SmileDirectClub, Inc. (NASDAQ: SDC) today announced its financial
results for the quarter ended September 30, 2019.
Third Quarter 2019 Financial
Highlights
- Third quarter total revenue increased $60.5 million, or 50.6%,
over the third quarter of 2018, to $180.2 million.
- Third quarter net loss of $(387.6) million.
- Third quarter Adjusted EBITDA of $(45.2) million.
- Third quarter diluted EPS of $(0.89).
Key Operating Metrics
- Third quarter unique aligner shipments of 106,070, compared to
72,387 in the third quarter of 2018.
- Average aligner gross sales price (“ASP”)1 of $1,788 compared
to $1,773 in the third quarter of 2018.
“Post-IPO, our team is laser focused on execution. Our results
for the quarter, all of which exceeded management’s expectations,
are a testament to the strength and momentum of the underlying
business,” said Kyle Wailes, SmileDirectClub’s CFO.
SmileDirectClub’s Chairman and CEO, David Katzman continued, “Q3
was a good quarter. We were able to demonstrate our ability to
execute. We have an incredible team, the best I have ever worked
with. Overall, our business is better positioned than ever to
capitalize on the massive market opportunity in front of us, and we
look forward to demonstrating that in the quarters to come.”
Business Outlook
Our guidance for the fiscal year 2019 is as follows:
- Revenues are expected to be in the range of $750.0 million to
$755.0 million, representing growth of 78% year-over-year at the
mid-point of the range.
- Adjusted EBITDA for the fiscal year is expected between $(73)
million to $(80) million.
Conference Call
Information
SmileDirectClub Third Quarter 2019
Conference Call Details |
|
|
Date: |
Tuesday, November 12, 2019 |
Time: |
4:30 p.m. ET (1:30 p.m. PT) |
Dial-In: |
1-877-407-9208 (domestic) or 1-201-493-6784
(international) |
Webcast: |
Visit “Events and Presentations” section of the company’s IR
page at http://investors.smiledirectclub.com. |
A replay of the call may be accessed from 7:30 p.m.
ET on Tuesday, November 12, 2019 until 11:59
p.m ET on Tuesday, November 26, 2019 by dialing
1-844-512-2921 (domestic) or 1-412-317-6671 (international) and
entering the replay PIN: 136904923. An archived version of the call
and a copy of the 2019 Q3 Results supplemental earnings
presentation will also be available upon completion on the Investor
Relations section of SmileDirectClub’s website
at http://investors.smiledirectclub.com.
Forward-Looking Statements
This earnings release contains forward-looking
statements. All statements other than statements of historical
facts may be forward-looking statements. Forward-looking statements
generally relate to future events and include, without limitation,
projections, forecasts and estimates about possible or assumed
future results of our business, financial condition, liquidity,
results of operations, plans, and objectives. Some of these
statements may include words such as “expects,” “anticipates,”
“believes,” “estimates,” “targets,” “plans,” “potential,”
“intends,” “projects,” and “indicates.”
Although they reflect our current, good faith
expectations, these forward-looking statements are not guarantees
of future performance, and involve a number of risks,
uncertainties, estimates, and assumptions, which are difficult to
predict. Some of the factors that may cause actual outcomes and
results to differ materially from those expressed in, or implied
by, the forward-looking statements include, but are not necessarily
limited to: our management of growth; the execution of our business
strategies, implementation of new initiatives, and improved
efficiency; our sales and marketing efforts; our manufacturing
capacity, performance, and cost; our ability to obtain future
regulatory approvals; our financial estimates and needs for
additional financing; consumer acceptance of and competition for
our clear aligners; our relationships with retail partners and
insurance carriers; our R&D, commercialization, and other
activities and expenditures; the methodologies, models,
assumptions, and estimates we use to prepare our financial
statements, make business decisions, and manage risks; laws and
regulations governing remote healthcare and the practice of
dentistry; our relationships with vendors; the security of our
operating systems and infrastructure; our risk management
framework; our cash and capital needs; our intellectual property
position; our exposure to claims and legal proceedings; and other
factors described in our filings with the Securities and Exchange
Commission, including but not limited to our Quarterly Report on
Form 10-Q for the quarter ended September 30, 2019.
