SmileDirectClub Unveils Strategy for Profitability and Cash Flow

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Strategic Global Workforce Realignment Aimed at Enhancing Annual Cost Efficiency, Generating Positive Cash Flow, and Driving Innovation Initiatives for Growth

Company Reveals Preliminary Results for Q4 and Full-Year 2022 Performance

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NASHVILLE, Tenn., Jan. 17, 2023 (GLOBE NEWSWIRE) — SmileDirectClub, Inc. (Nasdaq: SDC) has announced a comprehensive strategy for the realignment of its operational programs and global team. This strategic initiative is designed to sharpen its focus on core business objectives and innovative technological advancements while simultaneously implementing additional cost-saving measures within the company’s operational framework. The ultimate goal is to foster growth and ensure a sustainable positive cash flow position for the organization.

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Key Strategic Plan Details for 2023

In taking these essential steps to optimize the business structure, SmileDirectClub anticipates realizing an additional $120 to $140 million in cost savings throughout 2023, excluding transition costs. This approach is projected to position SmileDirectClub on a trajectory toward achieving positive cash flow by the end of 2023. David Katzman, Chief Executive Officer of SmileDirectClub, emphasized that “These actions are the logical progression of the initiatives we implemented in 2022, aimed at realigning our operations so we can effectively seize growth opportunities with enhanced efficiency and financial prudence.” He also expressed satisfaction with the advancements made through the introduction of the innovative SmileMaker Platform and highlighted the forthcoming launch of the CarePlus premium offering, reinforcing the company’s commitment to crafting a technology-driven product range that offers consumers greater choice, convenience, and affordability in oral care solutions.

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Projected Fiscal Year 2023 Financial Guidance

Upon implementation of the outlined changes, the company anticipates safeguarding its investment in strategic priorities while adjusting the cost structure of its core operations. This adjustment has the potential to drive positive Adjusted EBITDA by the third quarter of 2023. The anticipated changes include reductions in general and administrative expenses estimated between $50 million and $55 million, as well as cuts in marketing and selling costs estimated at $60 million to $65 million, all aimed at achieving greater operational efficiency. For the full year ending December 31, 2023, SmileDirectClub expects total revenue within the range of $400 million to $450 million for its core business. This estimation excludes any potential revenue increases from the upcoming rollout of the SmileMaker Platform in the United States or the launch of the CarePlus program. As these initiatives are launched at scale, the company will provide more comprehensive details and updated full-year expectations.

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For the entire fiscal year 2023, SmileDirectClub’s expected costs and capital outlook for its core business includes:

Preliminary Results for Q4 and Fiscal Year 2022

For the fourth quarter and year ending December 31, 2022, the Company expects total revenue to fall within the range of $86 million to $88 million for Q4 and between $470 million to $472 million for the entire fiscal year.

The preliminary costs and capital outlook for the full year 2022 includes:

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“SmileDirectClub has implemented significant measures over the past year to instill strong financial discipline throughout our operations and ensure we are well-positioned to leverage the investments made towards becoming a leader in oral care technology innovation,” stated Katzman. “These strategic steps are crafted to ensure we deliver exceptional value to both our customers and shareholders, continuing our mission to make premium oral care not only affordable but accessible to everyone.”

The preliminary results for the fourth quarter and fiscal year 2022 represent estimates based on data available to management at the time of this release. These results remain subject to review by our independent auditor and may change upon the conclusion of the company’s year-end closing processes.

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SmileDirectClub’s complete annual results will be finalized and disclosed during the company’s quarterly earnings call scheduled for March 1, 2023.

Understanding Non-GAAP Financial Metrics

This press release includes certain non-GAAP financial metrics, specifically Adjusted EBITDA (“Adjusted EBITDA”). We provide a reconciliation of these non-GAAP financial metrics to the most directly comparable GAAP financial measures. However, for forward-looking Adjusted EBITDA metrics, a reconciliation to corresponding GAAP measures is not feasible due to the variability, complexity, and limited visibility of non-cash items excluded from our non-GAAP outlook measures.

We define Adjusted EBITDA as net loss plus depreciation and amortization, interest expenses, income tax expenses (benefit), equity-based compensation, losses on debt extinguishment, impairment of long-lived assets, abandonment, and related charges, as well as certain other non-operating expenses. This includes one-time store closure costs associated with our real estate repositioning strategy, severance, retention, and other labor costs, specific one-time legal settlement costs, and unrealized foreign currency effects. We utilize Adjusted EBITDA as a performance metric when we believe certain items do not reflect our operational performance. This measure provides valuable supplemental insights to management regarding our operational performance and is also beneficial to stockholders and stakeholders.

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We believe that Adjusted EBITDA serves as a vital measure for stakeholders regarding our performance, financial health, and operational results for several reasons: (i) it is among the key metrics our management team uses to assess operational performance and to guide day-to-day decision-making and (ii) it is widely utilized by securities analysts, investors, lenders, and other stakeholders as a standard performance metric for comparing results or estimating valuations across companies within our industry.

It is important to note that Adjusted EBITDA does not have a standardized definition under GAAP, and our definition may differ from similar measures used by other companies. Therefore, Adjusted EBITDA should not be viewed in isolation or as a replacement for financial information prepared following GAAP standards.

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A reconciliation of preliminary Adjusted EBITDA to the Net Loss, the most comparable GAAP financial measure for Adjusted EBITDA, is detailed below.

Insight into Forward-Looking Statements

This press release contains forward-looking statements. All statements except those that relate to historical facts may be considered forward-looking. These statements generally pertain to future events and encompass projections, forecasts, and estimates regarding potential or assumed future performance of our business, financial condition, liquidity, operational results, plans, and objectives. Some of these statements may include terms such as “expects,” “anticipates,” “believes,” “estimates,” “targets,” “plans,” “potential,” “intends,” “projects,” and “indicates.”

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