SmileDirectClub, Inc. (NASDAQ: SDC) today announced its financial
results for the fourth quarter and year-ended December 31, 2019.
Fourth Quarter 2019 Financial Highlights
- Fourth quarter total revenue increased $68 million, or 53.1%,
over the fourth quarter of 2018, to $197 million.
- Fourth quarter net loss of $(97) million.
- Fourth quarter Adjusted EBITDA of $(60) million.
- Fourth quarter diluted EPS of $(0.25).
2019 Financial Highlights
- FY 2019 total revenue increased $327 million, or 77.3%, over FY
2018, to $750 million.
- FY 2019 net loss of $(538) million.
- FY 2019 Adjusted EBITDA of $(103) million.
- FY 2019 diluted EPS of $(1.14).
Key Operating Metrics
- Fourth quarter 2019 unique aligner shipments of 115,042,
compared to 76,372 in the fourth quarter of 2018; full year 2019
unique aligner shipments of 453,053, compared to 258,278 in the
full year 2018.
- Average aligner gross sales price (“ASP”) of $1,771 for both
the fourth quarter and full year 2019, compared to $1,797 and
$1,764 in the fourth quarter and full year 2018, respectively.
“As CEO of this business, I am faced with
numerous decisions every day, and one important decision that I am
making given our club member experience and profitability in Q4, is
to control our growth in order to provide the best consumer
experience, and reduce our costs to be adjusted EBITDA profitable
by Q4 of 2020,” said SmileDirectClub CEO David Katzman.
SmileDirectClub CFO Kyle Wailes added, “As we
have stated, 2020 is a year of significant, albeit controlled
growth for SmileDirectClub. Our number one priority is to improve
our club member experience. We will also increase our focus on the
international infrastructure we have already built to best position
our business for long-term global growth. Profitability will also
be a big focus for us in 2020, and we understand the levers we have
to pull to achieve profitability.”
Business Outlook
Our guidance for the fiscal year 2020 is as
follows:
- Revenues are expected to be in the range of $1,000 million to
$1,100 million, representing growth of 40% year-over-year at the
mid-point of the range.
- Adjusted EBITDA for the fiscal year is expected between $(50)
million to $(75) million.
Conference Call Information
SmileDirectClub Fourth Quarter 2019
Conference Call Details |
|
|
Date: |
February 25, 2020 |
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, February 25,
2020 until 11:59 p.m. ET on Tuesday, March 10,
2020 by dialing 1-844-512-2921 (domestic) or 1-412-317-6671
(international) and entering the replay PIN: 136998632. An archived
version of the call and a copy of the 2019 full year 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 Annual Report on Form
10-K for the year ended December 31, 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 an
oral care company and creator of the first direct-to-consumer
medtech platform for teeth straightening, now also offered directly
via dentist and orthodontists’ offices. Through our cutting-edge
teledentistry technology and vertically integrated model, we are
revolutionizing the oral care industry, from clear aligner therapy
to our affordable, premium oral care product line.
SmileDirectClub’s mission is to democratize access to affordable
and convenient care, unleashing the power of a person’s smile to
positively impact their place in the world. SmileDirectClub is
headquartered in Nashville, Tennessee and operates in the U.S.,
Canada, Australia, New Zealand, United Kingdom, Ireland, Germany
and Hong Kong. For more information, please visit
SmileDirectClub.com.
