Strategic Cost Control Enhances Cash Flow
Increases Midpoint for 2022 Revenue and Adjusted EBITDA Guidance
NASHVILLE, Tenn., Nov. 07, 2022 (GLOBE NEWSWIRE) — SmileDirectClub, Inc. (Nasdaq: SDC), recognized as a leader in innovative oral care solutions with the pioneering medtech platform for teeth straightening, has disclosed its financial outcomes for the third quarter ending September 30, 2022. In this report, the company showcases its commitment to enhancing customer experience and operational efficiency.
Key Financial Results for the Third Quarter of 2022
- Total revenue reached $107 million, reflecting a 15.1% decline compared to the previous quarter and a 22.5% decrease relative to the same period last year, highlighting the challenges faced.
- The net loss stood at $(70) million, slightly worsening by $4 million from the second quarter of 2022; however, it showed an improvement of $20 million compared to the prior year.
- Adjusted EBITDA was reported at $(30) million, which was a $7 million decline from the previous quarter yet represented a substantial improvement of $24 million year-over-year.
- Diluted EPS for the quarter was $(0.18), experiencing a $0.01 drop from the second quarter of 2022, but improved by $0.05 from the previous year.
- Net cash utilized in operating activities was $(24) million, increasing by $6 million over the second quarter of 2022, yet improving by $15 million over the prior year period.
- Free Cash Flow, calculated as net cash used in operating activities minus net cash spent on investing activities, totaled $(35) million, indicating an improvement of $1 million from the previous quarter and a significant improvement of $29 million from the prior year.
Operational Insights and Strategic Developments
- During the third quarter, unique aligner shipments totaled 52,367, indicating a 16.5% sequential drop from 62,705 shipments in the second quarter of 2022.
- The average aligner gross sales price (ASP) during this quarter was $1,902, which shows a slight decrease from $1,917 in the previous quarter.
“Our dedicated team executed revenue and profit results in line with our revised projections shared during our second quarter call. We are updating our full-year 2022 revenue and adjusted EBITDA midpoint forecasts upwards due to enhanced customer engagement driven by improved marketing efficiency. Our rigorous cost management strategies allowed us to achieve year-over-year profit improvements despite facing top-line challenges,” stated David Katzman, Chief Executive Officer and Chairman of SmileDirectClub. “In the third quarter, substantial advancements were made towards our key growth initiatives. Our cutting-edge SmileMaker mobile scanning application for 3D treatment planning is on track for testing in the fourth quarter, with a broader geographic rollout anticipated in early 2023. Furthermore, our premium aligner service, SmileDirectClub Care+, is slated for test market introduction in the first quarter of next year. The response from the dental community has been overwhelmingly positive, particularly as we expand our partner network by adding 260 new partners during this quarter, with increased interest from providers even prior to the official launch of Care+.”
Future Business Strategy and Vision
The mission of SmileDirectClub is to democratize access to beautiful smiles, ensuring that everyone can enjoy affordable and convenient solutions. The company aspires to be recognized as the “world’s leading oral health brand” by empowering more individuals to harness the transformational power of a confident smile. This vision transcends the mere manufacturing and marketing of clear aligners. Every decision made and investment undertaken by the company is geared towards supporting this mission and facilitating long-term growth potential. To fulfill its vision, SmileDirectClub aims to broaden its reach beyond the existing core customer base, continually introducing groundbreaking innovations across a diverse portfolio that spans both consumer-facing and non-consumer-facing solutions through a focus on its Partner Network, aligner product innovations, Care+, and comprehensive oral care solutions. SmileDirectClub possesses the unique capabilities and agility to disrupt traditional players, effectively responding to customer needs while maintaining a strong brand presence in the market.
The company has secured 46 patents to date for its innovative approaches to orthodontic treatment planning, aligner manufacturing, smile scanning technologies, and its proprietary telehealth platform, with many more patents pending in the United States and internationally. These innovations encompass various technologies related to data capture, 3D imaging, intraoral scanning, monitoring, manufacturing, and consumer products. Notably, the company has successfully treated over 1.8 million customers and established a robust end-to-end vertically integrated platform for consumers at scale. It has developed a Dental Partner Network that includes 950 global practices, all active or in training, and offers oral care products available in over 16,300 retail outlets worldwide, bolstering its position as the most recognized teledentistry brand with 58% aided awareness. There has been a strong demand from healthcare professionals to join the SmileDirectClub Partner Network, with 260 new partners added in the third quarter and a promising pipeline of additional practice interest even before the Care+ launch.
When consumers consider options for teeth straightening, they typically engage in several activities: researching online for available solutions, consulting with their dentist, or seeking recommendations from friends and family. According to the company’s research, consumer feedback indicates that its product and customer experience closely mirror that of Invisalign, but at a lower cost and with greater convenience. Comparative studies show that significantly fewer customers recommend other teledentistry brands compared to the recommendations for SmileDirectClub. A recent consumer brand survey revealed that SmileDirectClub continues to increase its unaided and aided brand awareness, surpassing its teledentistry competitors and nearing the recognition levels of Invisalign, the category originator. Furthermore, the company’s pioneering telehealth platform received accolades from MedTech Breakthrough, winning the “Best Telehealth Platform” award in 2022.
