Loading, Please Wait...

CST: 10/12/2019 17:03:40   

Smile Direct Club Reports Third Quarter 2019 Financial Results

28 Days ago

NASHVILLE, Tenn., Nov. 12, 2019 (GLOBE NEWSWIRE) -- SmileDirectClub, Inc. (NASDAQ: SDC) today announced its financial results for the quarter ended September 30, 2019.

Third Quarter 2019 Financial Highlights

  • Third quarter total revenue increased $60.5 million, or 50.6%, over the third quarter of 2018, to $180.2 million.
  • Third quarter net loss of $(387.6) million.
  • Third quarter Adjusted EBITDA of $(45.2) million.
  • Third quarter diluted EPS of $(0.89).

Key Operating Metrics

  • Third quarter unique aligner shipments of 106,070, compared to 72,387 in the third quarter of 2018.
  • Average aligner gross sales price (“ASP”)1 of $1,788 compared to $1,773 in the third quarter of 2018.

“Post-IPO, our team is laser focused on execution. Our results for the quarter, all of which exceeded management’s expectations, are a testament to the strength and momentum of the underlying business,” said Kyle Wailes, SmileDirectClub’s CFO.

SmileDirectClub’s Chairman and CEO, David Katzman continued, “Q3 was a good quarter. We were able to demonstrate our ability to execute. We have an incredible team, the best I have ever worked with. Overall, our business is better positioned than ever to capitalize on the massive market opportunity in front of us, and we look forward to demonstrating that in the quarters to come.”

Business Outlook

Our guidance for the fiscal year 2019 is as follows:

  • Revenues are expected to be in the range of $750.0 million to $755.0 million, representing growth of 78% year-over-year at the mid-point of the range.
  • Adjusted EBITDA for the fiscal year is expected between $(73) million to $(80) million.

Conference Call Information

SmileDirectClub Third Quarter 2019 Conference Call Details
   
Date: Tuesday, November 12, 2019
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 Tuesday, November 12, 2019 until 11:59 p.m ET on Tuesday, November 26, 2019 by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the replay PIN: 136904923. An archived version of the call and a copy of the 2019 Q3 Results supplemental earnings presentation will also be available upon completion on the Investor Relations section of SmileDirectClub’s website at http://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 guarantees 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: 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.

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) is the industry pioneer as the first direct-to-consumer med-tech platform for transforming smiles.  Through our cutting-edge teledentistry technology and vertically integrated model, we are revolutionizing the oral care industry.  SmileDirectClub’s mission is to unleash the power of people’s smiles to empower them to positively impact their place in the world.  SmileDirectClub was founded by Alex Fenkell and Jordan Katzman in partnership with Camelot Venture Group.  Available in the U.S., Canada, Australia, New Zealand, the UK, and Ireland.  SmileDirectClub is headquartered in Nashville, Tennessee.  For more information, visit SmileDirectClub.com

Investor/Media Contact:

Alison Sternberg
Vice President, Investor Relations 310-562-7297
Alison.sternberg@smiledirectclub.com


SmileDirectClub, Inc.

Consolidated Balance Sheet

(in thousands)

 

  September 30
2019
December 31,
2018
ASSETS    
Cash $ 547,563   $ 313,929  
Accounts receivable 224,360   113,934  
Inventories 14,633   8,781  
Prepaid and other current assets 11,987   5,782  
Total current assets 798,543   442,426  
Accounts receivable, non-current 87,299   60,217  
Property, plant and equipment, net 119,130   52,551  
Other assets 6,269    
Total assets $ 1,011,241   $ 555,194  
LIABILITIES, TEMPORARY AND PERMANENT EQUITY (DEFICIT)    
Accounts payable $ 40,561   $ 25,250  
Accrued liabilities 129,434   34,939  
Due to related parties 1,128   20,305  
Deferred revenue 24,893   19,059  
Current portion of related party debt   16,054  
Current portion of long-term debt 29,737   1,866  
Total current liabilities 225,753   117,473  
Long-term debt, net of current portion 189,648   137,123  
Long-term related party debt   1,799  
Other long-term liabilities 45,230   602  
Total liabilities 460,631   256,997  
Commitment and contingencies    
Temporary Equity    
Redeemable Series A Preferred Units   388,634  
Permanent Equity (Deficit)    
Class A common stock, par value $0.0001 and 102,807,291 shares issued and outstanding at September 30, 2019 and 0 shares issued and outstanding at December 31, 2018 10    
Class B common stock, par value $0.0001 and 279,474,505 shares issued and outstanding at September 30, 2019 and 0 shares issued and outstanding at December 31, 2018 28    
Additional paid-in-capital 441,855   57,497  
Accumulated deficit (88,296 ) (148,249 )
Noncontrolling interest 197,013    
Warrants   315  
Total permanent equity (deficit) 550,610   (90,437 )
Total liabilities, temporary and permanent equity (deficit) $ 1,011,241   $ 555,194  

