CEO Series: Phil McKenzie – Forget tech… teeth are the new growth story | Pacific Smiles (ASX: PSQ)

HOSTS Alec Renehan & Bryce Leske|10 June, 2021

Meet your hosts

  • Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

Phil is the CEO and Managing Director of Pacific Smiles Group (ASX: PSQ), an Australian dental group operating over 100 dental centres under the Pacific Smile Dental Care and the NIB Dental Care brands, located throughout NSW, Victoria, Queensland and the ACT. Prior to joining Pacific Smiles in 2018, Phil was the driver of Apple’s retail entry into Australia as Apple’s Australian Market Director and after that was CEO of Widex and Audiology Management Group. In this conversation Phil explains how to conceptualise the industry, identifies the main players in the scene, talks at length about this leadership philosophy that was reinforced and tested during the pressures of the pandemic, and talks to the future of Pacific Smiles Group.

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Alec Renehan: [00:00:00] So, Bryce, we often say on the show that we're crypto curious here. Yes, we're interested to watch this asset class develop. There's plenty going on in that space. Plenty of noise in that space alien was buying. Ellen was tweeting, he stopped buying. He's still tweeting. But look, it's it's a very interesting asset class to watch develop. And we own some crypto. We do acclimates owns a bit of bitcoin. Yes. And we when we are buying, we like to use swift eggs. [00:00:37][36.3]

Bryce Leske: [00:00:37] That is right. Swift is Australia's fastest growing crypto trading platform. The choice here at equity markets with over two hundred and twenty different crypto assets. We have certainly not worked our way through all of them. Bitcoin is the choice for us. But if you are a crypto curious and want to have a look at many of the others that are available, then Swift might be the platform for you that tiny spreads low fees and plenty of options to deposit cash into your account. So if you are looking to a deputizing, the good news is Swift are offering fifteen dollars of bitcoin to everyone who signs up. So that is 15 dollars. If you head to Swiftx.com.au/equitymates for 15 dollars worth of Bitcoin swiftx.com/equitymates . [00:01:21][44.3]

Alec Renehan: [00:01:22] That's right. Now, crypto may not be for everyone. It may not be for you. But if you're curious like Price and I go check out Swift X and say if it's the right platform for you. With their lives, I will say this about [00:01:39][16.5]

Bryce Leske: [00:01:48] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going? [00:02:03][15.6]

Alec Renehan: [00:02:04] I'm very good, Brize. Very excited for this episode. We're continuing our CEO series. We're speaking to some of the best CEOs in Australia and around the world. And this one I'm particularly excited for because I've been a shareholder for a while. [00:02:16][12.7]

Bryce Leske: [00:02:17] You have been I remember chatting about this company back when we were at university on the balcony and looking forward to packing, unpacking this one. We're joined in the studio by Phil Mackenzie, a welcome. [00:02:28][11.2]

Phil McKenzie: [00:02:29] Thank you. It's a privilege to be here. Thanks very much. [00:02:30][1.6]

Bryce Leske: [00:02:31] So Phil is the CEO and managing director of Pacific Smile's Group. The ASX ticker is P. S Q They are an Australian dental group operating over 100 dental centers under the Pacific Smile, Dental Care and NIB dental care brands located throughout New South Wales, Victoria, Queensland and the Act prior to joining Pacific Smilers in 2018. Phil was the driver of Apple's retail entry into Australia as Apple's Australian market director. And we just found out offline that you were the first retail employee for Apple here in Australia. So did pretty well in that job interview, I assume. And after that, you were the CEO of Windex and Audiology Management Group. So pretty extensive résumé, a lot of experience. And we're going to unpack your journey as CEO at Pacifics Miles. [00:03:23][52.5]

Phil McKenzie: [00:03:24] Excellent. I look forward to it. [00:03:25][0.9]

Alec Renehan: [00:03:25] I'm glad Bryce got Pacific smiles out. It sounded like a bit of a tongue twister there for a second. So, Phil, we always like to start these CEO interviews by hearing the company leader describe their company in their own words. So to kick us off today, can you tell us how you say Pacifics, Miles? [00:03:43][18.4]

