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Consolidating the EU retail landscape in orthodontic services space

The rise of Impress as Specialty DSO

Retail orthodontic start-ups are the new Starbucks, and Barcelona-based Impress is leading this retail orthodontic space category, at least in EU. The company’s signature red and pinewood spruced clinics invoke the brand experience of an upmarket café that’s enveloped in a unique hospitality-driven experience.

Traditionally, the consolidation of dental health clinics has largely been uneven across EU – impacted by the highly fragmented local regulatory environments. Whether or not will the Spanish orthodontic retail chain continue to replicate its growth story in other EU countries (Impress recently entered the French market) will depend on how effectively can the company steer itself – in terms of the uphill regulatory challenges.

Network effects are a function of the number of clinics operated by the dental chain – thus, the network effects are expected to grow stronger and generate synergies with DSOs’ increasing footprint - as the brand expands beyond its home-brewed market.

What’s even more outstanding is how Impress has not only been able to drive up its valuation, but also how its recent financing round beat any previous estimates, especially in the face of the broader economic headwinds, including:

  • High inflationary pressure negatively impacting consumer demand and margins – flattening out brand Invisalign’s revenue growth in Q1’22 on sequential basis.

  • As more players enter the high-growth clear aligners category, this is negatively impacting the margins – eventually causing brands to bleed on the profitability scala. Market leader Align Technologies’ operating margin and gross margin have declined by 4.8 and 2.8 percentage respectively, in recent months.

  • The combined market cap of leading dental manufactures has declined high-double digits LTM. The flagship brand Invisalign’s market cap is down by – 60% YTD.

  • What worsens the situation even more is the market outlook for H2’22 still looks uncertain as markets show no sign of near-term recovery.

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