Investor/Media Contact:Alison
SternbergVice President, Investor Relations
310-562-7297Alison.Sternberg@smiledirectclub.com
SmileDirectClub, Inc.Consolidated
Balance Sheets(in thousands)
|
For the Year Ended December 31, |
|
2019 |
2018 |
ASSETS |
|
|
Cash |
$ |
318,458 |
|
$ |
313,929 |
|
Accounts receivable |
239,413 |
|
113,934 |
|
Inventories |
18,431 |
|
8,781 |
|
Prepaid and other current assets |
14,186 |
|
5,782 |
|
Total current assets |
590,488 |
|
442,426 |
|
Accounts receivable, non-current |
106,315 |
|
60,217 |
|
Property, plant and equipment, net |
177,543 |
|
52,551 |
|
Other assets |
11,299 |
|
— |
|
Total assets |
$ |
885,645 |
|
$ |
555,194 |
|
LIABILITIES, TEMPORARY AND PERMANENT EQUITY
(DEFICIT) |
|
|
Accounts payable |
$ |
52,706 |
|
$ |
25,250 |
|
Accrued liabilities |
89,824 |
|
34,939 |
|
Due to related parties |
— |
|
20,305 |
|
Deferred revenue |
25,435 |
|
19,059 |
|
Current portion of related party debt |
— |
|
16,054 |
|
Current portion of long-term debt |
35,376 |
|
1,866 |
|
Total current liabilities |
203,341 |
|
117,473 |
|
Long-term debt, net of current portion |
173,150 |
|
137,123 |
|
Long-term related party debt |
— |
|
1,799 |
|
Other long-term liabilities |
46,617 |
|
602 |
|
Total liabilities |
423,108 |
|
256,997 |
|
Commitment and contingencies |
|
|
Temporary Equity |
|
|
Preferred Units |
— |
|
388,634 |
|
Permanent Equity (Deficit) |
|
|
Class A common stock, par value $0.0001 and 103,303,674 shares
issued and outstanding at December 31, 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 December 31, 2019 and 0 shares issued and
outstanding at December 31, 2018 |
28 |
|
— |
|
Additional paid-in-capital |
452,119 |
|
57,677 |
|
Accumulated other comprehensive income (loss) |
(272 |
) |
— |
|
Accumulated deficit |
(114,513 |
) |
(148,429 |
) |
Noncontrolling interest |
125,165 |
|
— |
|
Warrants |
— |
|
315 |
|
Total permanent equity (deficit) |
462,537 |
|
(90,437 |
) |
Total liabilities, temporary and permanent equity
(deficit) |
$ |
885,645 |
|
$ |
555,194 |
|
SmileDirectClub, Inc.Consolidated
Statements of Operations(in thousands, except
share and per share amounts)
|
Three months ended December 31, |
For the Year Ended December 31, |
2019 |
2018 |
2019 |
2018 |
Revenue, net |
$ |
184,000 |
|
$ |
120,103 |
|
$ |
706,529 |
|
$ |
398,127 |
|
Financing revenue |
12,714 |
|
8,401 |
|
43,899 |
|
25,107 |
|
Total revenues |
196,714 |
|
128,504 |
|
750,428 |
|
423,234 |
|
Cost of revenues |
52,498 |
|
30,344 |
|
163,861 |
|
98,048 |
|
Cost of revenues—related parties |
877 |
|
7,312 |
|
14,529 |
|
35,920 |
|
Total cost of revenues |
53,375 |
|
37,656 |
|
178,390 |
|
133,968 |
|
Gross profit |
143,339 |
|
90,848 |
|
572,038 |
|
289,266 |
|
Marketing and selling expenses |
141,059 |
|
69,413 |
|
481,468 |
|
213,080 |
|
General and administrative expenses |
94,524 |
|
44,193 |
|
580,843 |
|
121,743 |
|
Loss from operations |
(92,244 |
) |
(22,758 |
) |
(490,273 |
) |
(45,557 |
) |
Interest expense |
4,052 |
|
3,249 |
|
15,659 |
|
12,532 |
|
Interest expense—related parties |
— |
|
(73 |
) |
75 |
|
1,173 |
|
Loss on extinguishment of debt |
— |
|
— |
|
29,672 |
|
— |
|
Other expense |
(642 |
) |
13 |
|
(142 |
) |
15,148 |
|
Net loss before provision for income tax expense |
(95,654 |
) |
(25,947 |
) |
(535,537 |
) |
(74,410 |
) |
Provision for income tax expense |
1,672 |
|
67 |
|
2,268 |
|
361 |
|
Net loss |
(97,326 |
) |
(26,014 |
) |
(537,805 |
) |
(74,771 |
) |
Net loss attributable to noncontrolling interest |
(71,109 |
) |
— |
|
(423,292 |
) |
— |
|
Net loss attributable to SmileDirectClub, Inc. |
$ |
(26,217 |