Phil McKenzie: [00:03:44] Yeah, absolutely. Pacific Smiles Group is a dentist service organization, distinctly different from being a dental service organization. We've set about identifying that the dentist is our primary customer, the person that we're seeking to service, the professional that we're seeking to enable. And so essentially we've established over one hundred eight dental centers on the Eastern Seaboard and a few under managed service relationship with HPF in the West. And we exist to provide our services and facilities to the dentists that choose to put their practice with us. Mm. [00:04:18][34.1]

Bryce Leske: [00:04:19] I frequent the NIB dental care here in Sydney twice a year. Thank you to and I be a zero cost with the health fund. But Peski was founded in 2002, going public in 2014. For those that haven't heard of the company before, are you able to tell us a little bit about the journey to date? [00:04:39][19.7]

Phil McKenzie: [00:04:39] Yeah, absolutely. So the founding story was essentially a collection of dentists who thought there has to be a better way to take care of the administration and so-called ancillary components outside of their professional practice. So they clubbed together and over the fullness of time, created the Pacific Smiles group. Quite a journey to get there, but essentially it could be best described as a dentist, could turn up on their motorcycle outside of Pacific smiles and a tee shirt and a pair of jeans. We will provide them with scrubs, gloves, a mask, a patient, a dental surgery, dental assistant, consumables, a billing system, a patient management system. And essentially they take care of everything inside the mouth and we take care of the rest. [00:05:24][44.8]

Bryce Leske: [00:05:25] Interesting. As he says with a big, bright smile, you [00:05:29][3.7]

Alec Renehan: [00:05:29] have to have good things to say you do. So it's an interesting model. And is it a model that many other people are doing or is this something that's quite unique for Pacifics? Miles. [00:05:39][10.2]

Phil McKenzie: [00:05:40] I think there's a number of very well-placed designers or dental service organizations that we can look to in the US. And there's certainly a couple here in Australia. Our unique aspects for Pacific smiles is that we do it predominately greenfield rollout. So we've rolled out the centers versus acquiring them. We have a differentiator in terms of with the largest commonly branded so Pacific Smile's dental branded group and we typically go inside shopping centers. So we're not on the strip location next to the tax agent behind, you know, the laundromat next to the Chinese takeaway. We're inside a shopping center with proximity to Coles and Woolies, and that's what we see is a real differentiator for us. [00:06:18][38.2]

Alec Renehan: [00:06:18] Yeah, yeah. I remember when I was working for Coles in Melbourne, the flagship store next to the head office of Pacific Smile's opened up there. That's great. I'm a shareholder there. I'm a shareholder of the Coles. I'm slowly taking over this shopping center. So you took over as CEO in twenty eighteen. The business had been public for four years, running for 16 years. What what was sort of the business you inherited and what some of the key folks. Kisses for you, you know, as you took on the CEO role. [00:06:47][28.7]

Phil McKenzie: [00:06:47] Yeah, it's a really real privilege to hold the role of chief executive for Pacific Smiles. And the base of the business was absolutely superb. So my criteria for joining was something that I absolutely believed in. So health care and doing something that makes a difference. Absolutely. And then the potential of the business. So I had the opportunity to come across from the US where I was living at the time, and assess the business, travel to the dental centers and look at the baseline of a rollout model and fell in love. Absolutely believed in it. So the team, you know, that was assembled had done an excellent job to grow it from a founder led business through into a listed entity. And my job was essentially to come in. And there I sat and maybe Colin Chapman said it best, but to simplify and add lightness. So whatever we could do to make sure that we were very clear about our value propositions to customers being the dentist staff, being the team members of Pacific Smiles and the patients, those consumers that choose to put their care with us. And so that's what we've set about doing. [00:07:46][58.3]

Alec Renehan: [00:07:46] And I said, well if you look at Brice's teeth, you're obviously doing it. [00:07:49][3.0]

