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 second quarter ended
June 30, 2022.
Second Quarter 2022 Financial Highlights
- Total revenue of $126 million, a
17.0% decrease over the first quarter of 2022 and a decrease of
27.8% over the prior year period.
- Net loss of $(65) million, an
improvement of $8 million over the first quarter of 2022 and
decrease of $10 million over the prior year period.
- Adjusted EBITDA of $(23) million,
an $11 million improvement over the first quarter of 2022, and a
decrease of $1 million over the prior year period.
- Diluted EPS of $(0.17), an
improvement of $0.02 over the first quarter of 2022 and a decrease
of $0.03 over the prior year period.
- Net cash used in operating
activities was $(18) million, an improvement of $43 million over
the first quarter of 2022 and an improvement of $13 million over
the prior year period.
- Free Cash Flow defined as net cash
used in operating activities less net cash used in investing
activities of $(36) million, an improvement of $41 million over the
first quarter of 2022 and an improvement of $18 million over the
prior year period.
Key Operating Metrics and Strategic
Highlights
- Second quarter unique aligner
shipments of 62,705, a 17.8% sequential decrease over 76,254
shipments in the first quarter of 2022.
- Second quarter average aligner
gross sales price (“ASP”) of $1,917 compared to $1,890 for the
first quarter of 2022.
“Despite top line challenges, our cost control
actions taken in the first quarter reduced our expense base and
minimized the impact to our bottom line, while delivering an
improving cash flow result during the second quarter,” said David
Katzman, Chief Executive Officer and Chairman of SmileDirectClub.
“We recognize that reengaging top-line growth through innovation is
important to the long-term success of our business.”
Katzman added, “A key step in leveraging our
technology innovations will be the rollout of our mobile scanning
app for 3D treatment planning as part of our SmileMaker Platform.
This is our proprietary smartphone-based scanning app with AI
technology that allows customers to scan their teeth using their
smartphone to see their 3D draft treatment plan for their new
smile, learn how long it will take to straighten their teeth, and
purchase within minutes of downloading our application. This
technology delivers on our founders’ original vision of making it
easy to get started with treatment, and no other clear aligner
option out there can do what we have developed. This transformative
innovation improves the customer experience and reduces the
timeline between site visit and purchase decision that exists
today.
“This new go-to-market strategy transforms
SmileDirectClub from a marketing-led approach to growth to a
technology-led company, with a pipeline of new innovations that
will be introduced into the market in future quarters. In addition
to our SmileMaker Platform, we will continue to focus on executing
on our key strategic growth initiatives, including expanding our
customer reach through our Partner Network, investing in
proprietary technologies and product innovations, developing and
launching our SDC+ solution and pursuing profitable SmileShop
expansion.”
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. The aspirational
vision of the organization is to become the “world’s leading oral
health brand by helping more people realize the life changing
potential of a confident smile.” SmileDirectClub’s vision and
mission are greater than manufacturing and marketing clear
aligners. Every decision and investment the Company has made is to
support and expand this mission and enable its long-term growth
potential. For SmileDirectClub to realize its vision through its
mission, the Company must expand reach within and beyond the
existing core customer base. Expanding reach comes through
continuously bringing transformative innovation to the market
across an entire portfolio of both consumer facing and non-consumer
facing innovations through focus on the Partner Network, aligner
product innovations, SDC+, oral care solutions and SmileShop
expansion. 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 43 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 690 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 57% aided awareness.
When consumers are considering straightening
their teeth, they typically do one or all of the following: search
online to understand their options; ask a dentist; and 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, 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.
Revised Full Year 2022
Guidance
Challenges to consumer spending accelerated
faster than we anticipated during the quarter which, combined with
reduced stimulus, sustained high inflation, and a shift in
discretionary spending towards services have resulted in less
predictable demand curves and lower overall expected demand for the
balance of the year.
For the year ended December 31, 2022, the
Company expects total revenue to be in the range of $450 million to
$500 million.
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 69.5% to 71.5%
- Adjusted EBITDA range of ($180
million) to ($140 million)
- CapEx range of $60 million to $70
million
- One-time costs range of $20 million
to $25 million
- Year-end cash balance between $120
million to $160 million
Revenue and expense guidance updates now include
contributions and investments for accelerated expansion of the
Partner Network and SmileShop footprint expansion.
