Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Feb. 26, 2021 | Jun. 30, 2020 | |
Entity Information [Line Items] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2020 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Transition Report | false | ||
Entity File Number | 001-39037 | ||
Entity Registrant Name | SMILEDIRECTCLUB, INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 83-4505317 | ||
Entity Address, Address Line One | 414 Union Street | ||
Entity Address, City or Town | Nashville, | ||
Entity Address, State or Province | TN | ||
Entity Address, Postal Zip Code | 37219 | ||
City Area Code | 800 | ||
Local Phone Number | 848-7566 | ||
Title of 12(b) Security | Class A common stock, par value $0.0001 per share | ||
Trading Symbol | SDC | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
ICFR Auditor Attestation Flag | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 462,442,300 | ||
Documents Incorporated by Reference | The following documents are incorporated by reference herein: Portions of the definitive Proxy Statement of SmileDirectClub, Inc. to be filed pursuant to Regulation 14A of the general rules and regulations under the Securities Exchange Act of 1934, as amended, for the 2021 annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K. | ||
Entity Central Index Key | 0001775625 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Common Class A | |||
Entity Information [Line Items] | |||
Entity Common Stock, Shares Outstanding (in shares) | 117,369,451 | ||
Common Class B | |||
Entity Information [Line Items] | |||
Entity Common Stock, Shares Outstanding (in shares) | 269,572,682 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
ASSETS | ||
Cash | $ 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 | |
Property, plant and equipment, net | 177,543 | |
Operating lease right-of-use asset | 31,176 | 0 |
Other assets | 11,487 | 11,299 |
Total assets | 884,789 | 885,645 |
LIABILITIES, TEMPORARY AND PERMANENT EQUITY (DEFICIT) | ||
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 | 0 |
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 | 0 |
Other long-term liabilities | 43,400 | 47,354 |
Total liabilities | 650,651 | 427,360 |
Commitment and contingencies | ||
Permanent Equity (Deficit) | ||
Additional paid-in-capital | 483,393 | 447,866 |
Accumulated other comprehensive loss | (102) | (272) |
Accumulated deficit | (192,879) | (114,513) |
Noncontrolling interest | (73,932) | 125,166 |
Warrants | 17,620 | 0 |
Total permanent equity | 234,138 | 458,285 |
Total liabilities, temporary and permanent equity | 884,789 | 885,645 |
Common Class A | ||
Permanent Equity (Deficit) | ||
Common stock | 11 | 10 |
Common Class B | ||
Permanent Equity (Deficit) | ||
Common stock | 27 | 28 |
Total permanent equity | $ 27 | $ 28 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 |
Common Class A | ||
Common stock, shares issued (in shares) | 115,429,319 | 103,303,674 |
Common stock, shares outstanding (in shares) | 115,429,319 | 103,303,674 |
Common stock, par value (USD per share) | $ 0.0001 | $ 0.0001 |
Common Class B | ||
Common stock, shares issued (in shares) | 270,908,566 | 279,474,505 |
Common stock, shares outstanding (in shares) | 270,908,566 | 279,474,505 |
Common stock, par value (USD per share) | $ 0.0001 | $ 0.0001 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Total revenues | $ 656,780 | $ 750,428 | $ 423,234 |
Cost of revenues | 206,852 | 163,861 | 98,048 |
Cost of revenues—related parties | 0 | 14,529 | 35,920 |
Total cost of revenues | 206,852 | 178,390 | 133,968 |
Gross profit | 449,928 | 572,038 | 289,266 |
Marketing and selling expenses | 322,919 | 481,468 | 213,080 |
General and administrative expenses | 311,982 | 580,843 | 121,743 |
Lease abandonment and impairment of long-lived assets | 25,457 | 0 | 0 |
Other store closure and related costs | 7,034 | 0 | 0 |
Loss from operations | (217,464) | (490,273) | (45,557) |
Interest expense | 45,010 | 15,659 | 12,532 |
Interest expense—related parties | 0 | 75 | 1,173 |
Loss on extinguishment of debt | 13,781 | 29,672 | 0 |
Other (income) expense | (878) | (142) | 15,148 |
Net loss before provision for income tax expense | (275,377) | (535,537) | (74,410) |
Provision for income tax expense | 3,122 | 2,268 | 361 |
Net loss | (278,499) | (537,805) | (74,771) |
Net loss attributable to noncontrolling interest | (200,133) | (423,292) | 0 |
Net loss attributable to SmileDirectClub, Inc. | $ (78,366) | $ (114,513) | (74,771) |
Earnings (loss) per share of Class A common stock: | |||
Earnings (loss) per share, basic (in USD per share) | $ (0.71) | ||
Earnings (loss) per share, diluted (in USD per share) | $ (0.72) | ||
Weighted average shares outstanding: | |||
Basic (in shares) | 109,854,360 | 102,442,525 | |
Diluted (in shares) | 385,200,442 | 381,917,030 | |
Common Class A | |||
Earnings (loss) per share of Class A common stock: | |||
Earnings (loss) per share, basic (in USD per share) | $ (0.71) | $ (1.12) | |
Earnings (loss) per share, diluted (in USD per share) | $ (0.72) | $ (1.14) | |
Excluding Financing Revenue | |||
Total revenues | $ 607,373 | $ 706,529 | 398,127 |
Financing Revenue | |||
Total revenues | $ 49,407 | $ 43,899 | $ 25,107 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Statement of Comprehensive Income [Abstract] | |||
Net loss | $ (278,499) | $ (537,805) | $ (74,771) |
Other comprehensive gain (loss): | |||
Foreign currency translation adjustment | 663 | (1,010) | 0 |
Comprehensive loss | (277,836) | (538,815) | (74,771) |
Comprehensive loss attributable to noncontrolling interests | (199,640) | (424,030) | 0 |
Comprehensive loss attributable to SmileDirectClub, Inc. | $ (78,196) | $ (114,785) | $ (74,771) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Equity (Deficit) - USD ($) $ in Thousands | Total | Common Class B | Common StockCommon Class A | Common StockCommon Class B | Additional Paid in Capital | Warrants | (Accumulated Deficit) Retained Earnings | Noncontrolling Interest | Accumulated Other Comprehensive Loss | AOCI Attributable to Parent | SDC Financial, LLC | SDC Financial, LLCAdditional Paid in Capital | SDC Financial, LLCWarrants | SDC Financial, LLC(Accumulated Deficit) Retained Earnings | SDC Financial, LLCAccumulated Other Comprehensive Loss |
Members' units, beginning balance (in shares) at Dec. 31, 2017 | 109,041 | 369 | |||||||||||||
Members' equity, beginning balance at Dec. 31, 2017 | $ (33,854) | $ 39,489 | $ 315 | $ (73,658) | $ 0 | ||||||||||
Increase (Decrease) in Members' Equity [Roll Forward] | |||||||||||||||
Redemption of member units (in shares) | (271) | ||||||||||||||
Redemption of member units | $ (1,544) | (1,544) | $ (1,544) | ||||||||||||
Unitholder distribution | (21) | (21) | $ (21) | ||||||||||||
Grant of incentive member units (in shares) | 108 | ||||||||||||||
Tax distributions paid | (86) | $ (86) | |||||||||||||
Equity-based compensation | 19,839 | $ 19,839 | |||||||||||||
Net loss | (74,771) | (74,771) | (74,771) | ||||||||||||
Members' units, ending balance (in shares) at Dec. 31, 2018 | 108,878 | 369 | |||||||||||||
Members' equity, ending balance at Dec. 31, 2018 | (90,437) | $ 57,677 | $ 315 | (148,429) | 0 | ||||||||||
Beginning balance, temporary equity at Dec. 31, 2017 | 0 | ||||||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | |||||||||||||||
Issuance of Preferred Units | 388,634 | ||||||||||||||
Ending balance, temporary equity at Dec. 31, 2018 | 388,634 | ||||||||||||||
Beginning balance (in shares) at Dec. 31, 2017 | 0 | 0 | |||||||||||||
Beginning balance at Dec. 31, 2017 | (33,854) | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Equity-based compensation | 19,839 | ||||||||||||||
Issuance of common stock | 388,634 | ||||||||||||||
Foreign currency translation adjustment | 0 | ||||||||||||||
Ending balance (in shares) at Dec. 31, 2018 | 0 | 0 | |||||||||||||
Ending balance at Dec. 31, 2018 | 298,197 | 0 | $ 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Increase (Decrease) in Members' Equity [Roll Forward] | |||||||||||||||
Preferred Unit redemption accretion | (59,250) | $ (59,250) | |||||||||||||
Redemption of member units (in shares) | (20,710) | ||||||||||||||
Redemption of member units | (54,154) | $ (54,154) | |||||||||||||
Equity-based compensation | 8,561 | 8,561 | |||||||||||||
Distribution payable | (43,400) | $ (43,400) | |||||||||||||
Effect of Reorganization Transactions (in shares) | (88,168) | (369) | |||||||||||||
Effect of Reorganization Transactions | 342,925 | $ 90,566 | $ (315) | 252,674 | |||||||||||
Net loss | (537,805) | (104,245) | (104,245) | ||||||||||||
Members' units, ending balance (in shares) at Dec. 31, 2019 | 0 | 0 | |||||||||||||
Members' equity, ending balance at Dec. 31, 2019 | 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||||||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | |||||||||||||||
Preferred Unit redemption accretion | 59,250 | ||||||||||||||
Effect of Reorganization Transactions | (447,884) | ||||||||||||||
Ending balance, temporary equity at Dec. 31, 2019 | $ 0 | ||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Foreign currency translation adjustment | (1,010) | ||||||||||||||
Ending balance (in shares) at Dec. 31, 2019 | 103,303,674 | 279,474,505 | |||||||||||||
Ending balance at Dec. 31, 2019 | 458,285 | 28 | $ 10 | 447,866 | 0 | (114,513) | 125,166 | (272) | |||||||
Increase (Decrease) in Members' Equity [Roll Forward] | |||||||||||||||
Net loss | (278,499) | (78,366) | (200,133) | ||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
Equity-based compensation | 44,903 | 44,903 | |||||||||||||
Issuance of Class A shares in connection with equity-based compensation plans (in shares) | 2,100,320 | ||||||||||||||
Issuance of Class B shares in connection with warrant exercise (in shares) | 1,459,386 | ||||||||||||||
Issuance of Class B shares in connection with warrant exercise | 922 | (15) | 937 | ||||||||||||
Exchange of Class B common stock for Class A common stock (in shares) | 10,025,325 | (10,025,325) | |||||||||||||
Exchange of Class B common stock for Class A common stock | 0 | $ 1 | $ (1) | 395 | (395) | ||||||||||
HPS Warrant issuance | 17,620 | 17,620 | |||||||||||||
Equity-based payments | (9,901) | (9,901) | |||||||||||||
Foreign currency translation adjustment | 663 | 493 | $ 170 | ||||||||||||
Other | 145 | 145 | |||||||||||||
Ending balance (in shares) at Dec. 31, 2020 | 115,429,319 | 270,908,566 | |||||||||||||
Ending balance at Dec. 31, 2020 | $ 234,138 | $ 27 | $ 11 | $ 483,393 | $ 17,620 | $ (192,879) | $ (73,932) | $ (102) |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Operating Activities | |||
Net loss | $ (278,499) | $ (537,805) | $ (74,771) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation and amortization | 56,390 | 27,336 | 8,861 |
Deferred loan cost amortization | 4,407 | 3,969 | 4,319 |
Accrued interest to related parties | 0 | 0 | 1,152 |
Fair value adjustment of warrant derivative | 0 | 0 | 14,500 |
Equity-based compensation | 44,903 | 350,122 | 19,839 |
Loss on extinguishment of debt | 13,594 | 17,693 | 0 |
Paid in kind interest expense | 8,450 | 0 | 0 |
Asset impairment and related charges | 27,767 | 0 | 0 |
Other non-cash operating activities | 10,071 | 1,783 | 646 |
Changes in operating assets and liabilities: | |||
Accounts receivable | 52,400 | (171,577) | (128,811) |
Inventories | (11,602) | (9,650) | (6,058) |
Prepaid and other current assets | (378) | (13,059) | (4,612) |
Accounts payable | (7,670) | (1,182) | 24,449 |
Accrued liabilities | (4,585) | 13,107 | 13,494 |
Due to related parties | 0 | (20,305) | 5,584 |
Deferred revenue | 1,184 | 6,376 | 6,622 |
Net cash used in operating activities | (83,568) | (333,192) | (114,786) |
Investing Activities | |||
Purchases of property and equipment—related party | 0 | 0 | (15,135) |
Purchases of property, equipment, and intangible assets | (97,141) | (106,361) | (26,706) |
Net cash used in investing activities | (97,141) | (106,361) | (41,841) |
Financing Activities | |||
IPO proceeds, net of discount and related fees | (1,155) | 1,277,010 | 0 |
Repurchase of Class A shares and LLC Units | 0 | (696,489) | 0 |
Proceeds from warrant exercise | 922 | 0 | 0 |
Repurchase of Class A shares to cover employee tax withholdings | (9,901) | (85,684) | 0 |
Settlement of canceled awards | 0 | (2,000) | 0 |
Issuance of Class A common stock | 0 | 6 | 0 |
Proceeds from sale of Preferred Units, net | 0 | 0 | 388,634 |
Member tax distributions | 0 | 0 | (86) |
Proceeds from HPS Credit Facility and Warrants, net | 388,000 | 0 | 0 |
Borrowings on long-term debt | 16,807 | 176,000 | 117,375 |
Payments of issuance costs | (11,784) | (6,127) | (3,514) |
Principal payments on long-term debt | (194,439) | (193,516) | 0 |
Principal payments on related party debt | 0 | (22,352) | (35,532) |
Payments on finance leases | (10,138) | (3,017) | 0 |
Other | 663 | 251 | (392) |
Net cash provided by financing activities | 178,975 | 444,082 | 466,485 |
Increase (Decrease) in cash | (1,734) | 4,529 | 309,858 |
Cash at beginning of period | 318,458 | 313,929 | 4,071 |
Cash at end of period | $ 316,724 | $ 318,458 | $ 313,929 |
Organization and Basis of Prese
Organization and Basis of Presentation | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Basis of Presentation | Organization and Basis of Presentation Organization SmileDirectClub, Inc. was formed on April 11, 2019 with no operating assets or operations as a Delaware corporation for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of SDC Financial LLC and its subsidiaries. Unless otherwise indicated or the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “SmileDirectClub,” and similar references refer to SmileDirectClub, Inc. and its consolidated subsidiaries, including SDC Financial LLC and its subsidiaries. “SDC Financial” refers to SDC Financial LLC and “SDC Inc.” refers to SmileDirectClub, Inc. The Company is engaged by its network of doctors to provide a suite of non-clinical administrative support services, including access to and use of its SmileCheck platform, as a dental support organization (“DSO”). For purposes of these Notes to Consolidated Financial Statements, the Company’s affiliated network of dentists and orthodontists is included in the definition of “we,” “us,” “our,” and the “Company” as it relates to any clinical aspect of the member’s treatment. All of the Company’s manufacturing operations are directly or indirectly conducted by Access Dental Lab, LLC (“Access Dental”), one of its operating subsidiaries. SmileDirectClub is an oral care company and creator of the first MedTech platform for teeth straightening. Through the Company’s cutting-edge teledentistry technology and vertically integrated model, it is revolutionizing the oral care industry, from clear aligner therapy to its 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., Costa Rica, Puerto Rico, Canada, Australia, New Zealand, United Kingdom, Ireland, Germany, Austria, Hong Kong, Singapore and Spain. SDC Inc. is a holding company. Its sole material asset is its equity interest in SDC Financial which, through its direct and indirect subsidiaries, conducts all of the Company’s operations. SDC Financial is a Delaware limited liability company and wholly owns SmileDirectClub, LLC (“SDC LLC”) (a Tennessee limited liability company) and Access Dental (a Tennessee limited liability company). Because SDC Inc. is the managing member of SDC Financial, SDC Inc. indirectly operates and controls all of the business and affairs of SDC Financial and its subsidiaries. Initial Public Offering On September 16, 2019, SDC Inc. completed an initial public offering (“IPO”) of 58,537,000 shares of its Class A common stock at a public offering price of $23.00 per share. SDC Inc. received $1,286 million in proceeds, net of underwriting discounts and commissions. SDC Inc. used substantially all of the net proceeds after expenses to purchase newly-issued membership interest units from SDC Financial. Reorganization Transactions In connection with the IPO, the Company completed the following transactions (the “Reorganization Transactions”): • the formation of SDC Inc. as a Delaware corporation to function as the ultimate parent of SmileDirectClub and a publicly traded entity; • SDC Inc.’s acquisition of the pre-IPO membership interest units in SDC Financial (“Pre-IPO Units”) held by certain pre-IPO investors that are taxable as corporations for U.S. federal income tax purposes (“Blockers”), pursuant to a series of mergers (the “Blocker Mergers”) of the Blockers with wholly owned subsidiaries of SDC Inc., and the issuance by SDC Inc. to the equityholders of the Blockers shares of Class A common stock as consideration in the Blocker Mergers; • the amendment and restatement of the SDC Financial’s limited liability company operating agreement (the “SDC Financial LLC Agreement”) to, among other things, modify the capital structure of SDC Financial by replacing the different classes of Pre-IPO Units (including restricted Pre-IPO Units held by certain employees) with a single new class of membership interests of SDC Financial (“LLC Units”); • the issuance to each of the pre-IPO investors previously holding Pre-IPO Units (including restricted Pre-IPO Units) of a number of shares of SDC Inc. Class B common stock equal to the number of LLC Units held by it; • the issuance to certain employees of cash and shares of Class A common stock pursuant to their Incentive Bonus Agreements (“IBAs”); and • the equitable adjustment, pursuant to their terms, of outstanding warrants to purchase Pre-IPO Units held by two service providers into warrants to acquire LLC Units (together with an equal number of shares of SDC Inc.’s Class B common stock). Following the completion of the Reorganization Transactions and the IPO, SDC Inc. owned 26.9% of SDC Financial. Holders (other than SDC Inc.) of LLC Units following the consummation of the Reorganization Transactions and the IPO (“Continuing LLC Members”) owned the remaining 73.1% of SDC Financial. SDC Inc. is the sole managing member of SDC Financial and, although SDC Inc. has a minority economic interest in SDC Financial, it has the sole voting power in, and controls the management of, SDC Financial. Accordingly, SDC Inc. consolidates the financial results of SDC Financial and reports a noncontrolling interest in its consolidated financial statements. As the Reorganization Transactions are considered transactions between entities under common control, the financial statements for periods prior to the IPO and Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes. In connection with the Reorganization Transactions and the IPO, the Company entered into a Tax Receivable Agreement (the “Tax Receivable Agreement”) with the Continuing LLC Members, pursuant to which SDC Inc. agreed to pay the Continuing LLC Members 85% of the amount of cash tax savings, if any, in U.S. federal, state, and local income tax or franchise tax that SDC Inc. actually realizes as a result of (a) the increases in tax basis attributable to exchanges of LLC Units by Continuing LLC Members and (b) tax benefits related to imputed interest deemed to be paid by SDC Inc. as a result of the Tax Receivable Agreement. Basis of Presentation and Consolidation The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements include the accounts of SDC Inc., which consolidates SDC Financial and its wholly-owned subsidiaries, as well as accounts of contractually affiliated professional corporations (“PCs”) managed by the Company. The consolidated financial statements include the accounts of variable interest entities in which the Company is the primary beneficiary under the provisions of Accounting Standards Codification (“ASC”) Topic 810, ‘ ‘ Consolidation. ” At December 31, 2020, the variable interest entities include 54 dentist owned PCs, and at December 31, 2019 the variable interest entities included 44 dentist owned PCs. The Company is a dental service organization and does not engage in the practice of dentistry. All clinical services are provided by dentists and orthodontists who are engaged as independent contractors or otherwise engaged by the dentist-owned PCs. The Company contracts with the PCs and dentists and orthodontists through a suite of agreements, including but not limited to, management services agreements, supply agreements, and licensing agreements, pursuant to which the Company provides the administrative, non-clinical management services to the PCs and independent contractors. The Company has the contractual right to manage the activities that most significantly impact the variable interest entities’ economic performance through these agreements without engaging in the corporate practice of dentistry. Additionally, the Company would absorb substantially all of the expected losses of these entities should they occur. The accompanying consolidated statements of operations reflect the revenue earned and the expenses incurred by the PCs. All significant intercompany balances and transactions are eliminated in consolidation. In January 2020, the Company adopted lease accounting guidance as discussed in Note 2 to the Consolidated Financial Statements. Adoption of the new lease accounting guidance had a material impact to the Company’s consolidated balance sheets and related disclosures, and resulted in the recording of additional right-of-use assets and lease liabilities as of the date of adoption. This guidance was applied using the optional transition method which allowed the Company to not recast comparative financial information but rather recognize a cumulative-effect adjustment to retained earnings as of the effective date in the period of adoption. No material adjustments to retained earnings were made as a result of the adoption of this guidance. Consistent with the optional transition method, the financial information in the condensed consolidated balance sheets prior to the adoption of this new lease accounting guidance has not been adjusted and is therefore not comparable to the current period presented. The standard did not materially impact the Company’s condensed consolidated statements of operations, comprehensive loss, changes in equity (deficit), or cash flows. For additional information, including the required disclosures, related to the impact of adopting this standard, see Note 2 and Note 7 to the Consolidated Financial Statements. COVID-19 Pandemic The Company continues to navigate the uncertain and unprecedented economic and operating conditions resulting from COVID-19 and its protracted duration. In response to COVID-19 and the related containment measures, the Company made the following operational changes to ensure the health and safety of its employees and its members: transitioned its team members, where possible, to a remote working environment; closed a portion of its SmileShops based on the Company’s real estate repositioning program as well as local public health guidelines and evolving customer behaviors and expectations; reconfigured its SmileShops and popup locations to reduce customer overlap in the waiting area and require touchless temperature screening upon arrival; heightened the personal protective equipment protocol (“PPE”) requirements for Smile Guides; reconfigured its production lines to observe social distancing; and implemented enhanced cleaning and sanitizing routines, thermal temperature screening, mandatory PPE protocols and other health and safety measures at its manufacturing facilities. The Company also enacted a resilience policy that provides its team members paid leave for COVID-19 testing and up to two weeks of paid leave for any required self-quarantine due to the team member testing positive for COVID-19. Additionally, the Company took the following actions in an effort to fortify the financial position of the business: reduced its marketing spend as a percentage of revenue; reduced its headquarters and retail workforce; secured the HPS Credit Facility; and initiated a real estate repositioning program. The Company performed a review of its real estate needs and initiated restructuring actions related to a real estate repositioning program that remains ongoing. As a result of these changes, the Company incurred one-time charges of $32,491 during the year ended December 31, 2020, primarily associated with: the closure of its manufacturing facility in Kyle, Texas; the consolidation of several floors at its headquarters in Nashville, Tennessee; the closure and consolidation of a portion of its SmileShops; and the impairment of right of use assets and leasehold improvements at the closed SmileShops. Given the uncertain operating environment and the shift to work-from-home, the Company made the strategic decisions to align its rent costs with the current needs of the business, while also ensuring that it has sufficient capacity to support future growth. The Company continues to evaluate its SmileShops and other properties to determine if it will further rationalize its footprint to better align with marketplace demand, including the direct and indirect effects of the COVID-19 pandemic. For a complete discussion of our restructuring actions, see “Note 5—Lease Abandonment, Impairment of Long-lived Assets and Store Closure and Other Related Charges” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Management Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that impact the reported