failing because of these the high interest rate environment, plus the operational headwinds of running these businesses and ultimately seeing EBITDA declining created a situation where buyers were not really eager to get deals done, and sellers that had good businesses were recognizing that they might not be putting their best foot forward, and they were electing not to get a deal done. So that’s what you’re seeing play out in 2024 with that really, really low level of deal activity. But as a general rule, we feel that 2025 is set up to have a whole lot better year than ‘24 it’s already off to a better start in totality of all of ‘24 this is a really interesting slide that we always make sure that we pull out when Connor’s out there fielding conversations with potential sellers, trying to understand, what is the likelihood that I actually see a meaningful return on equity for these large amount of dollars that I’m rolling into to equity within the DSO that I’m partnering with, or perhaps keeping joint venture equity at the practice level, how do I get liquid on that? How do I monetize that? Well, one of the indicators on how you can do that and when you could expect to achieve that, is how far along is the respected DSO or DSOs. And if we’re looking at a multitude of offers on the table, where are each one of them in their journey toward a recapitalization of it. And in dental, you see of all private equity backed sectors within the healthcare industry, dental has the most number of DSOs that have greater than five year holding periods and greater than seven years hold period. It’s the goal of each one of these groups to average five years for a hold. So that means by the time that they acquire a business, either a privately owned business, or if they’re a private equity group that acquires the business from another private equity group, they want to be able to double, triple, quadruple the size of that business in a five year period, and then go find a buyer for it, and that produces liquidity to all the shareholders and investors and doctor partners in the business. The longer a business is in this run, the potentially you might view it as, the less likely you are to see a return on that investment, because it might be a signal to the health of that business. So it’s important to recognize that there are a lot of DSOs out there that haven’t made it to the finish line, and they might not make it to the finish line, but 37 total practices, excuse me, DSO platforms out there that are greater than five years into their journey towards a recapitalization event, which is why we have that illustration on two slides previously, where we’ve got that that backlog of deals that need to get done. So, we’re all hopeful. We’re all pulling for these groups to recapitalize, but the reality is, they might not all make it to the finish line, and it’s our job to make sure that we identify those for our clients.  So, some of the headwinds in the dental industry, if you’ve been a consumer of content from TUSK or otherwise, a lot of this stuff is going to be, you know, a little bit of a repeat. But it is important to note that in the dental world, deal structures have changed from 2019 or 2021, when debt was cheap and buyers were really bullish on the industry. And there were, there were very few businesses that were going backwards because there weren’t as many operational headwinds or inflationary headwinds that they were facing. So, as a result, the deal structures have changed. What does that really mean? Is it means, as a general average, the percentage of cash at close in ‘24 and in ‘25 is less than the percentage on average of cash at close in ‘21 or in 2019 there’s certainly greater scrutiny from the buy side. So fit matters. You can’t just be EBITDA. You have to be EBITDA with a story to tell. And the story that that you tell to one buyer is not the same story you tell to the other buyer. And by no means am I saying we’re lying or being untruthful. We’re just saying it’s important to highlight certain things with certain groups. Because we want to make sure that we’re highlighting the things that are one plus one equals three, not simply, hey, I have this much EBITDA, I’m in in a geography that you guys are interested in. You want to have a meaningful story to tell, the valuation settling. This is a bid ask spread that we refer to a lot. Essentially, it’s sellers and buyers needing to bridge the gap on both deal terms and valuation expectations in order to get deals done. Because, quite frankly, you if you looked at selling your business in ‘21 but you elected not to do it, and you tried to go to market in 2024 expecting the same valuation and deal structure, you were not going to be met with that. And as such, you had to reset your expectations on what you need. Similarly, buyers have to do the same when evaluating practices, these struggling large DSOs, those groups that are five and seven plus years out from a recapitalization event, they could be, not saying all of them are, but some of them are “zombie DSOs” whereby they actually have no ability to continue to grow their business. They don’t have an active business development team, and they are not reinvesting in the business. The private equity group has elected to not reinvest in that business, and they’re really just determining what the best course of action is, to recoup as much of their money as possible and get out but that might mean a couple different things. It might mean selling it back to the doctors that are in the practices today, it might mean breaking up different segments or regions and selling them to other DSOs that view them as attractive assets that they can integrate and operate and grow, you know, or some other factors that could come into place or options rather, that could come into play. And then all of these groups are now focused on growing EBITDA, rather than just acquiring it. So I will acquire EBITDA, but I also now have to have a plan on how I’m going to grow it, because the operational headwinds are such that they’re worried about a business going backwards, and