) |
$ |
(26,014 |
) |
$ |
(114,513 |
) |
$ |
(74,771 |
) |
|
|
|
|
|
Earnings per share of Class A common
stock: |
|
|
|
|
Basic |
$ |
(0.25 |
) |
N/A |
$ |
(1.12 |
) |
N/A |
Diluted |
$ |
(0.25 |
) |
N/A |
$ |
(1.14 |
) |
N/A |
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
Basic |
103,043,244 |
|
N/A |
102,442,525 |
|
N/A |
Diluted |
382,517,729 |
|
N/A |
381,917,030 |
|
N/A |
SmileDirectClub, Inc.Consolidated
Statements of Cash Flows(in
thousands)
|
For the Year Ended December 31, |
2019 |
2018 |
Operating Activities |
|
|
Net loss |
$ |
(537,805 |
) |
$ |
(74,771 |
) |
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
Depreciation and amortization |
27,336 |
|
8,861 |
|
Deferred loan cost amortization |
3,969 |
|
4,319 |
|
Accrued interest to related parties |
— |
|
1,152 |
|
Fair value adjustment of warrant derivative |
— |
|
14,500 |
|
Equity-based compensation |
350,122 |
|
19,839 |
|
Loss on extinguishment of debt |
17,693 |
|
— |
|
Other non-cash operating activities |
1,783 |
|
646 |
|
Changes in operating assets and liabilities: |
|
|
Accounts receivable |
(171,577 |
) |
(128,811 |
) |
Inventories |
(9,650 |
) |
(6,058 |
) |
Prepaid and other current assets |
(13,059 |
) |
(4,612 |
) |
Accounts payable |
(1,182 |
) |
24,449 |
|
Accrued liabilities |
13,107 |
|
13,494 |
|
Due to related parties |
(20,305 |
) |
5,584 |
|
Deferred revenue |
6,376 |
|
6,622 |
|
Net cash used in operating activities |
(333,192 |
) |
(114,786 |
) |
Investing Activities |
|
|
Purchases of property and equipment—related party |
— |
|
(15,135 |
) |
Purchases of property, equipment, and intangible assets |
(106,361 |
) |
(26,706 |
) |
Net cash used in investing activities |
(106,361 |
) |
(41,841 |
) |
Financing Activities |
|
|
IPO proceeds, net of discount and related fees |
1,277,010 |
|
— |
|
Repurchase of Class A shares and LLC Units |
(696,489 |
) |
— |
|
Repurchase of Class A shares to cover employee tax
withholdings |
(85,684 |
) |
— |
|
Settlement of canceled awards |
(2,000 |
) |
— |
|
Issuance of Class A common stock |
6 |
|
— |
|
Proceeds from sale of Preferred Units, net |
— |
|
388,634 |
|
Member tax distributions |
— |
|
(86 |
) |
Borrowings on long-term debt |
176,000 |
|
117,375 |
|
Payments of issuance costs |
(6,127 |
) |
(3,514 |
) |
Principal payments on long-term debt |
(193,516 |
) |
— |
|
Principal payments on related party debt |
(22,352 |
) |
(35,532 |
) |
Other |
(2,766 |
) |
(392 |
) |
Net cash provided by financing activities |
444,082 |
|
466,485 |
|
Increase (Decrease) in cash |
4,529 |
|
309,858 |
|
Cash at beginning of period |
313,929 |
|
4,071 |
|
Cash at end of period |
$ |
318,458 |
|
$ |
313,929 |
|
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 December 31, |
Years ended
December 31, |
2019 |
2018 |
2019 |
2018 |
(unaudited) |
Net loss |
$ |
(97,326 |
) |
$ |
(26,014 |
) |
$ |
(537,805 |
) |
$ |
(74,771 |
) |
Depreciation and amortization |
11,099 |
|
3,894 |
|
27,336 |
|
8,861 |
|
Total interest expense |
4,052 |
|
3,176 |
|
15,734 |
|
13,705 |
|
Income tax expense |
1,672 |
|
67 |
|
2,268 |
|
361 |
|
Loss on disposal of property, plant and equipment |
— |
|
— |
|
— |
|
617 |
|
Fair value adjustment of warrant derivative |
— |
|
— |
|
— |
|
14,500 |
|
Loss on extinguishment of debt |
— |
|
— |
|
29,672 |
|
— |
|
Equity-based compensation |
17,363 |
|
6,213 |
|
350,122 |
|
19,839 |
|
IPO related costs |
3,746 |
|
— |
|
9,892 |
|
— |
|
Other |
(644 |
) |
13 |
|
(142 |
) |
31 |
|
Adjusted EBITDA |
$ |
(60,038 |
) |
$ |
(12,651 |
) |
$ |
(102,923 |
) |
$ |
(16,857 |
) |
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