Conference Call Information
SmileDirectClub Second Quarter 2022 Conference Call
Details |
|
|
Date: |
August 9, 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, August 9,
2022 until 11:59 p.m. Eastern Time on Tuesday,
August 16, 2022 by dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international) and entering the replay PIN:
13730975. A copy of the second 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 and our Form 10-Q for the
period ended March 31, 2022.
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)
(“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:Kim
AtkinsonSenior Vice President, Global
Communicationspress@smiledirectclub.com
SmileDirectClub, Inc.Consolidated
Balance Sheets(in
thousands)(unaudited)
|
June 30, |
December 31, |
2022 |
2021 |
ASSETS |
|
|
Cash |
$ |
158,264 |
|
$ |
224,860 |
|
Accounts receivable, net |
|
166,528 |
|
|
184,558 |
|
Inventories |
|
43,110 |
|
|
40,803 |
|
Prepaid and other current
assets |
|
23,816 |
|
|
17,519 |
|
Total current assets |
|
391,718 |
|
|
467,740 |
|
Accounts receivable, net,
non-current |
|
55,093 |
|
|
59,210 |
|
Property, plant and equipment,
net |
|
210,574 |
|
|
227,201 |
|
Operating lease right-of-use
assets |
|
23,825 |
|
|
24,927 |
|
Other assets |
|
19,350 |
|
|
15,480 |
|
Total assets |
$ |
700,560 |
|
$ |
794,558 |
|
LIABILITIES AND EQUITY
(DEFICIT) |
|
|
Accounts payable |
$ |
33,780 |
|
$ |
19,922 |
|
Accrued liabilities |
|
91,062 |
|
|
122,066 |
|
Deferred revenue |
|
17,352 |
|
|
20,258 |
|
Current portion of long-term
debt |
|
6,189 |
|
|
10,997 |
|
Other current liabilities |
|
5,921 |
|
|
4,997 |
|
Total current liabilities |
|
154,304 |
|
|
178,240 |
|
Long-term debt, net of current
portion |
|
785,961 |
|
|
729,973 |
|
Operating lease liabilities,
net of current portion |
|
18,482 |
|
|
20,352 |
|
Other long-term
liabilities |
|
349 |
|
|
347 |
|
Total liabilities |
|
959,096 |
|
|
928,912 |
|
Equity
(Deficit) |
|
|
Class A common stock, par
value $0.0001 and 120,995,922 shares issued and outstanding at
June 30, 2022 and 119,280,781 shares issued and outstanding at
December 31, 2021 |
|
12 |
|
|
12 |
|
Class B common stock, par
value $0.0001 and 268,823,501 shares issued and outstanding at
June 30, 2022 and 269,243,501 shares issued and outstanding at
December 31, 2021 |
|
27 |
|
|
27 |
|
Additional
paid-in-capital |
|
460,820 |
|
|
448,867 |
|
Accumulated other
comprehensive income |
|
967 |
|
|
293 |
|
Accumulated deficit |
|
(338,207 |
) |
|
(295,321 |
) |
Noncontrolling interest |
|
(399,775 |
) |
|
(305,852 |
) |
Warrants |
|
17,620 |
|
|
17,620 |
|
Total equity (deficit) |
|
(258,536 |
) |
|
(134,354 |
) |
Total liabilities and equity (deficit) |
$ |
700,560 |
|
$ |
794,558 |
|
|
SmileDirectClub, Inc.Consolidated
Statements of Operations(in thousands, except
share and per share
amounts)(unaudited)
|
Three Months Ended June 30, |
Six Months Ended June 30, |
2022 |
2021 |
2022 |
|
2021 |
Revenue, net |
$ |
116,802 |
|
$ |
162,587 |
|
$ |
259,314 |
|
$ |
351,389 |
|
Financing revenue |
|
8,994 |
|
|
11,594 |
|
|
18,128 |
|
|
22,253 |
|
Total revenues |
|
125,796 |
|
|
174,181 |
|
|
277,442 |
|
|
373,642 |
|
Cost of revenues |
|
34,075 |
|
|
45,860 |
|
|
77,141 |