amounts. On an ongoing basis, the Company evaluates its estimates, including those related to the fair values of financial instruments, useful lives of property, plant and equipment, revenue recognition, equity-based compensation, long-lived assets, and contingent liabilities, among others. In connection with its credit facility with HPS Investment Partners, the Company issued warrants to certain affiliates of HPS Investment Partners. The warrants were recorded at fair value within equity on the consolidated balance sheets using the Black-Scholes option pricing model (see Note 10). Each of these estimates varies in regard to the level of judgment involved and its potential impact on the Company’s financial results. Estimates are considered critical either when a different estimate could have reasonably been used, or where changes in the estimate are reasonably likely to occur from period to period, and such use or change would materially impact the Company’s financial condition, results of operations, or cash flows. Actual results could differ from those estimates. Revenue Recognition The Company’s revenues are derived primarily from sales of aligners, impression kits, whitening gel, and retainers, and interest earned through its SmilePay financing program. Revenue is recorded for all customers based on the amount that is expected to be collected, which considers implicit price concessions, discounts and returns. The Company identifies a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price (“SSP”) and allocation of consideration from a contract to the individual performance obligations, and the appropriate timing of revenue recognition, is the result of significant qualitative and quantitative judgments. Management considers a variety of factors such as historical sales, usage rates (the number of times a customer is expected to order additional aligners), costs, and expected margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation, in making these estimates. Further, the Company’s process for estimating usage rates requires significant judgment and evaluation of inputs, including historical data and forecasted usages. Changes in the allocation of the SSP between performance obligations will not affect the amount of total revenues recognized for a particular contract. The Company uses the expected cost plus a margin approach to determine the SSP for performance obligations, and discounts are allocated to each performance obligation based on the relative standalone selling price. However, any material changes in the allocation of the SSP could impact the timing of revenue recognition, which may have a material effect on the Company’s financial position and result of operations as the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation. The Company estimates the amount expected to be collected based upon management’s assessment of historical write-offs and expected net collections, business and economic conditions, and other collection indicators. Management relies on the results of detailed reviews of historical write-offs and collections as a primary source of information in estimating the amount of contract consideration expected to be collected and implicit price concessions. Uncollectible receivables are written-off in the period management believes it has exhausted its ability to collect payment from the customer. The Company believes its analysis provides reasonable estimates of its revenues and valuations of its accounts receivable. A description of the revenue recognition for each product sold by the Company is detailed below. Aligners and Impression Kits: The Company enters into contracts with customers for aligner sales that involve multiple future performance obligations. The Company determined that aligner sales comprise the following distinct performance obligations: initial aligners, touch-up aligners, and retainers for international sales only which can occur at any time throughout the treatment plan (which is typically between five to ten months) upon the direction of and prescription from the treating dentist or orthodontist. The Company allocates revenues for each performance obligation based on its SSP and recognizes the revenues as control of the performance obligation is transferred upon shipment of the aligners. The Company recognizes aligner revenue on amounts expected to be collected during the course of the treatment plan. The Company bills its customers either upfront for the full cost of aligners or monthly through its SmilePay financing program, which involves a down payment and a fixed amount per month for up to 24 months. The Company’s accounts receivable related to the SmilePay financing program are reported at the amount expected to be collected on the consolidated balance sheets, which considers implicit price concessions. Financing revenue from its accounts receivable is recognized based on the contractual market interest rate with the customer, net of implicit price concessions. There are no fees or origination costs included in accounts receivable. The Company sells doctor-prescribed impression kits to its customers as an alternative to an in-person visit at one of its SmileShops, popup locations, or Partner Network locations, comprised of affiliated dentist and orthodontist offices, where the customer receives a free oral digital imaging of their teeth. The Company combines the sales of its impression kits with aligner sales and recognizes the revenues as control of the performance obligation is transferred upon shipment of the aligners. The Company estimates the amount of impression kit sales that do not result in an aligner therapy treatment plan and recognizes such revenue when aligner conversion becomes remote. Retainers and Other Products: The Company sells retainers and other products (such as whitening gel and tooth brushes) to customers, which can be purchased on the Company’s website or certain retail outlets. The sales of these products are independent and separate from the customer’s decision to purchase aligner therapy for domestic sales. The Company determined that the transfer of control for these performance obligations occurs as the title of such products passes to the customer or retail partner. The following table summarizes revenue recognized for each product sold by the Company: Years Ended December 31, 2020 2019 2018 Aligner revenue, net of implicit price concessions $ 543,136 $ 683,429 $ 390,505 Financing revenue, net of implicit price concessions 49,407 43,899 25,107 Retainers and other products revenue 64,237 23,100 7,622 Total revenue $ 656,780 $ 750,428 $ 423,234 Implicit price concessions included in total revenue $ 66,128 $ 74,662 $ 46,554 Deferred Revenue: Deferred revenue represents the Company’s contract liability for performance obligations associated with sales of aligners. During the years ended December 31, 2020, 2019 and 2018, the Company recognized $656,780, $750,428 and $423,234 of revenue, respectively, of which $19,750, $16,630 and $12,437 was previously included in deferred revenue on the consolidated balance sheets as of December 31, 2019, 2018 and 2017, respectively. Shipping and Handling Costs Shipping and handling charges are recorded in cost of revenues in the consolidated statements of operations upon shipment. The Company incurred approximately $23,036, $19,000 and $10,500 in outsourced shipping expenses for the years ended December 31, 2020, 2019 and 2018, respectively. Cost of Revenues Cost of revenues includes the total cost of products produced and sold. Such costs include direct materials, direct labor, overhead costs (occupancy costs, indirect labor, and depreciation), fees retained by doctors, freight and duty expenses associated with moving materials from vendors to the Company’s facilities and from its facilities to the customers, and adjustments for shrinkage (physical inventory losses), lower of cost or net realizable value, slow moving product and excess inventory quantities. Marketing and Selling Expenses Marketing and selling expenses include direct online and offline marketing and advertising costs, costs associated with intraoral imaging services, selling labor, and occupancy costs of SmileShop locations. All marketing and selling expenses, including advertising, are expensed as incurred. For the years ended December 31, 2020, 2019 and 2018, the Company incurred marketing, selling, and advertising costs of $322,919, $481,468 and $213,080, respectively. General and Administrative Expenses General and administrative expenses include payroll and benefit costs for corporate team members, equity-based compensation expenses, occupancy costs of corporate facilities, bank charges and costs associated with credit and debit card interchange fees, outside service fees, and other administrative costs, such as computer maintenance, supplies, travel, and lodging. Depreciation and Amortization Depreciation includes expenses related to the Company’s property, plant and equipment, including capital leases. Amortization includes expenses related to definite-lived intangible assets and capitalized software. Depreciation and amortization is calculated using the straight-line method over the useful lives of the related assets, ranging from three Years Ended December 31, 2020 2019 2018 Cost of revenues $ 24,718 $ 11,186 $ 4,719 Marketing and selling expenses 7,079 5,322 1,429 General and administrative expenses 24,593 10,828 2,713 Total $ 56,390 $ 27,336 $ 8,861 Fair Value of Financial Instruments The Company measures the fair value of financial instruments as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. The Company’s financial instruments consist of cash, current and non-current receivables, accounts payable, debt instruments, and derivative financial instruments. Due to their short-term nature, the carrying values of cash, current receivables, and trade payables approximate current fair value at each balance sheet date. The Company had $407,902 and $150,448 in borrowings under its debt facilities (as discussed in Note 10) as of December 31, 2020 and 2019, respectively. Based on current market interest rates (Level 2 inputs), the carrying value of the borrowings under its debt facilities approximates fair value for each period reported. Derivative Financial Instruments The Company accounts for derivative financial instruments in accordance with applicable accounting standards for such instruments and hedging activities, which require that all derivatives are recorded on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability. The Company had no outstanding derivatives at December 31, 2020 or 2019; however, the Company may enter into derivative contracts that are intended to economically hedge a certain portion of its risk, even though hedge accounting does not apply or the Company elects not to apply the hedge accounting standards. Certain Risks and Uncertainties The Company’s operating results depend to a significant extent on the ability to market and develop its products. The life cycles of the Company’s products are difficult to estimate due, in part, to the effect of future product enhancements and competition. The inability to successfully develop and market the Company’s products as a result of competition or other factors would have a material adverse effect on its business, financial condition, and results of operations. The Company provides credit to customers in the normal course of business. The Company maintains reserves for potential credit losses and such losses have been within management’s expectations. No individual customer accounted for 1% or more of the Company’s accounts receivable at December 31, 2020 or 2019, or net revenue for the years ended December 31, 2020, 2019 and 2018. Some of the Company’s products are considered medical devices and are subject to extensive regulation in the U.S. and internationally. The regulations to which the Company is subject are complex. Regulatory changes could result in restrictions on the Company’s ability to carry on or expand its operations, higher than anticipated costs or lower than anticipated sales. The failure to comply with applicable regulatory requirements may have a material adverse impact on the Company. The Company’s reliance on international operations exposes it to related risks and uncertainties, including difficulties in staffing and managing international operations, such as hiring and retaining qualified personnel; political, social and economic instability; interruptions and limitations in telecommunication services; product and material transportation delays or disruption; trade restrictions and changes in tariffs; import and export license requirements and restrictions; fluctuations in foreign currency exchange rates; and potential adverse tax consequences. If any of these risks materialize, operating results may be harmed. The Company purchases certain inventory from sole suppliers, and the inability of any supplier or manufacturer to fulfill the supply requirements could materially and adversely impact its future operating results. Cash Cash consists of all highly liquid investments with original maturities of less than three months. Cash is held in various financial institutions in the U.S. and internationally. Inventories Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method of inventory accounting. Inventory consists of raw materials for producing impression kits and aligners and finished goods. Inventory is net of shrinkage and obsolescence. Property, Plant and Equipment, net Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Routine maintenance and repairs are charged to expense as incurred. At the time property, plant and equipment are retired from service, the cost and accumulated depreciation or amortization are removed from the respective accounts and the related gains or losses are reflected in the consolidated statements of operations. Leases On January 1, 2020, the Company adopted the new leases standard using the modified retrospective transition method, which requires that it recognizes leases differently pre- and post-adoption. See “Recently Adopted Accounting Pronouncements—ASU No. 2016-02” below for more information. The Company categorizes leases at their inception as either operating or finance leases. Lease agreements cover certain retail locations, office space, warehouse, manufacturing and distribution space and equipment. Operating leases are included in operating lease right-of-use assets, other current liabilities, and long-term right-of-use operating lease obligations in the consolidated balance sheet. Finance leases are included in property, plant and equipment, net, current portion of long-term debt, and long-term debt. Leased assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses a secured incremental borrowing rate as the discount rate for determining the present value of lease payments when the rate implicit in the contract is not readily determinable. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the condensed consolidated balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property. Internally Developed Software Costs The Company generally provides services to its customers using software developed for internal use. The costs that are incurred to develop such software are expensed as incurred during the preliminary project stage. Once certain criteria have been met, direct costs incurred in developing or obtaining computer software are capitalized. Training and maintenance costs are expensed as incurred. Capitalized software costs are included in property, plant and equipment in the consolidated balance sheets and are amortized over a three-year period. During the years ended December 31, 2020, 2019, and 2018, the Company capitalized $21,509, $11,861, and $5,200, respectively, of internally developed software costs. Amortization expense for internally developed software was $7,978, $3,384 and $667 for the years ended December 31, 2020, 2019 and 2018, respectively. Impairment The Company evaluates long-lived assets (including finite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. An asset or asset group is considered impaired if its carrying amount exceeds the future undiscounted net cash flows that the asset or asset group is expected to generate. Factors the Company considers important which could trigger an impairment review include significant negative industry or economic trends, significant loss of customers and changes in the competitive environment. If an asset or asset group is considered to be impaired, the impairment to be recognized is calculated as the amount by which the carrying amount of the asset or asset group exceeds its fair market value. The Company’s estimates of future cash flows attributable to long-lived assets require significant judgment based on its historical and anticipated results and are subject to many assumptions. The estimation of fair value utilizing a discounted cash flow approach includes numerous uncertainties which require significant judgment when making assumptions of expected growth rates and the selection of discount rates, as well as assumptions regarding general economic and business conditions, and the structure that would yield the highest economic value, among other factors. Debt Issuance Costs The Company records debt issuance costs related to its term debt as direct deductions from the carrying amount of the debt. The costs are amortized to interest expense over the life of the debt using the effective interest method. Redeemable Series A Preferred Units SDC Financial classified its Redeemable Series A Preferred Units (‘‘Preferred Units”) as temporary equity on the consolidated balance sheet for periods prior to the Reorganization Transactions and IPO due to certain deemed liquidation events that are outside of its control. The Company evaluated the Preferred Units upon issuance in order to determine classification as to permanent or temporary equity and whether or not the instrument contained an embedded derivative that requires bifurcation. This analysis followed the whole instrument approach which compares an individual feature against the entire instrument that includes that feature. This analysis was based on a consideration of the economic characteristics and risk of the Preferred Units including: (i) redemption rights on the Preferred Units allowing the Preferred Unitholders the ability to redeem the Preferred Units six years from the anniversary of the Preferred Units original issuance, provided that a qualified public offering has not been consummated prior to such date; (ii) conversion rights that allowed the Preferred Unitholders the ability to convert into common member units at any time; (iii) the Preferred Unitholders could vote based on the combined membership percentage interest; and (iv) distributions of the preferred return on the Preferred Units were subject to the same conditions as non-Preferred Unit distributions which required all distributions to be approved by SDC Financial’s board of directors. The Company elected the accreted redemption value method in which it accreted changes in the redemption value, as defined in Note 9, over the period from the date of issuance of the Preferred Units to the earliest redemption date (six years from the date of issuance) using the effective interest method. Income Taxes SDC Inc. is the managing member of SDC Financial and, as a result, consolidates the financial results of SDC Financial in the consolidated financial statements. SDC Financial and its subsidiaries are limited liability companies and have elected to be taxed as partnerships for income tax purposes except for a subsidiary, SDC Holding, LLC (‘‘SDC Holding”) and its domestic and foreign subsidiaries, which are taxed as corporations. As such, SDC Financial does not pay any federal income taxes, as any income or loss is included in the tax returns of the individual members. SDC Financial does pay state income tax in certain jurisdictions, and the Company’s income tax provision in the consolidated financial statements reflects the income taxes for those states. Additionally, certain wholly-owned entities taxed as corporations are subject to federal, state, and foreign income taxes, in the jurisdictions in which they operate, and accruals for such taxes are included in the consolidated financial statements. The Company further evaluates deferred tax assets in each jurisdiction and recognizes associated benefits when positive evidence of realization exceeds negative evidence, and otherwise records valuation allowances as necessary. The Company computes the provision for income taxes using the liability method and recognizes deferred tax assets and liabilities for temporary differences between financial statement and income tax bases of assets and liabilities, as well as for operating loss and tax credit carryforwards. The Company measures deferred tax assets and liabilities using tax rates applicable to taxable income in effect for the years in which those tax assets are expected to be realized or settled and provides a valuation allowance against deferred tax assets when it cannot conclude that it is more likely than not that some or all deferred tax assets will be realized. In addition, the Company recognizes tax benefits from uncertain tax positions only if it expects that its tax positions are more likely than not that they will be sustained, based on the technical merits of the positions, on examination by the jurisdictional tax authority. The Company recognizes any accrued interest and penalties to unrecognized tax benefits as interest expense and income tax expense, respectively. Tax Receivable Agreement In connection with the Reorganization Transactions and the IPO, the Company entered into a Tax Receivable Agreement (the “Tax Receivable Agreement”) with the Continuing LLC Members, pursuant to which SDC Inc. agreed to pay the Continuing LLC Members 85% of the amount of cash tax savings, if any, in U.S. federal, state, and local income tax or franchise tax that SDC Inc. actually realizes as a result of (a) the increases in tax basis attributable to exchanges by Continuing LLC Members and (b) tax benefits related to imputed interest deemed to be paid by SDC Inc. as a result of the Tax Receivable Agreement. The Company recognizes this contingent liability in its consolidated financial statements when amounts become probable as to incurrence and estimable in amount. Recently Adopted Accounting Pronouncements In January 2020, the Company adopted FASB ASU 2016-02 and subsequent updates, collectively referred to as ‘‘Leases (Topic 842).” This update requires a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. In July 2018, ASU 2018-10, ‘‘Codification Improvements to Topic 842, Leases,” was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Furthermore, in July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the package of practical expedients in transition, which permits it to not reassess its conclusions pertaining to lease identification, lease classification, and initial direct costs on leases that commenced prior to the adoption of the new standard. The Company also elected the ongoing practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities related to short-term leases. The Company did not elect the use-of-hindsight practical expedient. The Company elected to not separate lease and non-lease components for certain classes of assets including real estate and equipment. As a result of adopting Topic 842, the Company recognized net operating lease right-of-use assets of $45,076 and operating lease liabilities of $44,807 as of the effective date. As part of adopting Topic 842 and the Company’s election to not separate lease and non-lease components, the Company increased its finance lease asset $3,791 and related liability $4,378 as of the effective date to include non-lease components. The cumulative effect of adding the non-lease components to finance leases upon adoption resulted in an immaterial adjustment to the opening balance of retained earnings as of January 1, 2020. The standard did not have a material impact on the Company’s results of operations or cash flows. In January 2020, the Company adopted FASB ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. In fiscal year 2020, the Company adopted FASB ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This update clarifies the accounting treatment for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The adoption of ASU 2018-15 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In September 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses” (Topic 326). The FASB issued this update to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this update replace the existing guidance of incurred loss impairment methodology with an approach that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses,” which clarifies the scope of guidance in the ASU 2016-13. The updated guidance is effective for annual periods beginning after December 15, 2020. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13, “ Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, ” which amends the disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures. This guidance is effective for years beginning after December 15, 2020, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures. In December 2019, the FASB issued ASU 2019-12, " Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ." This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, “ Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ,” which eliminates most of the guidance in Subtopic 470-20 that requires separate accounting for embedded conversion features in convertible debt arrangements. Further, ASU 220-06 removes some of the conditions in Subtopic 815-40-25, "Contracts on an Entity's own Equity," |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories are comprised of the following: Years Ended December 31, 2020 2019 Raw materials $10,059 $5,950 Finished goods 19,188 12,481 Total inventories $29,247 $18,431 |