if they don’t feel that they can grow it, they simply can’t look at paying a premium multiple for that business, because their lenders are now scared, and the cost of debt is more and expectations from the next private equity group that’s looking to recapitalize with that group are putting them under greater scrutiny. Some of the tailwinds that we feel is there’s been a lot of indications of lowering interest rates coming in 2025 I know there’s been a little bit of a stalling in that because of the tariff conversations and all of that activity needs to settle out before the FED feels they can make a meaningful move. But the indications are that there will be a handful of rates decreases this year, slowing of inflation. It’s still going up in some segments but going up at a lower rate. Debt markets are improving, more capital starting to flow, and it’s just an overall kind of better operating environment, from a hiring standpoint, and from, again, an inflationary environment standpoint. So, these are good tailwinds going into the year. And then in dental, specifically, we saw two recapitalization events at the end of ‘24 we’ve already seen two in not even the first half, but almost, really the first quarter of 2025 so we’re already beating the year before legacy groups are coming back to market. You know, we get these phone calls when the buy side have continued to add headcount to a segment of their business that they perhaps had parted ways with those individuals because they were not active in M&A. And as folks get hired, we get phone calls saying, “Hey, we’re back in the game. We’re ready to start looking at deals.” Buyers need to ramp up M&A. They can’t simply grow through EBITDA. The kind of organic EBITDA growth that they are not built to do, that you cannot quadruple the size of a business by organic growth, they need to grow through M&A, and we just need some of those stars to align to really activate those markets, and then a maturing industry, more of these DSOs are focused on that organic growth. So that’s where the storytelling and understanding how your business fits with each and every buyer is so important, and why you need somebody like us to help you navigate those conversations and frame up your business in a way that is going to be most attractive to the buy side. And then this is a great tailwind as well. You know, ultimately, they need money to spend. They need access to debt to fund these deals. And that’s what this slide is illustrating, is all of the access to new credit facilities from DSOs. So, on the first bar on the left, you’ve got full year 2023 at about 1,400,000,000. and then in Q1 of ‘24 and so on. Through ‘24 you can see just the regularity at which new credit facilities are being secured. And these are all good signals. These are from, you know, two handfuls of DSOs that have made public announcements, which is where we pulled this data from. So, this is not just one or two groups leading the way. This is, you know, two handfuls of DSOs out there securing these new facilities in order to be active. But it’s $5.8 billion in the last two years. And that’s all good things. And it all hasn’t been getting put to work, as you saw in 2024 with the lower volume of deals getting done. But you know, the big takeaways are, as old, existing DSOs re-enter the market, that’s a great situation. So DSOs establishing new credit facilities in these private equity groups continue to look at DSOs, look to invest in DSOs, and come to TUSK to try to get that initial platform. And if these folks that have very large sums of money to research various industries are continually looking at dental that’s a good signal and positive signal for the amount of runway we have left in this segment. And several DSOs have let us know that they plan not to just go to market, but actually still looking to get more deals done in 2025 and then some are waiting to go to market towards the end of the year, once they feel that they’ve got a little bit more certainty and outlook, but for our clients, you know, we’ve continued to get more bids in ‘24 than we have in ‘23 so, you know, it’s not, it’s not as easy as it once was to get those buyers, but they still continue to be really active buyers. We just have to go broadly to do so. But that’s what we’re here to do for each and every one of our clients. And then I think an important distinction is how many unique buyers we’ve completed deals with in called the last 18 months, and with 13 of those buyers being first time buyers, that means these are generally a newer group that we’ve just never done a transaction with because they’re, you know, less than five years old and just getting started, these businesses are being formed in one of the most difficult operating environments there is. So these groups are really sitting in a situation, like a pole position, if you will, where they can really take advantage of acquiring businesses in the years to come, because they were formed in a much more difficult environment than those groups that were formed. And call it 2019 or in 2021 when money was cheap, these groups are definitely going to be more built to last and sustain a difficult downturn or capitalize in an environment where things are looking up.Deal landmines, I think it’s important to point this out. We hear a lot, you know, what are just some tips and tricks or things that I need to be thinking about today if I’m six months or a year out from going to market, we’ve seen a lot of buyers get spooked by associate and provider issues, and I think more than ever before, you’re seeing buyers want access to key associates in the business prior to closing a deal than ever before. And that is definitely proving to be a very difficult conversation to navigate, and certainly is where we earn our keep in trying to keep the deal on track in order to get it closed. But if you have a key associate or key provider leave your business throughout a marketed process, that’s absolutely the fastest way to sync a deal. So, trying to shore those things up early on is really important to make sure that you can get