Bryce Leske: [00:07:49] Well, I'm not sure about that. So for the audience of retail investors that we have who might not know much about the dental industry, how should we, I guess, conceptualize the industry? Who are the main players here in Australia? You know, if you're wanting to you think there's a good macro trend here of people wanting more dental services. How should we think about that landscape? [00:08:13][24.1]

Phil McKenzie: [00:08:15] Yeah, well, for every potential patient that does and doesn't have teeth, would you believe they're a potential patient for Pacific smiles? In Australia? There are about 17 and a half thousand practicing dental professionals. And so we're seeking to serve as many of those as we can today. Pacific Miles probably has two, two and a half per cent market share of a 10 billion dollar industry. So the scope, the trajectory, the ramp is tremendous. So we set about putting centers in the locations where dentists want to be and patients are ultimately the corporate side. If you want to use that as the vernacular for, you know, the aggregated practices probably wouldn't add up to more than 10 per cent of the market. So it's still very cottage mom and pop style. The professional graduates, maybe he and a partner, he and his wife, she and her partner, she and her husband get in and and actually establish their own practice. [00:09:08][53.3]

Alec Renehan: [00:09:09] Yeah, well, that's interesting. So it is very much like a local dentist industry. [00:09:13][4.5]

Phil McKenzie: [00:09:14] Yeah. I think like many, you know, allied health, ancillary health care elements, it is from graduation to own business and on a trajectory. And then if you're lucky, you're required by some type of aggregating Roll-Up entity. And we've gone about it a bit differently. We believe that putting the footprint on the ground and then inviting the dentist to practice from a standardized professional facility is the right way to go. [00:09:37][23.1]

Bryce Leske: [00:09:38] And then how does the relationship work between the dentist and you guys? Like, they've obviously, if they're doing it all themselves, they retain all earnings and can do what they want with it. But you guys come in and say, we'll do everything. You just need to look after the mouth. How does that relationship work? [00:09:53][14.4]

Phil McKenzie: [00:09:53] Yeah, great question. The dentists contracts our services, would you believe so they come to us often. We'll source and advise them of who we are, but they come to us and say, listen, I'd like to practice from one of your rooms, service the patients that you generate. And for that privilege, we do in gross terms, a 60 40 split. So they pay us 60 per cent of what they generate. They keep 40 native lab fees. So in essential terms, while they may make perhaps 10 per cent more if they were to set themselves up, they probably get a hundred per cent more headache because of the complexity of running it. So we take that hassle away. [00:10:28][35.3]

Alec Renehan: [00:10:29] Yeah. And then I assume you guys well, obviously the Pacific Smiles brand is well known. NIB obviously is pushing customers, but then you are also trying to get patients in the door as well. [00:10:38][9.1]

Phil McKenzie: [00:10:39] Absolutely. So we've got both a sophisticated set of digital marketing tools that we used that were probably common across many businesses that you all see in terms of emails and text messages and social media. But would you believe that the analog effort of being inside a shopping center, having a pop up both with a tooth fairy or a giant toothbrush, giving away toothbrushes, and inviting people to come in and have a clean and check is actually one of the most effective ways of building a patient base. [00:11:04][25.1]

Alec Renehan: [00:11:04] Yeah, so the industry, you know, some corporate, a dentist, a lot of mom and pop operations, obviously everyone needs dental care. There are probably too big other players in the industry. One is the government. You know, there's a lot of money being pushed into that. I think the Victorian has like a dentist bus where everyone they drive around and gives all public school students dental care. But then the other big one is the health insurers. And, you know, we've mentioned an eBay where you operate the clinics for HBF over in WA. You've got a relationship with four people who are new to the industry. Can you tell us the role health insurers play? Sort of how you think about it as the leader of Pacific smiles, [00:11:46][41.7]

Phil McKenzie: [00:11:46] you know for sure. I think the relationship with the dentist is as fundamental as a service provider, but the quality relationship with the primary payer and the marketplace, which is the health fund, is fundamental. So we obviously in the early days said about a great relationship within eBay and we now operate 11 Knibb branded dental centers. We purchased three a.m. dental centers of Medibank, and we operate those with a degree of exclusivity to their membership base and services provided therein. And then we were invited by HPF to get involved to open HPF dental branded centers. I see it is absolutely fundamental that the primary payer needs to be considered as vital in the relationship. So we facilitate a relationship, specific smiles with the dentists and the health fund for preferred provider agreements. And ultimately, I would suggest that most health funds have made the decision that they're better insurers than they are service providers. And so looking to so-called professional service providers like us is a natural extension. [00:12:47][61.0]

