SmileDirectClub, Inc. (Nasdaq: SDC), the next generation oral care
company with the first medtech platform for teeth straightening,
today announced its financial results for the first quarter ended
March 31, 2022. Revenue for the first quarter of 2022 increased
20.1% compared to the fourth quarter of 2021 with gross profit up
32.5% for the same period.
First Quarter 2022 Financial
Highlights
- Total revenue of $152 million, a
20.1% increase over the fourth quarter of 2021 and a decrease of
24.0% over the prior year period.
- Net loss of $(73) million, an
improvement of $22 million over both the fourth quarter of 2021 and
the prior year period.
- Adjusted EBITDA of $(34) million, a
$27 million improvement over the fourth quarter of 2021, and a
decrease of $39 million over the prior year period.
- Diluted EPS of $(0.19), an
improvement of $0.06 over both the prior year period and fourth
quarter of 2021.
Key Operating Metrics and Strategic
Highlights
- First quarter unique aligner
shipments of 76,254, a 15.3% sequential increase over 66,133
shipments in the fourth quarter of 2021.
- First quarter average aligner gross
sales price (“ASP”) of $1,890 compared to $1,899 for the fourth
quarter of 2021.
- On April 27, 2022, completed a new
$255 million secured debt facility, strengthening the Company’s
liquidity with greater flexibility to fuel its continued operations
and growth plans.
“We are off to a good start for 2022 and on plan
with the right-sizing of our operating structure and allocating
capital to core growth initiatives that can produce the highest
return on investment,” said David Katzman, Chief Executive Officer
and Chairman of SmileDirectClub. “These actions have positioned us
to further advance our strategic growth initiatives, including oral
care, profitable SmileShop expansion, technology and product
innovation, and our Partner Network, which are all demonstrating
encouraging results. Additionally, we also strengthened our
liquidity position with the announcement last month of a new $255
million secured debt facility that gives us financial flexibility
to continue making investments in key strategic growth areas of our
business. We remain optimistic on our business outlook for 2022 and
beyond.”
Business Outlook
SmileDirectClub’s mission is to democratize
access to a smile each and every person loves and deserves by
making it affordable and convenient for everyone. Every decision
and investment the Company has made is to support and expand this
mission and enable its long-term growth potential. SmileDirectClub
possesses the unique assets and innovation to disrupt the
incumbents, the agility to adjust to the needs of its customer, and
a sustainable brand that is top of mind with consumers. The Company
has been issued 36 patents and counting for its innovations in
orthodontic treatment planning, aligner manufacturing, smile
scanning technologies, its proprietary telehealth platform and a
variety of other areas. There are many more patents pending and in
the pipeline in both the US and abroad on various technologies
relating to data capture, 3D image capture, intraoral scanning,
monitoring, manufacturing, and consumer products. In addition, the
Company has enabled treatment for over 1.7 million customers, built
the only end-to-end vertically integrated platform for the consumer
at scale, created a Dental Partner Network with 673 global
practices that are live or pending training, created oral care
products available at over 16,300 retail stores worldwide, and
remains the strongest teledentistry brand with 60% aided
awareness.
When consumers are considering straightening
their teeth, they typically do one or all of the following: One,
they search online to understand their options; two, they might ask
a dentist; and three, they might ask a friend or family member
which option they should choose. Based on the Company’s research,
consumers have noted its product and customer experience is nearly
identical to Invisalign, 60% less expensive, and more convenient.
For other teledentistry platforms, its research showed that
significantly fewer customers would recommend those brands compared
with SmileDirectClub customers. The U.S. Brand Tracker first
quarter survey separately noted that the Company’s unaided and
aided brand awareness continued its separation from its
teledentistry competitors and closer awareness compared to
Invisalign. Additionally, the Company’s pioneering telehealth
platform was recently recognized by MedTech Breakthrough, winning
the “Best Telehealth Platform” award in 2022.