Prepaid and other assets
Prepaid and other assets | 12 Months Ended |
Dec. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid and other assets | Prepaid and other assets Prepaid and other assets are comprised of the following: Years Ended December 31, 2020 2019 Prepaid expenses $ 9,315 $ 10,503 Deposits to vendors 2,111 3,132 Other 1,406 551 Total prepaid and other current assets $ 12,832 $ 14,186 Prepaid expenses, non-current $ 2,583 $ 1,308 Deposits to vendors, non-current 1,018 3,346 Indefinite-lived intangible assets 6,692 6,217 Other intangible assets, net 184 428 Investments 1,010 — Total other assets $ 11,487 $ 11,299 |
Lease Abandonment, Impairment o
Lease Abandonment, Impairment of Long-Lived Assets and Store Closure and Other Related Charges | 12 Months Ended |
Dec. 31, 2020 | |
Restructuring and Related Activities [Abstract] | |
Lease Abandonment, Impairment of Long-Lived Assets and Store Closure and Other Related Charges | Lease Abandonment, Impairment of Long-lived Assets and Store Closure and Other Related Charges Beginning in the second quarter of 2020, the Company performed a review of its real estate needs and initiated restructuring actions related to a real estate repositioning program. As a result of these changes, the Company incurred one-time charges of $32,491 for the year ended December 31, 2020. These charges were primarily associated with the closure of the manufacturing facility in Kyle, Texas; the consolidation of several floors at the Company headquarters in Nashville, Tennessee; the closure and consolidation of a portion of SmileShops, which is an on-going evaluation; and the impairment of right of use assets and leasehold improvements at the closed manufacturing facility and SmileShops. Given the uncertain operating environment and the shift to work-from-home, the Company made the strategic decision to align its rent costs with the current needs of the business, while also ensuring that the Company has sufficient capacity to support future growth. The Company continues to evaluate its SmileShops and other properties to determine if it will further rationalize its footprint to better align with marketplace demand, including the direct and indirect effects of the COVID-19 pandemic. Additional future restructuring charges may result from the Company’s real estate repositioning and optimization initiatives. The following table summarizes restructuring charges for the periods presented. Years Ended December 31, 2020 2019 2018 Lease abandonment and impairment of long-lived assets: Impairment of property, plant and equipment $ 21,628 $ — $ — Impairment of right of use asset 3,829 — — $ 25,457 $ — $ — Store closure and other related charges: Impairment of inventory $ 786 $ — $ — Short-term lease termination fees 4,687 — — Other expenses 1,561 — — $ 7,034 $ — $ — |
Property, plant and equipment,
Property, plant and equipment, net | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, plant and equipment, net | Property, plant and equipment, net Property, plant and equipment were comprised of the following: Years Ended December 31, 2020 2019 Lab and SmileShop equipment $ 116,340 $ 79,103 Computer equipment and software 91,595 48,401 Leasehold improvements 25,721 13,275 Furniture and fixtures 13,627 13,152 Vehicles 6,266 2,660 Construction in progress 31,796 60,317 285,345 216,908 Less: accumulated depreciation (95,350) (39,365) Property, plant and equipment, net $ 189,995 $ 177,543 The carrying values of assets under finance leases were $20,484 and $26,501 as of December 31, 2020 and 2019, respectively, net of accumulated depreciation of $15,444 and $4,670, respectively. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Leases | Leases The Company leases property and equipment under finance and operating leases. For leases with terms greater than 12 months, the Company records the related right-of-use assets and right-of-use obligations at the present value of lease payments over the term. Certain of the Company’s leases include rental escalation clauses and renewal options that are factored into the determination of lease payments when appropriate. Certain of the Company’s leased store locations have variable payments based upon scan volume as well as other variable property related costs. The Company does not separate lease and non-lease components of contracts. Generally, the Company uses its estimated incremental borrowing rate to discount the lease payments based on information available at lease commencement, as most of its leases do not provide a readily determinable implicit interest rate. The Company estimates its collateralized incremental borrowing rate based upon a synthetic credit rating and yield curve analysis at commencement or modification date in determining the present value of lease payments. The following table presents lease-related assets and liabilities at December 31, 2020: Leases Assets and Liabilities Balance Sheet Classification December 31, 2020 Assets: Operating leases Operating lease right-of-use asset $ 31,176 Finance leases Property, plant, and equipment, net 20,484 $ 51,660 Liabilities: Operating leases Other current liabilities $ 6,821 Finance leases Current portion of long-term debt 11,055 Operating leases Operating lease liabilities, net of current portion 27,771 Finance leases Long-term debt, net of current portion 10,997 $ 56,644 Weighted average remaining term: Operating leases 6.0 years Finance leases 1.6 years Weighted average discount rate: Operating leases 5.87 % Finance leases 7.50 % (1) Finance lease assets are recorded net of accumulated amortization of $15,444 as of December 31, 2020. (2) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2020. The following table presents certain information related to lease expense for finance and operating leases: Expense Category Statement of Operations Classification Year Ended December 31, 2020 Finance lease expense: Amortization of leased assets Cost of revenues $ 9,988 Interest of lease liabilities Interest expense 2,062 Operating leases (3) 9,875 Short-term lease expense (3) 16,452 Variable lease expense (3) 3,249 Total lease expense $ 41,626 (3) Expenses are included in “Cost of revenues”, “Marketing and selling expenses”, or “General and administrative expenses” in our condensed consolidated statements of operations, depending on the purpose of the related asset. Other Information The following table represents supplemental cash flow information: Year Ended December 31, 2020 Cash paid for amounts used in the measurement of lease liabilities: Cash used in operating activities $ 9,056 Cash used in investing activities $ — Cash used in financing activities $ 10,138 Maturities of Lease Liabilities The following table reconciles the undiscounted cash flows to the finance lease liabilities and operating lease liabilities recorded on the condensed consolidated balance sheet at December 31, 2020: Finance Leases Operating Leases 2021 $ 11,209 $ 8,643 2022 6,859 6,812 2023 — 6,130 2024 — 5,349 2025 — 4,632 2026 and thereafter — 9,895 Total minimum lease payments 18,068 41,461 Residual value 5,661 — Amount representing interest (1,677) (6,869) Present value of future minimum lease payments 22,052 34,592 Less: current portion (11,055) (6,821) Long-term lease liabilities $ 10,997 $ 27,771 |
Leases | Leases The Company leases property and equipment under finance and operating leases. For leases with terms greater than 12 months, the Company records the related right-of-use assets and right-of-use obligations at the present value of lease payments over the term. Certain of the Company’s leases include rental escalation clauses and renewal options that are factored into the determination of lease payments when appropriate. Certain of the Company’s leased store locations have variable payments based upon scan volume as well as other variable property related costs. The Company does not separate lease and non-lease components of contracts. Generally, the Company uses its estimated incremental borrowing rate to discount the lease payments based on information available at lease commencement, as most of its leases do not provide a readily determinable implicit interest rate. The Company estimates its collateralized incremental borrowing rate based upon a synthetic credit rating and yield curve analysis at commencement or modification date in determining the present value of lease payments. The following table presents lease-related assets and liabilities at December 31, 2020: Leases Assets and Liabilities Balance Sheet Classification December 31, 2020 Assets: Operating leases Operating lease right-of-use asset $ 31,176 Finance leases Property, plant, and equipment, net 20,484 $ 51,660 Liabilities: Operating leases Other current liabilities $ 6,821 Finance leases Current portion of long-term debt 11,055 Operating leases Operating lease liabilities, net of current portion 27,771 Finance leases Long-term debt, net of current portion 10,997 $ 56,644 Weighted average remaining term: Operating leases 6.0 years Finance leases 1.6 years Weighted average discount rate: Operating leases 5.87 % Finance leases 7.50 % (1) Finance lease assets are recorded net of accumulated amortization of $15,444 as of December 31, 2020. (2) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2020. The following table presents certain information related to lease expense for finance and operating leases: Expense Category Statement of Operations Classification Year Ended December 31, 2020 Finance lease expense: Amortization of leased assets Cost of revenues $ 9,988 Interest of lease liabilities Interest expense 2,062 Operating leases (3) 9,875 Short-term lease expense (3) 16,452 Variable lease expense (3) 3,249 Total lease expense $ 41,626 (3) Expenses are included in “Cost of revenues”, “Marketing and selling expenses”, or “General and administrative expenses” in our condensed consolidated statements of operations, depending on the purpose of the related asset. Other Information The following table represents supplemental cash flow information: Year Ended December 31, 2020 Cash paid for amounts used in the measurement of lease liabilities: Cash used in operating activities $ 9,056 Cash used in investing activities $ — Cash used in financing activities $ 10,138 Maturities of Lease Liabilities The following table reconciles the undiscounted cash flows to the finance lease liabilities and operating lease liabilities recorded on the condensed consolidated balance sheet at December 31, 2020: Finance Leases Operating Leases 2021 $ 11,209 $ 8,643 2022 6,859 6,812 2023 — 6,130 2024 — 5,349 2025 — 4,632 2026 and thereafter — 9,895 Total minimum lease payments 18,068 41,461 Residual value 5,661 — Amount representing interest (1,677) (6,869) Present value of future minimum lease payments 22,052 34,592 Less: current portion (11,055) (6,821) Long-term lease liabilities $ 10,997 $ 27,771 |
Accrued liabilities
Accrued liabilities | 12 Months Ended |
Dec. 31, 2020 | |
Payables and Accruals [Abstract] | |
Accrued liabilities | Accrued liabilities Accrued liabilities were comprised of the following at December 31, 2020: Years Ended December 31, 2020 2019 Accrued marketing costs $ 19,236 $ 31,804 Accrued payroll and payroll related expenses 27,912 25,019 Accrued sales tax and related costs 14,877 6,660 Other 38,564 29,856 Total accrued liabilities $ 100,589 $ 93,339 |
Income taxes
Income taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes SDC Inc. is the managing member of SDC Financial and, as a result, consolidates the financial results of SDC Financial. SDC Financial and its subsidiaries are limited liability companies and have elected to be taxed as partnerships for income tax purposes, except that a subsidiary, SDC Holding and certain of its domestic and foreign subsidiaries, are taxed as corporations. The Company files income tax returns in the U.S. federal, various states and foreign jurisdictions. Any taxable income or loss generated by SDC Financial is passed through to and included in the taxable income or loss of its members, including SDC Inc., generally on a pro rata basis or otherwise under the terms of the SDC Financial LLC Agreement. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of SDC Financial, as well as any stand-alone income or loss generated by SDC Inc. The Company’s U.S. federal and state income tax returns for the tax years 2016 and beyond remain subject to examination by the Internal Revenue Service. The Company also has operations in Costa Rica, Puerto Rico, Canada, Australia, the U.K., Germany, Austria, the Netherlands, Spain, Ireland, Hong Kong, Singapore, Taiwan, and New Zealand with tax filings in each foreign jurisdiction. With respect to state and local jurisdictions, the Company and its subsidiaries are typically subject to examination for several years after the income tax returns have been filed. The Internal Revenue Service has commenced an examination of the Company’s U.S. income tax return for 2017. We anticipate this audit will conclude within the next twelve months. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for in the accompanying consolidated financial statements for any adjustments that may be incurred due to state or local audits and uncertain tax positions. The Company is also subject to withholding taxes in foreign jurisdictions. The Company’s income tax expense may vary from the expense that would be expected based on statutory rates due principally to its organizational structure and recognition of valuation allowances against deferred tax assets. Income Tax Expense The components of loss before income taxes were as follows: Years Ended December 31, 2020 2019 2018 Domestic $ (269,211) $ (532,379) $ (51,224) Foreign (6,166) (3,158) (23,186) Loss before income taxes $ (275,377) $ (535,537) $ (74,410) The income tax provision was as follows: Years Ended December 31, 2020 2019 2018 Current: Federal $ 1,169 $ 1,018 $ 101 State 642 309 204 Foreign 1,253 491 — Current income tax provision $ 3,064 $ 1,818 $ 305 Deferred: Federal — — — State 58 450 56 Foreign — — — Deferred income tax provision 58 450 56 Total income tax provision $ 3,122 $ 2,268 $ 361 The reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate is as follows: Years Ended December 31, 2020 2019 2018 U.S. federal income tax statutory rate 21.0 % 21.0 % 21.0 % Income attributable to noncontrolling interest and non taxable income (13.2) % (16.6) % (21.0) % State income tax, net of federal benefit (0.1) % (0.1) % — % Losses for which no benefit has been recognized (0.4) % (3.8) % — % Foreign rate differential (0.1) % (0.1) % — % Uncertain tax position (0.5) % (0.2) % — % Change in investment in partnership (7.8) % — % — % Other — % (0.6) % — % Effective income tax rate (1.1) % (0.4) % — % Deferred Tax Assets and Liabilities Deferred income taxes reflect the net tax effects of tax carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the balances for income tax purposes. Significant components of deferred tax assets and liabilities are as follows: Years Ended December 31, 2020 2019 Deferred tax assets: Deferred revenue $ 351 $ 539 Accruals and reserves 3,511 1,169 Net operating loss carryforwards 63,542 21,989 Deferred warrant expense — — Basis in partnership 181,673 214,530 Gross deferred tax assets $ 249,077 $ 238,227 Valuation allowance (248,420) (237,775) Net deferred tax assets $ 657 $ 452 Deferred tax liabilities: Depreciation and amortization (818) (531) Other — — Gross deferred tax liabilities (818) (531) Net deferred tax liabilities $ (161) $ (79) At December 31, 2020 the Company had unused federal net operating loss carryforwards (tax effected) for federal income tax purposes of approximately $36,600, which can be carried forward indefinitely and may be used to offset future taxable income. In addition, the Company had unused net operating loss carryforwards (tax effected) for state income tax purposes of approximately $23,349, which expire from 2029 through 2034. The Company also had unused net operating loss carryforwards (tax effected) for foreign income tax purposes of approximately $3,665. Additionally, the Company has certain other deferred tax assets related to potential future tax benefits. All deferred tax assets are evaluated using positive and negative evidence as to their future realization. The Company considers recent historic losses to be significant negative evidence, and as such, records a valuation allowance against substantially all of its deferred tax assets. As of December 31, 2020, the Company maintained a valuation allowance of approximately $248,420 against its deferred tax assets. If there is a change in the Company’s assessment of the amount of deferred income tax assets that is realizable, adjustments to the valuation allowance will be made in future periods. Unrecognized Tax Benefits A reconciliation of the Company’s gross unrecognized tax benefits is as follows: Years Ended December 31, 2020 2019 Balance at beginning of year $ 1,006 $ 34 Increases for tax positions taken in prior years 462 — Decreases for tax positions taken in prior years — — Increases for tax positions taken in current year 1,087 972 Decreases for settlements with taxing authorities — — Decreases for lapsing of the statute of limitations — — Balance at end of year $ 2,555 $ 1,006 The total amount of accrued interest and penalties were not significant as of December 31, 2020. The total amount of unrecognized tax benefit recorded during 2020 and 2019 was $2,555 and $1,006, respectively. All our unrecognized tax benefits, if recognized, would have a favorable impact on the effective tax rate. Tax Receivable Agreement The Company expects to obtain an increase in its share of the tax basis in the net assets of SDC Financial when LLC Units are redeemed from or exchanged by Continuing LLC Members. The Company intends to treat any redemptions and exchanges of LLC Units as direct purchases of LLC Units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that it would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets. In connection with the Reorganization Transactions and the IPO, the Company entered into the Tax Receivable Agreement with the Continuing LLC Members. The Tax Receivable Agreement provides for the payment by SDC Inc. of 85% of the amount of any tax benefits that SDC Inc. actually realizes, or in some cases is deemed to realize, as a result of (i) increases in SDC Inc.’s share of the tax basis in the net assets of SDC Financial resulting from any redemptions or exchanges of LLC Units, (ii) tax basis increases attributable to payments made under the Tax Receivable Agreement, and (iii) deductions attributable to imputed interest pursuant to the Tax Receivable Agreement (the ‘‘TRA Payments”). The Company expects to benefit from the remaining 15% of any of cash savings, if any, that it realizes. During the year ended December 31, 2019, the Company acquired an aggregate of $635,690 in LLC Units in connection with the redemption of certain Continuing LLC Members, which resulted in an increase in the tax basis of the assets of SDC Financial subject to the provisions of the Tax Receivable Agreement. The Company has not recognized any additional liability under the Tax Receivable Agreement after concluding it was not probable that such TRA Payments would be paid based on its estimates of future taxable income. No payments were made to the Continuing LLC Members pursuant to the Tax Receivable Agreement during the years ended December 31, 2020, or 2019. The amounts payable under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character, and timing of the taxable income of SDC Inc. in the future. If the valuation allowance recorded against the deferred tax assets applicable to the tax attributes referenced above is released in a future period, the Tax Receivable Agreement liability may be considered probable at that time and recorded within earnings. |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term DebtThe Company’s debt and capital lease obligations are comprised of the following at December 31, 2020 and 2019: Years Ended December 31, 2020 2019 HPS Credit Facility, net of unamortized financing costs of $10,431 $ 381,942 $ — JPM Credit Facility, net of unamortized financing costs of $2,513 — 147,935 Align redemption promissory note 4,609 34,090 Capital lease obligations (Note 7) 22,052 26,501 Total debt 408,603 208,526 Less current portion (15,664) (35,376) Total long-term debt $ 392,939 $ 173,150 HPS Credit Facility In May 2020, SDC U.S. SmilePay SPV (“SPV”), a wholly-owned special purpose subsidiary of the Company, entered into a Loan Agreement among SPV, as borrower, SmileDirectClub, LLC, as the seller and servicer, certain lenders, and HPS Investment Partners, LLC, as administrative agent and collateral agent, providing a five-year secured term loan facility to SPV in an initial aggregate maximum principal amount of $400,000, net of original issue discount of $12,000, with the ability to request incremental term loans of up to an additional aggregate principal amount of $100,000 with the consent of the lenders participating in such increase (the “HPS Credit Facility”). The proceeds of the HPS Credit Facility were used to repay all outstanding amounts under the previous JPM Credit Facility and for working capital and other corporate purposes. In connection with the repayment, the Company paid $187 in fees and wrote-off the remaining unamortized loan costs of $1,594, both of which are included in loss from extinguishment of debt in the accompanying condensed consolidated statements of operations. The Company recorded $11,784 related to deferred financing costs of the HPS Credit Facility. During the year ended December 31, 2020, the Company amortized under the effective interest rate method $1,398 of deferred financing costs. The original issue discount is included in loss from extinguishment of debt in the accompanying condensed consolidated statements of operations. Outstanding loans under the HPS Credit Facility bear interest at a variable rate equal to three-month LIBOR (subject to a 1.75% per annum floor), plus 7.50% per annum payable in cash, plus 3.25% per annum payable in kind or, at the Company’s election, wholly or partially in cash. Subject to certain exceptions, the HPS Credit Facility is secured by first-priority security interests in SPV’s assets, which consist of certain receivables, cash governed by a control agreement with HPS, intellectual property and related assets. SPV’s obligations under the Loan Agreement are guaranteed on a limited basis by SmileDirectClub, LLC and SDC Financial LLC. As of December 31, 2020, the Company had $334,409 of its receivables collateralized as part of the HPS Credit Facility. The HPS Credit Facility contains various restrictions, covenants, ratios and events of default, including: • SPV has limitations on consolidations, creation of liens, incurring additional indebtedness, dispositions of assets, investments and paying dividends or other distributions. • SDC Financial LLC, its consolidated subsidiaries and certain originator entities must maintain minimum monthly liquidity of $100,000 and are subject to additional leverage ratios upon the occurrence of additional debt. • SDC Financial LLC is subject to a consolidated leverage ratio measured as of the end of each fiscal quarter beginning March 31, 2022, to be calculated based on annualized EBITDA for the first three quarters of 2022, and thereafter, to be calculated based on EBITDA during the trailing four fiscal quarters for the relevant period. The HPS Credit Facility can be refinanced during the first year, provided that SPV would be required to pay the amount of interest that would have accrued during the remainder of the first year, plus 4% of the principal amount prepaid; and after the first year, for a fee of 4% of the principal amount prepaid, with the prepayment fee decreasing each year to 3% in the third year, 2% in the fourth year and 1% in the fifth year. As of December 31, 2020, the Company had $407,902 outstanding and was in compliance with all covenants in the HPS Credit Facility. HPS Warrants In connection with the HPS Credit Facility, the Company issued warrants (“HPS Warrants”) to affiliates of HPS Investment Partners, LLC exercisable at any time into an aggregate of 3,889,575 shares of the Company’s Class A common stock, which amounted to 1% of the Company’s total outstanding Class A and Class B common stock, including the HPS Warrants, as of the closing date of the HPS Credit Facility, at an exercise price of $7.11 per share, payable in cash or pursuant to a cashless exercise. The HPS Warrants were recorded at their initial fair value of $17,620 and are being accreted through interest expense to the outstanding loan balance of the HPS Credit Facility. JPM Credit Facilit y In June 2019, the Company entered into a loan and security agreement with JPMorgan Chase Bank, N.A., as the administrative agent, the collateral agent and a lender (the “JPM Credit Facility”), providing a secured revolving credit facility in an initial aggregate maximum principal amount of $500 million with the potential to increase the aggregate principal amount that may be borrowed up to an additional $250 million with the consent of the lenders participating in such increase. The proceeds from the HPS Credit Facility were used to pay all outstanding amounts under the JPM Credit Facility. The Company recorded $6,188 related to deferred financing costs of the JPM Credit Facility. During the year ended December 31, 2020, the Company amortized under the effective interest method $919 of deferred financing costs. Align Redemption Promissory Note In connection with the required redemption of Align’s 20,710 Pre-IPO Units described in Note 16, the Company entered into a promissory note with Align Technology, Inc. (“Align”). Under the terms of the promissory note, the Company will make monthly payments of $2,311 to Align through March 2021. The promissory note bears annual interest of 2.52% which is included in the consolidated statement of operations. As of December 31, 2020, the Company has $4,609 outstanding under this promissory note. Future Maturities Annual future maturities of long-term debt, excluding finance lease obligations, unamortized financing costs and unamortized HPS Warrant value, are as follows: HPS Credit Facility Align Redemption Promissory Note Total 2021 $ — $ 4,609 $ 4,609 2022 — — — 2023 — — — 2024 — — — 2025 407,902 — 407,902 Total $ 407,902 $ 4,609 $ 412,511 |