 

SmileDirectClub, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

  Three months ended
September 30,
Nine months ended
September 30,
2019 2018 2019 2018
Revenue, net $ 168,663   $ 112,508   $ 522,529   $ 278,024  
Financing revenue 11,522   7,158   31,185   16,706  
Total revenues 180,185   119,666   553,714   294,730  
Cost of revenues 39,125   25,837   111,363   67,704  
Cost of revenues—related parties 2,310   10,098   13,652   28,608  
Total cost of revenues 41,435   35,935   125,015   96,312  
Gross profit 138,750   83,731   428,699   198,418  
Marketing and selling expenses 131,263   57,210   340,409   143,667  
General and administrative expenses 389,828   30,249   486,319   77,550  
Loss from operations (382,341 ) (3,728 ) (398,029 ) (22,799 )
Interest expense 4,291   4,352   11,607   9,283  
Interest expense—related parties   293   75   1,246  
Loss on extinguishment of debt 32     29,672    
Other expense 421   6,493   500   15,135  
Net loss before provision for income tax expense (387,085 ) (14,866 ) (439,883 ) (48,463 )
Provision for income tax expense 479   85   596   294  
Net loss (387,564 ) (14,951 ) (440,479 ) (48,757 )
Net loss attributable to noncontrolling interest (299,268 )   (352,183 )  
Net loss attributable to SDC Inc. $ (88,296 ) $ (14,951 ) $ (88,296 ) $ (48,757 )
         
Earnings per share of Class A common stock:        
Basic $ (0.89 ) N/A $ (0.89 ) N/A
Diluted $ (0.89 ) N/A $ (0.89 ) N/A
         
Weighted Average Shares Outstanding:        
Basic 99,533,877 N/A 99,533,877   N/A
Diluted 379,008,382 N/A 379,008,382   N/A

 

SmileDirectClub, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

  Nine months ended September 30,
2019 2018
Operating Activities    
Net loss $ (440,479 ) $ (48,757 )
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 16,237   4,966  
Deferred loan cost amortization 1,496   461  
Accrued interest to related parties   884  
Fair value adjustment of warrant derivative   14,500  
Equity-based compensation 332,759   13,626  
Loss on extinguishment of debt 17,693    
Other non-cash operating activities 1,783   3,305  
Changes in operating assets and liabilities:    
Accounts receivable (137,509 ) (97,005 )
Inventories (5,852 ) (3,963 )
Prepaid and other current assets (6,205 ) (2,233 )
Accounts payable (4,475 ) 11,935  
Accrued liabilities 45,880   9,926  
Due to related parties (19,177 ) 306  
Deferred revenue 5,834   8,869  
Net cash used in operating activities (192,015 ) (83,180 )
Investing Activities    
Purchases of property and equipment—related party   (4,722 )
Purchases of property, equipment, and intangible assets (66,355 ) (15,231 )
Net cash used in investing activities (66,355 ) (19,953 )
Financing Activities    
IPO proceeds, net of discount and related fees 1,285,759    
Repurchase of Class A shares and LLC Units (696,489 )  
Repurchase of Class A shares to cover employee tax withholdings (81,603 )  
Settlement of canceled awards (2,000 )  
Issuance of Class A common stock 6    
Proceeds from sale of Preferred Units, net   298,549  
Borrowings on long-term debt 176,000   117,375  
Payments of issuance costs (6,127 ) (3,174 )
Principal payments on long-term debt (159,047 )  
Principal payments on related party debt (24,581 ) (34,376 )
Other 86    
Net cash provided by financing activities 492,004   378,374  
Increase in cash 233,634   275,241  
Cash at beginning of period 313,929   4,071  
Cash at end of period $ 547,563   $ 279,312  


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, adjusted to remove derivative fair value adjustments, loss on extinguishment of debt, equity-based compensation and certain other non-operating expenses such as IPO related costs and 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 measures 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,
2019 2018 2019 2018
(unaudited)
Net loss $ (387,564 ) $ (14,951 ) $ (440,479 ) $ (48,757 )
Depreciation and amortization 6,514   2,232   16,237   4,966  
Total interest expense 4,291   4,645   11,682   10,529  
Income tax expense 479   85   596   294  
Fair value adjustment of warrant derivative   5,876     14,500  
Loss on extinguishment of debt 32     29,672    
Equity-based compensation 324,497   5,754   332,759   13,626  
IPO related costs 6,146     6,146    
Other 421   617   502   635  
Adjusted EBITDA $ (45,184 ) $ 4,258   $ (42,885 ) $ (4,207 )


1
We define average aligner gross sales price ("ASP") as gross revenue, before implicit price concession and other variable considerations and exclusive of sales tax, from aligner orders shipped divided by the number of unique aligner orders shipped.


 

Is your business listed correctly on America’s largest city directory network of 1,000 portals?