SmileDirectClub, Inc. (Nasdaq: SDC), the next generation oral care
company with the first medtech platform for teeth straightening,
today announced its financial results for the fourth quarter and
year ended December 31, 2020.
Fourth Quarter 2020 Financial Highlights
- Fourth quarter total revenue of
$185 million, up 10% over the third quarter.
- Fourth quarter net loss of $(33)
million, a 24% improvement over the third quarter.
- Fourth quarter Adjusted EBITDA of
$7 million, up 137% over the third quarter.
- Fourth quarter diluted EPS of
$(0.09), an 18% improvement over the third quarter.
2020 Financial Highlights
- FY 2020 total revenue of $657
million.
- FY 2020 net loss of $(278)
million.
- FY 2020 Adjusted EBITDA of $(77)
million.
- FY 2020 diluted EPS of
$(0.72).
Key Operating Metrics
- Fourth quarter 2020 unique aligner
shipments of 101,794.
- Average aligner gross sales price
(“ASP”) of $1,820 for the fourth quarter of 2020.
- Adjusted EBITDA of $7 million for
the fourth quarter of 2020.
Guidance
- In Q1, we expect revenue to be in
line with our long-term targets on a sequential basis, meaning up
5-7% over Q4 2020.
- We expect Adjusted EBITDA to be
profitable, but not at Q4 2020 levels, as we continue to ramp
marketing spend in quarters like Q1 where the ad rates are lower
and we can build our lead funnel, which we expect to pay off in
future quarters.
- As a reminder, marketing dollars we
spend now have a long tail. Over 15% of our orders in Q4 became a
lead at least 24 months ago.
“Despite the swift onset of the pandemic and the
macro uncertainty throughout 2020, our performance throughout the
year was continued validation of the strength of our business
model, and the power of the competitive moats around our platform.
It also demonstrated our ability to deliver on our continued focus
of controlled growth with profitability. We outlined this strategy
in Q4 of 2019, and we have been executing against it in the four
quarters since,” said SmileDirectClub Chief Executive Officer David
Katzman.
SmileDirectClub Chief Financial Officer Kyle
Wailes added, “Our results in the fourth quarter close out a year
where we made meaningful progress against our plan of controlled
growth with profitability. Similar to the rest of 2020, in Q4, the
flexibility and scalability of our business model served us well,
allowing us to come in ahead of expectations and on track toward
our long-term financial targets.”
Business OutlookWe remain laser
focused on providing the best club member experience, and our
mantra continues to be to drive controlled and profitable growth.
We remain the low-cost provider, with brand presence, no pricing
pressure, and no real competitor that provides an end-to-end
vertically integrated platform for the consumer. As we have said in
previous quarters, and as recently demonstrated, we will continue
to make strategic investments in the professional channel,
international growth, and in penetrating new demographics to drive
controlled growth, while also executing against our profitability
goals. Lastly, we continue to see favorable industry dynamics with
broader acceptance of telehealth and specifically tele-dentistry,
minimal penetration against our total addressable market, and clear
aligners gaining share in the overall industry. All of these
position us well for long-term success.
On COGS, we are making good progress on
manufacturing automation with our 2nd Generation manufacturing now
live and producing approximately 60% of our aligners. We plan to
increase that percentage significantly over the course of the year,
and we expect production of over 90% of our aligners by the end of
Q2. As we have often stated, we believe streamlining our cost
profile through operational efficiencies, will not only improve our
margin profile, but more importantly, will provide a consistently
superior customer experience that meets our expectations and
upholds our brand promise.
On Sales & Marketing, as previously stated
our SmileShops function primarily as fulfillment centers, not as
sources of demand generation. As of quarter end, we had 114
permanent shops open, with 82 of those in North America; and held
over 104 pop-up events over the course of the quarter – for a total
of 218 location sites. We continue to see our shops performing well
with higher utilization, which is a key part of meeting our
long-term financial targets. Additionally, we have seen great
success with our strategy of pop-up locations, which allows us to
fulfill demand without the addition of fixed locations and
associated costs.
