SDC - Earnings call transcript Q1 2022

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Operator

Greetings. Welcome to the SmileDirectClub First Quarter 2022 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Jonathan Fleetwood, Director of Investor Relations.

You may begin.

Jonathan Fleetwood

operator. you, Thank Good morning.

remind forward-looking me that conference let this you includes begin, statements. call we Before

on refer SmileDirectClub, SEC information additional For please the factors filings to risk described therein. including company's the

Act as We presentation rely refer In our our this statements. call, forward-looking Information not respect certain you of no that flow. on on adjusted call, assumptions financial to non-GAAP based make by for QX to for this of update applicable call included we future to forward-looking a measures, of our obtained and and should website. have You EBITDA will required beliefs discussion statements forward-looking statements by law. the such non-GAAP as including with a events. obligation predictions financial presentation description on is conference undertake information, All are on slides Exchange measures earnings which we Regulation cash also in as except this be XXXX of G free today. can certain the I of such required

to Officer presentation Katzman, Chief We on you Head Global measures. Investor Financial Jesse call Troy and joined Relations, certain Chief the appropriate this measures Weaver. David refer for GAAP I'm of a the by Crawford; and today non-GAAP and also Chairman, financial Executive reconciliation to Officer, Interim of FP&A

call turn now the to over David. me Let

David Katzman

plan, strengthening today. liquidity their mission $XXX start delivering I secured Thanks, QX Jonathan, than tireless growth to shipment us our considerable position to commitment with and and members progress good financials facility. and in XX% more our than more of to access made of growth debt performed care, want to according joining we Thank revenue morning, thanking XX%. for our million focus our and quarter-over-quarter everyone. by of democratizing you while team for

business our gives network, accounts which hit sheet products. against key receivable of making after flow expansion cash certain IP sufficient higher this to While XXXX, our facility, the balance investments partner we like care the and us on of is our SmileShop areas flexibility our going in by have oral to target advancing cash secured consumer, financial continue positive generating and strategic growth cash income

whitening with of oral fast-dissolving care successfully ended than the is the XX,XXX more With strips, stores retail available at at of launch end we locations, our our the up quarter products XX,XXX from QX. which

also track kit. our oral record We continued our whitening of innovation of wireless with introduction premium care the patented

offering momentum. in We category for product to retail partnership expect brand, years success skin as continued and this our come

also are on the expanding mandates pandemic, the made we've and home SmileShop kits our with the possible. distancing where footprint, profitably focus progress reevaluate We us pleased on our beginning prompted At social to stay SmileShops. of

scans. in promise, expansion this partner seven update and in In monitor the and progress our promising. on that approach QX, shops demand results location. early ensure enable to opened most the the also shop to a demand we shops past we you business. In currently to continued developed kits driving better have years, reassess the U.S., most incremental SmileShop network. shop in net incrementality may the Over further quarters, driving to our progress driving will We've incremental in impression channel, we strategy models for shops new and the the continue made and that us profitable not the we or predict also the coming a are market event markets see with are have into We've two sophisticated

in paying and our making off QX, improvements submissions our both that During practice the total productivity. we are continued focus operational practice credibility model quarter, improve with saw improvements SmileDirectClub's practices while we per to and growing Throughout in and network. to awareness on increases GPs, in

during mentioned and active last productivity been call, our submissions through maximize to the within focus practices. engagement the Troy tightening As on model has

to growth, organizational best the on the is time, the our returns pipeline practice scale driving of metric, possible generating we with force Before practice network at growth drive the sales focus profitable which further our partner being the same highest we ensures our productivity and an and to GP are growth. balancing important possible near-term

initiative incremental revenue company through strong business GP commitment our as network to submissions higher income that core from for us growth customer patients, the for the point their not also critical entry partner demographic. expected an creates to a Our only our is into is but engine source as of ever. a be provides demographic of existing This with household

you our safe our of afford. income that the customer was cases, $XX,XXX, in they a has core effective many current could know, one As median option only T-straining household

We that enabled in million X.X customers our care are has platform telehealth access extremely to democratize proud award-winning these for us to counting.