to the finish line. Messy accounting and legal, you know, it’s important to have timely books if you’re going to market. You need to prepare your accountant to have reconciled financials completed within two weeks of the of a close of a month. You might only get reconciled financials once a year currently. So you need to train your accountant, or get a new accountant that can ultimately accommodate this. This requirement of being in market, as I mentioned at the beginning, time kills all deals, and the quicker you can turn this, the greater confidence that a buyer can continue to have, and the quicker we can move through a process. Similarly with legal, you know, if you don’t have all your documents in order, if you’ve got cross collateralization of real estate and the practice, if you don’t have transferable employment agreements with some of your associate doctors, that could be a hang up. There are a lot of different things, from a legal perspective, you can be doing on the front end to make sure that you get through the process slowly. I just mentioned cross collateralization on real estate. So not just cross collateralization, but also expiring leases if you don’t own the building, making sure that you have a clear pathway or options for the new buyer to have to occupy the space is really important. So, we help to make sure that folks are set up for that. And then working with a bad buyer. And we don’t love working with first time buyers, but the reality is, those are maybe the best groups for our clients in the long run, if we’re talking about, you know, getting the full maximum value for their life’s work over a five year period, working with a zombie DSO is not going to happen just because we think that they have a good chance of getting the deal done doesn’t mean that that’s the best thing for our client. So, ensuring that we do the leg work, and yes, they might be a first time buyer, that doesn’t necessarily make them a bad buyer, but it does create an environment for a tougher closing process, where we have to work extra hard and perhaps even do some coaching of them to get them to the finish line. Starting conversations with a buyer before your business is ready, you know, it might sound and seem very innocent to take a dinner with a buyer that just happens to be in the neighborhood and wants to talk about your business because you know a friend of yours had recently sold to that DSO, OSO, etc. But the reality is, you can’t un-tell some of the things that might come up in casual conversation, and it’s important to control the narrative, which is what we’re here to do. So, there’s far more harm than good that could ever come from starting a conversation with a buyer before you’re ready to have that conversation. But all of these lead to re-traded or failed deals. So, you know, just like at the top of the market, of these groups that are 40 million plus EBITDA businesses, you know, they’ve failed through a marketed process or had a re-trade at the closing table. You know it happens at the at the level that we operate with as well. And the more you can do and address these items here, the less likely it is to have a re-trade or a failed deal. So, the hard truths. More deals occurring in today’s market than in past years, even with disrupted market, but structure matters more than ever. Look, you know, you’re not going to get what you got in 2019 or in 2021 maybe what you got in 2019 but 2021 that was a unicorn year and a very, very unique environment. And if that’s what you’re anchored on, I sincerely encourage you to re-anchor yourself on different deal terms, because I would not be holding out for 2021 to return. Some of these zombie DSOs will not deliver on the equity promises, and that’s going to create a lot of bad press, if you will, in the arena, and that’s not good for sentiment in the marketplace. So, you know, as you hear those things, it’s just kind of the natural occurrence of some of these larger groups that did not build it the right way back in, you know, the mid 2000s when they were formed, and they’re not going to be able to get to the finish line. And there are going to be some, you know, doctors, partners out there that ultimately do not get a return on their equity, or maybe not even able to recruit $1 for dollar of the rolled equity that they have. The holding periods have grown, as we covered earlier, and these recapitalization events are occurring, and the credit facilities are there and providing new capital for buyers, but in the spending spree is what we’re hoping for. But the holding periods have grown, and as such, expectations have need to be managed for that. If, if the average recap cycle was five years, you know, before maybe we need to get more comfortable with a six or a seven year hold period. But, but for now, we’re really just hoping that we can get through some of those five and seven year hold groups recapitalized this year and continue to add tailwinds to the market. But sellers can easily sync their deal through many factors, including provider, risk, legal, accounting. So look, there’s a lot of homework that goes into getting a deal done and a lot of work that takes to get a deal done, and it’s important for you guys to be aware of that, and our job is to help you identify those before you get in market. And ultimately that’s our differentiator in the market, is how willing we are to postpone a deal from going to market and then in order to address some really key and meaningful issues. And then, as I mentioned, the closing process has never been under more scrutiny. Our closing period has extended. Our goal is to get a deal closed in 60 to 90 days from the time that you sign an LOI. But the reality is, is that, on average, has ticked up because of the increased scrutiny that these groups are placing on deals. And that’s just the reality in which we operate in and we’re happy to do the work, but it just means that you need an expert in your corner more than ever. But with that, I’m going to hand it over to Connor, and he’s going to address some of today’s trends within the dental market.

