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 fourth quarter and
year ended December 31, 2021.
Fourth Quarter 2021 Financial Highlights
- Total revenue of $126 million, a
decrease of 31.6% over the prior year period.
- Net loss of $(95) million, a
decrease of $62 million over the prior year period.
- Adjusted EBITDA of $(62) million, a
decrease of $69 million over the prior year period.
- Diluted EPS of $(0.25), a decrease
of $0.16 over the prior year period.
2021 Financial Highlights
- FY 2021 total revenue of $638
million, a decrease of 2.9% over the prior year.
- Net loss of $(336) million, a
decrease of $57 million over the prior year.
- Adjusted EBITDA of $(133) million,
a decrease of $56 million over the prior year.
- Diluted EPS of $(0.87), a decrease
of $0.15 over the prior year.
Key Operating Metrics
- Fourth quarter unique aligner
shipments of 66,133.
- Fourth quarter average aligner
gross sales price (“ASP”) of $1,899 for the fourth quarter of 2021,
compared to $1,820 for the fourth quarter of 2020.
“Our fourth quarter results are in-line with the
guidance that we provided on our third quarter earnings call. The
macroeconomic headwinds impacting the spending of our core
demographic and our business have continued from early in the
summer and through the fourth quarter,” said David Katzman, Chief
Executive Officer and Chairman of SmileDirectClub. “We took actions
in January to reduce costs to optimize our operating structure and
focus investments on our core growth initiatives with the clearest
path to profitability. Our business strategy remains consistent to
make oral care accessible, affordable and available to everyone,
with our tactics focused on driving our business forward despite
the challenges impacting our current customer base. We constantly
monitor our customer’s challenges and preferences while continuing
to focus efforts to move upstream with higher income demographics
through our challenger campaign, investing in our professional
channel – the Partner Network, and inspiring consumers through our
branding efforts, including the creation of our Confidence Council.
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 32 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 1.5 million customers, built
the only end-to-end vertically integrated platform for the consumer
at scale, created a Dental Partner Network with 657 global
practices that are live or pending training, created oral care
products available at over 12,900 retail stores worldwide, and
remains the strongest teledentistry brand in terms of aided and
unaided 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 fourth
quarter survey separately noted that the Company’s unaided and
aided brand awareness continued its trend of separation from its
teledentistry competitors and closer awareness compared with
Invisalign on key topics such as “a legitimate orthodontic option
for straightening teeth” and “helps transform individuals through
confident smiles they love.”
In addition to these investments in influencing
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
tele-dentistry, 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
For the year ended December 31, 2022, the
Company expects total revenue to be in the range of $600 million to
$650 million. While macroeconomic trends persist into 2022 from a
demand perspective, the Company notes that its business can be
highly variable on a month-to-month or quarter-to-quarter
basis.
The assumptions underlying the revenue estimate
include:
- Low end of range represents
continued worsening of core consumer
- High end assumes macro headwinds
eases in back half of 2022
The full year 2022 costs and capital outlook
include (see Company’s supplemental earnings presentation for more
insights regarding these assumptions):
- Gross margin range (as a percentage
of total revenues) of 72.5% to 75.0%
- Adjusted EBITDA range of ($75
million) to ($25 million)
- CapEx range of $60 million to $70
million
- One-Time costs range of $20 million
to $25 million
Revenue and expense guidance does not include outsized
contributions or investments in any potential accelerated expansion
of the Partner Network or SmileShop footprint. Any potential
topline benefits or investments from the acceleration of these
initiatives will be discussed during upcoming quarterly calls.