Alec Renehan: [00:12:49] It's a funny balance that you're striking because, on one hand, you're right. You know, they're the primary payers. And the health insurers want to push people to their branded clinics. You know, they want price to know that everybody cares about his state and they're pushing him to his clinic. Their clinics are free. But at the same time, you're trying to build the Pacific Smile's brand. You want dentists and customers to know about Pacific smiles. How do you balance that? I guess their own branded clinics and then the white labeled clinics for want of a better word. [00:13:17][28.2]

Phil McKenzie: [00:13:18] If you go all the way back to our true purpose, which is to improve the oral health of all Australians to the world's best, essentially I need our centers and our partner centers to be where the patients are. So the idea of a branded center or a Pacific Smile's branded center, we're relatively agnostic on it. We think that the Pacific Smile's Branders is healthy and has a lot to go. But still, taking in ancillary health care is more of a convenience exercise. So the patient will go to a shopping center, not necessarily a Pacific Smile's, top of mind, but then with our presence and our relevance and location become a natural choice. So rather than investing a lot in building a brand, we're building an identity and a proximity and a consistency. And so if that's for a health fund or for Pacific smiles, we're super relaxed about that. [00:14:09][51.1]

Bryce Leske: [00:14:10] I mean, I didn't know that. And I bet I was going to run by you guys pretty good today. So you feel you've been going from building a network of consumer electronics stores being Apple to now building out a network of dental clinics? Yeah. What did you learn from your time at Apple and from that, you know, being the inaugural employee that applies to rolling out all these dental clinics across Australia? [00:14:38][27.6]

Phil McKenzie: [00:14:39] I think the very first thing that you learn is that it takes more than just one. And although I might have had the privilege of being the leader in some environments, it is invariably the people that surround you that make the difference. So the biggest learning was that, you know, it's often said that culture eats strategy for breakfast. And fundamentally, if you can galvanize the human beings that operate with you or visit you or choose to put their services with you towards a common purpose, then you've got a good start. And so my underlying learning would be not so much that it's all about the people, but if you can galvanize people and to understand what their contribution looks like and to know when they've done a good job, then there's almost nothing you can't achieve. [00:15:23][44.3]

Alec Renehan: [00:15:24] We want to unpack the people and culture aspect a little bit more. But before we eat, before we get there, you know, Pacifics, Miles, is in this growth phase and you're the numbers bear that out. You know, the top line revenue has almost doubled in the past five years, and you're reinvesting a lot of that money into growth. So it's not trickling. It's not coming down to the bottom line. How do you think about that trade off between, you know, growing the profit number and then, you know, reinvesting to really grow the business? [00:15:56][32.1]

Phil McKenzie: [00:15:57] Pacific's Mars trajectory is significant. So a two and a half per cent market share and a ten billion dollar industry working with 650 services facilities agreement dentists today and a seventeen and a half thousand dentist base says that the only way is up. So we've taken the opportunity really since listing to sensibly drive the growth of the business now very clear on our shopping center strategy. And so while we could stop the rollout and expand margins and flow through to the bottom line, we believe that this is a a long tail and a great story. So we do provide good returns. We do have sensible and healthy EBIT flowing through. But right now, in a very fragmented market, we feel that. Putting new centers on the ground is the right thing to do. [00:16:45][48.5]

Alec Renehan: [00:16:46] What do you think of growth companies these days? You think of tech. You wouldn't think of dentists. Is it hard to convince, you know, the market and retail investors like us that you should think about a dentist clinic as a growth story? [00:16:59][13.2]