Connor Jorgensen 29:36

All right, thank you, Ryan. Appreciate it. You know, at TUSK, we have been keeping an eye on the ADAs Health Policy Institute Research and really a lot of information that they’ve been releasing, because a lot of our clients are obviously living in this constant change that we’re seeing in the dental space. And so, what we put together was a lot of information, and really just the changing demographic, the practice modalities, just what is occurring in today’s dental market that is really impacting doctors who are considering a transition in the next 5 to 10 years. So, first, I think it’s really important to understand the changing demographic in today’s market. You know, when we’re looking at the two different types of demographics, we’re looking at doctors who are considering exiting the market, and we’re also looking at doctors who are now entering the market. So, when you’re talking about a doctor and a dentist who is exiting, you know, let’s take a grad from 1990 where the average dentist exiting dental school is 62% males and 38% females. So, a heavy swing towards men who are graduating dental school, and they were graduating with about $55,000 worth of debt. Now certainly a meaningful amount of debt, but this debt did not prevent them from going out and starting their own practice, or acquiring a practice, or buying into another practice and becoming a partner, because those are really the priorities of these doctors as they were exiting dental school, you know, they had the entrepreneurial spirit. They valued independence. They wanted to be their own boss. They wanted to be a business owner, because they realized that there was significant risk reward when it came to owning and operating and really putting in the blood, sweat, and tears of their practice, and there’s going to be a significant financial return for them if they did take on that risk. But when you look at the doctors who are now today, entering in the dental space and graduating dental school now, 45% of those doctors are male and 55% are female. So, we’re actually having a swap in the gender gap, where now there’s more females graduating from dental school, but they’re actually graduating with almost $300,000 worth of debt. So, this is a significant amount of debt that they’re carrying that is impacting decisions, and it is impacting how they’re pursuing the next phase in their career, but from a professional priority standpoint, you know, they value a work/life balance. They want to come in, see patients, do dentistry, and go home and be with their family. That is what they’re trying to really focus on. From a professional standpoint, they enjoy being in a collaborative environment, which I’ll show here in a couple minutes, but they want to be in a group setting where they are working with other doctors, or they have mentorship opportunities. But lastly, they also value financial stability. They again, can come in and work three or four days a week, make a really great living, and have that stability instead of the risk of owning and operating. That is what they really value in a professional environment. So the demographics of who is coming out of school and who is exiting the dental industry couldn’t be any more different from what we’re seeing in the numbers. But then when you look at where they’re practicing, there’s been some really interesting numbers that came out from the ADA HPI, where almost 50% of doctors who have been out of dental school for at least 25 years are practicing in a single location, and they’re the single dentist in that practice. So, we oftentimes hear doctors say that, you know, dentistry is kind of a lonely and isolating profession. That’s because almost half the doctors who’ve been out over 25 years are practicing by themselves. So that is a challenging environment, and only 15% of these doctors are actually in a group setting, whether it’s DSO affiliation or a multi-site business. But then on the flip side, when you look at doctors who are less than 10 years out of dental school, it’s almost the opposite. In the statistics, only 16% of these doctors are actually in a single location and sole owner and provider within a location, but almost 40% of these doctors are moving towards group practices, whether it’s multi-site or whether it’s a DSO affiliation. So again, these doctors are actively pursuing group environments to practice in. But what the numbers are also showing is that they’re staying in these environments even after the 10 years where, typically speaking, they would go out and start acquiring a practice or maybe a second location. Rather, they are focusing and staying within these group practices because they have that great work life balance. They’ve made a great living. They’re starting to pay down debt. They’re starting families. There’s a lot of intangibles that they are focused on in the freedom that they have. These next I’d say two statistics are pretty eye opening, where a lot of times, when I’m talking with doctors and reviewing their business, they’re telling me, look, Connor, I’m working harder than I ever have, and I’m making less money than I ever have before. And when we looked at the statistics, and again, from the ADA, you know, doctors are reporting that they are working harder than they ever have, and honestly overworked, where in 2023 37% of dentists reported that they were too busy and overworked. But in that same period, in 2023 they were actually making less money than they did in 2010 you know, when you look at the 13-year gap, dentists have dropped on their adjusted inflation adjusted net income by $40,000 so again, they are working harder than ever