On liquidity, we are well positioned with
approximately $500 million of cash on our balance sheet after
repayment of our outstanding debt facility in the coming months.
This gives us ample liquidity to manage through a protracted COVID
environment, or alternatively, to spend faster in a higher growth
environment, while also investing in strategic initiatives and
R&D.
Conference Call Information
SmileDirectClub Fourth Quarter 2020 Conference Call
Details |
|
|
Date: |
March 4, 2021 |
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 Thursday, March 4, 2021 until 11:59 pm ET on Thursday,
March 18, 2021 by dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international) and entering the replay PIN:
13716490. An archived version of the call and a copy of the 2020
fourth quarter and year end 2020 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, 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 SmileDirectClubSmileDirectClub, 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 orthodontist offices. Through
its proprietary technology and vertically integrated model,
SmileDirectClub is revolutionizing the oral care industry, offering
consumers the ability to get the same clinically safe and effective
treatment but without the 3x markup associated with traditional
orthodontics. SmileDirectClub’s mission is to democratize access to
a smile each and every person loves by making it affordable and
convenient for everyone, from clear aligner therapy to premium
oral care products. SmileDirectClub is headquartered in Nashville,
Tennessee and operates in the U.S., Canada, Australia, New Zealand,
United Kingdom, Ireland, Germany, Austria, Spain, Netherlands, Hong
Kong and Singapore. For more information, please
visit SmileDirectClub.com.
Investor Relations:Alison
Sternberg Vice President, Investor
RelationsAlison.sternberg@smiledirectclub.com
Media Relations:Kim
AtkinsonVice President,
Communicationspress@smiledirectclub.com
SmileDirectClub, Inc.Consolidated
Balance Sheets(in
thousands)(unaudited)
|
December 31,2020 |
December 31,2019 |
ASSETS |
|
|
Cash and cash equivalents |
$ |
316,724 |
|
|
$ |
318,458 |
|
Accounts receivable |
221,973 |
|
|
|
239,413 |
|
Inventories |
29,247 |
|
|
|
18,431 |
|
Prepaid and other current
assets |
12,832 |
|
|
|
14,186 |
|
Total current assets |
580,776 |
|
|
|
590,488 |
|
Accounts receivable,
non-current |
71,355 |
|
|
|
106,315 |
|
Property, plant and equipment,
net |
189,995 |
|
|
|
177,543 |
|
Operating lease right-of-use
asset |
31,176 |
|
|
|
— |
|
Other assets |
11,487 |
|
|
|
11,299 |
|
Total assets |
$ |
884,789 |
|
|
$ |
885,645 |
|
LIABILITIES AND
PERMANENT EQUITY |
|
|
Accounts payable |
$ |
36,848 |
|
|
$ |
52,706 |
|
Accrued liabilities |
100,589 |
|
|
93,339 |
|
Deferred revenue |
26,619 |
|
|
25,435 |
|
Current portion of long-term
debt |
15,664 |
|
|
35,376 |
|
Other current liabilities |
6,821 |
|
|
— |
|
Total current liabilities |
186,541 |
|
|
206,856 |
|
Long-term debt, net of current
portion |
392,939 |
|
|
173,150 |
|
Operating lease liabilities,
net of current portion |
27,771 |
|
|
— |
|
Other long-term
liabilities |
43,400 |
|
|
47,354 |
|
Total liabilities |
650,651 |
|
|
427,360 |