Phil McKenzie: [00:17:00] I think it's the numbers that add up when you hear things like 10 billion and 17 and a half thousand and 650 and only having 110 centers. And then you take into account the nature of the relationships and perhaps some broader understanding of where health services will go in Australia. And with the health funds, it becomes somewhat of a compelling story. And we're very clear that we have to keep it simple the moment we try and be excessively entrepreneurial or cleverer than we really should be, we make mistakes. So being very clear is vital. [00:17:33][33.6]

Bryce Leske: [00:17:34] So as an investor, it sounds two and a half percent market share and then the rest is just higgledy piggledy. Mums and dads. [00:17:41][6.4]

Alec Renehan: [00:17:42] They're your work [00:17:43][0.5]

Bryce Leske: [00:17:45] and a lot of other health centers. So really, it just feels like for you guys, it's just a sales game and a conversion game of going to dentists and convincing them that your offer is the one to go for as an investor. I'd like to know how quickly you think you can achieve that and what are you doing to actually convince dentists to come on board? And where does that to two and a half per cent turn to five, 10 to 10? [00:18:10][25.5]

Phil McKenzie: [00:18:11] Sure. There are some other sophisticated players out there. Some of the products are exceptional. You know, a number of colleagues in the industry are you know, they're really working hard to make this this happen. So for us, the simple examples, we have had a great couple of years with rolling centers out, successfully moving to profitability and a good timeline. So inside of 12 months, which has given us support from the market and from the board to accelerate that rollout of new centers to somewhere between 20 to 25 so per annum. So that's at the average cost of a new dental center being around about 850000 dollars. That's considerable support to to roll out demonstratively in the market. We've got great relationships with landlords. We take a lease typically over 10 years. We depreciate over seven and we get a cost of capital payback and five. So we're looking at this is as part of our longer term play to want to really take an opportunity right now. When does two and a half per cent become five in terms of market share? Look, I'd like to suggest within the next five years, you know, we put 25 centers on the ground this coming year, hit if y 20 to maybe we get it all right. And then we get the opportunity to do it again. And then we're at 150 dental centers to say no better steps and the very much the right direction to meet our growth ambitions. It's exciting. [00:19:33][82.5]

Bryce Leske: [00:19:34] Yeah, absolutely. [00:19:34][0.8]

Alec Renehan: [00:19:36] Yeah, it is exciting, Phil, We want to turn to people and culture, but before we do, we're going to take a quick break to hear from our sponsors. Bryce, you're a man that moves to the beat of his own drum, actually literally moved to the beat of his own drum when you studied drumming back at uni. [00:19:52][16.4]

Bryce Leske: [00:19:53] Yes, he's true. Got booted out. Yes. [00:19:55][2.1]

Alec Renehan: [00:19:56] And after you study drumming, you had a short lived but highly successful career as a Canberra nightclub deejay. So you're all about moving to your old mate. And that's great, because our sponsor to kick off today's episode is all about banking to your own beat. And that is Virgin Money. [00:20:14][18.5]

Bryce Leske: [00:20:15] That's right. Ren banking with Virgin money has never been more rewarding. You can earn rewards on your everyday spending and pay zero monthly fees with the Virgin Money Go transaction account [00:20:25][10.6]

Alec Renehan: [00:20:26] and with points, perks, and epic experiences tailored to you. You can manage your money easily on the go, smash your savings goals, get money fit and be rewarded for it. So, Bryce, are you ready to bank to your own beat? [00:20:40][14.0]

Bryce Leske: [00:20:41] OK, I'm ready to bank to my own beat Ren bank to your own beat. Virgin Money terms [00:20:46][5.3]

Alec Renehan: [00:20:46] and conditions and monthly criteria apply. Now let's get into the show. So, Phil, you mentioned before the importance of the team and you said culture eats strategy all the time, which is a saying that I like might steal that from you. I think it's a strategy for breakfast is always the baby. [00:21:06][19.3]

Phil McKenzie: [00:21:06] Peter Drucker did that. I'm not 100 percent sure. [00:21:07][1.6]

Alec Renehan: [00:21:08] No, no, no. And let's start at the top with you. Do you have a leadership philosophy as CEO? [00:21:16][8.0]