Temporary Equity
Temporary Equity | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Temporary Equity | Temporary Equity Prior to the IPO and Reorganization Transactions, SDC Financial issued 14,784 Preferred Units for net proceeds of $388,634, after deduction of $11,578 in issuance costs. In connection with the Reorganization Transactions and the IPO, the Preferred Units were recapitalized and converted into LLC Units. The Preferred Units were redeemable for a redemption price equal to the greater of (i) the original unit price less any distributions for such Preferred Unit and (ii) the fair value for such Preferred Unit and were convertible to Pre-IPO Units at a conversion price of $27,071 per Preferred Unit. Preferred Unitholders received priority on preferred returns and return of capital on any member distributions accrued a preferred return at the rate of 12.5% per annum, which amount was cumulative and compounded annually. The Company classified the Preferred Units as temporary equity in the consolidated balance sheets, as redemption was outside the control of the Company. The Preferred Units were recorded at the redemption value and the Company accounted for the changes in the redemption value using the accretion method which was recorded through equity. The Company recorded $59,250 of accretion during the year ended December 31, 2019. |
Noncontrolling Interests
Noncontrolling Interests | 12 Months Ended |
Dec. 31, 2020 | |
Noncontrolling Interest [Abstract] | |
Noncontrolling Interests | Noncontrolling InterestsSDC Inc. is the sole managing member of SDC Financial, and consolidates the financial results of SDC Financial. Therefore, SDC Inc. reports a noncontrolling interest based on the common units of SDC Financial held by the Continuing LLC Members. Changes in SDC Inc.’s ownership interest in SDC Financial, while SDC Inc. retains its controlling interest in SDC Financial, are accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC Units by the Continuing LLC Members will result in a change in ownership and reduce or increase the amount recorded as noncontrolling interest and increase or decrease additional paid-in capital when SDC Financial has positive or negative net assets, respectively. As of December 31, 2020, SDC Inc. had 115,429,319 shares of Class A common stock outstanding, which resulted in an equivalent amount of ownership of LLC Units by SDC Inc. As of December 31, 2020, SDC Inc. had a 29.9% economic ownership interest in SDC Financial. |
Variable Interest Entities
Variable Interest Entities | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Variable Interest Entities | Variable Interest Entities Upon completion of the IPO, SDC Inc. became the managing member of SDC Financial with 100% of the management and voting power in SDC Financial. In its capacity as managing member, SDC Inc. has the sole authority to make decisions on behalf of SDC Financial and bind SDC Financial to signed agreements. Further, SDC Financial maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights. Accordingly, management concluded that SDC Financial is determined to be a limited partnership or similar legal entity as contemplated in ASC 810. Furthermore, management concluded that SDC Inc. is SDC Financial’s primary beneficiary. As the primary beneficiary, SDC Inc. consolidates the results of SDC Financial for financial reporting purposes under the variable interest consolidation model guidance in ASC 810. SDC Inc.’s relationship with SDC Financial results in no recourse to the general credit of SDC Inc. SDC Financial and its consolidated subsidiaries represents SDC Inc.’s sole investment. SDC Inc. shares in the income and losses of SDC Financial in direct proportion to SDC Inc.’s ownership percentage. Further, SDC Inc. has no contractual requirement to provide financial support to SDC Financial. SDC Inc.’s financial position, performance and cash flows effectively represent those of SDC Financial as of and for the year ended December 31, 2020 and the period ended December 31, 2019. Prior to the IPO and Reorganization Transactions, SDC Inc. was not impacted by SDC Financial. |
Incentive Compensation Plans
Incentive Compensation Plans | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Incentive Compensation Plans | Incentive Compensation Plans In connection with the IPO, the Company adopted the 2019 Omnibus Incentive Compensation Plan (the “ 2019 Plan ” ) in August 2019. The Company ’ s board of directors or the compensation committee of the board of directors, acting as plan administrator, administers the 2019 Plan and the awards granted under it. The Company reserved a total of 38,486,295 shares of Class A common stock for issuance pursuant to the 2019 Plan. The Company currently has two types of share-based compensation awards outstanding under the 2019 Plan: Class A common stock options ( “ Options ” ) and Class A restricted stock units ( “ RSUs ” ), including those issued pursuant to incentive bonus agreements ( “ IBAs ” ). Class A Common Stock Options Options activity was as follows during the year ended December 31, 2020: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding beginning of period 1,744,556 $ 23.00 9.7 $ — Granted — — Exercised — — Expired — — Forfeited 65,217 23.00 Outstanding at December 31, 2020 1,679,339 $ 23.00 8.7 $ — Exercisable at December 31, 2020 298,908 $ 23.00 — $ — The Company estimates fair value of the Options using the Black-Scholes option pricing model. Inputs to the Black-Scholes option pricing model include an expected dividend yield of 0%, expected volatility of 45%, risk-free interest rate of 1.7% and an expected term of 6.0 years or 6.5 years, pursuant to vesting terms, resulting in a weighted average fair value of $10.29 or $10.68 per Option pursuant to vesting terms. As of December 31, 2020, unrecognized compensation expense related to the Options was $9,921. This expense is expected to be recognized over a weighted average period of 1.7 years. Expected dividend yield - An increase in the expected dividend yield would decrease compensation expense. Expected volatility - This is a measure of the amount by which the price of the equity instrument has fluctuated or is expected to fluctuate. The expected volatility was based on the historical volatility of a group of guideline companies. An increase in expected volatility would increase compensation expense. Risk-free interest rate - This is the U.S. Treasury rate as of the measurement date having a term approximating the expected life of the award. An increase in the risk-free interest rate would increase compensation expense. Expected term - The period of time over which the awards are expected to remain outstanding. The Company estimates the expected term as the mid-point between actual or expected vesting date and the contractual term. An increase in the expected term would increase compensation expense. Restricted Stock Units Incentive Bonus Awards The Company has IBA agreements with several key employees to provide a bonus payment in the event of a liquidation event as defined in each agreement. The bonus amounts are calculated based on the value of the Company at the time of the liquidation event, less an amount determined upon the employee entering into the agreement. The right to the payment generally vests annually over a five-year period, with certain liquidation events resulting in an acceleration of the vesting period. As the vesting of these awards was contingent on a liquidation event, no amounts were required to be recorded prior to a liquidation event. The IBA agreements were modified in August 2019 to accelerate certain vesting conditions upon a liquidation event and to modify the settlement terms, whereby the Company settled the vested portion of each IBA in 50% shares of Class A common stock and/or vested RSUs and 50% cash, of which approximately 80% of the cash (40% of the total vested portion of the award) that the IBA holders would have otherwise received was withheld by the Company to fulfill tax withholding obligations and the remainder was paid out to IBA holders upon the occurrence of a liquidation event. As a result of the modification and the occurrence of a liquidation event through the IPO, the Company recorded equity-based compensation expense of $316,959, equivalent to the amount of IBAs vested at the time of the IPO, in the form of cash, 5,654,078 shares of Class A common stock and 2,199,453 vested RSUs to be released over a period of six ’ continued employment, over a period generally ranging from 2 years to 4 years. Non-IBA Restricted Stock Units The Company granted RSUs to certain team members that generally vest annually over two A summary of activity related to these RSUs is as follows: IBA RSUs Non-IBA RSUs Total RSUs Weighted Average Grant Date Fair Value RSUs outstanding, December 31, 2019 4,794,394 1,089,796 5,884,190 $ 21.88 Granted — 1,900,605 1,900,605 $ 9.07 Vested (2,722,283) (303,969) (3,026,252) $ 22.20 Cancelled (445,373) (493,288) (938,661) $ 16.13 RSUs outstanding, December 31, 2020 1,626,738 2,193,144 3,819,882 $ 16.68 As of December 31, 2020, unrecognized compensation expense related to unvested IBA and non-IBA RSUs was $34,356. This expense is expected to be recognized over a weighted average period of 1.4 years. Incentive Bonus Units Prior to the IPO, SDC Financial issued Incentive Bonus Units ( “ IBUs ” ) to employees and non-employees. For employee IBUs, the fair value is based on SDC Financial ’ s unit value on the date of grant. For non-employee IBUs the fair value is determined at the time of vesting. Two employee IBU agreements were modified in July 2019 to accelerate certain vesting conditions upon a change of control. As a result of the acceleration of vesting conditions resulting from the Reorganization Transactions and the IPO, the Company recognized incremental compensation expense of $436 during the year ended December 31, 2019. As of December 31, 2020, unrecognized compensation expense related to unvested IBUs was $262. Employee Stock Purchase Plan The SmileDirectClub, Inc. team member Stock Purchase Plan (“SPP”) was initiated in November 2019. Under the SPP, the Company is authorized to issue up to 5,772,944 shares of its Class A common stock to qualifying employees. Eligible team members may direct the Company, during each six months option period, to withhold up to 30% of their base salary and commissions, the proceeds from which are used to purchase shares of Class A common stock at a price equal to the lesser of 85% of the closing market price on the exercise date or the grant date. For accounting purposes, the SPP is considered a compensatory plan such that the Company recognizes equity-based compensation expense based on the fair value of the options held by the employees to purchase the Company’s shares. |
Earnings (Loss) per Share
Earnings (Loss) per Share | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) per Share | Earnings (Loss) per Share Basic earnings per share of Class A common stock is computed by dividing net income attributable to SDC Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to SDC Inc., adjusted for the assumed exchange of all potentially dilutive LLC Units for Class A common stock, by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive elements. Prior to the IPO, the SDC Financial membership structure included Pre-IPO Units, some of which were profits interests. The Company analyzed the calculation of earnings per unit for periods prior to the IPO and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements. Therefore, earnings per share information has not been presented for the years ended December 31, 2018. The basic and diluted earnings per share period for the year ended December 31, 2019, represents only the period from September 11, 2019 to December 31, 2019, which represents the period wherein the Company had outstanding Class A common stock. The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock: Year Ended December 31, 2020 Year Ended December 31, 2019 Numerator: Net loss $ (278,499) $ (537,805) Less: Net loss attributable to SDC Financial prior to the Reorganization Transactions — (104,245) Less: Net loss attributable to noncontrolling interests subsequent to the Reorganization Transactions (200,133) (319,047) Net loss attributable to SDC Inc. - basic (78,366) (114,513) Add: Reallocation of net loss attributable to noncontrolling interests after the Reorganization Transactions from the assumed exchange of LLC Units for Class A common stock (200,133) (319,047) Net loss attributable to SDC Inc. - diluted $ (278,499) $ (433,560) Denominator: Weighted average shares of Class A common stock outstanding - basic 109,854,360 102,442,525 Add: Dilutive effects as shown separately below LLC Units that are exchangeable for Class A common stock 275,346,082 279,474,505 Weighted average shares of Class A common stock outstanding - diluted 385,200,442 381,917,030 Earnings (loss) per share of Class A common stock outstanding - basic $ (0.71) $ (1.12) Earnings (loss) per share of Class A common stock outstanding - diluted $ (0.72) $ (1.14) Shares of the Company’s Class B common stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Due to their anti-dilutive effect, the following securities have been excluded from diluted net loss per share in the periods presented: Year Ended December 31, 2020 Year Ended December 31, 2019 Options 1,679,339 1,744,556 Restricted Stock Units 3,819,882 5,884,190 Warrants 3,889,575 1,471,735 |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2020 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | Employee Benefit PlansThe Company has a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code of 1986, as amended, that covers substantially all U.S. employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. For the years ended December 31, 2020, 2019 and 2018, the Company matched 100% of employees’ salary deferral contributions up to 3% and 50% of employees’ salary deferral contributions from 3% to 5% of employees’ eligible compensation. The Company contributed $3,202, $2,707 and $1,133 to the 401(k) plan for the years ended December 31, 2020, 2019 and 2018, respectively. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Products and Services The Company is affiliated through common ownership by the Company’s Chairman and Chief Executive Officer, with several other entities (“Affiliates”). Certain Affiliates incur (or previously incurred) costs related to the Company, including travel costs, certain senior management personnel costs, freight, and rent, the most significant of which is freight. The Company reimbursed $0, $7,433, and $8,250 of freight incurred through an Affiliate during the years ended December 31, 2020, 2019, and 2018, respectively, which is included in cost of revenues—related parties. These costs incurred by Affiliates related to the Company are billed at actual cost to the Company by the Affiliates. In addition, the Company paid one of the Affiliates $0, $1,255, and $1,200 in management fees for the years ended December 31, 2020, 2019, and 2018, respectively, which is included in general and administrative expenses. These fees include charges relating to several individuals who provide senior leadership to the Company as well as certain other services. Certain of these individuals have been granted IBUs, which have resulted in equity-based compensation expense (see Note 14). The Company purchased legal services from a law firm where a partner is an immediate family member of an executive officer and director of the Company. Fees paid for services totaled $5,790, $1,716, and $153 for the years ended December 31, 2020, 2019, and 2018, respectively. The Company was party to a Strategic Supply Agreement with Align, a former equityholder of the Company, in which the Company had the option to purchase aligners from Align at a price that varies with the level of product purchased. While the majority of the Company’s aligners were manufactured in-house, the Company did purchase aligners under this agreement during the first quarter of 2019. Additionally, the Company purchases oral digital imaging equipment from Align. For the years ended December 31, 2020, 2019, and 2018 purchases from Align of equipment were $0, $6,025, and $15,135, respectively, and purchases of aligners included in cost of revenues—related parties were $0, $7,659, and $27,670, respectively. In February 2019, the Company entered into an agreement with the David Katzman Revocable Trust (the ‘‘Trust”) to purchase all of the issued and outstanding membership units of a limited liability corporation (‘‘SDC Plane”) owned by the Trust for a purchase price of approximately $1,100, which was the Trust’s acquisition cost. SDC Plane owns an interest in an aircraft, which is available for use by our executives. In February 2020, the Company completed the purchase of a private aircraft from Camelot SI Leasing, LLC, an entity indirectly under common control with Camelot, for $3,400, the appraised value of the aircraft. Distribution Payable In August 2019, SDC Financial declared a distribution of $43,400 less any amount determined to be due and payable to Align in connection with the current Align arbitration proceedings to the pre-IPO investors. Such distribution will be paid upon final determination of the outcome and amount payable, if any, in connection with such current arbitration proceedings. This amount is presented within other long-term liabilities on the accompanying consolidated balance sheet. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Matters assurance, and it is reasonably possible that some of these matters may be decided unfavorably to the Company. In addition, the Company periodically receives communications from state and federal regulatory and similar agencies inquiring about the nature of its business activities, licensing of professionals providing services, and similar matters. Such matters are routinely concluded with no financial or operational impact on the Company. From September to December 2019, a number of purported stockholder class action complaints were filed in the U.S. District Court for the Middle District of Tennessee and in state courts in Tennessee, Michigan and New York against the Company, members of the Company’s board of directors, certain of its current officers, and the underwriters of its IPO. The following complaints have been filed to date: Mancour v. SmileDirectClub, Inc., 19-1169-IV (TN Chancery Court filed 9/27/19), Vang v. SmileDirectClub, Inc., 19c2316 (TN Circuit Court filed 9/30/19), Fernandez v. SmileDirectClub, Inc., 19c2371 (TN Circuit Court filed 10/4/19), Wei Wei v. SmileDirectClub, Inc., 19-1254-III (TN Chancery Court filed 10/18/19), Andre v. SmileDirectClub, Inc., 19-cv-12883 (E.D. Mich. filed 10/2/19), Ginsberg v. SmileDirectClub, Inc., 19-cv-09794 (S.D.N.Y. filed 10/23/19), Franchi v. SmileDirectClub, Inc., 19- cv-962 (M.D. Tenn. filed 10/29/19), Nurlybayev v. SmileDirectClub, Inc., 19-177527-CB (Oakland County, MI Circuit Court filed 10/30/19), Sasso v. Katzman, et al., No. 657557/2019 (NY Supreme Court filed 12/18/19), Nurlybayev v. SmileDirectClub, Inc., No. 652603/2020 (Supreme Ct. N.Y. Cty. filed June 19, 2020). The complaints all allege, among other things, that the registration statement filed with the SEC on August 16, 2019, and accompanying amendments, and the Prospectus filed with the SEC on September 13, 2019, in connection with the Company’s initial public offering were inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and omitted to state material facts required to be stated therein. The complaints seek unspecified money damages, other equitable relief, and attorneys’ fees and costs. All of the actions are in the preliminary stages. The Company denies any alleged wrongdoing and intends to vigorously defend against these actions. In December 2019, the Fernandez, Vang, Mancour and Wei Wei actions were consolidated and re-captioned In re SmileDirectClub, Inc. Securities Litigation, 19-1169-IV (Davidson County, TN Chancery Court). Plaintiffs filed a consolidated amended complaint on December 20, 2019, and Defendants moved to stay or dismiss the action on February 10, 2020. On June 4, 2020, the court denied that motion. Defendants subsequently moved for permission to seek an interlocutory appeal of that decision. On June 22, 2020, the court granted that motion. On August 3, 2020, Defendants filed an application for interlocutory appeal with the court of appeals, which was denied. On September 21, 2020, Defendants filed an application for interlocutory appeal with the Tennessee Supreme Court, which was denied. On October 2, 2020, Plaintiffs moved for class certification, which Defendants opposed on January 25, 2021. A hearing on the class certification motion is scheduled for March 26, 2021. The Andre and Ginsberg actions were transferred to the U.S. District Court for the Middle District of Tennessee, where they were consolidated with the Franchi action. Plaintiffs filed a consolidated amended complaint on February 21, 2020, and Defendants moved to dismiss the action on March 23, 2020. That motion remains pending. In the Nurlybayev action, on January 10, 2020, the Defendants moved to dismiss or stay the entire action in favor of the related actions pending in Tennessee, which motion was granted and the case was dismissed on February 26, 2020. On June 19, 2020, Plaintiff Nurlybayev filed a substantially similar action in New York state court. On August 21, 2020, Defendants filed a motion to dismiss that action, which is fully briefed and remains pending. In the Sasso action, Plaintiff agreed to stay the action pending resolution of any motions to dismiss in any of the related actions. The Court so-ordered the parties’ stipulation to that effect on January 22, 2020. In November and December 2019 and March 2020, three stockholder derivative actions were filed against the members of the Company’s board of directors, certain of the Company’s current officers and related entities: Doris Shenwick Trust v. Katzman et al., C.A. No. 2019-0940-MTZ (filed Nov. 22, 2019); Harts v. Katzman et al., C.A No. 2019-1027-MTZ (filed Dec. 23, 2019); and Sammons v. Katzman et al., C.A No. 2020-0169-MTZ (Mar. 5, 2020). The three derivative actions were consolidated into In Re SmileDirectClub, Inc. Derivative Litigation, C.A. No. 2019-0940-MTZ (Delaware Chancery Court) and Plaintiffs filed a consolidated amended complaint on April 8, 2020. The Company denies any alleged wrongdoing and has moved to dismiss the action. Briefing on the motion to dismiss was completed on November 6, 2020. A hearing on the motion to dismiss was held on February 17, 2021. The court took the matter under advisement. Some state dentistry boards have established new rules or interpreted existing rules in a manner that limits or restricts the Company’s ability to conduct its business as currently conducted in other states or have engaged in conduct so as to otherwise interfere with the Company’s ability to conduct its business. We have filed actions in federal court in Alabama, Georgia, and California against the state dental boards in those states, alleging violations by the dental boards of various laws, including the Sherman Act and the Commerce Clause. While a national orthodontic association has filed Amicus Briefs in support of the dental boards in both the Georgia and Alabama litigations and has filed a motion to do the same in California (which motion was denied), the FTC and DOJ have filed joint Amicus Briefs in support of the Company in both the Alabama and Georgia matters. The