In addition to these investments to create the
next generation of oral care and influence consumer decision
making, the Company will continue to make strategic investments in
penetrating new demographics to drive controlled growth, while also
executing against its profitability goals. Lastly, favorable
industry dynamics continue to increase with broader acceptance of
telehealth and specifically teledentistry, minimal penetration
against the total addressable market, a number of recent regulatory
wins that should help remove barriers to access to care, and clear
aligners gaining share in the overall industry.
Full Year 2022 Guidance
The Company reaffirmed its guidance as well as its assumptions
underlying that guidance for the year ended December 31, 2022,
previously provided on February 28, 2022.
Conference Call Information
SmileDirectClub First Quarter 2022 Conference Call
Details |
|
|
Date: |
May 10, 2022 |
Time: |
8:00 a.m. Eastern Time (7:00
a.m. Central Time) |
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 the same
day from 11 a.m. Eastern Time on Tuesday, May 10,
2022 until 11:59 p.m. Eastern Time on Tuesday,
May 17, 2022 by dialing 1-844-512-2921 (domestic) or 1-412-317-6671
(international) and entering the replay PIN: 13728500. A copy of
the first quarter 2022 results supplemental earnings presentation
and an archived version of the call, when completed, will also be
available on the Investor Relations section of SmileDirectClub’s
website at 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 a guarantee
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: the ongoing assessment of the cyber incident, material
legal, financial and reputational risks resulting from such
incident and the related operational disruptions; the duration and
magnitude of the COVID-19 pandemic and related containment
measures; 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 Annual Report on Form
10-K for the year ended December 31, 2021.
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 SmileDirectClub
SmileDirectClub, Inc. (Nasdaq: SDC)
(“SmileDirectClub”) is an oral care company and creator of the
first medtech platform for teeth straightening. Through its
cutting-edge telehealth technology and vertically integrated model,
SmileDirectClub is revolutionizing the oral care industry.
SmileDirectClub’s mission is to democratize access to a smile each
and every person loves by making it affordable and convenient for
everyone. For more information, please visit
SmileDirectClub.com.
Investor Relations:Jesse
WeaverGlobal Head, FP&A and Investor
RelationsJesse.Weaver@smiledirectclub.com
Jonathan FleetwoodDirector, Investor
Relationsinvestorrelations@smiledirectclub.com
Media Relations:Amber
PietrobonoDirector, Corporate
Communicationspress@smiledirectclub.com
SmileDirectClub, Inc.Consolidated
Balance Sheets(in
thousands)(unaudited)
|
March 31, |
December 31, |
|
2022 |
|
|
2021 |
|
ASSETS |
|
|
Cash |
$144,747 |
|
$224,860 |
|
Accounts receivable, net |
|
181,651 |
|
|
184,558 |
|
Inventories |
|
39,018 |
|
|
40,803 |
|
Prepaid and other current
assets |
|
24,802 |
|
|
17,519 |
|
Total current assets |
|
390,218 |
|
|
467,740 |
|
Accounts receivable, net,
non-current |
|
58,876 |
|
|
59,210 |
|
Property, plant and equipment,