Phil McKenzie: [00:21:17] Yeah, and it's learned, right? I don't think anything comes always from within. I think invariably it's learned or experienced. So I would say that the role of the leader is to lead, develop, inspire and enable those four fundamental pieces that are important within Pacific smiles. We actually used it used a book called Legacy, which was written by I think I called James Ker about being embedded with the All Blacks and some of the fundamental learnings. And he's got five principles, which, you know, you can have a look for yourselves. But essentially some of those fundamentals around how we operate as leaders and people within the business became a real methodology for me from the beginning. Then over time, the team actually developed their own identity. So we have three key cornerstones. So it's we must play to win. And that's that's because we're unified and we're adapting to whatever the circumstances. And so we minted, would you believe, a series of medals around those three play to win UniFi and Adat and various people pass them out in the business when they catch someone doing something right, something amazing. So they become a transferable token, if you will, that just highlighted on catching people doing the right thing. We've added to that. So leaders have added to it with another little token. And this is all-around execution, because in order for us to grow at the rate that we want to, in the way that we want to, we have to execute with excellence. So there's just that subtlety of how we behave and how we do what we said we do. That's fundamental to our success. [00:22:51][93.7]

Alec Renehan: [00:22:51] You can't say transferable token on a podcast without me thinking NFTE. Maybe you should put them on the block you and then you can pass the baton out of my. [00:23:02][10.4]

Bryce Leske: [00:23:05] I mean, outside of those metals, how do you think about actually building like a high performing team or company culture? You know, I guess back at your time at Apple, you would have had to have built a team up. Yeah. How did you go through that process? [00:23:21][16.0]

Phil McKenzie: [00:23:22] It's visible leadership, so it's being present. I spend a hell of a lot of time on the road. So during the middle of covid last year, me and a number of executives and we hit the road. We couldn't fly anywhere, so we jumped in cars. And I know at one stage I did four and a half, five thousand KS driving from Newcastle to Victoria and around all the centers just to say hello. So I couldn't spend a lot of time. And there I go in and you'd wave and you'd say, thank you for all that you're doing, because I hadn't seen people for weeks and so various executives did the same thing. You know, we traveled to Queensland, we traveled to the act just to be visible leaders. And I think whether it's through a difficult period like covid or whether through its growth leading from the floor is better than leading from behind a desk. So that's, I think, just a really simple aspect of how we're trying to do it effectively. [00:24:13][51.2]

Alec Renehan: [00:24:15] You mentioned covid. They're managing a team through covid would have been probably one of the biggest challenges of your career. I'm going to hazard a guess what was like what was covered like both for Pacifics, Miles, but then also for, you know, for the I guess, the culture of your business. And like, how did you manage the people through that time? [00:24:34][19.0]

Phil McKenzie: [00:24:35] What are what did Muhammad Ali or someone say? Everybody's got a plan to get punched in the face. Man At one point there we stood down twelve hundred staff over Zoome. Wow. [00:24:47][11.9]

Bryce Leske: [00:24:48] With group call. [00:24:48][0.7]

Phil McKenzie: [00:24:49] Yeah. [00:24:49][0.0]

Alec Renehan: [00:24:50] With have to do individual calls. [00:24:51][1.8]

Phil McKenzie: [00:24:52] Yeah. I tell you the support people and my team behind the scenes that rallied to, to make that something that was even possible before we knew about job keeper and then the sheer administration of human emotion, human needs and flow on impact to the dentist, to the staff and to the patients is something I've never seen before. So I would suggest that everybody put their heart and soul into looking after people and then, you know, quite delightful if it's even something to tackle. Delightful. We came out of the lockdown period and the business rose. So patients return, dentists return, staff returned. And for the last 12 months, we've had a very positive period of attendance of patients. The business has grown demonstrably and the capability is extended because people have been through the very worst of times. So they're now set to do some of their best work as. Grow the business. So it's quite special. [00:25:53][60.5]

