U.S. Markets closed
  • S&P 500

    3,638.35
    +8.70 (+0.24%)
     
  • Dow 30

    29,910.37
    +37.90 (+0.13%)
     
  • Nasdaq

    12,205.85
    +111.44 (+0.92%)
     
  • Russell 2000

    1,855.27
    +10.25 (+0.56%)
     
  • Crude Oil

    45.53
    -0.18 (-0.39%)
     
  • Gold

    1,788.10
    -23.10 (-1.28%)
     
  • Silver

    22.64
    -0.81 (-3.44%)
     
  • EUR/USD

    1.1970
    +0.0057 (+0.4788%)
     
  • 10-Yr Bond

    0.8420
    -0.0360 (-4.10%)
     
  • Vix

    20.84
    -0.41 (-1.93%)
     
  • GBP/USD

    1.3314
    -0.0042 (-0.3169%)
     
  • USD/JPY

    104.0850
    -0.1650 (-0.1583%)
     
  • BTC-USD

    17,797.04
    +198.79 (+1.13%)
     
  • CMC Crypto 200

    333.27
    -4.23 (-1.25%)
     
  • FTSE 100

    6,367.58
    +4.65 (+0.07%)
     
  • Nikkei 225

    26,644.71
    +107.40 (+0.40%)
     

SmileDirectClub Reports Third Quarter 2020 Financial Results

SmileDirectClub
·13 min read

NASHVILLE, Tenn., Nov. 16, 2020 (GLOBE NEWSWIRE) -- SmileDirectClub, Inc. (Nasdaq: SDC) today announced its financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights

  • Third quarter total revenue of $169 million.

  • Third quarter net loss of $(43) million.

  • Third quarter Adjusted EBITDA of $3 million.

  • Third quarter diluted EPS of $(0.11).

Key Operating Metrics

  • Third quarter 2020 unique aligner shipments of 93,301.

  • Average aligner gross sales price (“ASP”) of $1,794 for the third quarter of 2020, compared to $1,788 for the third quarter of 2019.

  • Adjusted EBITDA of $3 million for the third quarter of 2020, compared to $(45) million for the third quarter of 2019, an improvement of 106.7%.

“Our performance in Q3 was continued validation of the strength of our business model, and the power of the competitive moats around our platform. It also demonstrated our continued focus on controlled growth with profitability. We outlined this strategy in the fourth quarter of 2019, and we have been executing against it in the three quarters since,” said SmileDirectClub Chief Executive Officer David Katzman.

SmileDirectClub Chief Financial Officer Kyle Wailes added, “Similar to the second quarter, the flexibility and scalability of our business model served us well, allowing us to make meaningful progress against our growth initiatives, alongside advancements on the cost side driving Adjusted EBITDA profitability one quarter ahead of our plan.”

Business Outlook
The Company remains laser focused on providing the best Club Member experience, while driving controlled and profitable growth. Within the third quarter, the Company made meaningful progress against this plan and the associated future growth drivers; specifically, expanding the core customer acquisition channels, extending the value proposition to the teen demographic, and international expansion. On the cost side, the Company turned AEBITDA profitable one quarter ahead of plan through continued advancement in automating its manufacturing and treatment planning operations, continued discipline around the deployment of marketing and selling dollars, and ongoing cost discipline across the business.

The Company expects to continue to see favorable industry dynamics with broader acceptance of telehealth and specifically teledentistry, minimal penetration against the total addressable market, no real competitor that provides an end-to-end vertically integrated platform for the consumer, and clear aligners gaining share in the overall industry. The Company would expect these dynamics to accrue to more efficient customer acquisition costs, as the Company continues to execute against its 20-30% annualized revenue growth targets.

As the low-cost provider with brand presence and no pricing pressure, and in an increasingly favorable climate for telehealth, the Company is well positioned to continue to gain share in the massively underserved market for clear aligners.