|
|
93,821 |
|
Gross profit |
|
91,721 |
|
|
128,321 |
|
|
200,301 |
|
|
279,821 |
|
Marketing and selling
expenses |
|
71,191 |
|
|
95,943 |
|
|
167,902 |
|
|
193,066 |
|
General and administrative
expenses |
|
72,320 |
|
|
85,042 |
|
|
143,113 |
|
|
166,120 |
|
Lease abandonment and
impairment of long-lived assets |
|
— |
|
|
— |
|
|
1,232 |
|
|
— |
|
Restructuring and other
related costs |
|
3,168 |
|
|
536 |
|
|
14,700 |
|
|
1,664 |
|
Loss from operations |
|
(54,958 |
) |
|
(53,200 |
) |
|
(126,646 |
) |
|
(81,029 |
) |
Interest expense |
|
4,454 |
|
|
1,939 |
|
|
6,010 |
|
|
19,505 |
|
Loss on extinguishment of
debt |
|
— |
|
|
— |
|
|
— |
|
|
47,631 |
|
Other expense |
|
5,818 |
|
|
130 |
|
|
7,241 |
|
|
1,042 |
|
Net loss before provision for income tax expense (benefit) |
|
(65,230 |
) |
|
(55,269 |
) |
|
(139,897 |
) |
|
(149,207 |
) |
Provision for income tax
expense (benefit) |
|
256 |
|
|
(12 |
) |
|
(1,207 |
) |
|
1,695 |
|
Net loss |
|
(65,486 |
) |
|
(55,257 |
) |
|
(138,690 |
) |
|
(150,902 |
) |
Net loss attributable to
noncontrolling interest |
|
(45,181 |
) |
|
(38,377 |
) |
|
(95,804 |
) |
|
(105,113 |
) |
Net loss attributable to SmileDirectClub, Inc. |
$ |
(20,305 |
) |
$ |
(16,880 |
) |
$ |
(42,886 |
) |
$ |
(45,789 |
) |
|
|
|
|
|
Earnings (loss) per
share of Class A common stock: |
|
|
|
|
Basic |
$ |
(0.17 |
) |
$ |
(0.14 |
) |
$ |
(0.36 |
) |
$ |
(0.39 |
) |
Diluted |
$ |
(0.17 |
) |
$ |
(0.14 |
) |
$ |
(0.36 |
) |
$ |
(0.39 |
) |
|
|
|
|
|
Weighted average
shares outstanding: |
|
|
|
|
Basic |
|
120,818,400 |
|
|
118,344,050 |
|
|
120,507,211 |
|
|
117,656,599 |
|
Diluted |
|
389,665,923 |
|
|
387,609,677 |
|
|
389,483,239 |
|
|
387,246,120 |
|
|
SmileDirectClub, Inc.Consolidated
Statements of Cash Flows(in
thousands)(unaudited)
|
Six Months Ended June 30, |
2022 |
2021 |
Operating
Activities |
|
|
Net loss |
$ |
(138,690 |
) |
$ |
(150,902 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
Depreciation and amortization |
|
38,496 |
|
|
33,169 |
|
Deferred loan cost amortization |
|
2,329 |
|
|
3,041 |
|
Equity-based compensation |
|
13,866 |
|
|
27,167 |
|
Loss on extinguishment of debt |
|
— |
|
|
47,631 |
|
Paid in kind interest expense |
|
— |
|
|
3,324 |
|
Asset impairment and related charges |
|
6,300 |
|
|
— |
|
Other non-cash operating activities |
|
1,102 |
|
|
798 |
|
Changes in operating assets
and liabilities: |
|
|
Accounts receivable |
|
22,147 |
|
|
3,726 |
|
Inventories |
|
(2,307 |
) |
|
(3,701 |
) |
Prepaid and other current assets |
|
(6,377 |
) |
|
(6,572 |
) |
Accounts payable |
|
16,726 |
|
|
(11,998 |
) |
Accrued liabilities |
|
(29,790 |
) |
|
(2,990 |
) |
Deferred revenue |
|
(2,906 |
) |
|
(2,044 |
) |
Net cash used in operating activities |
|
(79,104 |
) |
|
(59,351 |
) |
Investing
Activities |
|
|
Purchases of property,
equipment, and intangible assets |
|
(32,872 |
) |
|
(45,303 |
) |
Net cash used in investing activities |
|
(32,872 |
) |
|
(45,303 |
) |
Financing
Activities |
|
|
Repurchase of Class A shares
to cover employee tax withholdings |
|
(2,340 |
) |
|
(6,260 |
) |
Proceeds from stock purchase
plan |
|
429 |
|
|
632 |
|
Repayment of HPS Credit
Facility |
|
— |
|
|
(396,497 |
) |