before and making less money. And there’s a lot of headaches that are involved in owning and operating these practices, which is a really frustrating position to be in as a business owner. So, at the end of 2024 the ADA had sent out a survey to their respondents and asked, you know, what are the top concerns that you have as a practice owner as you’re looking into 2025 you know, we certainly had seen the great resignation. There started to be some inflationary concerns, obviously, interest rates and the top three concerns were staffing shortages, recruitment and retention, lower insurance reimbursement and denials, to be honest, and then increasing overhead within the practice itself, an interesting to statistic from the staffing shortages, a third of all dental practices are actively pursuing and recruiting hygienists. Currently in 2025 so 33% of doctors are looking at new hygienists and recruiting hygienists. So that is a daunting number to consider, and almost 40% of these doctors are actually looking for new assistance as well. So the staffing shortages are real, and everyone is feeling it today. And then, you know, everyone is feeling the, I’d say, stagnant reimbursement rates, that is a real challenge. And doctors today that are owning and operating are feeling the pinch again. They are having increasing costs from operating the business, but they are having either stagnant or deflated reimbursement rates. And the only answer is it’s coming out of your pocket, which is a really frustrating and challenging environment to be in as an owner. Then lastly, the ADA came out with the dentist economic confidence from 2021 through Q1 of ‘25 and what’s interesting to note here is that in 2025 it was actually the lowest confidence from both individual dental practice owners as well as the dental industry itself, from the start of when the HPI had been calculating and taking this information in, so really kind of a stagnant confidence level from 2022 through 2024 and we saw a little bit of a spike. But Q1 of ‘25 we saw a significant downturn in the confidence, not only in, again, doctors who are in their own practice, but just the dental industry as a whole, in the dental sector, and that certainly can have, I’d say, significant impact on doctors who might be considering exiting a DSO or exiting a group practice to then come in and pursue a private practice sale as well. So when we’re looking at really the hard truths from the ADA Health Policy Institute’s information, I’d say, first and foremost, the demographic of today’s dentist is changing significantly. The new doctors coming out are prioritizing a work life, balance, financial security. They want to work in a group setting with other doctors and mentorship, and it’s driving them into this group practice and DSO affiliation now, majority of practices that you had seen a couple slides ago that will be sold in a private practice setting or pursuing a private practice sale are not going to be very attractive to some of these doctors who are the younger generation, who could be the next up to be acquiring the practices. So that’s where it’s going to be driving some of these owners today that might be looking exit in the next five years or so, to be limited in their transition options, because the newer generation is not interested in acquiring those practices. And again, the numbers are showing that they’re staying and choosing to stay within a group setting as well. Long term margin compression is real. You know, we showed the numbers. We showed the confidence in the economic outcome as well, where doctors are feeling burnt out. They are feeling like the they’re working harder than they ever have, and they’re making less money, which the numbers are showing. And it’s a real concern for doctors, because they’re saying, look, I need help, I need support, and I need to change the way I’m doing things. And then lastly, as I mentioned, you know, the confidence in the private practice sector is the lowest that it’s ever been, certainly for everyone here on this call, and TUSK included, we hope it obviously rebounds here quickly, but it certainly can have an impact in the doctor to doctor trades here moving forward. Okay, so some good news, some bad news, mixed in there, but certainly, you know, happy to fill a little more positivity in the remaining portion of the conversation here. But you know, every doctor needs to understand what his or her transition options are available to them, whether they’re looking to pursue a sale in the next 12 months, or it might be in the next 10 years, that the importance is that you have all of the information available to you, and that we can educate you on what your options are and what’s best suited for you again, your team, your patients, your family, and obviously, to have the greatest financial outcome as well. So really, who are today’s sellers that that TUSK works with? So there’s really four different categories that I like to think that we work with. First is the exiting doctor. You know, this might be a doctor who’s looking to retire or exit their business in the next 12 months, or the next, you know, five years, let’s call it, and ready to retire and move on with their life. Another doctor looking to de-risk, you know, at the end of the day, a lot of doctors we work with say, look, my highest valued asset is tied up in my dental practice, and I need to de-risk my value and my my personal financial opportunity and monetize a portion of my business. So, some doctors are looking to de-risk their assets. Others, as I mentioned, you know, are burnt out. They say, look, I love what I’m doing, hate how I’m doing it, and I want a