California matter was amended and an order of dismissal was entered on July 7, 2020. The Company filed notice of appeal on July 17, 2020 and expects oral argument in or around the first quarter of 2021. Both the Alabama and Georgia matters were then sent to the 11th Circuit Court of Appeals as a result of the dental boards in both states appealing the lower court’s decisions. Oral argument before the 11th Circuit Court of Appeals occurred in the Georgia matter on May 20, 2020 and in the Alabama matter on July 8, 2020. The FTC and DOJ participated in oral arguments in support of the Company. The DOJ’s antitrust chief presented in the Alabama matter. On August 11, 2020, the 11th Circuit Court of Appeals affirmed the Georgia district court’s denial of the board members’ motion to dismiss. On December 8, 2020, the 11th Circuit Court of Appeals voted to have a rehearing en blanc. The FTC and DOJ filed an amicus and participated in oral argument that was held on February 23, 2021. The court has not yet issued a ruling. In September 2019, a putative class action on behalf of a consumer and three orthodontists was brought against the Company in the U.S. District Court for the Middle District of Tennessee, Ciccio, et al. v. SmileDirectClub, LLC, et al., Case No. 3:19-cv-00845 (M.D. Tenn.). The Plaintiffs assert claims for breach of warranty, false advertising under the Lanham Act, common law fraud, and various state consumer protection statutes relating to the Company’s advertising. Following a proactive voluntary dismissal by the majority of consumer plaintiffs, one consumer has since sought to rejoin the Middle District of Tennessee litigation or, in the alternative, to intervene, which the Court granted. That ruling has been appealed, and the Court has stayed the consumer claims pending the appeal. Litigation is in the pleading stage and discovery as to the purported provider class has commenced. A preliminary Case Management Order has been entered setting trial for some time in March 2022. The Company denies any alleged wrongdoing and intends to defend against this action vigorously. In March 2019, a final arbitration award was issued in an arbitration proceeding brought by the Company alleging that one of our former members, Align, had violated certain restrictive covenants set forth in its operating agreement. The arbitrator ruled that Align had breached both the non-competition and confidentiality provisions of the Company’s operating agreement and that, as a result, Align was required to close its Invisalign Stores, return all of the Company’s confidential information, and sell its membership units to the Company or certain of its pre-IPO unitholders for an amount equal to the balance of Align’s capital account as of November 2017. The arbitrator also extended the non-competition period to which Align is subject through August of 2022 and prohibited Align from using the Company’s confidential information in any manner going forward. The Company is paying Align $54,000, pursuant to a promissory note payable over 24 months through March 2021, in full redemption of Align’s membership units pursuant to this ruling. The ruling has been confirmed in its entirety in the circuit court of Cook County, Chicago, Illinois, but Align continues to object to the purchase price and repurchase documentation despite the arbitration ruling and its confirmation, and has since filed a subsequent arbitration proceeding disputing the $54,000 redemption amount and seeking an additional $43,400 . Arbitration was held in December 2020. The record has been closed and the arbitrator’s decision is expected by April 2021. In December 2020, a class action complaint was filed in the Illinois state court: Stacy Benbow et al. v. SmileDirectClub, Inc. et al., 2020 CH 07269 (Cook County Circuit Court filed 12/14/20). The complaint alleges violations of the Telephone Consumer Protection Act and seeks to represent a nationwide class of similarly situated persons. The complaint seeks injunctive relief, statutory damages, and attorneys’ fees and costs. A tentative settlement has been approved by the court and the Company has recorded an estimated loss of $4,800 related to such tentative settlement, but additional court proceedings are necessary before the settlement is finalized. Notice to the class is scheduled to be sent on March 20, 2021 and final approval is set for May 19, 202 1. Tax Receivable Agreement As described in Note 7, the Company is a party to the Tax Receivable Agreement pursuant to which SDC Inc. is contractually committed to pay the Continuing LLC Members 85% of the amount of any tax benefits that SDC Inc. actually realizes, or in some cases is deemed to realize, as a result of certain transactions. The Company is not obligated to make any payments under the Tax Receivable Agreement until the tax benefits associated with the transactions that gave rise to the payments are realized. TRA Payments are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) future changes in tax laws. If the Company does not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then it will not be required to make the related TRA Payments. During the year ended December 31, 2020 and 2019, the Company recognized no liabilities relating to its obligations under the Tax Receivable Agreement, after concluding that it was not probable that the Company would have sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits. There were no transactions subject to the Tax Receivable Agreement for which the Company recognized the related liability, as the Company concluded that it would not have sufficient future taxable income to utilize all of the related tax benefits. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company provides aligner products. The Company’s chief operating decision maker views the operations and manages the business on a consolidated basis and, therefore the Company has one operating segment, aligner products, for segment reporting purposes in accordance with ASC 280-10, “ Segment Reporting .” For the year ended December 31, 2020, approximately 86.6% of the Company’s revenues were generated by sales within North America and substantially all of its net property, plant and equipment was within the North America. |
Quarterly Results of Operations
Quarterly Results of Operations Data (Unaudited) | 12 Months Ended |
Dec. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Results of Operations (Unaudited) | Quarterly Results of Operations Data (Unaudited) Three Months Ended December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Revenue, net $ 184,556 $ 168,501 $ 107,073 $ 196,650 Gross profit 136,017 118,741 58,297 136,873 Loss from operations (19,200) (27,765) (74,019) (96,480) Net loss (32,951) (43,482) (94,666) (107,400) Net loss attributable to noncontrolling interest (23,224) (30,892) (67,867) (78,150) Net loss attributable to SmileDirectClub, Inc. $ (9,727) $ (12,590) $ (26,799) $ (29,250) Earnings (loss) per share of Class A common stock: Basic $ (0.09) $ (0.11) $ (0.25) $ (0.28) Diluted $ (0.09) $ (0.11) $ (0.25) $ (0.28) Weighted average shares outstanding: Basic 114,008,652 111,703,080 109,048,411 104,595,081 Diluted 386,128,446 385,672,677 385,133,303 383,855,705 Three Months Ended December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 Revenue, net $ 196,713 $ 180,185 $ 195,794 $ 177,736 Gross profit 143,338 138,750 161,129 128,821 Loss from operations (92,246) (382,341) 685 (16,371) Net loss (97,326) (387,564) (32,435) (20,480) Net loss attributable to noncontrolling interest (71,109) (299,268) — — Net loss attributable to SmileDirectClub, Inc. $ (26,217) $ (88,296) $ (32,435) $ (20,480) Earnings (loss) per share of Class A common stock: Basic $ (0.25) $ (0.89) N/A N/A Diluted $ (0.25) $ (0.89) N/A N/A Weighted average shares outstanding: Basic 103,043,244 99,533,877 N/A N/A Diluted 382,517,729 379,008,382 N/A N/A |
Supplemental Cash Flow
Supplemental Cash Flow | 12 Months Ended |
Dec. 31, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Cash Flow | Supplemental Cash Flow The supplemental cash flow information comprised of the following for the years ended December 31: 2020 2019 2018 Interest paid $ 30,900 $ 9,664 $ 8,392 Income taxes paid $ — $ — $ — Purchases of property and equipment included in accounts payable $ 11,809 $ 28,638 $ 1,457 Property acquired under finance lease $ — $ 23,973 $ 6,867 Promissory note issued in exchange for member unit redemptions $ — $ — $ 1,546 Costs associated with IPO included in accrued expenses $ — $ 1,155 $ — |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On February 9, 2021, the Company issued $650,000 principal amount of the Company’s 0.00% Convertible Senior Notes due 2026 (the “Notes”). The Company also granted the initial purchasers of the Notes an option to purchase up to an additional $97,500 aggregate principal amount of the Notes (“Option Notes”). On February 9, 2021, the initial purchasers of the Notes exercised their option to purchase $70,000 aggregate principal amount of the Option Notes (the “First Greenshoe Exercise”). The sale of the Option Notes from the First Greenshoe Exercise closed on February 12, 2021. On February 11, 2021, the initial purchasers of the Notes exercised the remaining portion of their option to purchase $27,500 aggregate principal amount of the Option Notes (the “Second Greenshoe Exercise” and, the Option Notes issued in connection with the Second Greenshoe Exercise, the “Second Greenshoe Option Notes”). The sale of the Second Greenshoe Option Notes closed on February 16, 2021. The Notes were issued and governed by an indenture, dated February 9, 2021, (the “Indenture”), between the Company and Wilmington Trust, National Association, as trustee. The Notes will mature on February 1, 2026, unless earlier repurchased, redeemed or converted. The Notes will not bear regular interest, and the principal amount of the Notes will not accrete. The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including the Company’s credit facility and trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. The Company may, at its option, redeem some of the Notes, in whole or in part, at the applicable redemption price as set forth in the Indenture. If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s Class A common stock. The Notes have customary provisions relating to the occurrence of an “Event of Default” (as defined in the Indenture), which include the following: (i) a default by the Company in the payment when due (whether at maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption price or fundamental change repurchase price for, any Note (ii) a default by the Company for 30 days in the payment when due of special interest, if any, on any Note; (iii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iv) a default by the Company in its obligation to convert a Note in accordance with the Indenture upon the exercise of the conversion right with respect thereto, if such default is not cured within three business days after its occurrence; (v) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (vi) a default by the Company in its other obligations or agreements under the Indenture or the Notes (other than a default set forth in clauses (i), (ii), (iii), (iv) or (v) above) if such default is not cured or waived within 60 days after written notice is given in accordance with the Indenture; (vii) certain defaults by the Company or any of its significant subsidiaries with respect to indebtedness for borrowed money of at least $50,000; and (viii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of the Company’s significant subsidiaries. If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid special interest, if any, on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by written notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid special interest, if any, on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50% on the principal amount of the Notes. The Company used approximately $69,500 of the net proceeds from the Notes to fund the cost of entering into the capped call transactions described below. The Company intends to use a portion of the remainder of the net proceeds from the offering to repay amounts owed under the HPS Credit Facility. On February 4, 2021, in connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with certain of the initial purchasers of the Notes and/or their respective affiliates and/or other financial institutions (the “Option Counterparties”). In addition, on February 9, 2021, in connection with First Greenshoe Exercise and on February 11, 2021, in connection with the Second Greenshoe Exercise, the Company entered into additional privately negotiated capped call transactions (together, the “Capped Call Transactions”) with the Option Counterparties. The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, the number of shares of Class A common stock initially underlying the Notes. The Capped Call Transactions are expected generally to reduce potential dilution to the Class A common stock upon any conversion of the Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of such converted Notes, as the case may be, with such reduction and/or offset subject to a cap. The Capped Call Transactions are separate transactions entered into by the Company with each Option Counterparty, and are not part of the terms of the Notes and will not affect any noteholder’s rights under the Notes. Noteholders will not have any rights with respect to the Capped Call Transactions. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Consolidation | Basis of Presentation and Consolidation The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements include the accounts of SDC Inc., which consolidates SDC Financial and its wholly-owned subsidiaries, as well as accounts of contractually affiliated professional corporations (“PCs”) managed by the Company. The consolidated financial statements include the accounts of variable interest entities in which the Company is the primary beneficiary under the provisions of Accounting Standards Codification (“ASC”) Topic 810, ‘ ‘ Consolidation. ” At December 31, 2020, the variable interest entities include 54 dentist owned PCs, and at December 31, 2019 the variable interest entities included 44 dentist owned PCs. The Company is a dental service organization and does not engage in the practice of dentistry. All clinical services are provided by dentists and orthodontists who are engaged as independent contractors or otherwise engaged by the dentist-owned PCs. The Company contracts with the PCs and dentists and orthodontists through a suite of agreements, including but not limited to, management services agreements, supply agreements, and licensing agreements, pursuant to which the Company provides the administrative, non-clinical management services to the PCs and independent contractors. The Company has the contractual right to manage the activities that most significantly impact the variable interest entities’ economic performance through these agreements without engaging in the corporate practice of dentistry. Additionally, the Company would absorb substantially all of the expected losses of these entities should they occur. The accompanying consolidated statements of operations reflect the revenue earned and the expenses incurred by the PCs. All significant intercompany balances and transactions are eliminated in consolidation. |
New Accounting Pronouncements Adopted and Not Yet Adopted | In January 2020, the Company adopted lease accounting guidance as discussed in Note 2 to the Consolidated Financial Statements. Adoption of the new lease accounting guidance had a material impact to the Company’s consolidated balance sheets and related disclosures, and resulted in the recording of additional right-of-use assets and lease liabilities as of the date of adoption. This guidance was applied using the optional transition method which allowed the Company to not recast comparative financial information but rather recognize a cumulative-effect adjustment to retained earnings as of the effective date in the period of adoption. No material adjustments to retained earnings were made as a result of the adoption of this guidance. Consistent with the optional transition method, the financial information in the condensed consolidated balance sheets prior to the adoption of this new lease accounting guidance has not been adjusted and is therefore not comparable to the current period presented. The standard did not materially impact the Company’s condensed consolidated statements of operations, comprehensive loss, changes in equity (deficit), or cash flows. For additional information, including the required disclosures, related to the impact of adopting this standard, see Note 2 and Note 7 to the Consolidated Financial Statements. Recently Adopted Accounting Pronouncements In January 2020, the Company adopted FASB ASU 2016-02 and subsequent updates, collectively referred to as ‘‘Leases (Topic 842).” This update requires a dual approach for lessee accounting under which a lessee will account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement recognition. In July 2018, ASU 2018-10, ‘‘Codification Improvements to Topic 842, Leases,” was issued to provide more detailed guidance and additional clarification for implementing ASU 2016-02. Furthermore, in July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the package of practical expedients in transition, which permits it to not reassess its conclusions pertaining to lease identification, lease classification, and initial direct costs on leases that commenced prior to the adoption of the new standard. The Company also elected the ongoing practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities related to short-term leases. The Company did not elect the use-of-hindsight practical expedient. The Company elected to not separate lease and non-lease components for certain classes of assets including real estate and equipment. As a result of adopting Topic 842, the Company recognized net operating lease right-of-use assets of $45,076 and operating lease liabilities of $44,807 as of the effective date. As part of adopting Topic 842 and the Company’s election to not separate lease and non-lease components, the Company increased its finance lease asset $3,791 and related liability $4,378 as of the effective date to include non-lease components. The cumulative effect of adding the non-lease components to finance leases upon adoption resulted in an immaterial adjustment to the opening balance of retained earnings as of January 1, 2020. The standard did not have a material impact on the Company’s results of operations or cash flows. In January 2020, the Company adopted FASB ASU 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures. In fiscal year 2020, the Company adopted FASB ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This update clarifies the accounting treatment for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The adoption of ASU 2018-15 did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In September 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses” (Topic 326). The FASB issued this update to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this update replace the existing guidance of incurred loss impairment methodology with an approach that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses,” which clarifies the scope of guidance in the ASU 2016-13. The updated guidance is effective for annual periods beginning after December 15, 2020. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13, “ Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, ” which amends the disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures. This guidance is effective for years beginning after December 15, 2020, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures. In December 2019, the FASB issued ASU 2019-12, " Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ." This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, “ Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ,” which eliminates most of the guidance in Subtopic 470-20 that requires separate accounting for embedded conversion features in convertible debt arrangements. Further, ASU 220-06 removes some of the conditions in Subtopic 815-40-25, "Contracts on an Entity's own Equity," that are required for equity classification, including the requirement for equity contracts to permit settlement in unregistered shares. The updated guidance is effective for annual periods beginning after December 15, 2021, with early adoption permitted for annual periods beginning after December 15, 2020. The Company plans to adopt the provisions of this guidance effective January 1, 2021 using the modified retrospective method of adoption. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and related disclosures. |
Management Use of Estimates | Management Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that impact the reported amounts. On an ongoing basis, the Company evaluates its |
Revenue Recognition | Revenue Recognition The Company’s revenues are derived primarily from sales of aligners, impression kits, whitening gel, and retainers, and interest earned through its SmilePay financing program. Revenue is recorded for all customers based on the amount that is expected to be collected, which considers implicit price concessions, discounts and returns. The Company identifies a performance obligation as distinct if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. Determining the standalone selling price (“SSP”) and allocation of consideration from a contract to the individual performance obligations, and the appropriate timing of revenue recognition, is the result of significant qualitative and quantitative judgments. Management considers a variety of factors such as historical sales, usage rates (the number of times a customer is expected to order additional aligners), costs, and expected margin, which may vary over time depending upon the unique facts and circumstances related to each performance obligation, in making these estimates. Further, the Company’s process for estimating usage rates requires significant judgment and evaluation of inputs, including historical data and forecasted usages. Changes in the allocation of the SSP between performance obligations will not affect the amount of total revenues recognized for a particular contract. The Company uses the expected cost plus a margin approach to determine the SSP for performance obligations, and discounts are allocated to each performance obligation based on the relative standalone selling price. However, any material changes in the allocation of the SSP could impact the timing of revenue recognition, which may have a material effect on the Company’s financial position and result of operations as the contract consideration is allocated to each performance obligation, delivered or undelivered, at the inception of the contract based on the SSP of each distinct performance obligation. The Company estimates the amount expected to be collected based upon management’s assessment of historical write-offs and expected net collections, business and economic conditions, and other collection indicators. Management relies on the results of detailed reviews of historical write-offs and collections as a primary source of information in estimating the amount of contract consideration expected to be collected and implicit price concessions. Uncollectible receivables are written-off in the period management believes it has exhausted its ability to collect payment from the customer. The Company believes its analysis provides reasonable estimates of its revenues and valuations of its accounts receivable. A description of the revenue recognition for each product sold by the Company is detailed below. Aligners and Impression Kits: The Company enters into contracts with customers for aligner sales that involve multiple future performance obligations. The Company determined that aligner sales comprise the following distinct performance obligations: initial aligners, touch-up aligners, and retainers for international sales only which can occur at any time throughout the treatment plan (which is typically between five to ten months) upon the direction of and prescription from the treating dentist or orthodontist. The Company allocates revenues for each performance obligation based on its SSP and recognizes the revenues as control of the performance obligation is transferred upon shipment of the aligners. The Company recognizes aligner revenue on amounts expected to be collected during the course of the treatment plan. The Company bills its customers either upfront for the full cost of aligners or monthly through its SmilePay financing program, which involves a down payment and a fixed amount per month for up to 24 months. The Company’s accounts receivable related to the SmilePay financing program are reported at the amount expected to be collected on the consolidated balance sheets, which considers implicit price concessions. Financing revenue from its accounts receivable is recognized based on the contractual market interest rate with the customer, net of implicit price concessions. There are no fees or origination costs included in accounts receivable. The Company sells doctor-prescribed impression kits to its customers as an alternative to an in-person visit at one of its SmileShops, popup locations, or Partner Network locations, comprised of affiliated dentist and orthodontist offices, where the customer receives a free oral digital imaging of their teeth. The Company combines the sales of its impression kits with aligner sales and recognizes the revenues as control of the performance obligation is transferred upon shipment of the aligners. The Company estimates the amount of impression kit sales that do not result in an aligner therapy treatment plan and recognizes such revenue when aligner conversion becomes remote. Retainers and Other Products: The Company sells retainers and other products (such as whitening gel and tooth brushes) to customers, which can be purchased on the Company’s website or certain retail outlets. The sales of these products are independent and separate from the customer’s decision to purchase aligner therapy for domestic sales. The Company determined that the transfer of control for these performance obligations occurs as the title of such products passes to the customer or retail partner. The following table summarizes revenue recognized for each product sold by the Company: Years Ended December 31, 2020 2019 2018 Aligner revenue, net of implicit price concessions $ 543,136 $ 683,429 $ 390,505 Financing revenue, net of implicit price concessions 49,407 43,899 25,107 Retainers and other products revenue 64,237 23,100 7,622 Total revenue $ 656,780 $ 750,428 $ 423,234 Implicit price concessions included in total revenue $ 66,128 $ 74,662 $ 46,554 Deferred Revenue: Deferred revenue represents the Company’s contract liability for performance obligations associated with sales of aligners. During the years ended December 31, 2020, 2019 and 2018, the Company recognized $656,780, $750,428 and $423,234 of revenue, respectively, of which $19,750, $16,630 and $12,437 was previously included in deferred revenue on the consolidated balance sheets as of December 31, 2019, 2018 and 2017, respectively. Shipping and Handling Costs Shipping and handling charges are recorded in cost of revenues in the consolidated statements of operations upon shipment. The Company incurred approximately $23,036, $19,000 and $10,500 in outsourced shipping expenses for the years ended December 31, 2020, 2019 and 2018, respectively. Cost of Revenues Cost of revenues includes the total cost of products produced and sold. Such costs include direct materials, direct labor, overhead costs (occupancy costs, indirect labor, and depreciation), fees retained by doctors, freight and duty expenses associated with moving materials from vendors to the Company’s facilities and from its facilities to the customers, and adjustments for shrinkage (physical inventory losses), lower of cost or net realizable value, slow moving product and excess inventory quantities. |