Bryce Leske: [00:25:54] I'm always interested to hear from leaders about how they think about what happened with the pandemic and how they have perhaps changed business strategy going forward. Yes, of course, it was a shock that only comes once every blue moon. But have you actually made any changes within the business to prevent what, you know, the shock that happened to the business? What have been some of the major takeaways from that? That, you know, [00:26:25][31.2]

Phil McKenzie: [00:26:26] we learned a lot in the early stages. We were trying to control things. We couldn't control anything other than our response as a business. The first thing we learned very quickly that we had to do was update our communication to dentist patients and staff because we thought that just saying something that everybody knew, but it took 25 times of repetition, repetition, and everybody's saying the same thing before it started to get in. And so that communication decentralizing decision making so that people were empowered and, you know, remote locations, not remote, but spread out across the eastern seaboard waiting to be told. We gave them a framework for decision making. We gave them parameters to make mistakes. And then we were listening very hard and using all the technology that we could muster, you know, daily room calls, multiple daily leadership calls. So simplifying increasing communication, decentralizing control and extending trust. And we made some mistakes, but everybody grew. And I would suggest that's something we're carrying going forward. [00:27:31][65.6]

Alec Renehan: [00:27:33] Listening to you talk and you know, the question about business strategy, it comes back to people. It's no surprise that TDM, who is known for loving people in culture and really focusing on that are big fans of you. It's pretty great to hear how people-focused you are when you think about, you know, you're in the states, maybe has a reputation for not being as people-focused. The country is, you know, some of the European and Australian companies. What do you think they get wrong or what would you say to some of your other business leaders out there? Like what do you think they should do better? [00:28:08][35.4]

Phil McKenzie: [00:28:09] It's not a competition. If if you can engender the confidence in the people that you're working with, that they can be better. All shall rise if you take accountability for trying to make someone better or drive the business or drive the behaviors and only has the lifespan of what you can produce. But if you can encourage someone that their potential is up to them and then facilitate that being improved, then the potential is unlimited because what happens is it ceases to be a competition, it ceases to be one-upmanship and actually becomes a thing of pride. And that's really the number one thing that flows through our centers. And Pacific smiles is a sense of pride for the many, many people that are working with us about the center, about the business, about the work we do. And so I would say a people's potential and you're off to a good start. [00:29:05][55.1]

Bryce Leske: [00:29:05] A very hard thing to do, I think, is to actually. It's easy to say, but then I think it just takes years of experience to know because everyone's different, right. And so knowing how you can extract the best out of everyone, despite everyone being completely different, very difficult. I'm trying to get the best out of Ren, [00:29:26][21.2]

Alec Renehan: [00:29:28] you know, a little more of a drive and so feel we could talk people and culture all day, but would love to hear about how you think about Pacifics Miles future. So we'll start short term and then we'll start thinking more long term. So if you think about the next 12 months for your business, what what is the next year hold for Pacifics? [00:29:50][22.4]

Phil McKenzie: [00:29:51] Miles, we've got a board and Dorst, very clear, laid out plan to put 20 to 25 brand new dental centers on the ground for Pacific Smile's. We'll do a number of new centers for HPF Dental and we'll continue to build the relationships with the health funds. So everybody is clear on that. Everybody understands what their role is and will continue to engage with everybody in terms of what they need to execute with excellence. And it will be that simple. We're not going to try and do anything super clever. We're just going to be really clever about executing on our plan. [00:30:23][32.4]

Bryce Leske: [00:30:24] And we always need to know, though, what is the as an investor an biggest risk that you see for your business right now? [00:30:32][8.3]

Phil McKenzie: [00:30:33] Twofold one would be the complacency or the comfort that comes with a mild success. So we've been wildly successful over the 12 months from now, trying to be excellent [00:30:43][9.7]

Alec Renehan: [00:30:44] share prices, what, almost double? [00:30:45][1.4]

Bryce Leske: [00:30:46] Yeah, good to know that that's mild success. Yeah. [00:30:48][2.9]