inflation XX% QX With But number expand X% demographic growth their roughly the impact highly for aligners QX. year, incredible inflation the our acceleration to of on growing having aided with XX% since last at increasing we've compound X.X% support, to sensitive awareness, year, our clear a is versus as the the discretionary QX spending. category and this in player mentioned in been we've call becoming annual core able of core approximately XXXX. this since revenue while is continued with In two worldwide, customer nondiscretionary brand the rate building to

on ability on we we This year segment. to a a have quarter been revenue this taken we through it's through able impact customers' program customers record inflation our our items And to monthly by to our ago meaningful our not just steps had price us vertically grow high-ticket to have integrated their business of core While QX one from are taken our has XXXX also spend today. financing raising ability within increases, in support payments. to strain mitigate on discretionary smilePay where

brackets as also expensive that this our higher-income product, their and wants know rely to ability quality growth win our as therapies. They awareness from the the dental and provides brand similarly about from with by orthodontic our our friends strongly we in taking and those share households. level and of but decisions in of our long-term believe democratize of orthodontic to to convenience We to the treatment and achieve well believe targets expect access and professionals, needs liner more While quality reviews wires of the make on from clear also customers come customers the our they telehealth traditional same other to right online today. different offering we care, have traditional our mission of care demographic,

convenient credibility partner the practice a start stream a through both we journey with recognize again that their this investment We our insights adjust challenger customer These a know the well areas from channel point more journey income with brand. for on The our our purpose we to allowing households While also as campaign, way to we higher as offering being telehealth our need GP modestly customers our our in through appeal. seem our of journey platform SmileShop service our network, our continue we in channel. which the which tools. them advanced growing to general income us to partner market a underscores build their dental existing is awareness neighborhood or start highlights dual that than and network income a building practitioner greatly today by also higher-income business serves us at an to demographic and the model that for within to improve office the prefer, other they they connected with proposition their our point for our offerings the focus our higher we've research supplemented model means GP. network revenue would in on our customers on They value and start to of by through for can importance either bring an need a in education our price access can higher higher partner which incremental done

this the rolling as ready market are to begin XXXX. team possible to in offering, get share is a working soon the specific as or not out early XXXX details in and of premium we late test While diligently

you international initiatives were current environment, that operating investment. to As profitability, our capital rightsizing QX, early macro in light return produce the recall, our allocating that near-term we announced can growth core for may we and in reevaluating on footprint structure of the highest

an have amount grit members as this team transition incredible demonstrated dedication navigated of Our we've and together.

place during there the While this time I'm we've as we challenges transition challenges. February, how began our After weeks. this coming in with have pleased target back within with some to plan operational that customer team of impacted operated Promoter took quickly service have transition any to and unfortunately Net The been experience acted us care latest Score. experience our and to our in built levels a the remediation team bring magnitude, customer

and challenges spoke priority, Our always customers from against we have top expect a we come best-in-class nature. temporary These our were we to acknowledge directly we and to that to are have expectations deliver the customers aim set experience. delivering not are currently ourselves high for what to they In a April, in SDC. operational

reiterate close, progress significant just made to in my reflected want our appreciation the NPS have future quarters. in to We that team. I On already will be

our of firmly as market in companies and was the the story the operationally, few aligner focused focus. platforms This for considered won team. been of top an and industry. the challenges As and short-term in we the of platform. of medical MedTech story A decision company industries clear very only telehealth recognizes impressive in highly Award the today. larger the in platform. Breakthrough recognized ago, XXXX in our but digital telehealth independent I and we the a a difficult health, winner joined I for me the transition and products And platform, X,XXX investment breakthrough mentioned, announced we've spite for and fitness rather XXXX, were health leadership days is facing not best are we game-changing space in that an is nominations we of in list Nearly a direction MedTech retrenchment, believe intelligence Best the breakthrough that program, technology organization people,

growing million will work period Troy, spent While years deliver QX number time, the amazing provide the breakthrough financially financial served our we seven to reach this call customer, liner I'll $X more results to a over X.X billion the over braces. saving smile more than has over collectively revolutionary they traditional brand the and In platform our in largest turn Troy? of of outlook. to of expand we who full number of on them our two need to innovations. world. largest this the people strained while and in this a last also short detail against core And the one now love year doing orthodontic direct-to-consumer we're results and underscores importance recognize the the brand, demonstrates brand award importance It the