Marketing and Selling, General and Administrative Expenses | Marketing and Selling Expenses Marketing and selling expenses include direct online and offline marketing and advertising costs, costs associated with intraoral imaging services, selling labor, and occupancy costs of SmileShop locations. All marketing and selling expenses, including advertising, are expensed as incurred. For the years ended December 31, 2020, 2019 and 2018, the Company incurred marketing, selling, and advertising costs of $322,919, $481,468 and $213,080, respectively. General and Administrative Expenses General and administrative expenses include payroll and benefit costs for corporate team members, equity-based compensation expenses, occupancy costs of corporate facilities, bank charges and costs associated with credit and debit card interchange fees, outside service fees, and other administrative costs, such as computer maintenance, supplies, travel, and lodging. |
Depreciation and Amortization | Depreciation and AmortizationDepreciation includes expenses related to the Company’s property, plant and equipment, including capital leases. Amortization includes expenses related to definite-lived intangible assets and capitalized software. Depreciation and amortization is calculated using the straight-line method over the useful lives of the related assets, ranging from three |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company measures the fair value of financial instruments as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. |
Derivatives Financial Instruments | Derivative Financial Instruments The Company accounts for derivative financial instruments in accordance with applicable accounting standards for such instruments and hedging activities, which require that all derivatives are recorded on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated |
Certain Risks and Uncertainties | Certain Risks and Uncertainties The Company’s operating results depend to a significant extent on the ability to market and develop its products. The life cycles of the Company’s products are difficult to estimate due, in part, to the effect of future product enhancements and competition. The inability to successfully develop and market the Company’s products as a result of competition or other factors would have a material adverse effect on its business, financial condition, and results of operations. The Company provides credit to customers in the normal course of business. The Company maintains reserves for potential credit losses and such losses have been within management’s expectations. No individual customer accounted for 1% or more of the Company’s accounts receivable at December 31, 2020 or 2019, or net revenue for the years ended December 31, 2020, 2019 and 2018. Some of the Company’s products are considered medical devices and are subject to extensive regulation in the U.S. and internationally. The regulations to which the Company is subject are complex. Regulatory changes could result in restrictions on the Company’s ability to carry on or expand its operations, higher than anticipated costs or lower than anticipated sales. The failure to comply with applicable regulatory requirements may have a material adverse impact on the Company. The Company’s reliance on international operations exposes it to related risks and uncertainties, including difficulties in staffing and managing international operations, such as hiring and retaining qualified personnel; political, social and economic instability; interruptions and limitations in telecommunication services; product and material transportation delays or disruption; trade restrictions and changes in tariffs; import and export license requirements and restrictions; fluctuations in foreign currency exchange rates; and potential adverse tax consequences. If any of these risks materialize, operating results may be harmed. The Company purchases certain inventory from sole suppliers, and the inability of any supplier or manufacturer to fulfill the supply requirements could materially and adversely impact its future operating results. |
Cash | CashCash consists of all highly liquid investments with original maturities of less than three months. Cash is held in various financial institutions in the U.S. and internationally. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value using the first-in, first-out method of inventory accounting. Inventory consists of raw materials for producing impression kits and aligners and finished goods. Inventory is net of shrinkage and obsolescence. |
Property, Plant and Equipment, net | Property, Plant and Equipment, net Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Routine maintenance and repairs are charged to expense as incurred. At the time property, plant and equipment are retired from service, the cost and accumulated depreciation or amortization are removed from the respective accounts and the related gains or losses are reflected in the consolidated statements of operations. |
Leases | Leases On January 1, 2020, the Company adopted the new leases standard using the modified retrospective transition method, which requires that it recognizes leases differently pre- and post-adoption. See “Recently Adopted Accounting Pronouncements—ASU No. 2016-02” below for more information. The Company categorizes leases at their inception as either operating or finance leases. Lease agreements cover certain retail locations, office space, warehouse, manufacturing and distribution space and equipment. Operating leases are included in operating lease right-of-use assets, other current liabilities, and long-term right-of-use operating lease obligations in the consolidated balance sheet. Finance leases are included in property, plant and equipment, net, current portion of long-term debt, and long-term debt. Leased assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses a secured incremental borrowing rate as the discount rate for determining the present value of lease payments when the rate implicit in the contract is not readily determinable. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included on the condensed consolidated balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date we have the right to control the property. |
Internally Developed Software Costs | Internally Developed Software CostsThe Company generally provides services to its customers using software developed for internal use. The costs that are incurred to develop such software are expensed as incurred during the preliminary project stage. Once certain criteria have been met, direct costs incurred in developing or obtaining computer software are capitalized. Training and maintenance costs are expensed as incurred. Capitalized software costs are included in property, plant and equipment in the consolidated balance sheets and are amortized over a three-year period. |
Impairment | Impairment The Company evaluates long-lived assets (including finite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. An asset or asset group is considered impaired if its carrying amount exceeds the future undiscounted net cash flows that the asset or asset group is expected to generate. Factors the Company considers important which could trigger an impairment review include significant negative industry or economic trends, significant loss of customers and changes in the competitive environment. If an asset or asset group is considered to be impaired, the impairment to be recognized is calculated as the amount by which the carrying amount of the asset or asset group exceeds its fair market value. The Company’s estimates of future cash flows attributable to long-lived assets require significant judgment based on its historical and anticipated results and are subject to many assumptions. The estimation of fair value utilizing a discounted cash flow approach includes numerous uncertainties which require significant judgment when making assumptions of expected growth rates and the selection of discount rates, as well as assumptions regarding general economic and business conditions, and the structure that would yield the highest economic value, among other factors. |
Debt Issuance Costs | Debt Issuance Costs The Company records debt issuance costs related to its term debt as direct deductions from the carrying amount of the debt. The costs are amortized to interest expense over the life of the debt using the effective interest method. |
Redeemable Series A Preferred Units | Redeemable Series A Preferred Units SDC Financial classified its Redeemable Series A Preferred Units (‘‘Preferred Units”) as temporary equity on the consolidated balance sheet for periods prior to the Reorganization Transactions and IPO due to certain deemed liquidation events that are outside of its control. The Company evaluated the Preferred Units upon issuance in order to determine classification as to permanent or temporary equity and whether or not the instrument contained an embedded derivative that requires bifurcation. This analysis followed the whole instrument approach which compares an individual feature against the entire instrument that includes that feature. This analysis was based on a consideration of the economic characteristics and risk of the Preferred Units including: (i) redemption rights on the Preferred Units allowing the Preferred Unitholders the ability to redeem the Preferred Units six years from the anniversary of the Preferred Units original issuance, provided that a qualified public offering has not been consummated prior to such date; (ii) conversion rights that allowed the Preferred Unitholders the ability to convert into common member units at any time; (iii) the Preferred Unitholders could vote based on the combined membership percentage interest; and (iv) distributions of the preferred return on the Preferred Units were subject to the same conditions as non-Preferred Unit distributions which required all distributions to be approved by SDC Financial’s board of directors. The Company elected the accreted redemption value method in which it accreted changes in the redemption value, as defined in Note 9, over the period from the date of issuance of the Preferred Units to the earliest redemption date (six years from the date of issuance) using the effective interest method. |
Income Taxes and Tax Receivable Agreement | Income Taxes SDC Inc. is the managing member of SDC Financial and, as a result, consolidates the financial results of SDC Financial in the consolidated financial statements. SDC Financial and its subsidiaries are limited liability companies and have elected to be taxed as partnerships for income tax purposes except for a subsidiary, SDC Holding, LLC (‘‘SDC Holding”) and its domestic and foreign subsidiaries, which are taxed as corporations. As such, SDC Financial does not pay any federal income taxes, as any income or loss is included in the tax returns of the individual members. SDC Financial does pay state income tax in certain jurisdictions, and the Company’s income tax provision in the consolidated financial statements reflects the income taxes for those states. Additionally, certain wholly-owned entities taxed as corporations are subject to federal, state, and foreign income taxes, in the jurisdictions in which they operate, and accruals for such taxes are included in the consolidated financial statements. The Company further evaluates deferred tax assets in each jurisdiction and recognizes associated benefits when positive evidence of realization exceeds negative evidence, and otherwise records valuation allowances as necessary. The Company computes the provision for income taxes using the liability method and recognizes deferred tax assets and liabilities for temporary differences between financial statement and income tax bases of assets and liabilities, as well as for operating loss and tax credit carryforwards. The Company measures deferred tax assets and liabilities using tax rates applicable to taxable income in effect for the years in which those tax assets are expected to be realized or settled and provides a valuation allowance against deferred tax assets when it cannot conclude that it is more likely than not that some or all deferred tax assets will be realized. In addition, the Company recognizes tax benefits from uncertain tax positions only if it expects that its tax positions are more likely than not that they will be sustained, based on the technical merits of the positions, on examination by the jurisdictional tax authority. The Company recognizes any accrued interest and penalties to unrecognized tax benefits as interest expense and income tax expense, respectively. Tax Receivable Agreement In connection with the Reorganization Transactions and the IPO, the Company entered into a Tax Receivable Agreement (the “Tax Receivable Agreement”) with the Continuing LLC Members, pursuant to which SDC Inc. agreed to pay the Continuing LLC Members 85% of the amount of cash tax savings, if any, in U.S. federal, state, and local income tax or franchise tax that SDC Inc. actually realizes as a result of (a) the increases in tax basis attributable to exchanges by Continuing LLC Members and (b) tax benefits related to imputed interest deemed to be paid by SDC Inc. as a result of the Tax Receivable Agreement. The Company recognizes this contingent liability in its consolidated financial statements when amounts become probable as to incurrence and estimable in amount. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Revenue by Product | The following table summarizes revenue recognized for each product sold by the Company: Years Ended December 31, 2020 2019 2018 Aligner revenue, net of implicit price concessions $ 543,136 $ 683,429 $ 390,505 Financing revenue, net of implicit price concessions 49,407 43,899 25,107 Retainers and other products revenue 64,237 23,100 7,622 Total revenue $ 656,780 $ 750,428 $ 423,234 Implicit price concessions included in total revenue $ 66,128 $ 74,662 $ 46,554 |
Schedule of Depreciation and Amortization | Depreciation and amortization by financial statement line item for the years ended December 31, 2020, 2019 and 2018 were as follows: Years Ended December 31, 2020 2019 2018 Cost of revenues $ 24,718 $ 11,186 $ 4,719 Marketing and selling expenses 7,079 5,322 1,429 General and administrative expenses 24,593 10,828 2,713 Total $ 56,390 $ 27,336 $ 8,861 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventories are comprised of the following: Years Ended December 31, 2020 2019 Raw materials $10,059 $5,950 Finished goods 19,188 12,481 Total inventories $29,247 $18,431 |
Prepaid and other assets (Table
Prepaid and other assets (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule Prepaid and Other Assets | Prepaid and other assets are comprised of the following: Years Ended December 31, 2020 2019 Prepaid expenses $ 9,315 $ 10,503 Deposits to vendors 2,111 3,132 Other 1,406 551 Total prepaid and other current assets $ 12,832 $ 14,186 Prepaid expenses, non-current $ 2,583 $ 1,308 Deposits to vendors, non-current 1,018 3,346 Indefinite-lived intangible assets 6,692 6,217 Other intangible assets, net 184 428 Investments 1,010 — Total other assets $ 11,487 $ 11,299 |
Lease Abandonment, Impairment_2
Lease Abandonment, Impairment of Long-Lived Assets and Store Closure and Other Related Charges (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Restructuring and Related Activities [Abstract] | |
Schedule of Restructuring Charges | The following table summarizes restructuring charges for the periods presented. Years Ended December 31, 2020 2019 2018 Lease abandonment and impairment of long-lived assets: Impairment of property, plant and equipment $ 21,628 $ — $ — Impairment of right of use asset 3,829 — — $ 25,457 $ — $ — Store closure and other related charges: Impairment of inventory $ 786 $ — $ — Short-term lease termination fees 4,687 — — Other expenses 1,561 — — $ 7,034 $ — $ — |
Property, plant and equipment_2
Property, plant and equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant, and Equipment, Net | Property, plant and equipment were comprised of the following: Years Ended December 31, 2020 2019 Lab and SmileShop equipment $ 116,340 $ 79,103 Computer equipment and software 91,595 48,401 Leasehold improvements 25,721 13,275 Furniture and fixtures 13,627 13,152 Vehicles 6,266 2,660 Construction in progress 31,796 60,317 285,345 216,908 Less: accumulated depreciation (95,350) (39,365) Property, plant and equipment, net $ 189,995 $ 177,543 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Schedule of Right of Use Assets and Lease Liabilities | The following table presents lease-related assets and liabilities at December 31, 2020: Leases Assets and Liabilities Balance Sheet Classification December 31, 2020 Assets: Operating leases Operating lease right-of-use asset $ 31,176 Finance leases Property, plant, and equipment, net 20,484 $ 51,660 Liabilities: Operating leases Other current liabilities $ 6,821 Finance leases Current portion of long-term debt 11,055 Operating leases Operating lease liabilities, net of current portion 27,771 Finance leases Long-term debt, net of current portion 10,997 $ 56,644 Weighted average remaining term: Operating leases 6.0 years Finance leases 1.6 years Weighted average discount rate: Operating leases 5.87 % Finance leases 7.50 % (1) Finance lease assets are recorded net of accumulated amortization of $15,444 as of December 31, 2020. (2) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2020. |
Schedule of Lease Expense and Supplemental Cash Flow Informatoin for Finance and Operating Leases | he following table presents certain information related to lease expense for finance and operating leases: Expense Category Statement of Operations Classification Year Ended December 31, 2020 Finance lease expense: Amortization of leased assets Cost of revenues $ 9,988 Interest of lease liabilities Interest expense 2,062 Operating leases (3) 9,875 Short-term lease expense (3) 16,452 Variable lease expense (3) 3,249 Total lease expense $ 41,626 (3) Expenses are included in “Cost of revenues”, “Marketing and selling expenses”, or “General and administrative expenses” in our condensed consolidated statements of operations, depending on the purpose of the related asset. Other Information The following table represents supplemental cash flow information: Year Ended December 31, 2020 Cash paid for amounts used in the measurement of lease liabilities: Cash used in operating activities $ 9,056 Cash used in investing activities $ — Cash used in financing activities $ 10,138 |
Schedule of Operating Lease Liability Maturities | The following table reconciles the undiscounted cash flows to the finance lease liabilities and operating lease liabilities recorded on the condensed consolidated balance sheet at December 31, 2020: Finance Leases Operating Leases 2021 $ 11,209 $ 8,643 2022 6,859 6,812 2023 — 6,130 2024 — 5,349 2025 — 4,632 2026 and thereafter — 9,895 Total minimum lease payments 18,068 41,461 Residual value 5,661 — Amount representing interest (1,677) (6,869) Present value of future minimum lease payments 22,052 34,592 Less: current portion (11,055) (6,821) Long-term lease liabilities $ 10,997 $ 27,771 |
Schedule of Finance Lease Liability Maturities | The following table reconciles the undiscounted cash flows to the finance lease liabilities and operating lease liabilities recorded on the condensed consolidated balance sheet at December 31, 2020: Finance Leases Operating Leases 2021 $ 11,209 $ 8,643 2022 6,859 6,812 2023 — 6,130 2024 — 5,349 2025 — 4,632 2026 and thereafter — 9,895 Total minimum lease payments 18,068 41,461 Residual value 5,661 — Amount representing interest (1,677) (6,869) Present value of future minimum lease payments 22,052 34,592 Less: current portion (11,055) (6,821) Long-term lease liabilities $ 10,997 $ 27,771 |
Accrued liabilities (Tables)
Accrued liabilities (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Liabilities | Accrued liabilities were comprised of the following at December 31, 2020: Years Ended December 31, 2020 2019 Accrued marketing costs $ 19,236 $ 31,804 Accrued payroll and payroll related expenses 27,912 25,019 Accrued sales tax and related costs 14,877 6,660 Other 38,564 29,856 Total accrued liabilities $ 100,589 $ 93,339 |
Income taxes (Tables)
Income taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Summary of Loss Before Income Taxes | The components of loss before income taxes were as follows: Years Ended December 31, 2020 2019 2018 Domestic $ (269,211) $ (532,379) $ (51,224) Foreign (6,166) (3,158) (23,186) Loss before income taxes $ (275,377) $ (535,537) $ (74,410) |
Schedule of Income Tax Provision | The income tax provision was as follows: Years Ended December 31, 2020 2019 2018 Current: Federal $ 1,169 $ 1,018 $ 101 State 642 309 204 Foreign 1,253 491 — Current income tax provision $ 3,064 $ 1,818 $ 305 Deferred: Federal — — — State 58 450 56 Foreign — — — Deferred income tax provision 58 450 56 Total income tax provision $ 3,122 $ 2,268 $ 361 |
Schedule of Effective Income Tax Rate Reconciliation | The reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate is as follows: Years Ended December 31, 2020 2019 2018 U.S. federal income tax statutory rate 21.0 % 21.0 % 21.0 % Income attributable to noncontrolling interest and non taxable income (13.2) % (16.6) % (21.0) % State income tax, net of federal benefit (0.1) % (0.1) % — % Losses for which no benefit has been recognized (0.4) % (3.8) % — % Foreign rate differential (0.1) % (0.1) % — % Uncertain tax position (0.5) % (0.2) % — % Change in investment in partnership (7.8) % — % — % Other — % (0.6) % — % Effective income tax rate (1.1) % (0.4) % — % |
Schedule of Deferred Tax Assets and Liabilities | Significant components of deferred tax assets and liabilities are as follows: Years Ended December 31, 2020 2019 Deferred tax assets: Deferred revenue $ 351 $ 539 Accruals and reserves 3,511 1,169 Net operating loss carryforwards 63,542 21,989 Deferred warrant expense — — Basis in partnership 181,673 214,530 Gross deferred tax assets $ 249,077 $ 238,227 Valuation allowance (248,420) (237,775) Net deferred tax assets $ 657 $ 452 Deferred tax liabilities: Depreciation and amortization (818) (531) Other — — Gross deferred tax liabilities (818) (531) Net deferred tax liabilities $ (161) $ (79) |