Conference Call Information

SmileDirectClub Third Quarter 2020 Conference Call Details

Date:

November 16, 2020

Time:

4:30 p.m. ET (1:30 p.m. PT)

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 from 7:30 p.m. ET on Monday, November 16, 2020 until 11:59 pm ET on Monday, November 30, 2020 by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the replay PIN: 13711961. An archived version of the call and a copy of the 2020 third quarter results supplemental earnings presentation will also be available upon completion 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 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, 2019 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

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, now also offered directly via dentist and orthodontists’ offices. Through our cutting-edge teledentistry technology and vertically integrated model, we are revolutionizing the oral care industry, from clear aligner therapy to our affordable, premium oral care product line. SmileDirectClub’s mission is to democratize access to a smile each and every person loves by making it affordable and convenient for everyone. SmileDirectClub is headquartered in Nashville, Tennessee and operates in the U.S., Canada, Australia, New Zealand, United Kingdom, Ireland, Germany, Austria, Hong Kong, Singapore and Spain. For more information, please visit SmileDirectClub.com.

Investor Relations:
Alison Sternberg
Vice President, Investor Relations
Alison.sternberg@smiledirectclub.com

Media Relations:
Kim Atkinson
Vice President, Communications
press@smiledirectclub.com

SmileDirectClub, Inc.
Consolidated Balance Sheets
(in thousands)

September 30,
2020

December 31,
2019

ASSETS

Cash and cash equivalents

$

373,045

$

318,458

Accounts receivable

230,244

239,413

Inventories

26,101

18,431

Prepaid and other current assets

15,337

14,186

Total current assets

644,727

590,488

Accounts receivable, non-current

71,729

106,315

Property, plant and equipment, net

183,430

177,543

Operating lease right-of-use asset

30,564

Other assets

11,461

11,299

Total assets

$

941,911

$

885,645

LIABILITIES AND PERMANENT EQUITY

Accounts payable

$

35,863

$

52,706

Accrued liabilities

93,308

93,339

Deferred revenue

51,851

25,435

Current portion of long-term debt

24,398

35,376

Other current liabilities

6,452

Total current liabilities

211,872

206,856

Long-term debt, net of current portion

391,283

173,150

Operating lease liabilities, net of current portion

32,038

Other long-term liabilities

43,400

47,354

Total liabilities

678,593

427,360

Commitment and contingencies

Permanent Equity

Class A common stock, par value $0.0001 and 113,105,780 shares issued and outstanding at September 30, 2020 and 103,303,674 shares issued and outstanding at December 31, 2019

11

10

Class B common stock, par value $0.0001 and 272,787,403 shares issued and outstanding at September 30, 2020 and 279,474,505 shares issued and outstanding at December 31, 2019

27

28

Additional paid-in-capital

479,419

447,866

Accumulated other comprehensive income (loss)

59

(272

)

Accumulated deficit

(183,152

)

(114,513

)

Noncontrolling interest

(50,666

)

125,166

Warrants

17,620

Total permanent equity

263,318

458,285

Total liabilities and permanent equity

$

941,911

$

885,645

SmileDirectClub, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Revenue, net

$

156,459

$

168,663

$

434,796

$

522,529

Financing revenue

12,042

11,522

37,428

31,185

Total revenues

168,501

180,185

472,224

553,714

Cost of revenues

49,760

39,125

158,313

111,363

Cost of revenues—related parties

2,310

13,652

Total cost of revenues

49,760

41,435

158,313

125,015

Gross profit

118,741

138,750

313,911

428,699

Marketing and selling expenses

66,722

131,263

243,564

340,409

General and administrative expenses

74,110

389,828

233,828

486,319

Lease abandonment and impairment of long-lived assets

3,960

28,593

Other store closure and related costs

1,714

6,190

Loss from operations

(27,765

)

(382,341

)

(198,264

)

(398,029

)

Interest expense

15,555

4,291

29,627

11,607

Interest expense—related parties

75

Loss on extinguishment of debt

32

13,781

29,672

Other (income) expense

(1,028

)

421

2,131

500

Net loss before income tax expense

(42,292

)

(387,085

)

(243,803

)

(439,883

)

Income tax expense

1,190

479

1,745

596

Net loss

(43,482

)

(387,564

)

(245,548

)

(440,479

)

Net loss attributable to noncontrolling interest

(30,892

)

(299,268

)

(176,909

)

(352,183

)

Net loss attributable to SmileDirectClub, Inc.