In addition to these strategic investments aimed at revolutionizing oral care and influencing consumer choices, the company will persist in making targeted investments to penetrate new demographics, ensuring controlled growth while pursuing profitability objectives. Industry trends remain favorable, with increased acceptance of telehealth services—particularly teledentistry—minimal penetration into the vast total addressable market, and recent regulatory advancements that have mitigated barriers to accessing care. Additionally, clear aligners are gaining market share across the broader dental industry.
Revised Financial Guidance for Full Year 2022
Ongoing challenges in consumer spending, coupled with persistently high inflation, continue to affect anticipated demand for the remainder of the year. The results from the third quarter align with expectations, and with only two months remaining in the year, we are refining our full-year 2022 outlook.
For the year concluding on December 31, 2022, the company projects total revenue to fall within the range of $470 million to $500 million.
The full-year 2022 cost and capital projections include (refer to the Company’s supplemental earnings presentation for further details regarding these assumptions):
- Gross margin anticipated to range between 70.5% to 71.5% of total revenues.
- Adjusted EBITDA expected to range from $(155 million) to $(135 million).
- Capital expenditures anticipated to be between $55 million to $60 million.
- One-time costs estimated to be between $20 million to $25 million.
- Projected year-end cash balance between $110 million to $130 million.
The year-end cash guidance includes an estimated $60 million to $70 million from external funding, primarily sourced from the utilization of the outstanding HPS facility.
Upcoming Conference Call Details
| SmileDirectClub Third Quarter 2022 Conference Call Schedule | |
| Date: | November 8, 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 the “Events and Presentations” section of the company’s IR page at http://investors.smiledirectclub.com |
A replay of the call will be accessible on the same day starting at 11 a.m. Eastern Time on Tuesday, November 8, 2022 and will remain available until 11:59 p.m. Eastern Time on Tuesday, November 15, 2022. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and enter the replay PIN: 13733253. Additionally, the third quarter 2022 results supplemental earnings presentation and an archived version of the call will be made available in the Investor Relations section of SmileDirectClub’s website at investors.smiledirectclub.com.
Important Forward-Looking Statements
This earnings release includes forward-looking statements that are not historical facts. These forward-looking statements relate to future events and encompass projections, forecasts, and estimates regarding our business performance, financial status, liquidity, operational results, plans, and objectives. Such statements may include terms such as “expects,” “anticipates,” “believes,” “estimates,” “targets,” “plans,” “potential,” “intends,” “projects,” and “indicates.”
Although these statements reflect our current, good-faith expectations, they do not guarantee future performance and are subject to numerous risks, uncertainties, estimates, and assumptions that are challenging to predict. Factors that could cause actual results to differ materially from those expressed in forward-looking statements include, but are not limited to: the ongoing evaluation of the cyber incident, potential legal, financial, and reputational risks arising from such incidents and resulting operational disruptions; the duration and impact of the COVID-19 pandemic and associated containment measures; management of growth; the execution of our business strategies, including the implementation of new initiatives and efficiency improvements; our sales and marketing endeavors; manufacturing capacity and cost performance; securing future regulatory approvals; financial forecasts and the need for additional financing; consumer acceptance and competition in the clear aligner market; relationships with retail partners and insurance companies; R&D activities and expenditures; methodologies and models used in preparing financial statements; laws and regulations governing remote healthcare and dental practices; vendor relationships; security of our operating systems and infrastructure; risk management strategies; cash and capital requirements; intellectual property status; exposure to legal claims; and other factors outlined in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ending December 31, 2021 and our Form 10-Q for the period ending September 30, 2022.
SmileDirectClub, Inc. (Nasdaq: SDC) is a leading oral care company that has developed the first medtech platform for effective teeth straightening. Through its innovative telehealth solutions and vertically integrated business model, SmileDirectClub is transforming the oral care landscape. The company aims to democratize access to beautiful smiles, providing affordable and convenient solutions for everyone. For more details, please visit SmileDirectClub.com.
Contact for Investor Relations:Jesse Weaver
Senior Vice President, Finance and Treasury
Jonathan Fleetwood
Director, Investor Relations
investorrelations@smiledirectclub.com
Media Relations Contact:Kim Atkinson
Senior Vice President, Global Communications
press@smiledirectclub.com
SmileDirectClub, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
| September 30, | December 31, | |||||
| 2022 | 2021 | |||||
| ASSETS | ||||||
| Cash | $ | 120,181 | $ | 224,860 | ||
| Accounts receivable, net | 152,531 | 184,558 | ||||
| Inventories | 44,242 | 40,803 | ||||
| Prepaid and other current assets | ||||||