Reconciliation of Unrecognized Tax Benefits | A reconciliation of the Company’s gross unrecognized tax benefits is as follows: Years Ended December 31, 2020 2019 Balance at beginning of year $ 1,006 $ 34 Increases for tax positions taken in prior years 462 — Decreases for tax positions taken in prior years — — Increases for tax positions taken in current year 1,087 972 Decreases for settlements with taxing authorities — — Decreases for lapsing of the statute of limitations — — Balance at end of year $ 2,555 $ 1,006 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Debt and Capital Lease Obligations | The Company’s debt and capital lease obligations are comprised of the following at December 31, 2020 and 2019: Years Ended December 31, 2020 2019 HPS Credit Facility, net of unamortized financing costs of $10,431 $ 381,942 $ — JPM Credit Facility, net of unamortized financing costs of $2,513 — 147,935 Align redemption promissory note 4,609 34,090 Capital lease obligations (Note 7) 22,052 26,501 Total debt 408,603 208,526 Less current portion (15,664) (35,376) Total long-term debt $ 392,939 $ 173,150 |
Schedule of Maturities of Long-term Debt | Annual future maturities of long-term debt, excluding finance lease obligations, unamortized financing costs and unamortized HPS Warrant value, are as follows: HPS Credit Facility Align Redemption Promissory Note Total 2021 $ — $ 4,609 $ 4,609 2022 — — — 2023 — — — 2024 — — — 2025 407,902 — 407,902 Total $ 407,902 $ 4,609 $ 412,511 |
Incentive Compensation Plans (T
Incentive Compensation Plans (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | Options activity was as follows during the year ended December 31, 2020: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding beginning of period 1,744,556 $ 23.00 9.7 $ — Granted — — Exercised — — Expired — — Forfeited 65,217 23.00 Outstanding at December 31, 2020 1,679,339 $ 23.00 8.7 $ — Exercisable at December 31, 2020 298,908 $ 23.00 — $ — |
Schedule of Restricted Stock Unit Activity | A summary of activity related to these RSUs is as follows: IBA RSUs Non-IBA RSUs Total RSUs Weighted Average Grant Date Fair Value RSUs outstanding, December 31, 2019 4,794,394 1,089,796 5,884,190 $ 21.88 Granted — 1,900,605 1,900,605 $ 9.07 Vested (2,722,283) (303,969) (3,026,252) $ 22.20 Cancelled (445,373) (493,288) (938,661) $ 16.13 RSUs outstanding, December 31, 2020 1,626,738 2,193,144 3,819,882 $ 16.68 |
Earnings (Loss) per Share (Tabl
Earnings (Loss) per Share (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share of Class A common stock: Year Ended December 31, 2020 Year Ended December 31, 2019 Numerator: Net loss $ (278,499) $ (537,805) Less: Net loss attributable to SDC Financial prior to the Reorganization Transactions — (104,245) Less: Net loss attributable to noncontrolling interests subsequent to the Reorganization Transactions (200,133) (319,047) Net loss attributable to SDC Inc. - basic (78,366) (114,513) Add: Reallocation of net loss attributable to noncontrolling interests after the Reorganization Transactions from the assumed exchange of LLC Units for Class A common stock (200,133) (319,047) Net loss attributable to SDC Inc. - diluted $ (278,499) $ (433,560) Denominator: Weighted average shares of Class A common stock outstanding - basic 109,854,360 102,442,525 Add: Dilutive effects as shown separately below LLC Units that are exchangeable for Class A common stock 275,346,082 279,474,505 Weighted average shares of Class A common stock outstanding - diluted 385,200,442 381,917,030 Earnings (loss) per share of Class A common stock outstanding - basic $ (0.71) $ (1.12) Earnings (loss) per share of Class A common stock outstanding - diluted $ (0.72) $ (1.14) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Due to their anti-dilutive effect, the following securities have been excluded from diluted net loss per share in the periods presented: Year Ended December 31, 2020 Year Ended December 31, 2019 Options 1,679,339 1,744,556 Restricted Stock Units 3,819,882 5,884,190 Warrants 3,889,575 1,471,735 |
Quarterly Results of Operatio_2
Quarterly Results of Operations Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Schedule of Quarterly Results of Operations (Unaudited) | Three Months Ended December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020 Revenue, net $ 184,556 $ 168,501 $ 107,073 $ 196,650 Gross profit 136,017 118,741 58,297 136,873 Loss from operations (19,200) (27,765) (74,019) (96,480) Net loss (32,951) (43,482) (94,666) (107,400) Net loss attributable to noncontrolling interest (23,224) (30,892) (67,867) (78,150) Net loss attributable to SmileDirectClub, Inc. $ (9,727) $ (12,590) $ (26,799) $ (29,250) Earnings (loss) per share of Class A common stock: Basic $ (0.09) $ (0.11) $ (0.25) $ (0.28) Diluted $ (0.09) $ (0.11) $ (0.25) $ (0.28) Weighted average shares outstanding: Basic 114,008,652 111,703,080 109,048,411 104,595,081 Diluted 386,128,446 385,672,677 385,133,303 383,855,705 Three Months Ended December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019 Revenue, net $ 196,713 $ 180,185 $ 195,794 $ 177,736 Gross profit 143,338 138,750 161,129 128,821 Loss from operations (92,246) (382,341) 685 (16,371) Net loss (97,326) (387,564) (32,435) (20,480) Net loss attributable to noncontrolling interest (71,109) (299,268) — — Net loss attributable to SmileDirectClub, Inc. $ (26,217) $ (88,296) $ (32,435) $ (20,480) Earnings (loss) per share of Class A common stock: Basic $ (0.25) $ (0.89) N/A N/A Diluted $ (0.25) $ (0.89) N/A N/A Weighted average shares outstanding: Basic 103,043,244 99,533,877 N/A N/A Diluted 382,517,729 379,008,382 N/A N/A |
Supplemental Cash Flow (Tables)
Supplemental Cash Flow (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
Schedule of Supplemental Cash Flow Information | The supplemental cash flow information comprised of the following for the years ended December 31: 2020 2019 2018 Interest paid $ 30,900 $ 9,664 $ 8,392 Income taxes paid $ — $ — $ — Purchases of property and equipment included in accounts payable $ 11,809 $ 28,638 $ 1,457 Property acquired under finance lease $ — $ 23,973 $ 6,867 Promissory note issued in exchange for member unit redemptions $ — $ — $ 1,546 Costs associated with IPO included in accrued expenses $ — $ 1,155 $ — |
Organization and Basis of Pre_2
Organization and Basis of Presentation - Initial Public Offering (Details) - IPO $ / shares in Units, $ in Millions | Sep. 16, 2019USD ($)$ / sharesshares |
Subsidiary, Sale of Stock [Line Items] | |
Number of shares issued in transaction (in shares) | shares | 58,537,000 |
Price per share of stock sold (USD per share) | $ / shares | $ 23 |
Consideration received on sale of stock | $ | $ 1,286 |
Organization and Basis of Pre_3
Organization and Basis of Presentation - Reorganization Transactions (Details) | Sep. 12, 2019 | Dec. 31, 2019 |
SDC Financial, LLC | ||
Noncontrolling Interest [Line Items] | ||
Ownership percentage | 26.90% | |
Continuing LLC Members | SDC Financial, LLC | ||
Noncontrolling Interest [Line Items] | ||
Ownership percentage | 73.10% | |
Affiliated Entity | Tax Receivable Agreement | ||
Noncontrolling Interest [Line Items] | ||
Related party transaction rate | 85.00% |
Organization and Basis of Pre_4
Organization and Basis of Presentation - Basis of Presentation and Consolidation, COVID-19 Pandemic (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020USD ($)variable_interest_entity | Dec. 31, 2019variable_interest_entity | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Number of variable interest entities | variable_interest_entity | 54 | 44 |
Restructuring costs and asset impairment Charges | $ | $ 32,491 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Schedule of Revenue by Product Including Price Concessions (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Disaggregation of Revenue [Line Items] | |||||||||||
Revenue recognized | $ 184,556 | $ 168,501 | $ 107,073 | $ 196,650 | $ 196,713 | $ 180,185 | $ 195,794 | $ 177,736 | $ 656,780 | $ 750,428 | $ 423,234 |
Implicit price concessions included in total revenue | 66,128 | 74,662 | 46,554 | ||||||||
Capitalized internally developed software costs | 21,509 | 11,861 | 5,200 | ||||||||
Aligner revenue, net of implicit price concessions | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Revenue recognized | 543,136 | 683,429 | 390,505 | ||||||||
Financing revenue, net of implicit price concessions | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Revenue recognized | 49,407 | 43,899 | 25,107 | ||||||||
Retainers and other products revenue | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Revenue recognized | $ 64,237 | $ 23,100 | $ 7,622 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Deferred Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||||||||||||
Revenue recognized | $ 184,556 | $ 168,501 | $ 107,073 | $ 196,650 | $ 196,713 | $ 180,185 | $ 195,794 | $ 177,736 | $ 656,780 | $ 750,428 | $ 423,234 | |
Revenue recognized that was included in deferred revenue | $ 19,750 | $ 19,750 | $ 16,630 | $ 12,437 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Shipping and Handling Costs (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Disaggregation of Revenue [Line Items] | |||
Cost of revenues | $ 206,852 | $ 163,861 | $ 98,048 |
Shipping and Handling | |||
Disaggregation of Revenue [Line Items] | |||
Cost of revenues | $ 23,036 | $ 19,000 | $ 10,500 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Marketing and Selling Expenses (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | |||
Marketing and selling expenses | $ 322,919 | $ 481,468 | $ 213,080 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Summary of Depreciation and Amortization, Income Statement Location (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2018 | |
Property, Plant and Equipment [Line Items] | ||||
Depreciation and amortization | $ 56,390 | $ 27,336 | $ 8,861 | |
Cost of revenues | ||||
Property, Plant and Equipment [Line Items] | ||||
Depreciation and amortization | 24,718 | 11,186 | 4,719 | |
Marketing and selling expenses | ||||
Property, Plant and Equipment [Line Items] | ||||
Depreciation and amortization | 7,079 | 5,322 | 1,429 | |
General and administrative expenses | ||||
Property, Plant and Equipment [Line Items] | ||||
Depreciation and amortization | $ 24,593 | $ 10,828 | $ 2,713 | |
Minimum | ||||
Property, Plant and Equipment [Line Items] | ||||
Amortization and depreciation, useful life | 3 years | |||
Maximum | ||||
Property, Plant and Equipment [Line Items] | ||||
Amortization and depreciation, useful life | 10 years |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Accounting Policies [Abstract] | ||
Debt facilities borrowings | $ 407,902 | $ 150,448 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Internally Developed Software Costs (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | |||
Capitalized internally developed software costs | $ 21,509 | $ 11,861 | $ 5,200 |
Amortization of internally developed software costs | $ 7,978 | $ 3,384 | $ 667 |
Summary of Significant Accou_11
Summary of Significant Accounting Policies - Redeemable Series A Preferred Units (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Period after issuance for redemption date | 6 years |
Summary of Significant Accou_12
Summary of Significant Accounting Policies - Tax Receivable Agreement (Details) | Sep. 12, 2019 |
Tax Receivable Agreement | Affiliated Entity | |
Operating Loss Carryforwards [Line Items] | |
Related party transaction rate | 85.00% |
Summary of Significant Accou_13
Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating lease right-of-use asset | $ 31,176 | $ 0 | |
Operating lease liability | 34,592 | ||
Lease liabilities | $ 22,052 | ||
Cumulative Effect, Period of Adoption, Adjustment | ASU 2016-02 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating lease right-of-use asset | $ 45,076 | ||
Operating lease liability | 44,807 | ||
Finance lease right-of-use asset | 3,791 | ||
Lease liabilities | $ 4,378 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventory (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 10,059 | $ 5,950 |
Finished goods | 19,188 | 12,481 |
Total inventories | $ 29,247 | $ 18,431 |
Prepaid and other assets - Summ
Prepaid and other assets - Summary of Prepaid and Other Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expenses | $ 9,315 | $ 10,503 |
Deposits to vendors | 2,111 | 3,132 |
Other | 1,406 | 551 |
Total prepaid and other current assets | 12,832 | 14,186 |
Prepaid expenses, non-current | 2,583 | 1,308 |
Deposits to vendors, non-current | 1,018 | 3,346 |
Indefinite-lived intangible assets | 6,692 | 6,217 |
Other intangible assets, net | 184 | 428 |
Investments | 1,010 | 0 |
Total other assets | $ 11,487 | $ 11,299 |
Prepaid and other assets - Narr
Prepaid and other assets - Narrative (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Impairment of intangible assets (excluding goodwill) | $ 0 | $ 0 |
Lease Abandonment, Impairment_3
Lease Abandonment, Impairment of Long-Lived Assets and Store Closure and Other Related Charges - Narrative (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Restructuring and Related Activities [Abstract] | |
Restructuring costs and asset impairment Charges | $ 32,491 |
Restructuring reserve | $ 397 |
Lease Abandonment, Impairment_4
Lease Abandonment, Impairment of Long-Lived Assets and Store Closure and Other Related Charges - Schedule of Restructuring Charges (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Lease abandonment and impairment of long-lived assets and inventory: | |||
Impairment of property, plant and equipment | $ 21,628 | $ 0 | $ 0 |
Impairment of right of use asset | 3,829 | 0 | 0 |
Lease abandonment and impairment of long-lived assets, total | 25,457 | 0 | 0 |
Store closure and other related charges: | |||
Impairment of inventory | 786 | 0 | 0 |
Short-term lease termination fees | 4,687 | 0 | 0 |
Other expenses | 1,561 | 0 | 0 |
Other store closure and related costs | $ 7,034 | $ 0 | $ 0 |
Property, plant and equipment_3
Property, plant and equipment, net - Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 216,908 | |
Property, plant, equipment and finance lease right-of-use assets, gross | $ 285,345 | |
Less: accumulated depreciation | (39,365) | |
Less: accumulated depreciation | (95,350) | |
Property, plant and equipment, net | 177,543 | |
Property, plant, equipment and finance lease right-of-use assets, net | 189,995 | |
Lab and SmileShop equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 79,103 | |
Property, plant, equipment and finance lease right-of-use assets, net | 116,340 | |
Computer equipment and software | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 48,401 | |
Property, plant, equipment and finance lease right-of-use assets, gross | 91,595 | |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 13,275 | |
Property, plant, equipment and finance lease right-of-use assets, gross | 25,721 | |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 13,152 | |
Property, plant, equipment and finance lease right-of-use assets, gross | 13,627 | |
Vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 2,660 | |
Property, plant, equipment and finance lease right-of-use assets, gross | 6,266 | |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 60,317 | |
Property, plant, equipment and finance lease right-of-use assets, gross | $ 31,796 |
Property, plant and equipment_4
Property, plant and equipment, net - Narrative (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Finance lease right-of-use asset, net | $ 20,484 | |
Property, plant and equipment, net | $ 177,543 | |
Finance lease right-of-use asset, accumulated amortization | 15,444 | |
Accumulated depreciation | 39,365 | |
Assets Held under Capital Leases | ||
Property, Plant and Equipment [Line Items] | ||
Finance lease right-of-use asset, net | 20,484 | |
Property, plant and equipment, net | 26,501 | |
Finance lease right-of-use asset, accumulated amortization | $ 15,444 | |
Accumulated depreciation | $ 4,670 |
Leases - ROU Assets and Lease L
Leases - ROU Assets and Lease Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Assets: | ||
Operating leases | $ 31,176 | $ 0 |
Finance lease right-of-use asset, net | 20,484 | |
Total leased assets | 51,660 | |
Liabilities: | ||
Operating lease, liability, current | $ 6,821 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:OtherLiabilitiesCurrent | |
Finance lease, liability, current | $ 11,055 | |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:DebtCurrent | |
Operating Lease, Liability, Noncurrent | $ 27,771 | $ 0 |
Finance lease, liability, noncurrent | $ 10,997 | |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | us-gaap:LongTermDebtNoncurrent | |
Lease liability | $ 56,644 | |
Weighted average remaining term: | ||
Operating lease, weighted average remaining lease term | 6 years | |
Finance lease, weighted average remaining lease term | 1 year 7 months 6 days | |
Weighted average discount rate: | ||
Operating lease, weighted average discount rate, percent | 5.87% | |
Finance lease, weighted average discount rate, percent | 7.50% | |
Finance lease right-of-use asset, accumulated amortization | $ 15,444 |
Leases - Components of Lease Co
Leases - Components of Lease Cost and Other Information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Finance lease expense: | |||
Amortization of leased assets | $ 9,988 | ||
Interest of lease liabilities | 2,062 | ||
Operating leases | 9,875 | ||
Short-term lease expense | 16,452 | ||
Variable lease expense | 3,249 | ||
Total lease expense | 41,626 | ||
Cash used in operating activities | 9,056 | ||
Cash used in investing activities | 0 | ||
Cash used in financing activities | $ 10,138 | $ 3,017 | $ 0 |
Leases - Undiscounted Cash Flow
Leases - Undiscounted Cash Flows of Operating Lease and Finance Lease (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Finance Lease, Liability, Payment, Due [Abstract] | ||
2021 | $ 11,209 | |
2022 | 6,859 | |
2023 | 0 | |
2024 | 0 | |
2025 | 0 | |
2026 and thereafter | 0 | |
Total minimum lease payments | 18,068 | |
Residual value | 5,661 | |
Amount representing interest | (1,677) | |
Present value of future minimum lease payments | 22,052 | |
Less: current portion | (11,055) | |
Long-term lease liabilities | 10,997 | |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | ||
2021 | 8,643 | |
2022 | 6,812 | |
2023 | 6,130 | |
2024 | 5,349 | |
2025 | 4,632 | |
2026 and thereafter | 9,895 | |
Total minimum lease payments | 41,461 | |
Residual value | 0 | |
Amount representing interest | (6,869) | |
Present value of future minimum lease payments | 34,592 | |
Less: current portion | (6,821) | |
Long-term lease liabilities | $ 27,771 | $ 0 |
Accrued liabilities - Schedule
Accrued liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Payables and Accruals [Abstract] | ||
Accrued marketing costs | $ 19,236 | $ 31,804 |
Accrued payroll and payroll related expenses | 27,912 | 25,019 |
Accrued sales tax and related costs | 14,877 | 6,660 |
Other | 38,564 | 29,856 |
Total accrued liabilities | $ 100,589 | $ 93,339 |
Income taxes - Schedule of Loss
Income taxes - Schedule of Loss Before Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |||
Domestic | $ (269,211) | $ (532,379) | $ (51,224) |
Foreign | (6,166) | (3,158) | (23,186) |
Net loss before provision for income tax expense | $ (275,377) | $ (535,537) | $ (74,410) |
Income taxes - Schedule of Inco
Income taxes - Schedule of Income Tax Provision (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Current: | |||
Federal | $ 1,169 | $ 1,018 | $ 101 |
State | 642 | 309 | 204 |
Foreign | 1,253 | 491 | 0 |
Current income tax provision | 3,064 | 1,818 | 305 |
Deferred: | |||
Federal | 0 | 0 | 0 |
State | 58 | 450 | 56 |
Foreign | 0 | 0 | 0 |
Deferred income tax provision | 58 | 450 | 56 |
Total income tax provision | $ 3,122 | $ 2,268 | $ 361 |
Income taxes - Schedule of In_2
Income taxes - Schedule of Income Tax Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |||
U.S. federal income tax statutory rate | 21.00% | 21.00% | 21.00% |
Income attributable to noncontrolling interest and non taxable income | (13.20%) | (16.60%) | (21.00%) |
State income tax, net of federal benefit | (0.10%) | (0.10%) | 0.00% |
Losses for which no benefit has been recognized | (0.40%) | (3.80%) | 0.00% |
Foreign rate differential | (0.10%) | (0.10%) | 0.00% |
Uncertain tax position | (0.50%) | (0.20%) | 0.00% |
Change in investment in partnership | (7.80%) | 0.00% | 0.00% |
Other | 0.00% | (0.60%) | 0.00% |
Effective income tax rate | (1.10%) | (0.40%) | 0.00% |
Income taxes - Schedule of Defe
Income taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred tax assets: | ||
Deferred revenue | $ 351 | $ 539 |
Accruals and reserves | 3,511 | 1,169 |
Net operating loss carryforwards | 63,542 | 21,989 |
Deferred warrant expense | 0 | 0 |
Basis in partnership | 181,673 | 214,530 |
Gross deferred tax assets | 249,077 | 238,227 |
Valuation allowance | (248,420) | (237,775) |
Net deferred tax assets | 657 | 452 |
Deferred tax liabilities: | ||
Depreciation and amortization | (818) | (531) |
Other | 0 | 0 |
Gross deferred tax liabilities | (818) | (531) |
Net deferred tax liabilities | $ (161) | $ (79) |
Income taxes - Narrative (Detai
Income taxes - Narrative (Details) - USD ($) $ in Thousands | Sep. 12, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Operating Loss Carryforwards [Line Items] | ||||
Valuation allowance | $ 248,420 | $ 237,775 | ||
Unrecognized tax benefits | 2,555 | $ 1,006 | $ 34 | |
LLC units acquired in the period | 635,690 | |||
Domestic Tax Authority | ||||
Operating Loss Carryforwards [Line Items] | ||||
Operating loss carryforwards, tax effected | 36,600 | |||
State and Local Jurisdiction | ||||
Operating Loss Carryforwards [Line Items] | ||||
Operating loss carryforwards, tax effected | 23,349 | |||
Foreign Tax Authority | ||||
Operating Loss Carryforwards [Line Items] | ||||
Operating loss carryforwards, tax effected | $ 3,665 | |||
Tax Receivable Agreement | ||||
Operating Loss Carryforwards [Line Items] | ||||
Expected income tax benefit from remaining cash savings percentage | 15.00% | |||
Affiliated Entity | Tax Receivable Agreement | ||||
Operating Loss Carryforwards [Line Items] | ||||
Related party transaction rate | 85.00% |
Income taxes - Reconciliation o
Income taxes - Reconciliation of Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | ||
Balance at beginning of year | $ 1,006 | $ 34 |
Increases for tax positions taken in prior years | 462 | 0 |
Decreases for tax positions taken in prior years | 0 | 0 |
Increases for tax positions taken in current year | 1,087 | 972 |
Decreases for settlements with taxing authorities | 0 | 0 |
Decreases for lapsing of the statute of limitations | 0 | 0 |
Balance at end of year | $ 2,555 | $ 1,006 |
Long-Term Debt - Schedule of De
Long-Term Debt - Schedule of Debt and Capital Lease Obligations (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
Long-term debt | $ 412,511 | |
Lease liabilities | 22,052 | |
Capital lease obligations | $ 26,501 | |
Total debt | 408,603 | 208,526 |
Less current portion | (15,664) | (35,376) |
Total long-term debt | 392,939 | 173,150 |
Line of Credit | HPS Credit Facility | ||
Debt Instrument [Line Items] | ||
Long-term debt | 381,942 | 0 |
Unamortized discount and financing costs | 10,431 | |
Line of Credit | JPM Credit Facility | ||
Debt Instrument [Line Items] | ||
Long-term debt | 0 | 147,935 |
Unamortized discount and financing costs | 2,513 | |
Promissory Note | Align Redemption Promissory Note | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 4,609 | $ 34,090 |
Long-Term Debt - HPS Credit Fac
Long-Term Debt - HPS Credit Facility (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
May 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Line of Credit Facility [Line Items] | ||||
Deferred loan cost amortization | $ 4,407,000 | $ 3,969,000 | $ 4,319,000 | |
Revolving Credit Facility | HPS Credit Facility | Line of Credit | SDC U.S. SmilePay SPV | ||||
Line of Credit Facility [Line Items] | ||||
Debt instrument, term | 5 years | |||
Maximum borrowing capacity | $ 400,000,000 | |||
Debt issuance discounts | 12,000,000 | |||
Additional aggregate principal available | 100,000,000 | |||
Financing costs incurred | 187,000 | |||
Write off of debt issuance costs | 1,594,000 | |||
Deferred financing costs | 11,784,000 | |||
Deferred loan cost amortization | 1,398,000 | |||
Receivables collateralized on outstanding debt | 334,409,000 | |||
Debt instrument, covenant minimum monthly liquidity | $ 100,000,000 | |||
Debt instrument, refinancing fee, percentage of principal amount prepaid, year one | 4.00% | |||
Debt instrument, refinancing fee, percentage of principal amount prepaid, year two | 4.00% | |||
Debt instrument, refinancing fee, percentage of principal amount prepaid, year three | 3.00% | |||
Debt instrument, refinancing fee, percentage of principal amount prepaid, year four | 2.00% | |||
Debt instrument, refinancing fee, percentage of principal amount prepaid, year five | 1.00% | |||
Long-term debt, including unamortized financing costs | $ 407,902,000 | |||
Revolving Credit Facility | HPS Credit Facility | Line of Credit | SDC U.S. SmilePay SPV | London Interbank Offered Rate (LIBOR) | Minimum | ||||
Line of Credit Facility [Line Items] | ||||
Margin for the year | 1.75% | |||
Revolving Credit Facility | HPS Credit Facility | Line of Credit | SDC U.S. SmilePay SPV | LIBOR - Payable In Cash | ||||
Line of Credit Facility [Line Items] | ||||