$

(12,590

)

$

(88,296

)

$

(68,639

)

$

(88,296

)

Earnings per share of Class A common stock:

Basic

$

(0.11

)

$

(0.89

)

$

(0.63

)

$

(0.89

)

Diluted

$

(0.11

)

$

(0.89

)

$

(0.64

)

$

(0.89

)

Weighted average shares outstanding:

Basic

111,703,080

99,533,877

108,459,488

99,533,877

Diluted

385,672,677

379,008,382

384,888,849

379,008,382

SmileDirectClub, Inc.
Consolidated Statements of Cash Flows
(in thousands)

Nine Months Ended September 30,

2020

2019

Operating Activities

Net loss

$

(245,548

)

$

(440,479

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

39,399

16,237

Deferred loan cost amortization

3,021

1,496

Equity-based compensation

38,189

332,759

Loss on extinguishment of debt

13,594

17,693

Paid in kind interest expense

5,118

Lease abandonment, impairment of long-lived assets and other store closure and related charges

30,903

Changes in ROU asset

5,797

Other non-cash operating activities

1,783

Changes in operating assets and liabilities:

Accounts receivable

43,755

(137,509

)

Inventories

(8,456

)

(5,852

)

Prepaid and other current assets

(2,844

)

(6,205

)

Accounts payable

(9,441

)

(4,475

)

Accrued liabilities

(8,559

)

45,880

Due to related parties

(19,177

)

Deferred revenue

26,416

5,834

Net cash used in operating activities

(68,656

)

(192,015

)

Investing Activities

Purchases of property, equipment, and intangible assets

(68,768

)

(66,355

)

Net cash used in investing activities

(68,768

)

(66,355

)

Financing Activities

Payment of IPO related costs

(1,155

)

1,285,759

Proceeds from warrant exercise

922

Repurchase of Class A shares and related fees

(696,489

)

Repurchase of Class A shares to cover employee tax withholdings

(6,976

)

(81,603

)

Settlement of canceled awards

(2,000

)

Issuance of Class A common stock

6

Proceeds from HPS Credit Facility and Warrants, net

388,000

Borrowings on long-term debt

16,807

176,000

Payments of loan costs

(11,784

)

(6,127

)

Principal payments on long-term debt

(187,579

)

(159,047

)

Principal payments on related party debt

(24,581

)

Payments on finance leases

(7,543

)

Other

1,319

86

Net cash provided by financing activities

192,011

492,004

Increase in cash and cash equivalents

54,587

233,634

Cash and cash equivalents at beginning of period

318,458

313,929

Cash and cash equivalents at end of period

$

373,045

$

547,563

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, equity-based compensation, 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 and other labor 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 would be 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
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

(unaudited)

Net loss

$

(43,482

)

$

(387,564

)

$

(245,548

)

$

(440,479

)

Depreciation and amortization

14,042

6,514

39,399

16,237

Total interest expense

15,555

4,291

29,627

11,682

Income tax expense

1,190

479

1,745

596

Lease abandonment and impairment of long-lived assets

3,960

28,593

Other store closure and related costs

1,714

6,190

Loss on extinguishment of debt

32

13,781

29,672

Equity-based compensation

10,972

324,497

38,189

332,759

IPO related costs

6,146

6,146

Other non-operating general and administrative (gains) losses

(930

)

421

3,775

502

Adjusted EBITDA

$

3,021

$

(45,184

)

$

(84,249

)

$

(42,885

)