Conference Call Information
SmileDirectClub Fourth Quarter and Year End 2021 Conference
Call Details |
|
|
Date: |
March 1, 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, March 1,
2022 until 11:59 p.m. Eastern Time on Tuesday,
March 8, 2022 by dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international) and entering the replay PIN:
13726802. A copy of the 2021 fourth quarter and year end 2021
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 Relations
Jonathan FleetwoodDirector, Investor
Relationsinvestorrelations@smiledirectclub.com
Media Relations:Amber
PietrobonoDirector, Corporate
Communicationspress@smiledirectclub.com
SmileDirectClub, Inc.Consolidated
Balance Sheets(in
thousands)(unaudited)
|
December 31, |
December 31, |
2021 |
2020 |
ASSETS |
|
|
Cash |
$ |
224,860 |
|
$ |
316,724 |
|
Accounts receivable, net |
|
184,558 |
|
|
221,973 |
|
Inventories |
|
40,803 |
|
|
29,247 |
|
Prepaid and other current
assets |
|
17,519 |
|
|
12,832 |
|
Total current assets |
|
467,740 |
|
|
580,776 |
|
Accounts receivable, net,
non-current |
|
59,210 |
|
|
71,355 |
|
Property, plant and equipment,
net |
|
227,201 |
|
|
189,995 |
|
Operating lease right-of-use
asset |
|
24,927 |
|
|
31,176 |
|
Other assets |
|
15,480 |
|
|
11,487 |
|
Total assets |
$ |
794,558 |
|
$ |
884,789 |
|
LIABILITIES AND EQUITY
(DEFICIT) |
|
|
Accounts payable |
$ |
19,922 |
|
$ |
36,848 |
|
Accrued liabilities |
|
122,066 |
|
|
100,589 |
|
Deferred revenue |
|
20,258 |
|
|
26,619 |
|
Current portion of long-term
debt |
|
10,997 |
|
|
15,664 |
|
Other current liabilities |
|
4,997 |
|
|
6,821 |
|
Total current liabilities |
|
178,240 |
|
|
186,541 |
|
Long-term debt, net of current
portion |
|
729,973 |
|
|
392,939 |
|
Operating lease liabilities,
net of current portion |
|
20,352 |
|
|
27,771 |
|
Other long-term
liabilities |
|
347 |
|
|
43,400 |
|
Total liabilities |
|
928,912 |
|
|
650,651 |
|
Equity
(Deficit) |
|
|
Class A common stock, par
value $0.0001 and 119,280,781 shares issued and outstanding at
December 31, 2021 and 115,429,319 shares issued and
outstanding at December 31, 2020 |
|
12 |
|
|
11 |
|
Class B common stock, par
value $0.0001 and 269,243,501 shares issued and outstanding at
December 31, 2021 and 270,908,566 shares issued and
outstanding at December 31, 2020 |
|
27 |
|
|
27 |
|
Additional
paid-in-capital |
|
448,867 |
|
|
483,393 |
|
Accumulated other
comprehensive income (loss) |
|
293 |
|
|
(102 |
) |
Accumulated deficit |
|
(295,321 |
) |
|
(192,879 |
) |
Noncontrolling interest |
|
(305,852 |
) |
|
(73,932 |
) |
Warrants |
|
17,620 |
|
|
17,620 |
|
Total equity (deficit) |
|
(134,354 |
) |
|
234,138 |
|
Total liabilities and equity (deficit) |
$ |
794,558 |
|
$ |
884,789 |
|
SmileDirectClub, Inc.Consolidated
Statements of Operations(in thousands, except
share and per share
amounts)(unaudited)
|