net |
|
221,883 |
|
|
227,201 |
|
Operating lease right-of-use
asset |
|
23,848 |
|
|
24,927 |
|
Other assets |
|
15,425 |
|
|
15,480 |
|
Total
assets |
$710,250 |
|
$794,558 |
|
LIABILITIES AND EQUITY
(DEFICIT) |
|
|
Accounts payable |
$18,286 |
|
$19,922 |
|
Accrued liabilities |
|
111,740 |
|
|
122,066 |
|
Deferred revenue |
|
19,833 |
|
|
20,258 |
|
Current portion of long-term
debt |
|
8,593 |
|
|
10,997 |
|
Other current liabilities |
|
4,896 |
|
|
4,997 |
|
Total current liabilities |
|
163,348 |
|
|
178,240 |
|
Long-term debt, net of current
portion |
|
730,992 |
|
|
729,973 |
|
Operating lease liabilities,
net of current portion |
|
19,097 |
|
|
20,352 |
|
Other long-term
liabilities |
|
350 |
|
|
347 |
|
Total liabilities |
|
913,787 |
|
|
928,912 |
|
Equity
(Deficit) |
|
|
Class A common stock, par
value $0.0001 and 120,433,220 shares issued and outstanding at
March 31, 2022 and 119,280,781 shares issued and outstanding at
December 31, 2021 |
|
12 |
|
|
12 |
|
Class B common stock, par
value $0.0001 and 268,993,501 shares issued and outstanding at
March 31, 2022 and 269,243,501 shares issued and outstanding at
December 31, 2021 |
|
27 |
|
|
27 |
|
Additional
paid-in-capital |
|
452,153 |
|
|
448,867 |
|
Accumulated other
comprehensive income |
|
453 |
|
|
293 |
|
Accumulated deficit |
|
(317,902 |
) |
|
(295,321 |
) |
Noncontrolling interest |
|
(355,900 |
) |
|
(305,852 |
) |
Warrants |
|
17,620 |
|
|
17,620 |
|
Total equity (deficit) |
|
(203,537 |
) |
|
(134,354 |
) |
Total liabilities and
equity (deficit) |
$710,250 |
|
$794,558 |
|
SmileDirectClub, Inc.Consolidated
Statements of Operations(in thousands, except
share and per share
amounts)(unaudited)
|
Three Months Ended March 31, |
|
2022 |
|
|
2021 |
|
Revenue, net |
$142,512 |
|
$188,802 |
|
Financing revenue |
|
9,134 |
|
|
10,659 |
|
Total revenues |
|
151,646 |
|
|
199,461 |
|
Cost of revenues |
|
43,066 |
|
|
47,961 |
|
Gross profit |
|
108,580 |
|
|
151,500 |
|
Marketing and selling
expenses |
|
96,711 |
|
|
97,123 |
|
General and administrative
expenses |
|
70,793 |
|
|
81,078 |
|
Lease abandonment and
impairment of long-lived assets |
|
1,232 |
|
|
— |
|
Restructuring and other
related costs |
|
11,532 |
|
|
1,128 |
|
Loss from operations |
|
(71,688 |
) |
|
(27,829 |
) |
Interest expense |
|
1,556 |
|
|
17,566 |
|
Loss on extinguishment of
debt |
|
— |
|
|
47,631 |
|
Other expense |
|
1,423 |
|
|
912 |
|
Net loss before provision for
income tax expense (benefit) |
|
(74,667 |
) |
|
(93,938 |
) |
Provision for income tax
expense (benefit) |
|
(1,463 |
) |
|
1,707 |
|
Net loss |
|
(73,204 |
) |
|
(95,645 |
) |
Net loss attributable to
noncontrolling interest |
|
(50,623 |
) |
|
(66,736 |
) |
Net loss attributable to
SmileDirectClub, Inc. |
$(22,581 |
) |
$(28,909 |
) |
|
|
|
Earnings (loss) per
share of Class A common stock: |
|
|
Basic |
$(0.19 |
) |
$(0.25 |
) |
Diluted |
$(0.19 |
) |
$(0.25 |
) |
|
|
|
Weighted average
shares outstanding: |
|
|
Basic |
|
120,191,790 |
|
|
116,961,510 |
|
Diluted |
|
389,297,928 |
|
|
386,878,524 |
|
SmileDirectClub, Inc.Consolidated
Statements of Cash Flows(in
thousands)(unaudited)
|
Three Months Ended March 31, |
|
2022 |
|
|
2021 |
|
Operating
Activities |
|
|
Net loss |
$(73,204 |
) |