Payment of extinguishment
costs |
|
— |
|
|
(37,701 |
) |
Borrowings of long-term
debt |
|
54,920 |
|
|
747,500 |
|
Payments of issuance
costs |
|
(5,426 |
) |
|
(21,179 |
) |
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 |
|
(4,808 |
) |
|
(5,182 |
) |
Other |
|
2,553 |
|
|
(83 |
) |
Net cash provided by financing activities |
|
45,328 |
|
|
163,703 |
|
Effect of exchange rates
change on cash and cash equivalents |
|
52 |
|
|
875 |
|
Increase (decrease) in
cash |
|
(66,596 |
) |
|
59,924 |
|
Cash at beginning of
period |
|
224,860 |
|
|
316,724 |
|
Cash at end of period |
$ |
158,264 |
|
$ |
376,648 |
|
Use of Non-GAAP Financial
Measures
This earnings release contains certain non-GAAP
financial measures, including adjusted EBITDA (“Adjusted EBITDA”)
and Free Cash Flow. We provide a reconciliation of these non-GAAP
financial measures to the most directly comparable GAAP financial
measures 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 Free Cash Flow and Adjusted EBITDA, to evaluate our
actual operating performance and for the planning and forecasting
of future periods.
We define Free Cash Flow as net cash used in
operating activities less net cash used in investing
activities.
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 both Free Cash Flow and
Adjusted EBITDA to net loss, the most directly comparable GAAP
financial measure for Adjusted EBITDA, is set forth below.
SmileDirectClub, Inc.Reconciliation of
Free Cash Flow(in thousands)
|
Three Months Ended |
June 30, |
March 31, |
June 30, |
2022 |
2022 |
2021 |
Net cash used in operating activities |
$ |
(17,840 |
) |
$ |
(61,264 |
) |
$ |
(31,013 |
) |
Net cash used in investing
activities |
|
(17,754 |
) |
|
(15,118 |
) |
|
(22,322 |
) |
Free Cash Flow |
$ |
(35,594 |
) |
$ |
(76,382 |
) |
$ |
(53,335 |
) |
|
SmileDirectClub, Inc.Reconciliation of
Net Loss to Adjusted EBITDA(in
thousands)
|
Three Months Ended |
Six Months Ended |
June 30, |
March 31, |
June 30, |
June 30, |
June 30, |
2022 |
2022 |
2021 |
2022 |
2021 |
Net loss |
$ |
(65,486 |
) |
$ |
(73,204 |
) |
$ |
(55,257 |
) |
$ |
(138,690 |
) |
$ |
(150,902 |
) |
Depreciation and
amortization |
|
19,580 |
|
|
18,916 |
|
|
16,709 |
|
|
38,496 |
|
|
33,169 |
|
Total interest expense |
|
4,454 |
|
|
1,556 |
|
|
1,939 |
|
|
6,010 |
|
|
19,505 |
|
Income tax expense
(benefit) |
|
256 |
|
|
(1,463 |
) |
|
(12 |
) |
|
(1,207 |
) |
|
1,695 |
|
Lease abandonment and
impairment of long-lived assets |
|
— |
|
|
1,232 |
|
|
— |
|
|
1,232 |
|
|
— |
|
Restructuring and other
related costs |
|
3,168 |
|
|
11,532 |
|
|
536 |
|
|
14,700 |
|
|
1,664 |
|
Loss on extinguishment of
debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
47,631 |
|
Equity-based compensation |
|
8,560 |
|
|
5,306 |
|
|
12,008 |
|
|
13,866 |
|
|
27,167 |
|
Other non-operating general
and administrative losses |
|
6,306 |
|
|
1,684 |
|
|
1,601 |
|
|
7,990 |
|
|
2,513 |
|
Adjusted EBITDA |
$ |
(23,162 |
) |
$ |
(34,441 |
) |
$ |
(22,476 |
) |
$ |
(57,603 |
) |
$ |
(17,558 |
) |
SmileDirectClub (NASDAQ:SDC)
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From Jun 2024 to Jul 2024
SmileDirectClub (NASDAQ:SDC)
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From Jul 2023 to Jul 2024