Troy Crawford

Thank investor posted results to which sure to will I supplemental review will on Please to be cover. I details right quarter. website, you, provide our everything additional David. jump our for materials the our

mentioned, by XX,XXX was primarily quarter increase David $XXX sequentially. This for initial of aligner an of is XX% As ASP driven $XX.XX. the an revenue at million, was first which shipments

on from the liner decline, reserves. the revenue revenue, impact historical other quality XX% aligner our to by up we environment year-over-year revenue decline we consumer by driven shipment have see in of we revenue out well X% trend this as quarter as a the to the count is of price the recorded of details of that deliver XX% gives in back XX% primarily as continues economy fourth have significant the gross of of year-over-year sequential was over in the aligner 'XX, fluctuation The on fourth portfolio. to the impacted level spending, record of rebalancing on quarter. concessions as level The the confidence effects quarter. the no QX of the do Despite IPC inflationary period the the items. We had Implicit in QX, towards from what day. expect the our gross higher can Our increase but us last the percentage some that overall of from were guidance percentage in for in is stimulus year.Providing We revenue the year. XX% some a QX full IPC revenue government the started seen we seen of deterioration down over play quarterly in representative

million. relative and $X We down in Other cancellation. tax, have due rebalance compared we SmilePay fourth the other and we accounts is and lower retainers, whitening $XX kit gross to slightly to This retail adjustments, includes in quarter, due and revenue net in rollout at to came the over Financing XX% in As analyze increase separate balance. IPC information. at our revenue, prior primarily first from includes is on receivable which based ancillary is reserve to at approximately which about sales quarters, Reserves to came our QX. of other revenue maintained mentioned associated up current our products and XX% products, which for with aligner including program, adjustments, QX revenue those regularly came of and in revenue the from million innovative primarily which quarter strips revenue, reserves QX. reserves of in refunds million the $X or interest total aforementioned new the lower was X% refund driven rate rebalancing. whitening and impression related

purchases our came historical levels. in QX, SmilePay. to aligner XX%. financed at turning with Now in through This approximately initial is share program of SmilePay line the In

mentioned David SmilePay customer is perform and continued an affordability to quarters. with with delinquency prior were program SmilePay Overall, important our in well, earlier, base. QX consistent to drive As component the has our rates

While we and that monthly on a confidence a fact payment, customer keep card us macro have will SmilePay has environment, had to the difficulty low gives continue core admittedly, that well. with the our perform the file credit

payment price extended XX While months maintain XX terms to customers. we our SmilePay we to the in the of also for increased affordability our program the have recently aligners, help our from

with is our items, historical the trend costs. on implementation some results with in costs Gross line to cost fourth for which to XX%, higher start-up side which associated business. was OS onetime Turning our including the some more of compared quarter, the retail the margin included inventory quarter and Smile

producing Marketing The as leverage came a compared XXX superior the Consistent of fixed reduction for sites. significant had percent is consistent higher course suspended or targets. result of of those automation us of in location for sequential a and the of reduction to coming therefore, fourth includes percentage. of the SmileShop turnaround the referrals members. selling an net increase in higher events and held more locations our operations net spend a margin second-generation aided enable our in gross the XX driven demand international line machines that costs with us aligners product the efficiency. in quarter, customers revenue, are pop-up closure the in increased QX of are over revenue club in helping shop markets we by a attributed shops suspended gross we and in events targeted primarily to quarter we decrease XXX is where XX% revenue decrease costs, quarter margin of marketing flexibility for This fully million overall and and SmileShops, a in that QX, to XX% through a international of locations time, to also XXXX. marketing. to pop-up from as us revenue in our a our the productivity, for at and XX% of our streamlining is January awareness, provide with quarter had $XX approximately Our meet are total permanent end primarily to allows January. efficient expenses as but portion from markets and as internal with The way We in in scrap revenue well XXX our On and leverage

