Key Financial Metrics Highlight Positive Trends in Cash Flow Management

NASHVILLE, Tenn., Aug. 08, 2022 (GLOBE NEWSWIRE) — SmileDirectClub, Inc. (Nasdaq: SDC) is leading the evolution in oral care technology with its innovative medtech platform for teeth straightening. Today, the company reported its financial performance for the second quarter, concluding on June 30, 2022, revealing critical insights into its operational efficiency and market strategies.

Second Quarter 2022 Financial Performance Overview

• Total revenue reached $126 million, reflecting a 17.0% decline compared to the first quarter of 2022 and a drop of 27.8% from the same period last year.
• The net loss stood at $(65) million, indicating an improvement of $8 million over Q1 2022 and a decrease of $10 million compared to the previous year.
• Adjusted EBITDA recorded at $(23) million, showing an $11 million enhancement over the first quarter of 2022, despite a $1 million reduction year-over-year.
• Diluted EPS was $(0.17), marking an improvement of $0.02 from Q1 2022 but a decrease of $0.03 from the same period last year.
• Net cash utilized in operating activities was $(18) million, improving by $43 million compared to Q1 2022 and bettering by $13 million year-over-year.
• Free Cash Flow, calculated as net cash used in operating activities minus net cash used in investing activities, was $(36) million, reflecting a $41 million improvement over Q1 2022 and an $18 million increase over the previous year.

Strategic Insights and Operational Metrics

• Unique aligner shipments for the second quarter totaled 62,705, representing a 17.8% sequential decrease from 76,254 shipments in Q1 2022.
• The average aligner gross sales price (“ASP”) for the second quarter was $1,917, up from $1,890 in Q1 2022.

“Even with challenges on the revenue front, the cost control measures implemented in the first quarter were effective in reducing our expense base and lessening the impact on our overall financial results. This enabled us to achieve a positive cash flow outcome during the second quarter,” stated David Katzman, Chief Executive Officer and Chairman of SmileDirectClub. “We understand the necessity of rekindling top-line growth through continuous innovation for the business’s long-term viability,” he added.

Katzman further emphasized, “A pivotal advancement in leveraging our technology will be the introduction of our mobile scanning application for 3D treatment planning, integrated into our SmileMaker Platform. This proprietary smartphone-based scanning solution uses AI technology, enabling customers to scan their teeth with their smartphones, view a 3D draft treatment plan for their new smile, estimate the duration for teeth straightening, and make purchases within minutes of downloading our app. This innovation aligns with our founders’ mission of simplifying treatment initiation, setting us apart from all other clear aligner options in the market. This transformative approach enhances the customer experience and shortens the decision-making timeline between the initial site visit and the purchase.”

“Our new go-to-market strategy is evolving SmileDirectClub from a marketing-focused growth model to a technology-centric enterprise, preparing us to unveil a series of new innovations in upcoming quarters. In addition to our SmileMaker Platform, we will maintain our commitment to executing our strategic growth initiatives, which include broadening our customer base through our Partner Network, investing in proprietary technologies and product innovations, launching our SDC+ solution, and pursuing the profitable expansion of SmileShops,” Katzman concluded.

Future Business Outlook and Commitment to Oral Health Accessibility

SmileDirectClub is dedicated to making the dream of a beautiful smile accessible to everyone, ensuring affordability and convenience in oral healthcare. The organization aspires to be recognized as the “world’s leading oral health brand” by enabling more individuals to experience the transformative power of a confident smile. The company’s vision transcends merely producing and marketing clear aligners; every decision and investment is strategically aimed at supporting this mission, fostering long-term growth opportunities. Realizing this vision demands expanding our reach beyond the current core customer base, continuously introducing innovative solutions across our consumer-facing and non-consumer-facing portfolios, focusing on the Partner Network, aligner product innovations, SDC+, oral care solutions, and SmileShop expansion. SmileDirectClub possesses the unique assets and innovations to disrupt the market, the agility to adapt to customer needs, and a sustainable brand presence that resonates with consumers.

The company has secured 43 patents and continues to innovate in areas including orthodontic treatment planning, aligner manufacturing, smile scanning technologies, and telehealth platforms. Numerous patents are pending both domestically and internationally, covering technologies related to data capture, 3D imaging, intraoral scanning, monitoring, manufacturing, and consumer products. SmileDirectClub has successfully enabled treatment for over 1.7 million customers, established the only vertically integrated end-to-end platform for consumers at scale, and developed a Partner Network comprising 690 global practices currently active or in training. Additionally, their oral care products are available in over 16,300 retail stores internationally, solidifying their position as the leading teledentistry brand with a 57% recognition rate among consumers.

When consumers contemplate the option of teeth straightening, they often engage in various research methods, such as online searches, consultations with dentists, or discussions with friends and family for recommendations. According to company research, consumers perceive SmileDirectClub’s product and customer experience to be nearly on par with Invisalign, yet more affordable and convenient. In contrast, a study revealed that significantly fewer customers recommend other teledentistry platforms compared to SmileDirectClub. The first quarter survey from the U.S. Brand Tracker highlighted an increasing gap in brand awareness between SmileDirectClub and its teledentistry competitors, with recognition levels nearing those of Invisalign. Furthermore, the company’s pioneering telehealth platform recently received accolades from MedTech Breakthrough, being awarded the “Best Telehealth Platform” in 2022.