New risks and uncertainties arise over time, and
it is not possible for us to predict all such factors or how they
may affect us. You should not place undue reliance on
forward-looking statements, which speak only as of the date they
are made. We are under no duty to update any of these
forward-looking statements after the date of this earnings release
to conform these statements to actual results or revised
expectations. You should, therefore, not rely on these
forward-looking statements as representing our views as of any date
subsequent to the date of this earnings release.
About
SmileDirectClubSmileDirectClub, Inc. (NASDAQ:
SDC) is the industry pioneer as the first direct-to-consumer
med-tech platform for transforming smiles. Through our
cutting-edge teledentistry technology and vertically integrated
model, we are revolutionizing the oral care industry.
SmileDirectClub’s mission is to unleash the power of people’s
smiles to empower them to positively impact their place in the
world. SmileDirectClub was founded by Alex Fenkell and Jordan
Katzman in partnership with Camelot Venture Group. Available
in the U.S., Canada, Australia, New Zealand, the UK, and
Ireland. SmileDirectClub is headquartered in Nashville,
Tennessee. For more information, visit
SmileDirectClub.com
Investor/Media
Contact:
Alison Sternberg Vice President, Investor
Relations 310-562-7297Alison.sternberg@smiledirectclub.com
SmileDirectClub, Inc.
Consolidated Balance Sheet
(in thousands)
|
September 30 2019 |
December 31, 2018 |
ASSETS |
|
|
Cash |
$ |
547,563 |
|
$ |
313,929 |
|
Accounts receivable |
224,360 |
|
113,934 |
|
Inventories |
14,633 |
|
8,781 |
|
Prepaid and other current assets |
11,987 |
|
5,782 |
|
Total current assets |
798,543 |
|
442,426 |
|
Accounts receivable, non-current |
87,299 |
|
60,217 |
|
Property, plant and equipment, net |
119,130 |
|
52,551 |
|
Other assets |
6,269 |
|
— |
|
Total assets |
$ |
1,011,241 |
|
$ |
555,194 |
|
LIABILITIES, TEMPORARY AND PERMANENT EQUITY
(DEFICIT) |
|
|
Accounts payable |
$ |
40,561 |
|
$ |
25,250 |
|
Accrued liabilities |
129,434 |
|
34,939 |
|
Due to related parties |
1,128 |
|
20,305 |
|
Deferred revenue |
24,893 |
|
19,059 |
|
Current portion of related party debt |
— |
|
16,054 |
|
Current portion of long-term debt |
29,737 |
|
1,866 |
|
Total current liabilities |
225,753 |
|
117,473 |
|
Long-term debt, net of current portion |
189,648 |
|
137,123 |
|
Long-term related party debt |
— |
|
1,799 |
|
Other long-term liabilities |
45,230 |
|
602 |
|
Total liabilities |
460,631 |
|
256,997 |
|
Commitment and contingencies |
|
|
Temporary Equity |
|
|
Redeemable Series A Preferred Units |
— |
|
388,634 |
|
Permanent Equity (Deficit) |
|
|
Class A common stock, par value $0.0001 and 102,807,291 shares
issued and outstanding at September 30, 2019 and 0 shares issued
and outstanding at December 31, 2018 |
10 |
|
— |
|
Class B common stock, par value $0.0001 and 279,474,505 shares
issued and outstanding at September 30, 2019 and 0 shares issued
and outstanding at December 31, 2018 |
28 |
|
— |
|
Additional paid-in-capital |
441,855 |
|
57,497 |
|
Accumulated deficit |
(88,296 |
) |
(148,249 |
) |
Noncontrolling interest |
197,013 |
|
— |
|
Warrants |
— |
|
315 |
|
Total permanent equity (deficit) |
550,610 |
|
(90,437 |
) |
Total liabilities, temporary and permanent equity
(deficit) |
$ |
1,011,241 |
|
$ |
555,194 |
|
SmileDirectClub, Inc.