$(95,645 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
Depreciation and amortization |
|
18,916 |
|
|
16,460 |
|
Deferred loan cost
amortization |
|
1,078 |
|
|
1,960 |
|
Equity-based compensation |
|
5,306 |
|
|
15,159 |
|
Loss on extinguishment of
debt |
|
— |
|
|
47,631 |
|
Paid in kind interest
expense |
|
— |
|
|
3,324 |
|
Asset impairment and related
charges |
|
1,367 |
|
|
— |
|
Other non-cash operating
activities |
|
1,079 |
|
|
954 |
|
Changes in operating assets
and liabilities: |
|
|
Accounts receivable |
|
3,241 |
|
|
(6,675 |
) |
Inventories |
|
1,785 |
|
|
649 |
|
Prepaid and other current
assets |
|
(7,258 |
) |
|
1,169 |
|
Accounts payable |
|
(2,137 |
) |
|
(15,569 |
) |
Accrued liabilities |
|
(11,012 |
) |
|
5,798 |
|
Deferred revenue |
|
(425 |
) |
|
(3,553 |
) |
Net cash used in operating
activities |
|
(61,264 |
) |
|
(28,338 |
) |
Investing
Activities |
|
|
Purchases of property,
equipment, and intangible assets |
|
(15,118 |
) |
|
(22,981 |
) |
Net cash used in investing
activities |
|
(15,118 |
) |
|
(22,981 |
) |
Financing
Activities |
|
|
Repurchase of Class A shares
to cover employee tax withholdings |
|
(1,847 |
) |
|
(4,043 |
) |
Repayment of HPS Credit
Facility |
|
— |
|
|
(396,497 |
) |
Payment of extinguishment
costs |
|
— |
|
|
(37,701 |
) |
Borrowings of long-term
debt |
|
— |
|
|
747,500 |
|
Payments of issuance
costs |
|
— |
|
|
(20,595 |
) |
Purchase of capped call
transactions |
|
— |
|
|
(69,518 |
) |
Final payment of Align
arbitration |
|
— |
|
|
(43,400 |
) |
Principal payments on
long-term debt |
|
— |
|
|
(4,609 |
) |
Payments of finance
leases |
|
(2,404 |
) |
|
(2,541 |
) |
Other |
|
562 |
|
|
169 |
|
Net cash provided by (used in)
financing activities |
|
(3,689 |
) |
|
168,765 |
|
Effect of exchange rates
change on cash and cash equivalents |
|
(42 |
) |
|
375 |
|
Increase (decrease) in
cash |
|
(80,113 |
) |
|
117,821 |
|
Cash at beginning of
period |
|
224,860 |
|
|
316,724 |
|
Cash at end of period |
$144,747 |
|
$434,545 |
|
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
(benefit), equity-based compensation, loss on extinguishment of
debt, impairment of long-lived assets, abandonment and other
related charges and certain other non-operating expenses, such as
one-time store closure costs associated with our real estate
repositioning strategy, severance, retention and other labor costs,
certain one-time legal settlement costs, and unrealized 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 is 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 measure 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 March 31, |
|
2022 |
|
|
2021 |
|
Net loss |
$(73,204 |
) |
$(95,645 |
) |
Depreciation and
amortization |
|
18,916 |
|
|
16,460 |
|
Total interest expense |
|
1,556 |
|
|
17,566 |
|
Income tax expense
(benefit) |
|
(1,463 |
) |
|
1,707 |
|
Lease abandonment and
impairment of long-lived assets |
|
1,232 |
|
|
— |
|
Restructuring and other
related costs |
|
11,532 |
|
|
1,128 |
|
Loss on extinguishment of
debt |
|
— |
|
|
47,631 |
|
Equity-based compensation |
|
5,306 |
|
|
15,159 |
|
Other non-operating general
and administrative losses |
|
1,684 |
|
|
912 |
|
Adjusted EBITDA |
$(34,441 |
) |
$4,918 |
|
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