Phil McKenzie: [00:30:50] What happens is you start to over believe and I think you've always got to be consciously uncomfortable and pushing each other for is this really as good as we could have done it. So the complacency is something that keeps me current on what's going on and then making sure that we build a natural breakpoint. So I say twenty to twenty five centers, but if we're not delivering what we should at ten, then we'll slow down. So not backing yourself to deliver or bust, there's got to be a sensible cadence and a logical set of reflective points. So you can say, do you know what, we're not where we said we'd be, but we're in control, therefore will adjust. And that ability to course correct brings confidence in the market, bring confidence in the team, and ultimately sets us up for longevity, I think. [00:31:35][45.8]

Bryce Leske: [00:31:36] Can it go the other way, though? You hit twenty five in half the time and you let's double that. Let's double down. [00:31:41][5.0]

Phil McKenzie: [00:31:41] Well, listen, I know a number of our shareholders are absolutely of the belief that we should batten down the hatches and go for it. I think it comes down to being really measured and sensible because we are a health care service provider. So yes, it could. But more moreover, I would probably keep my powder dry to continue doing a jolly good job. Yeah, the right cadence, [00:32:00][18.9]

Alec Renehan: [00:32:02] long term love that [00:32:03][0.9]

Bryce Leske: [00:32:03] under promise over deliver. [00:32:04][1.0]

Alec Renehan: [00:32:04] Yeah. So speaking of long term, if you think about Pacific smiles in ten, fifteen years from now, what does success look like? [00:32:15][10.7]

Phil McKenzie: [00:32:16] Success looks like a great reputation for having exceptional service and facilities for maybe more than just dental professionals. At the end of the day, we operate over a hundred dental centers today, but are essentially a service and facility provider inside shopping centers. So being able to have great relationships with health funds, being trusted by the public and fundamentally having the respect of the dentists, and respect for dentists, I should say yes, on a very bright future and hopefully separate us from everyone else inside scoop. [00:32:49][32.6]

Alec Renehan: [00:32:50] Yeah, I mean, I got a follow up about the whole beyond dentistry. Are you going to bakery to move to japes? Is that in the product pipeline? [00:32:58][8.1]

Phil McKenzie: [00:32:58] No, I think we want to stay in the lane that we're in. But if you think about a surgery today that has a chair in it, we have a high degree of infection control. We're very sanitized and and clean facility. We could be offering vaccinations, inoculations. And if you think about health funds, desire to drive in the wellness space, there's very much an opportunity to do nutrition consulting other professionals, not us. We could do blood works, pathology. There's all sorts of things that are service orientated for professionals that they need rooms and an opportunity to practice from inside. There's a long runway here. Yeah. [00:33:34][35.7]

Alec Renehan: [00:33:34] Now you got to be [00:33:39][4.3]

Phil McKenzie: [00:33:39] super clear dentals, the primary focus, but it's delightful to know that we could should we choose to have other strings to our [00:33:46][6.8]

Alec Renehan: [00:33:46] body. Is there any other major competitors following the shopping center strategy? [00:33:49][3.4]

Phil McKenzie: [00:33:50] There are a couple of others that are inside, usually smaller and not with as many as us. It's not something that we've got a caveat on, but we're very clear about how we do it and when we do it and where we do it and and the relationship with the landlords and the trust that we've built with the dentist as a cornerstone of that. So the barrier to entry is certainly cost. And the complexity, but I'm sure that some people will consider following us and at some [00:34:14][23.8]

Alec Renehan: [00:34:14] point, yeah, well, now that people are listening to this episode, you better accelerate the rollout. Exactly. [00:34:20][5.9]

Bryce Leske: [00:34:21] Well, Phil, it's always a pleasure chatting to CEOs and executives to understand the journey and how they think about their business. One of the biggest challenges for retail investors is actually getting insight into how management think about the businesses that they're running. So having you on the show has been a great pleasure. And I'm sure many people in our audience have taken a lot of value from it. So thank you very much for your time. For those listening along at home, a reminder that it's specific smile's ASX ticker PSQ. Full disclosure, Ren is a shareholder and we'll leave it there. It's been an absolute pleasure. So thank you very much. [00:34:57][35.5]

Phil McKenzie: [00:34:57] Thank you very much. Thanks for all of us. [00:34:57][0.0]

[2021.5]

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