Margin for the year | 7.50% | |||
Revolving Credit Facility | HPS Credit Facility | Line of Credit | SDC U.S. SmilePay SPV | LIBOR - Payable In Kind | ||||
Line of Credit Facility [Line Items] | ||||
Margin for the year | 3.25% |
Long-Term Debt - HPS Warrants (
Long-Term Debt - HPS Warrants (Details) $ / shares in Units, $ in Thousands | May 12, 2020USD ($)$ / sharesshares |
Debt Instrument [Line Items] | |
Conversion price (USD per share) | $ / shares | $ 7.11 |
Fair value of warrants | $ | $ 17,620 |
Common Class A | |
Debt Instrument [Line Items] | |
Warrants outstanding (in shares) | shares | 3,889,575 |
Common Class A, Common Class B, And Warrants | |
Debt Instrument [Line Items] | |
Warrants as a percentage of outstanding common stock and warrants | 1.00% |
Long-Term Debt - JPM Credit Fac
Long-Term Debt - JPM Credit Facility (Details) - Line of Credit - JPM Credit Facility - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Jun. 30, 2019 | |
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 500,000,000 | |
Additional borrowing capacity | 250,000,000 | |
Deferred financing costs | $ 6,188,000 | |
Amortization of deferred financing and debt issuance costs | $ 919,000 |
Long-Term Debt - Align Redempti
Long-Term Debt - Align Redemption Promissory Note (Details) - USD ($) $ in Thousands | Sep. 16, 2019 | Dec. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | |||
Pre-IPO units required for redemption (in shares) | 20,710 | ||
Long-term debt | $ 412,511 | ||
Promissory Note | Align Redemption Promissory Note | |||
Debt Instrument [Line Items] | |||
Monthly payments | $ 2,311 | ||
Interest rate, stated percentage | 2.52% | ||
Long-term debt | $ 4,609 | $ 34,090 |
Long-Term Debt - Schedule of _2
Long-Term Debt - Schedule of Debt Maturities (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
2021 | $ 4,609 | |
2022 | 0 | |
2023 | 0 | |
2024 | 0 | |
2025 | 407,902 | |
Total | 412,511 | |
Line of Credit | HPS Credit Facility | ||
Debt Instrument [Line Items] | ||
Total | 381,942 | $ 0 |
Line of Credit | HPS Credit Facility | Revolving Credit Facility | SDC U.S. SmilePay SPV | ||
Debt Instrument [Line Items] | ||
2021 | 0 | |
2022 | 0 | |
2023 | 0 | |
2024 | 0 | |
2025 | 407,902 | |
Total | 407,902 | |
Promissory Note | Align Redemption Promissory Note | ||
Debt Instrument [Line Items] | ||
2021 | 4,609 | |
2022 | 0 | |
2023 | 0 | |
2024 | 0 | |
2025 | 0 | |
Total | $ 4,609 | $ 34,090 |
Temporary Equity - Narrative (D
Temporary Equity - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |
Oct. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Class of Stock [Line Items] | |||
Preferred units issued during the period (in shares) | 14,784 | ||
Issuance of Preferred Units | $ 388,634 | ||
Preferred stock issuance costs | $ 11,578 | ||
Preferred stock, redemption price per share (USD per share) | $ 27,071,000 | ||
Preferred stock, accrued preferred rate of return | 12.50% | ||
SDC Financial, LLC | |||
Class of Stock [Line Items] | |||
Issuance of Preferred Units | $ 388,634 | ||
Preferred Unit redemption accretion | $ 59,250 |
Noncontrolling Interests - Narr
Noncontrolling Interests - Narrative (Details) - shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Common Class A | ||
Class of Stock [Line Items] | ||
Common stock, shares outstanding (in shares) | 115,429,319 | 103,303,674 |
SDC Financial, LLC | ||
Class of Stock [Line Items] | ||
Economic ownership interest | 29.90% |
Variable Interest Entities (Det
Variable Interest Entities (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Variable Interest Entity, Primary Beneficiary | |
Variable Interest Entity [Line Items] | |
Ownership percentage | 100.00% |
Incentive Compensation Plans -
Incentive Compensation Plans - Class A Common Stock Options Narrative (Details) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020USD ($)award_type$ / shares | Aug. 31, 2019shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of award types | award_type | 2 | |
Expected dividend yield | 0.00% | |
Expected volatility rate | 45.00% | |
Risk-free interest rate | 1.70% | |
Unrecognized compensation expense | $ | $ 9,921 | |
Weighted average period, expected expense recognition | 1 year 8 months 12 days | |
2019 Omnibus Incentive Compensation Plan | Common Class A | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares reserved for future issuance (in shares) | shares | 38,486,295 | |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term | 6 years | |
Weighted average fair value per option (in dollars per share) | $ 10.29 | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term | 6 years 6 months | |
Weighted average fair value per option (in dollars per share) | $ 10.68 |
Incentive Compensation Plans _2
Incentive Compensation Plans - Schedule of Stock Option Activity (Details) - 2019 Omnibus Incentive Compensation Plan - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Number of Options | ||
Outstanding beginning of period (in shares) | 1,744,556 | |
Granted (in shares) | 0 | |
Exercised (in shares) | 0 | |
Expired (in shares) | 0 | |
Forfeited (in shares) | 65,217 | |
Outstanding at end of period (in shares) | 1,679,339 | 1,744,556 |
Exercisable at end of period (in shares) | 298,908 | |
Weighted Average Exercise Price | ||
Outstanding beginning of period (in dollars per share) | $ 23 | |
Granted (in dollars per share) | 0 | |
Exercised (in dollars per share) | 0 | |
Expired (in dollars per share) | 0 | |
Forfeited (in dollars per share) | 23 | |
Outstanding at end of period (in dollars per share) | 23 | $ 23 |
Exercisable at end of period (in dollars per share) | $ 23 | |
Weighted Average Remaining Contractual Term | ||
Weighted-average remaining contractual term | 8 years 8 months 12 days | 9 years 8 months 12 days |
Aggregate Intrinsic Value | ||
Outstanding | $ 0 | $ 0 |
Exercisable at December 31, 2020 | $ 0 |
Incentive Compensation Plans _3
Incentive Compensation Plans - Incentive Bonus Awards Narrative (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Aug. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation expense | $ 44,903 | $ 350,122 | $ 19,839 | |
Restricted Stock Units (RSUs), Incentive Bonus Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Nonvested (in shares) | 1,626,738 | 4,794,394 | ||
2019 Omnibus Incentive Compensation Plan | Restricted Stock Units (RSUs), Incentive Bonus Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting period | 5 years | |||
Accelerated vesting, percent of cash award withheld for taxes | 80.00% | |||
Percent of total award withheld for taxes | 40.00% | |||
Equity-based compensation expense | $ 316,959 | |||
Nonvested (in shares) | 2,199,453 | |||
2019 Omnibus Incentive Compensation Plan | Restricted Stock Units (RSUs), Incentive Bonus Awards | Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting period | 2 years | |||
Award requisite service period | 6 months | |||
2019 Omnibus Incentive Compensation Plan | Restricted Stock Units (RSUs), Incentive Bonus Awards | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting period | 4 years | |||
Award requisite service period | 24 months | |||
Common Class A | 2019 Omnibus Incentive Compensation Plan | Restricted Stock Units (RSUs), Incentive Bonus Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Accelerated vesting, percent settled in common stock | 50.00% | |||
Accelerated vesting, percent settled in cash | 50.00% | |||
Shares granted (in shares) | 5,654,078 |
Incentive Compensation Plans _4
Incentive Compensation Plans - Non-IBA Restricted Stock Units Narrative (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted average period, expected expense recognition | 1 year 8 months 12 days |
Restricted Stock Units (RSUs), Non-Incentive Bonus Awards | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted average period, expected expense recognition | 1 year 4 months 24 days |
Restricted Stock Units (RSUs), Non-Incentive Bonus Awards | Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Award vesting period | 2 years |
Restricted Stock Units (RSUs), Non-Incentive Bonus Awards | Maximum | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Award vesting period | 3 years |
Restricted Stock Units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized compensation expense | $ 34,356 |
Incentive Compensation Plans _5
Incentive Compensation Plans - Schedule of Restricted Stock Unit Activity (Details) | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
Restricted Stock Units (RSUs), Incentive Bonus Awards | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
RSUs outstanding, at beginning of period (in shares) | 4,794,394 |
Grants in period (in shares) | 0 |
Vested in period (in shares) | (2,722,283) |
Cancelled (in shares) | (445,373) |
RSUs outstanding, at end of period (in shares) | 1,626,738 |
Restricted Stock Units (RSUs), Non-Incentive Bonus Awards | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
RSUs outstanding, at beginning of period (in shares) | 1,089,796 |
Grants in period (in shares) | 1,900,605 |
Vested in period (in shares) | (303,969) |
Cancelled (in shares) | (493,288) |
RSUs outstanding, at end of period (in shares) | 2,193,144 |
Restricted Stock Units | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
RSUs outstanding, at beginning of period (in shares) | 5,884,190 |
Grants in period (in shares) | 1,900,605 |
Vested in period (in shares) | (3,026,252) |
Cancelled (in shares) | (938,661) |
RSUs outstanding, at end of period (in shares) | 3,819,882 |
Weighted Average Grant Date Fair Value | |
RSUs outstanding, at beginning of period (in dollars per share) | $ / shares | $ 21.88 |
Granted (in dollars per share) | $ / shares | 9.07 |
Vested (in dollars per share) | $ / shares | 22.20 |
Cancelled (in dollars per share) | $ / shares | 16.13 |
RSUs outstanding, at end of period (in dollars per share) | $ / shares | $ 16.68 |
Incentive Compensation Plans _6
Incentive Compensation Plans - Incentive Bonus Units Narrative (Details) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Jul. 31, 2019incentiveCompensationAgreement | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation expense | $ 44,903 | $ 350,122 | $ 19,839 | |
Incentive Bonus Units, Employee | 2019 Omnibus Incentive Compensation Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of awards modified (in shares) | incentiveCompensationAgreement | 2 | |||
Incentive Bonus Units | 2019 Omnibus Incentive Compensation Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation expense | 436 | |||
Unrecognized compensation expense | $ 262 |
Incentive Compensation Plans _7
Incentive Compensation Plans - Employee Stock Purchase Plan Narrative (Details) - Employee Stock - Stock Purchase Plan | 1 Months Ended |
Nov. 30, 2019shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of shares authorized | 5,772,944 |
Option period | 6 months |
Maximum employee witholding amount | 30.00% |
Discount from market price, exercise or grant date | 85.00% |
Incentive Compensation Plans _8
Incentive Compensation Plans - Summary of Equity-Based Compensation Expense Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | |||
Equity-based compensation expense | $ 44,903 | $ 350,122 | $ 19,839 |
Earnings (Loss) per Share - Sum
Earnings (Loss) per Share - Summary of Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 16, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Numerator [Abstract] | |||||||||||||
Net loss | $ (32,951) | $ (43,482) | $ (94,666) | $ (107,400) | $ (97,326) | $ (433,560) | $ (387,564) | $ (32,435) | $ (20,480) | $ (104,245) | $ (278,499) | $ (537,805) | $ (74,771) |
Net loss attributable to noncontrolling interest | $ (23,224) | $ (30,892) | $ (67,867) | $ (78,150) | (71,109) | (319,047) | $ (299,268) | $ 0 | $ 0 | $ (104,245) | (200,133) | $ (423,292) | $ 0 |
Net loss attributable to SDC Inc. - basic | (114,513) | (78,366) | |||||||||||
Add: Reallocation of net loss attributable to noncontrolling interests after the Reorganization Transactions from the assumed exchange of LLC Units for Class A common stock | $ (319,047) | (200,133) | |||||||||||
Net loss attributable to SDC Inc. - diluted | $ (433,560) | $ (278,499) | |||||||||||
Denominator [Abstract] | |||||||||||||
Weighted average shares of Class A common stock outstanding - basic (in shares) | 114,008,652 | 111,703,080 | 109,048,411 | 104,595,081 | 103,043,244 | 102,442,525 | 99,533,877 | 109,854,360 | 102,442,525 | ||||
Add: Dilutive effects as shown separately below (in shares) | 279,474,505 | 275,346,082 | |||||||||||
Weighted average shares of Class A common stock outstanding - diluted (in shares) | 386,128,446 | 385,672,677 | 385,133,303 | 383,855,705 | 382,517,729 | 381,917,030 | 379,008,382 | 385,200,442 | 381,917,030 | ||||
Earnings (loss) per share, basic (in USD per share) | $ (1.12) | $ (0.71) | |||||||||||
Earnings (loss) per share, diluted (in USD per share) | $ (1.14) | $ (0.72) |
Earnings (Loss) per Share - Ant
Earnings (Loss) per Share - Antidilutive Securities Excluded From Computation of Earnings per Share (Details) - shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 1,679,339 | 1,744,556 |
Restricted Stock Units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 3,819,882 | 5,884,190 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 3,889,575 | 1,471,735 |
Employee Benefit Plans - (Detai
Employee Benefit Plans - (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Defined Contribution Plan Disclosure [Line Items] | |||
Company contribution for 401(k) | $ 3,202 | $ 2,707 | $ 1,133 |
Threshold One | |||
Defined Contribution Plan Disclosure [Line Items] | |||
Employer match | 100.00% | 100.00% | 100.00% |
Employer matching contribution, percent of Employees' gross pay | 3.00% | 3.00% | 3.00% |
Threshold Two | |||
Defined Contribution Plan Disclosure [Line Items] | |||
Employer match | 50.00% | 50.00% | 50.00% |
Minimum | Threshold Two | |||
Defined Contribution Plan Disclosure [Line Items] | |||
Employer matching contribution, percent of Employees' gross pay | 3.00% | 3.00% | 3.00% |
Maximum | Threshold Two | |||
Defined Contribution Plan Disclosure [Line Items] | |||
Employer matching contribution, percent of Employees' gross pay | 5.00% | 5.00% | 5.00% |
Related Party Transactions - Na
Related Party Transactions - Narrative (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||||
Feb. 29, 2020 | Aug. 31, 2019 | Feb. 28, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transaction [Line Items] | ||||||
Cost of revenues—related parties | $ 0 | $ 14,529 | $ 35,920 | |||
Affiliated Entity | ||||||
Related Party Transaction [Line Items] | ||||||
Management fees paid to affiliate | 0 | 1,255 | 1,200 | |||
Immediate Family Member of Director | ||||||
Related Party Transaction [Line Items] | ||||||
Fees for legal services provided by related party | 5,790 | 1,716 | 153 | |||
Freight | Affiliated Entity | ||||||
Related Party Transaction [Line Items] | ||||||
Cost of revenues—related parties | 0 | 7,433 | 8,250 | |||
Private Aircraft | ||||||
Related Party Transaction [Line Items] | ||||||
Purchases from related party | $ 3,400 | |||||
Aligner revenue, net of implicit price concessions | ||||||
Related Party Transaction [Line Items] | ||||||
Cost of revenues—related parties | 0 | 7,659 | 27,670 | |||
Aligner revenue, net of implicit price concessions | Oral Digital Imaging Equipment | ||||||
Related Party Transaction [Line Items] | ||||||
Purchases from related party | $ 0 | $ 6,025 | $ 15,135 | |||
David Katzman Revocable Trust | ||||||
Related Party Transaction [Line Items] | ||||||
Purchase of members' units, value | $ 1,100 | |||||
SDC Financial, LLC | ||||||
Related Party Transaction [Line Items] | ||||||
Distribution declared | $ 43,400 |
Commitments and Contingencies -
Commitments and Contingencies - Narrative (Details) | Sep. 12, 2019 | Sep. 30, 2019orthodontist | Mar. 31, 2019USD ($) | Mar. 31, 2020complaint | Dec. 31, 2020USD ($) |
Pending Litigation | |||||
Loss Contingencies [Line Items] | |||||
Complaints filed | complaint | 3 | ||||
U.S. District Court For The Middle District Of Tennessee, Ciccio, et al. v. SmileDirectClub, LLC | Pending Litigation | |||||
Loss Contingencies [Line Items] | |||||
Number of plaintiffs | orthodontist | 3 | ||||
Align Technology, Inc. Arbitration | Pending Litigation | |||||
Loss Contingencies [Line Items] | |||||
Additional damages sought | $ 43,400,000 | ||||
Stacy Benbow et al. v. SmileDirectClub, Inc. et al., 2020 CH 07269 | |||||
Loss Contingencies [Line Items] | |||||
Loss contingency, estimate of possible loss | $ 4,800,000 | ||||
Align Redemption Promissory Note | Promissory Note | |||||
Loss Contingencies [Line Items] | |||||
Debt instrument, face amount | $ 54,000,000 | ||||
Term of debt | 24 months | ||||
Affiliated Entity | Tax Receivable Agreement | |||||
Loss Contingencies [Line Items] | |||||
Related party transaction rate | 85.00% |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 12 Months Ended |
Dec. 31, 2020segment | |
Revenue, Major Customer [Line Items] | |
Number of operating segments | 1 |
Revenue from Contract with Customer Benchmark | Geographic Concentration Risk | North America | |
Revenue, Major Customer [Line Items] | |
Percent of sales generated in North America | 86.60% |
Quarterly Results of Operatio_3
Quarterly Results of Operations Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 16, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Class of Stock [Line Items] | |||||||||||||
Total revenues | $ 184,556 | $ 168,501 | $ 107,073 | $ 196,650 | $ 196,713 | $ 180,185 | $ 195,794 | $ 177,736 | $ 656,780 | $ 750,428 | $ 423,234 | ||
Gross profit | 136,017 | 118,741 | 58,297 | 136,873 | 143,338 | 138,750 | 161,129 | 128,821 | 449,928 | 572,038 | 289,266 | ||
Loss from operations | (19,200) | (27,765) | (74,019) | (96,480) | (92,246) | (382,341) | 685 | (16,371) | (217,464) | (490,273) | (45,557) | ||
Net loss | (32,951) | (43,482) | (94,666) | (107,400) | (97,326) | $ (433,560) | (387,564) | (32,435) | (20,480) | $ (104,245) | (278,499) | (537,805) | (74,771) |
Net loss attributable to noncontrolling interest | (23,224) | (30,892) | (67,867) | (78,150) | (71,109) | $ (319,047) | (299,268) | 0 | 0 | $ (104,245) | (200,133) | (423,292) | 0 |
Net loss attributable to SmileDirectClub, Inc. | $ (9,727) | $ (12,590) | $ (26,799) | $ (29,250) | $ (26,217) | $ (88,296) | $ (32,435) | $ (20,480) | $ (78,366) | $ (114,513) | $ (74,771) | ||
Earnings (loss) per share of Class A common stock: | |||||||||||||
Earnings (loss) per share, basic (in USD per share) | $ (1.12) | $ (0.71) | |||||||||||
Earnings (loss) per share, diluted (in USD per share) | $ (1.14) | $ (0.72) | |||||||||||
Weighted average shares outstanding: | |||||||||||||
Basic (in shares) | 114,008,652 | 111,703,080 | 109,048,411 | 104,595,081 | 103,043,244 | 102,442,525 | 99,533,877 | 109,854,360 | 102,442,525 | ||||
Diluted (in shares) | 386,128,446 | 385,672,677 | 385,133,303 | 383,855,705 | 382,517,729 | 381,917,030 | 379,008,382 | 385,200,442 | 381,917,030 | ||||
Common Class A | |||||||||||||
Earnings (loss) per share of Class A common stock: | |||||||||||||
Earnings (loss) per share, basic (in USD per share) | $ (0.09) | $ (0.11) | $ (0.25) | $ (0.28) | $ (0.25) | $ (0.89) | $ (0.71) | $ (1.12) | |||||
Earnings (loss) per share, diluted (in USD per share) | $ (0.09) | $ (0.11) | $ (0.25) | $ (0.28) | $ (0.25) | $ (0.89) | $ (0.72) | $ (1.14) |
Supplemental Cash Flow - Schedu
Supplemental Cash Flow - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Supplemental Cash Flow Elements [Abstract] | |||
Interest paid | $ 30,900 | $ 9,664 | $ 8,392 |
Income taxes paid | 0 | 0 | 0 |
Purchases of property and equipment included in accounts payable | 11,809 | 28,638 | 1,457 |
Property acquired under finance lease | 0 | 23,973 | 6,867 |
Promissory note issued in exchange for member unit redemptions | 0 | 0 | 1,546 |
Costs associated with IPO included in accrued expenses | $ 0 | $ 1,155 | $ 0 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event - USD ($) | Feb. 11, 2021 | Feb. 09, 2021 |
Subsequent Event [Line Items] | ||
Payment to fund equity transaction | $ 69,500,000 | |
Convertible Debt | Convertible Senior Notes Due 2026 | ||
Subsequent Event [Line Items] | ||
Debt instrument, face amount | $ 650,000,000 | |
Interest rate, stated percentage | 0.00% | |
Debt instrument, debt default, period when payment due of special interest | 30 days | |
Debt instrument, debt default, written notice period | 60 days | |
Debt instrument, debt default, amount outstanding threshold | $ 50,000,000 | |
Debt instrument, debt default, percent of aggregate principal amount | 25.00% | |
Debt instrument, debt default, period of special interest payments to meet covenants | 180 days | |
Debt instrument, debt default, period of special interest payments to meet covenants, maximum interest rate | 0.50% | |
Convertible Debt | Convertible Senior Notes Due 2026, Option Notes | ||
Subsequent Event [Line Items] | ||
Debt instrument, face amount | $ 97,500,000 | |
Proceeds from issuance of debt | $ 27,500,000 | $ 70,000,000 |
Uncategorized Items - sdc-20201
Label | Element | Value |
Noncontrolling Interest, Reorganization Effect | sdc_NoncontrollingInterestReorganizationEffect | $ 0 |
Stock Issued During Period, Value, New Issues | us-gaap_StockIssuedDuringPeriodValueNewIssues | 1,275,835,000 |
Stock Issued During Period, Value, Reorganization Effect | sdc_StockIssuedDuringPeriodValueReorganizationEffect | 0 |
APIC, Share-based Payment Arrangement, Increase for Cost Recognition | us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue | 8,561,000 |
APIC, Share-based Payment Arrangement, Increase for Cost Recognition | us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue | 299,199,000 |
Stock Repurchased During Period, Value | us-gaap_StockRepurchasedDuringPeriodValue | 696,489,000 |
Members' Equity, Distributions Payable | sdc_MembersEquityDistributionsPayable | 43,400,000 |
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs | us-gaap_AdjustmentsToAdditionalPaidInCapitalStockIssuedIssuanceCosts | 87,685,000 |
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture | us-gaap_StockIssuedDuringPeriodValueShareBasedCompensation | 0 |
Stockholders' Equity, Other | us-gaap_StockholdersEquityOther | 2,964,000 |
Members' Equity, Redemptions | sdc_MembersEquityRedemptions | 54,154,000 |
Retained Earnings [Member] | ||
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | us-gaap_ProfitLoss | (114,513,000) |
AOCI Including Portion Attributable to Noncontrolling Interest [Member] | ||
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax | us-gaap_OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax | (272,000) |
Noncontrolling Interest [Member] | ||
Noncontrolling Interest, Reorganization Effect | sdc_NoncontrollingInterestReorganizationEffect | 444,636,000 |
Stock Issued During Period, Value, Reorganization Effect | sdc_StockIssuedDuringPeriodValueReorganizationEffect | 315,000 |
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax | us-gaap_OtherComprehensiveIncomeLossForeignCurrencyTransactionAndTranslationAdjustmentNetOfTax | (738,000) |
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | us-gaap_ProfitLoss | (319,047,000) |
Additional Paid-in Capital [Member] | ||
Noncontrolling Interest, Reorganization Effect | sdc_NoncontrollingInterestReorganizationEffect | (444,636,000) |
Stock Issued During Period, Value, New Issues | us-gaap_StockIssuedDuringPeriodValueNewIssues | 1,275,830,000 |
Stock Issued During Period, Value, Reorganization Effect | sdc_StockIssuedDuringPeriodValueReorganizationEffect | 104,609,000 |
APIC, Share-based Payment Arrangement, Increase for Cost Recognition | us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue | 299,199,000 |
Stock Repurchased During Period, Value | us-gaap_StockRepurchasedDuringPeriodValue | 696,486,000 |
Adjustments to Additional Paid in Capital, Stock Issued, Issuance Costs | us-gaap_AdjustmentsToAdditionalPaidInCapitalStockIssuedIssuanceCosts | 87,685,000 |
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture | us-gaap_StockIssuedDuringPeriodValueShareBasedCompensation | (1,000) |
Stockholders' Equity, Other | us-gaap_StockholdersEquityOther | 2,964,000 |
Common Class A [Member] | Common Stock [Member] | ||
Stock Issued During Period, Value, New Issues | us-gaap_StockIssuedDuringPeriodValueNewIssues | 5,000 |
Stock Issued During Period, Value, Reorganization Effect | sdc_StockIssuedDuringPeriodValueReorganizationEffect | 7,000 |
Stock Repurchased During Period, Value | us-gaap_StockRepurchasedDuringPeriodValue | $ 3,000 |
Stock Issued During Period, Reorganization Effect | sdc_StockIssuedDuringPeriodReorganizationEffect | 70,238,188 |
Stock Repurchased During Period, Shares | us-gaap_StockRepurchasedDuringPeriodShares | 31,621,975 |
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture | us-gaap_StockIssuedDuringPeriodSharesShareBasedCompensation | 6,150,461 |
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture | us-gaap_StockIssuedDuringPeriodValueShareBasedCompensation | $ 1,000 |
Stock Issued During Period, Shares, New Issues | us-gaap_StockIssuedDuringPeriodSharesNewIssues | 58,537,000 |
Common Class B [Member] | Common Stock [Member] | ||
Stock Issued During Period, Value, Reorganization Effect | sdc_StockIssuedDuringPeriodValueReorganizationEffect | $ 28,000 |
Stock Issued During Period, Reorganization Effect | sdc_StockIssuedDuringPeriodReorganizationEffect | 279,474,505 |