|
Commitment and
contingencies |
|
|
Permanent
Equity |
|
|
Class A common stock, par
value $0.0001 and 115,429,319 shares issued and outstanding at
December 31, 2020 and 103,303,674 shares issued and outstanding at
December 31, 2019 |
11 |
|
|
10 |
|
Class B common stock, par
value $0.0001 and 270,908,566 shares issued and outstanding at
December 31, 2020 and 279,474,505 shares issued and outstanding at
December 31, 2019 |
27 |
|
|
28 |
|
Additional
paid-in-capital |
483,393 |
|
|
447,866 |
|
Accumulated other
comprehensive income (loss) |
(102 |
) |
|
(272 |
) |
Accumulated deficit |
(192,879 |
) |
|
(114,513 |
) |
Noncontrolling interest |
(73,932 |
) |
|
125,166 |
|
Warrants |
17,620 |
|
|
— |
|
Total permanent equity |
234,138 |
|
|
458,285 |
|
Total liabilities and permanent equity |
$ |
884,789 |
|
|
$ |
885,645 |
|
SmileDirectClub, Inc.Consolidated
Statements of Operations(in thousands, except
share and per share amounts)(unaudited)
|
Three Months Ended December 31, |
Year Ended December 31, |
2020 |
2019 |
2020 |
2019 |
Revenue, net |
$ |
172,577 |
|
|
$ |
183,999 |
|
|
$ |
607,373 |
|
|
$ |
706,529 |
|
Financing revenue |
11,979 |
|
|
12,714 |
|
|
49,407 |
|
|
43,899 |
|
Total revenues |
184,556 |
|
|
196,713 |
|
|
656,780 |
|
|
750,428 |
|
Cost of revenues |
48,539 |
|
|
52,498 |
|
|
206,852 |
|
|
163,861 |
|
Cost of revenues—related
parties |
— |
|
|
877 |
|
|
— |
|
|
14,529 |
|
Total cost of revenues |
48,539 |
|
|
53,375 |
|
|
206,852 |
|
|
178,390 |
|
Gross profit |
136,017 |
|
|
143,338 |
|
|
449,928 |
|
|
572,038 |
|
Marketing and selling
expenses |
79,355 |
|
|
141,059 |
|
|
322,919 |
|
|
481,468 |
|
General and administrative
expenses |
78,154 |
|
|
94,525 |
|
|
311,982 |
|
|
580,843 |
|
Lease abandonment and
impairment of long-lived assets |
(3,136 |
) |
|
— |
|
|
25,457 |
|
|
— |
|
Other store closure and
related costs |
844 |
|
|
— |
|
|
7,034 |
|
|
— |
|
Loss from operations |
(19,200 |
) |
|
(92,246 |
) |
|
(217,464 |
) |
|
(490,273 |
) |
Interest expense |
15,383 |
|
|
4,052 |
|
|
45,010 |
|
|
15,659 |
|
Interest expense—related
parties |
— |
|
|
— |
|
|
— |
|
|
75 |
|
Loss on extinguishment of
debt |
— |
|
|
— |
|
|
13,781 |
|
|
29,672 |
|
Other (income) expense |
(3,009 |
) |
|
(644 |
) |
|
(878 |
) |
|
(142 |
) |
Net loss before income tax
expense |
(31,574 |
) |
|
(95,654 |
) |
|
(275,377 |
) |
|
(535,537 |
) |
Income tax expense |
1,377 |
|
|
1,672 |
|
|
3,122 |
|
|
2,268 |
|
Net loss |
(32,951 |
) |
|
(97,326 |
) |
|
(278,499 |
) |
|
(537,805 |
) |
Net loss attributable to
noncontrolling interest |
(23,224 |
) |
|
(71,109 |
) |
|
(200,133 |
) |
|
(423,292 |
) |
Net loss attributable to
SmileDirectClub, Inc. |
$ |
(9,727 |
) |
|
$ |
(26,217 |
) |
|
$ |
(78,366 |
) |
|
$ |
(114,513 |
) |
|
|
|
|
|
Earnings per share of
Class A common stock: |
|
|
|
|
Basic |
$ |
(0.09 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.71 |
) |
|
$ |
(1.12 |
) |
Diluted |
$ |
(0.09 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.72 |
) |
|
$ |
(1.14 |
) |
|
|
|
|
|
Weighted average
shares outstanding: |
|
|
|
|
Basic |
114,008,652 |
|
|
103,043,244 |
|
|
109,854,360 |
|
|
102,442,525 |
|
Diluted |
386,128,446 |
|
|
382,517,729 |