strategic partner that’s going to help with alleviating the administrative burdens and the headaches of recruiting and HR and marketing and payroll and all the things that most dentists are not passionate about, rather leveraging a professional like a DSO to do that for them. Then lastly, a growth focused doctor. You know, there are still incredibly thriving practices out there that doctors are getting to the next level and saying, look, I need someone to help me put some gas on this fire and continue to grow this business. And they want to elevate it to the next level. And so that’s where a lot of groups, as Ryan had mentioned, are looking for those type of doctors that are actively wanting to stay on board, continue to grow and focus on, you know, what’s next in in the business itself. So it’s important to also understand what the criteria is for each buyer type. So briefly, in a private practice setting, you know, typically speaking, if a doctor is looking to sell into a private practice or someone’s looking to buy into a private practice, usually revenue targets about $2 million or below, in collections, no infrastructure needed, and usually the seller is going to stay on for about three to six months to help transition the patients so that new doctor can get acclimated with the team, with the patients and be able to take on and then that selling doctor can retire to Fiji, or wherever he may want to travel and retire to next. From a DSOs perspective, they’re looking at EBITDA, so they’re not really too concerned on total collections. Rather, they’re looking at EBITDA, which is the free cash flow the business is producing. You know, typically, speaking, anywhere from 300,000 in EBITDA to $5 million in EBITDA. No infrastructure needed. Again, this practice that would be sold is going to be integrated into a larger platform. And then, typically, that doctor that is selling to a DSO needs to stay on board for a minimum of three years. I like to to prepare our clients to say that to maximize value and deal terms, you need to be committed to at least five years. But certainly, have been able to negotiate shorter, shorter employment terms. And then lastly, financial investors. So, this is a private equity group or a family office that is investing into a large platform that has over $3 million in EBITDA, you know, but it has scalable systems in place. It has an executive team in place so you can continue to grow and scale that business. Because they’re investing into the business to grow it, right? They’re not looking to acquire and integrate. Rather, they want to grow the business itself, and really, from a doctor’s perspective, who is maybe the CEO or Executive, or, you know, actively producing within that platform, you need to be committed for, again, a minimum of five years, because it is such a large transaction as well. Now the requirements for each transaction is also important to understand and know the difference among each so from a private practice acquisition, traditionally speaking, a doctor coming in and acquiring a senior doctor’s business, typically is buying 100% of the business. Yes, there can be a buy in or a buyout of certain percentages, but for the most part, it’s about 100% and that doctor is looking to grow the business, you know, anywhere from one to 5% of growth. And that doctor might hold the business for 10 years, or might hold the business for 25 years, depending on, again, the goals of that new doctor that’s owning the business, but from a DSOs perspective, this is where they want to create as much alignment as possible, and the way to do that is through an equity position with that selling doctor. So in your transaction, you’re going to get anywhere from 51 to 70% of that value in cash, but then the remaining 30 to 49% value is going to be in some form of equity, and that equity is going to create alignment between that selling doctor and that DSO, but it’s also going to create a lot of upside for that selling doctor at some point to be able to liquidate that equity. DSO is going to try and grow the business anywhere from 5 to 15% year over year, through economies of scale or top line revenue, different strategies. And then, as Ryan had mentioned, you know, traditionally speaking, we typically have seen a hold period for anywhere from three to five years, but we are seeing that extend a little further. So, you know, depending on when you transition and when that DSO partner is scheduled to recapitalize, you might be holding equity from anywhere from three to six years, if not maybe a little longer. Then lastly, from a financial investor’s perspective, you need to plan on at least 35% equity of your transaction value, they are going to want to grow and scale rapidly, so anywhere from 20 to 30, if not more, percentage points in in same store growth. And then, you know, the whole pattern again, is going to be a little longer, because you’re, you’re essentially the first investment of this new financial investor. So, it might take a little longer, anywhere from 4 to 10 years. So certainly, different requirements and criteria when you’re looking at a private practice or a DSO or a financial investor sale. So, it’s important to also understand what the valuation strategies are and how they differ. So in a private practice setting, typically speaking, you’re looking at anywhere from 70 to 100% of collections. There’s a lot that goes into it, but rule of thumb, typically is about 70 to 100% of collections where specialty is a little higher on that percentage, but in a financial or DSO investor, they’re valuing your business at a multiple of EBITDA. So, what is EBITDA? EBITDA is earnings before