Three Months Ended December 31, |
Years Ended December 31, |
2021 |
2020 |
2021 |
2020 |
Revenue, net |
$ |
116,507 |
|
$ |
172,577 |
|
$ |
594,692 |
|
$ |
607,373 |
|
Financing revenue |
|
9,779 |
|
|
11,979 |
|
|
42,919 |
|
|
49,407 |
|
Total revenues |
|
126,286 |
|
|
184,556 |
|
|
637,611 |
|
|
656,780 |
|
Cost of revenues |
|
44,364 |
|
|
48,539 |
|
|
177,597 |
|
|
206,852 |
|
Gross profit |
|
81,922 |
|
|
136,017 |
|
|
460,014 |
|
|
449,928 |
|
Marketing and selling
expenses |
|
99,209 |
|
|
79,355 |
|
|
388,450 |
|
|
322,919 |
|
General and administrative
expenses |
|
73,791 |
|
|
78,154 |
|
|
325,569 |
|
|
311,982 |
|
Lease abandonment and
impairment of long-lived assets |
|
103 |
|
|
(3,136 |
) |
|
1,481 |
|
|
25,457 |
|
Other store closure and
related costs |
|
2,039 |
|
|
844 |
|
|
3,798 |
|
|
7,034 |
|
Loss from operations |
|
(93,220 |
) |
|
(19,200 |
) |
|
(259,284 |
) |
|
(217,464 |
) |
Interest expense |
|
1,877 |
|
|
15,383 |
|
|
23,154 |
|
|
45,010 |
|
Loss on extinguishment of
debt |
|
— |
|
|
— |
|
|
47,631 |
|
|
13,781 |
|
Other expense (income) |
|
576 |
|
|
(3,009 |
) |
|
4,313 |
|
|
(878 |
) |
Net loss before provision for income tax expense (benefit) |
|
(95,673 |
) |
|
(31,574 |
) |
|
(334,382 |
) |
|
(275,377 |
) |
Provision for income tax
expense (benefit) |
|
(308 |
) |
|
1,377 |
|
|
1,268 |
|
|
3,122 |
|
Net loss |
|
(95,365 |
) |
|
(32,951 |
) |
|
(335,650 |
) |
|
(278,499 |
) |
Net loss attributable to
noncontrolling interest |
|
(66,104 |
) |
|
(23,224 |
) |
|
(233,208 |
) |
|
(200,133 |
) |
Net loss attributable to SmileDirectClub, Inc. |
$ |
(29,261 |
) |
$ |
(9,727 |
) |
$ |
(102,442 |
) |
$ |
(78,366 |
) |
|
|
|
|
|
Earnings (loss) per
share of Class A common stock: |
|
|
|
|
Basic |
$ |
(0.25 |
) |
$ |
(0.09 |
) |
$ |
(0.87 |
) |
$ |
(0.71 |
) |
Diluted |
$ |
(0.25 |
) |
$ |
(0.09 |
) |
$ |
(0.87 |
) |
$ |
(0.72 |
) |
|
|
|
|
|
Weighted average
shares outstanding: |
|
|
|
|
Basic |
|
119,188,971 |
|
|
114,008,652 |
|
|
118,360,801 |
|
|
109,854,360 |
|
Diluted |
|
388,432,472 |
|
|
386,128,446 |
|
|
387,775,890 |
|
|
385,200,442 |
|
SmileDirectClub, Inc.Consolidated
Statements of Cash Flows(in
thousands)(unaudited)
|
Years Ended December 31, |
2021 |
2020 |
Operating
Activities |
|
|
Net loss |
$ |
(335,650 |
) |
$ |
(278,499 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
Depreciation and amortization |
|
70,113 |
|
|
56,390 |
|
Deferred loan cost amortization |
|
5,148 |
|
|
4,407 |
|
Equity-based compensation |
|
44,628 |
|
|
44,903 |
|
Loss on extinguishment of debt |
|
47,631 |
|
|
13,594 |
|
Paid in kind interest expense |
|
3,324 |
|
|
8,450 |
|
Asset impairment and related charges |
|
1,481 |
|
|
27,767 |
|
Other non-cash operating activities |
|
372 |
|
|
10,071 |
|
Changes in operating assets
and liabilities: |
|
|
Accounts receivable |
|
49,560 |
|
|
52,400 |
|
Inventories |
|