Consolidated Statements of
Operations
(in thousands, except share and per share
amounts)
|
Three months endedSeptember
30, |
Nine months endedSeptember
30, |
2019 |
2018 |
2019 |
2018 |
Revenue,
net |
$ |
168,663 |
|
$ |
112,508 |
|
$ |
522,529 |
|
$ |
278,024 |
|
Financing revenue |
11,522 |
|
7,158 |
|
31,185 |
|
16,706 |
|
Total revenues |
180,185 |
|
119,666 |
|
553,714 |
|
294,730 |
|
Cost of revenues |
39,125 |
|
25,837 |
|
111,363 |
|
67,704 |
|
Cost of revenues—related parties |
2,310 |
|
10,098 |
|
13,652 |
|
28,608 |
|
Total cost of revenues |
41,435 |
|
35,935 |
|
125,015 |
|
96,312 |
|
Gross profit |
138,750 |
|
83,731 |
|
428,699 |
|
198,418 |
|
Marketing and selling expenses |
131,263 |
|
57,210 |
|
340,409 |
|
143,667 |
|
General and administrative expenses |
389,828 |
|
30,249 |
|
486,319 |
|
77,550 |
|
Loss from operations |
(382,341 |
) |
(3,728 |
) |
(398,029 |
) |
(22,799 |
) |
Interest expense |
4,291 |
|
4,352 |
|
11,607 |
|
9,283 |
|
Interest expense—related parties |
— |
|
293 |
|
75 |
|
1,246 |
|
Loss on extinguishment of debt |
32 |
|
— |
|
29,672 |
|
— |
|
Other expense |
421 |
|
6,493 |
|
500 |
|
15,135 |
|
Net loss before provision for income tax expense |
(387,085 |
) |
(14,866 |
) |
(439,883 |
) |
(48,463 |
) |
Provision for income tax expense |
479 |
|
85 |
|
596 |
|
294 |
|
Net loss |
(387,564 |
) |
(14,951 |
) |
(440,479 |
) |
(48,757 |
) |
Net loss attributable to noncontrolling interest |
(299,268 |
) |
— |
|
(352,183 |
) |
— |
|
Net loss attributable to SDC Inc. |
$ |
(88,296 |
) |
$ |
(14,951 |
) |
$ |
(88,296 |
) |
$ |
(48,757 |
) |
|
|
|
|
|
Earnings per share of Class A common
stock: |
|
|
|
|
Basic |
$ |
(0.89 |
) |
N/A |
$ |
(0.89 |
) |
N/A |
Diluted |
$ |
(0.89 |
) |
N/A |
$ |
(0.89 |
) |
N/A |
|
|
|
|
|
Weighted Average Shares Outstanding: |
|
|
|
|
Basic |
99,533,877 |
N/A |
99,533,877 |
|
N/A |
Diluted |
379,008,382 |
N/A |
379,008,382 |
|
N/A |
SmileDirectClub, Inc.
Consolidated Statements of Cash
Flows
(in thousands)
|
Nine months ended September 30, |
2019 |
2018 |
Operating Activities |
|
|
Net loss |
$ |
(440,479 |
) |
$ |
(48,757 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
Depreciation and amortization |
16,237 |
|
4,966 |
|
Deferred loan cost amortization |
1,496 |
|
461 |
|
Accrued interest to related parties |
— |
|
884 |
|
Fair value adjustment of warrant derivative |
— |
|
14,500 |
|
Equity-based compensation |
332,759 |
|
13,626 |
|
Loss on extinguishment of debt |
17,693 |
|
— |
|
Other non-cash operating activities |
1,783 |
|
3,305 |
|
Changes in operating assets and liabilities: |
|
|
Accounts receivable |
(137,509 |
) |
(97,005 |
) |
Inventories |
(5,852 |
) |
(3,963 |
) |
Prepaid and other current assets |
(6,205 |
) |
(2,233 |
) |
Accounts payable |
(4,475 |
) |
11,935 |
|
Accrued liabilities |
45,880 |
|
9,926 |
|
Due to related parties |
(19,177 |
) |
306 |
|
Deferred revenue |
5,834 |
|
8,869 |
|
Net cash used in operating activities |
(192,015 |
) |
(83,180 |
) |
Investing Activities |
|
|
Purchases of property and equipment—related party |
— |
|
(4,722 |
) |
Purchases of property, equipment, and intangible assets |
(66,355 |
) |
(15,231 |
) |
Net cash used in investing activities |
(66,355 |
) |
(19,953 |
) |
Financing Activities |
|
|
IPO proceeds, net of discount and related fees |
1,285,759 |
|
— |
|
Repurchase of Class A shares and LLC Units |
(696,489 |
) |
— |
|
Repurchase of Class A shares to cover employee tax
withholdings |
(81,603 |
) |
— |
|
Settlement of canceled awards |
(2,000 |
) |
— |
|
Issuance of Class A common stock |
6 |
|
— |
|
Proceeds from sale of Preferred Units, net |
— |
|
298,549 |
|
Borrowings on long-term debt |
176,000 |
|
117,375 |
|
Payments of issuance costs |
(6,127 |
) |
(3,174 |
) |
Principal payments on long-term debt |
(159,047 |
) |
— |
|
Principal payments on related party debt |
(24,581 |
) |
(34,376 |
) |
Other |
86 |
|
— |
|
Net cash provided by financing activities |
492,004 |
|
378,374 |
|
Increase in cash |
233,634 |
|
275,241 |
|
Cash at beginning of period |
313,929 |
|
4,071 |
|
Cash at end of period |
$ |
547,563 |
|
$ |
279,312 |
|
Use of Non-GAAP Financial
Measures
This earnings release contains certain non-GAAP financial
measures, including adjusted EBITDA (“Adjusted EBITDA”). We provide
a reconciliation of this non-GAAP financial measure to the most
directly comparable GAAP financial measure below and in our Current
Report on Form 8-K announcing our quarterly earnings results, which
can be found on the SEC’s website at www.sec.gov and our website at
investors.smiledirectclub.com.