interest, taxes, depreciation and amortization. Simple way of putting is it’s the free cash flow the business produces after all expenses are paid and you, as a clinician, are paid as well. So that’s where DSOs are looking to see and understand how much free cash flow the business truly is producing after everything is said and done. So quick case study when we’re looking at the differentiation between a private practice and a DSO investor and buyer. If we’re looking at a $2 million practice again, can go either way from a DSO or to a private practice, and all of the expense categories are essentially benchmarked with industry standards, from supplies, advertising, payroll, doctor, compensation, you name it, total expenses in that business is $1.6 million so adjusted net income, or the EBITDA that the business is producing after the doctor is compensated for his or her collections, is $400,000 so if you were to transact and sell this to another doctor, you can expect evaluation range anywhere from 1.4 to $2 million when everything is said and done. Now, on the flip side, when you look at a DSO investor, you know same exact business, same expense categories, same adjusted EBITDA, but now we’re looking at a valuation of EBITDA and a multiple of EBA, rather than a percentage of collections. That same business is likely going to trade anywhere from 2.4 to $3.2 million in total value for that selling doctor. So, it’s a significant difference between the two. And again, that’s where you need to really choose with which pathway is most interesting to you but also enticing and going to be able to hit your financial needs as well. Now a lot of doctors will come to me and say, “Well, you know, hey, why don’t I just hold the business for another four years and sell the business in year five? I’m going to be able to take advantage of a lot of the personal expenses, or one time expenses that run through the business.” But when I work with these doctors, and we review their business and review their adjusted EBITDA. It’s usually pretty eye opening to understand what the true value is in a DSO sale versus a private practice, where in the same exact business, same exact cash flow, where 400,000 in EBITDA, and you know, you transacted a private practice, five year value to this doctor, is about $4.8 million where, on the high end, with a DSO and very conservative metrics, we’re looking at about $5.9 million so there’s over a $1.1 million gap for the selling doctor over a five year period that he or she can take advantage of if they choose to pursue a DSO sale. Now, again, that’s where fit matters. Culture matters, value. Everything you can think of from a negotiation standpoint truly matters. But this is a very conservative estimate when it comes to what a transaction value looks like. Now, another question I get is, “Well, I hear all these terms, all these deal structures, help me understand what this means.” So, there’s really four primary deal structures in today’s DSL market. When I say DSO I’m talking about DSOs, DPOs, OSOs, SDPOs, whatever acronym you want to use, I’m kind of all grouping them into one bucket. And there’s really four distinct models that we see today. So, first being an earn out, where this is, traditionally speaking, less used now, from a only earn out perspective, but essentially an earn out is where you get majority of the transaction value upfront, and then you might earn out some of that value over two, three or four years of the business. As you maintain revenue within the business, what traditionally has been the most popular is a hold co model, where this is where you’d sell, get anywhere from 60 to you’d sell the entirety of the business and receive 60 to 70% of the value in cash, but then that remaining 30 or 40% value is going to be in the parent company stock. So, think of it as having Amazon or Tesla stock, but it’s now in the parent company that you choose to partner with. Then there’s joint venture. And I’d say the last probably seven years, this has become incredibly popular because it creates the most alignment between the selling doctor and the DSO partner that they choose, because joint ventures where you retain ownership of your business, so you can sell, you know, a majority stake, 51, 55, 60% of your business, and then still retain 49, 45, 40% of your business, so that you’re still getting cash distributions from the growth and profitability of your business. But you’ve been able to de-risk. You’ve been able to monetize and take some chips off the table. So, it’s a really positive and really attractive model for many doctors today, especially if they have a longer runway in their transaction. And then lastly, a hybrid model, where it’s kind of this blend of hold co, joint venture and earn out as well. So, you can kind of get the mix of every equity structure, but also mitigate your personal risk in different equity buckets, so that you’re not putting all your eggs in one basket as well. Another thing to really highlight is what drives value within a DSO transaction. You know, Ryan had mentioned earlier that there’s both quantitative and qualitative aspects about a business that creates value in a transaction. And I’d say first and foremost is EBITDA and EBITDA margin, you know, DSOs are going to be looking at a business to understand and ensure that it is a cash flowing and a healthy business. So how is the overall profitability of the business? Do you have a high margin, or even a margin that that is suitable for a DSO partnership, and that’s attractive for them, right then, growth potential? You know, I always tell our clients and prospective clients that you need to be able to talk