(11,775 |
) |
|
(11,602 |
) |
Prepaid and other current assets |
|
(8,733 |
) |
|
(378 |
) |
Accounts payable |
|
(11,296 |
) |
|
(7,670 |
) |
Accrued liabilities |
|
10,039 |
|
|
(4,585 |
) |
Deferred revenue |
|
(6,361 |
) |
|
1,184 |
|
Net cash used in operating activities |
|
(141,519 |
) |
|
(83,568 |
) |
Investing
Activities |
|
|
Purchases of property,
equipment, and intangible assets |
|
(106,567 |
) |
|
(97,141 |
) |
Net cash used in investing activities |
|
(106,567 |
) |
|
(97,141 |
) |
Financing
Activities |
|
|
IPO proceeds, net of discount
and related fees |
|
— |
|
|
(1,155 |
) |
Proceeds from warrant
exercise |
|
— |
|
|
922 |
|
Repurchase of Class A shares
to cover employee tax withholdings |
|
(10,028 |
) |
|
(9,901 |
) |
Proceeds from stock purchase
plan |
|
1,031 |
|
|
— |
|
Repayment of HPS Credit
Facility |
|
(396,497 |
) |
|
— |
|
Payment of extinguishment
costs |
|
(37,701 |
) |
|
— |
|
Proceeds from HPS Credit
Facility and Warrants, net |
|
— |
|
|
388,000 |
|
Borrowings of long-term
debt |
|
747,500 |
|
|
16,807 |
|
Payments of issuance
costs |
|
(21,179 |
) |
|
(11,784 |
) |
Purchase of capped call
transactions |
|
(69,518 |
) |
|
— |
|
Final payment of Align
arbitration |
|
(43,400 |
) |
|
— |
|
Principal payments on
long-term debt |
|
(4,609 |
) |
|
(194,439 |
) |
Payments of finance
leases |
|
(11,055 |
) |
|
(10,138 |
) |
Other |
|
1,173 |
|
|
663 |
|
Net cash provided by financing activities |
|
155,717 |
|
|
178,975 |
|
Effect of exchange rates change on cash and cash equivalents |
|
505 |
|
|
— |
|
Decrease in cash |
|
(91,864 |
) |
|
(1,734 |
) |
Cash at beginning of
period |
|
316,724 |
|
|
318,458 |
|
Cash at end of period |
$ |
224,860 |
|
$ |
316,724 |
|
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 December 31, |
Years Ended December 31, |
2021 |
2020 |
2021 |
2020 |
(unaudited) |
Net loss |
$ |
(95,365 |
) |
$ |
(32,951 |
) |
$ |
(335,650 |
) |
$ |
(278,499 |
) |
Depreciation and
amortization |
|
18,458 |
|
|
16,991 |
|
|
70,113 |
|
|
56,390 |
|
Total interest expense |
|
1,877 |
|
|
15,383 |
|
|
23,154 |
|
|
45,010 |
|
Income tax expense
(benefit) |
|
(308 |
) |
|
1,377 |
|
|
1,268 |
|
|
3,122 |
|
Lease abandonment and
impairment of long-lived assets |
|
103 |
|
|
(3,136 |
) |
|
1,481 |
|
|
25,457 |
|
Other store closure and
related costs |
|
2,039 |
|
|
844 |
|
|
3,798 |
|
|
7,034 |
|
Loss on extinguishment of
debt |
|
— |
|
|
— |
|
|
47,631 |
|
|
13,781 |
|
Equity-based compensation |
|
6,969 |
|
|
6,714 |
|
|
44,628 |
|
|
44,903 |
|
Other non-operating general
and administrative losses |
|
4,596 |
|
|
1,943 |
|
|
10,373 |
|
|
5,718 |
|
Adjusted EBITDA |
$ |
(61,631 |
) |
$ |
7,165 |
|
$ |
(133,204 |
) |
$ |
(77,084 |
) |
SmileDirectClub (NASDAQ:SDC)
Historical Stock Chart
From Jun 2024 to Jul 2024
SmileDirectClub (NASDAQ:SDC)
Historical Stock Chart
From Jul 2023 to Jul 2024