|
|
385,200,442 |
|
|
381,917,030 |
|
SmileDirectClub, Inc.Consolidated
Statements of Cash Flows(in
thousands)(unaudited)
|
Year Ended December 31, |
2020 |
2019 |
Operating
Activities |
|
|
Net loss |
$ |
(278,499 |
) |
|
$ |
(537,805 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
Depreciation and amortization |
56,390 |
|
|
27,336 |
|
Deferred loan cost amortization |
4,407 |
|
|
3,969 |
|
Equity-based compensation |
44,903 |
|
|
350,122 |
|
Loss on extinguishment of debt |
13,594 |
|
|
17,693 |
|
Paid in kind interest expense |
8,450 |
|
|
— |
|
Lease abandonment, impairment of long-lived assets and other store
closure and related charges |
27,767 |
|
|
— |
|
Other non-cash operating activities |
10,071 |
|
|
1,783 |
|
Changes in operating assets
and liabilities: |
|
|
Accounts receivable |
52,400 |
|
|
(171,577 |
) |
Inventories |
(11,602 |
) |
|
(9,650 |
) |
Prepaid and other current assets |
(378 |
) |
|
(13,059 |
) |
Accounts payable |
(7,670 |
) |
|
(1,182 |
) |
Accrued liabilities |
(4,585 |
) |
|
13,107 |
|
Due to related parties |
— |
|
|
(20,305 |
) |
Deferred revenue |
1,184 |
|
|
6,376 |
|
Net cash used in operating activities |
(83,568 |
) |
|
(333,192 |
) |
Investing
Activities |
|
|
Purchases of property,
equipment, and intangible assets |
(97,141 |
) |
|
(106,361 |
) |
Net cash used in investing activities |
(97,141 |
) |
|
(106,361 |
) |
Financing
Activities |
|
|
IPO proceeds, net of discount
and related fees |
(1,155 |
) |
|
1,277,010 |
|
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 |
(9,901 |
) |
|
(85,684 |
) |
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 |
(194,439 |
) |
|
(193,516 |
) |
Principal payments on related
party debt |
— |
|
|
(22,352 |
) |
Payments on finance
leases |
(10,138 |
) |
|
(3,017 |
) |
Other |
663 |
|
|
251 |
|
Net cash provided by financing activities |
178,975 |
|
|
444,082 |
|
Increase in cash and cash
equivalents |
(1,734 |
) |
|
4,529 |
|
Cash and cash equivalents at
beginning of period |
318,458 |
|
|
313,929 |
|
Cash and cash equivalents at
end of period |
$ |
316,724 |
|
|
$ |
318,458 |
|
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 December 31, |
Year Ended December 31, |
2020 |
2019 |
2020 |
2019 |
(unaudited) |
Net loss |
$ |
(32,951 |
) |
|
$ |
(97,326 |
) |
|
$ |
(278,499 |
) |
|
$ |
(537,805 |
) |
Depreciation and
amortization |
16,991 |
|
|
11,099 |
|
|
56,390 |
|
|
27,336 |
|
Total interest expense |
15,383 |
|
|
4,052 |
|
|
45,010 |
|
|
15,734 |
|
Income tax expense |
1,377 |
|
|
1,672 |
|
|
3,122 |
|
|
2,268 |
|
Lease abandonment and
impairment of long-lived assets |
(3,136 |
) |
|
— |
|
|
25,457 |
|
|
— |
|
Other store closure and
related costs |
844 |
|
|
— |
|
|
7,034 |
|
|
— |
|
Loss on extinguishment of
debt |
— |
|
|
— |
|
|
13,781 |
|
|
29,672 |
|
Equity-based compensation |
6,714 |
|
|
17,363 |
|
|
44,903 |
|
|
350,122 |
|
IPO related costs |
— |
|
|
3,746 |
|
|
— |
|
|
9,892 |
|
Other non-operating general
and administrative (gains) losses |
1,943 |
|
|
(644 |
) |
|
5,718 |
|
|
(142 |
) |
Adjusted EBITDA |
$ |
7,165 |
|
|
$ |
(60,038 |
) |
|
$ |
(77,084 |
) |
|
$ |
(102,923 |
) |
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