about and highlight where the growth strategy is within your business, because these DSOs partners, yes, they’re acquiring the business. Yes, they’re acquiring the EBITDA, but they’re focused on growing both top line and bottom line in your business. And we need to tell a compelling story so that we can highlight those growth strategies and be able to drive the highest multiple and the highest value on your behalf based on future growth within the business. And so what growth strategies are available to you, whether it’s procedural mix, whether it’s provider mix, whether it’s additional clinical days, you name it, we want to be able to show where the growth is. And then, as I mentioned on the last slide, you know, equity alignment is incredibly important. Are you willing to roll a significant amount of value into this partnership, whether it’s joint venture, whether it’s hold CO, whether it’s a hybrid, because that shows that you’re putting some skin in the game just as much as they are, and you’re committed to the best outcome of the business as well. And then provider risk, you know, Ryan mentioned this that sometimes, if there’s a super producer or associates, might be able to, you know, kind of sink a deal sometimes. Are you personally a super producer? Are you the only producer in the business? These are concerns that DSOs look at when they’re considering your business or writing an offer to you. Is there a way to de-risk your position, specifically, maybe spread some collections and production to an associate, or bring on an associate in the business, so you’re not the only producer that is an important piece within the business itself. And then, you know employment terms, the longer you’re willing to continue to stay in the business, continue to practice, the better outcome it’s going to be for you, for that DSO partner, and obviously, best alignment possible. But that’s, again, where the culture really matters. You need to make sure that who you’re partnering with is aligned with you, both from a clinical perspective and a financial perspective, and they’re going to be supporting you and your team long term. And it’s not an organization that you’re not excited about, or it’s not an organization that you say, hey, I can do this for a couple years, but then I want out, you know, you want to be excited, just as they want to be excited about partnering with you. And are you going to be a great cultural fit in addition to their organization, just as much as how they are going to be helping you grow and be more profitable, be more efficient, and again, be able to support the future generation of dentists that might be coming through your doors as well. So, what are some of the hard truths from the transaction side of things? You know, as I mentioned, in majority of cases, a DSO transaction is going to be a far greater financial outcome for many doctors. Again, a lot of this depends on EBITDA and profitability, but when, from a structure standpoint, it’s going to be a far greater outcome for doctors who are looking to transition and sell, unfortunately, not all dental practices are going to be attractive to DSOs. And so that’s again, where, when we talk about being able to highlight a lot of the upside and potential in the business, and positioning your business in the best light possible, you need to be able to do that. And obviously that is what we do to drive as much interest and excitement among the DSO buyers. But doctors that may not have some of those quantitative or qualitative attributes aren’t going to have a smooth pathway to exit their business, which is a challenging conversation to have. Your transaction again is going to be tied both to the quantitative and qualitative. You need to have a good balance of both within your business, so that these DSO partners are excited about the partnership. Again, I do this every day, all day, where I can talk through your business, your attributes, what a DSO buyer might look for. Again, I used to be on the buy side. I understand what they’re looking for, and so I can certainly help you through that process and that conversation, and then be prepared for a minimum of a five year employment agreement. You know, again, we get a lot of doctors that say, “Hey, I want to be out by 2028” and unfortunately, we have to tell them, you know, that’s going to be a challenging transaction. Can we do it? Probably, but it’s going to be impacted on value or limited buyers, because these buyers want to have alignment. They want to have long term doctors that are partners within the organization itself. Then as I said, you know, culture matters. You need to explore all potential DSOs and DPOs and SDPOs, you name it, that are going to be supporting you and your business and your team and your patients. And so, if you’ve only seen one DSO, you’ve only seen one DSO, you need to explore the entirety of the market so you can understand not only the financial outcome, but also the support mechanisms and how they’re going to be able to really help you exit over time, but also grow your business as well. So, with that, thank you again, for everyone for time and attention, and we are more than happy to support with a practice valuation. Run through your numbers, run through your business, and provide some guidance and insight into what your transition options are available to you.

Ryan Mingus 57:10

All right. Well, thank you, Connor, appreciate taking us home there and again. Sorry we couldn’t get to the questions, but we will absolutely follow up with each and every one of you over email in the next 24 hours to make sure you get any questions you have answered. Have a great evening!