We utilize certain non-GAAP financial measures,
including Adjusted EBITDA, to evaluate our actual operating
performance and for planning and forecasting of future periods.
We define Adjusted EBITDA as net loss plus
depreciation and amortization, interest expense, income tax
expense, adjusted to remove derivative fair value adjustments, loss
on extinguishment of debt, equity-based compensation and certain
other non-operating expenses such as IPO related costs and foreign
currency adjustments. We use Adjusted EBITDA when evaluating our
performance when we believe that certain items are not indicative
of operating performance. Adjusted EBITDA provides useful
supplemental information to management regarding our operating
performance and we believe it will provide the same to
members/stockholders.
We believe that Adjusted EBITDA will provide
useful information to members/stockholders about our performance,
financial condition, and results of operations for the following
reasons: (i) Adjusted EBITDA would be among the measures used by
our management team to evaluate our operating performance and make
day-to-day operating decisions and (ii) Adjusted EBITDA is
frequently used by securities analysts, investors, lenders, and
other interested parties as a common performance measures to
compare results or estimate valuations across companies in our
industry.
Adjusted EBITDA does not have a definition under GAAP, and our
definition of Adjusted EBITDA may not be the same as, or comparable
to, similarly titled measures used by other companies. Adjusted
EBITDA should not be considered in isolation from, or as a
substitute for, financial information prepared in accordance with
GAAP. A reconciliation of Adjusted EBITDA to net loss, the most
directly comparable GAAP financial measure, is set forth below.
SmileDirectClub, Inc.
Reconciliation of Net Loss to Adjusted
EBITDA
(in thousands) |
Three months
ended September 30, |
Nine months
ended September 30, |
2019 |
2018 |
2019 |
2018 |
(unaudited) |
Net loss |
$ |
(387,564 |
) |
$ |
(14,951 |
) |
$ |
(440,479 |
) |
$ |
(48,757 |
) |
Depreciation and amortization |
6,514 |
|
2,232 |
|
16,237 |
|
4,966 |
|
Total interest expense |
4,291 |
|
4,645 |
|
11,682 |
|
10,529 |
|
Income tax expense |
479 |
|
85 |
|
596 |
|
294 |
|
Fair value adjustment of warrant derivative |
— |
|
5,876 |
|
— |
|
14,500 |
|
Loss on extinguishment of debt |
32 |
|
— |
|
29,672 |
|
— |
|
Equity-based compensation |
324,497 |
|
5,754 |
|
332,759 |
|
13,626 |
|
IPO related costs |
6,146 |
|
— |
|
6,146 |
|
— |
|
Other |
421 |
|
617 |
|
502 |
|
635 |
|
Adjusted EBITDA |
$ |
(45,184 |
) |
$ |
4,258 |
|
$ |
(42,885 |
) |
$ |
(4,207 |
) |
1 We define average aligner gross sales price ("ASP") as gross
revenue, before implicit price concession and other variable
considerations and exclusive of sales tax, from aligner orders
shipped divided by the number of unique aligner orders shipped.
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