In addition to these strategic investments aimed at pioneering the next generation of oral care and shaping consumer decision-making, the company remains committed to penetrating new demographics to ensure controlled growth while adhering to profitability targets. Favorable industry trends are also emerging, characterized by wider acceptance of telehealth services, particularly in teledentistry, minimal penetration in relation to the total addressable market, recent regulatory advancements that enhance access to care, and increasing market share of clear aligners within the broader industry.

Updated Full Year 2022 Revenue Forecast

The challenges in consumer spending have accelerated more swiftly than anticipated during this quarter, coupled with reduced stimulus funds, persistent high inflation, and a shift in discretionary spending towards services. These factors have led to less predictable demand curves and a lower overall demand forecast for the remainder of the year.

For the fiscal year ending December 31, 2022, the company anticipates total revenue to fall within the range of $450 million to $500 million.

The full-year 2022 cost and capital projections include (refer to the company’s supplemental earnings presentation for more detailed assumptions):

• Gross margin projected between 69.5% and 71.5% of total revenues
• Adjusted EBITDA forecasted between ($180 million) and ($140 million)
• Capital Expenditures expected to range from $60 million to $70 million
• One-time costs estimated between $20 million and $25 million
• Year-end cash balance projected between $120 million and $160 million

The updates to our revenue and expense guidance now factor in contributions for the accelerated expansion of the Partner Network and SmileShop footprint.

Important Conference Call Information

A replay of the call will be available on the same day starting at 11 a.m. Eastern Time on Tuesday, August 9, 2022, until 11:59 p.m. Eastern Time on Tuesday, August 16, 2022. To access the replay, call 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and enter the replay PIN: 13730975. A copy of the second quarter 2022 results supplemental earnings presentation and an archived version of the call will also be accessible on the Investor Relations section of SmileDirectClub’s website at investors.smiledirectclub.com.

Forward-Looking Statements Disclaimer

This earnings release includes forward-looking statements that relate to future events and outcomes, which may include, but are not limited to, projections, forecasts, and estimates concerning our business, financial condition, liquidity, operational results, plans, and objectives. These statements often contain terms like “expects,” “anticipates,” “believes,” “estimates,” “targets,” “plans,” and “indicates.”

While these statements reflect our current expectations in good faith, they are not guarantees of future performance and involve various risks, uncertainties, estimates, and assumptions that can be hard to predict. Factors that could cause actual results to differ from those discussed in these statements include, but are not limited to: ongoing evaluations of cyber incidents, significant legal, financial, and reputational risks stemming from such incidents and the related operational disruptions; the continuing effects of the COVID-19 pandemic; our management of growth; the effectiveness of our business strategies, implementation of new initiatives, and efficiency improvements; our sales and marketing efforts; our manufacturing capabilities, performance, and costs; our ability to secure future regulatory approvals; financial estimates and additional financing requirements; consumer acceptance of our clear aligners; our collaborations with retail partners and insurance carriers; our R&D, commercialization, and other activities and expenditures; the methodologies, models, assumptions, and estimates used to prepare our financial statements and manage risks; legal regulations governing remote healthcare and dentistry; our relationships with vendors; the security of our operational systems and infrastructure; our risk management framework; our cash and capital needs; our intellectual property standing; our exposure to claims and legal proceedings; and other factors detailed in our filings with the Securities and Exchange Commission, including but not limited to our Annual Report on Form 10-K for the year ending December 31, 2021, and our Form 10-Q for the period ending March 31, 2022.

New risks and uncertainties may emerge over time, making it impossible to predict all factors that could impact our business. Thus, you should not place undue reliance on any forward-looking statements made in this release, as they are only valid as of the date of publication. We have no obligation to update any forward-looking statements after the date of this earnings release to align with actual results or revised expectations, and you should not consider these statements as representative of our views after the release date.

About SmileDirectClub

SmileDirectClub, Inc. (Nasdaq: SDC) is an innovative oral care company and the pioneer of the first medtech platform for teeth straightening. By leveraging advanced telehealth technology and a vertically integrated model, SmileDirectClub is transforming the oral care landscape. The company’s mission is to democratize access to beautiful smiles for everyone, ensuring affordability and convenience. For further information, visit SmileDirectClub.com.

Investor Relations Contact:

Jesse Weaver

Global Head, FP&A and Investor Relations

Jonathan Fleetwood

Director, Investor Relations

[email protected]

Media Relations Contact:

Kim Atkinson

Senior Vice President, Global Communications

[email protected]

Financial Statements Overview for SmileDirectClub, Inc.

Consolidated Balance Sheets

(in thousands)

(unaudited)

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Sienna Blake

• Website

Sienna Blake is a licensed aesthetic consultant and beauty writer specializing in cosmetic surgery advancements and non-invasive treatments. With a background in dermatology and over eight years of industry experience, Sienna is passionate about helping people achieve confidence through informed beauty decisions. She holds a Bachelor's degree in Health Sciences and regularly collaborates with top plastic surgeons to stay at the forefront of aesthetic innovations. Outside of her work, Sienna enjoys traveling, skincare research, and practicing Pilates.

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