also incremental now in cover where are have these partner pending over QX. profitable or of we demand been locations events to globally locations. have network. supporting additional of the Pop-up network exists partner our footprint continue critical SmileShops active models that scan increasing We We expansion XXX other training, distribution to and evaluate believe cost our from

on David throughout quarter. practices, previously tightening network we've to partner has model productivity mentioned, on the maximize the within positive team focused active productivity engagement As extremely and the seen and been momentum

international any to and as and the investment within implemented percentage analysis We the our XX% the in what U.S. selling as the brand and was world revenue spend. the marketing revenue in XX% influencers XX% QX declined driving This our the to remain in Canada XX% to earlier, as the and efforts percent building. through offices in with significant greater focused in mentioned after changes qualified quarter most network of reflects markets focus rest our to the TV, in of find improvement the efficiency see find specific to As as effect in markets did and compared regarding our full quarter QX quarter, during our and efficiency on our exit as reach compared marketing our expenses due continued focus January. of sales partner leads see site. and of the and U.S. many We support long-term Canada. includes will is international not spend did The a seeking the improvements in to of were changes growth. through of to market unique a in well

changes that optimize XX members. mind iOS pre spend the that by and on and bottom quarter a efficiency focus channels. always order General spend a We're of expenses base administrative analysis, important achieve optimal amongst of platform our continuously and in marketing the and sales. to period With funnel impact the channels, reallocation. high aligner digital to efficiency to channel finding daily leads a continuing iOS continuing mix to across discipline and when requires leads, QX, diversified assessment to on we challenge and year-over-year were targeted analyzing testing in It's fluid to keep of to through While highly optimize is to are G&A QX new quality compared a process balance all funnel compared digital the calibrate approximately $XX we in in million million levels costs XX quarters. in continue of the $XX adjusting QX closer channels are XXXX. the lower million incentive first $XX between for compensation differences by be were to

the G&A the cost the QX effect due If Stock-based reversal awards QX the XXXX with million of lower The you realized be implemented QX rate Other bonus XXXX expense QX the year. actions XXXX. of XXXX which $X also run expect included a cost of XXXX the million continue a and by of stock-based in half normalized $XXX,XXX XXXX $X associated stock convert in G&A, through in to more $X.X we will see of with a $X X-year back interest leases. recall, $X.X compensation related expenses January. of QX to and is issued in And include we to million. and costs of should cost QX of excluding to cost changes to expense accrual compared in the step-down compared was forfeitures G&A compensation approximately full of quarterly in loan million in the associated balance continued that associated million with deferred between

expense onetime over of the $XX well produces store consisting XXXX. costs closure in EBITDA QX international adjusted costs $XX January restructuring and which related as operations. primarily negative of actions, million our related associated to improvement to quarter, our and Additionally, the was with severance other as million a $XX million approximately costs All first is retention including facility above

the adjusted negative Rest XXXX $XX EBITDA QX World was regionally, net quarter EBITDA and to $XX Our of million at U.S. Canada negative loss was million. million. and adjusted came in million Breaking $XX loss $XX of first net out compared

million. QX. the ended by initiatives cash was impacted for Cash We negative first to $XXX balance Moving negatively and million cash sheet. we the in quarter quarter in the Operating cash savings executed equivalents. first was cost flow $XX with operations from the

fourth we through During EBITDA exit retention outflow, adjusted back in costs the to cash member rest including the with to $XX cash the outflow and year. the $XX be flow some restructuring facility the million on team and such spent from quarter as the million. is associated million flowed $XX negative as quarter, the million the expensed was as from and of cash spent $XX and total costs. approximately of well of for related remainder Of million cash throughout for were quarter Cash P&L the the approximately investing on cost but defined the was million. for $XX store costs of the of quarter, costs between of million Free investing, restructuring still operations, for expected guidance exit $XX $XX severance as the cash first with transition within geographies, The added our less year.

previously growth customer our have additional to partner liquidity investments smileShop network, to as including have We access invest initiatives, income and expansion. we higher that any noted penetration accelerated in such

secured we our and earlier, new debt $XXX liquidity the draw mentioned an April, as term drew maturity we David the loan as which on agreement. the receivables structured a delayed XX-month that completing at of As successfully by facility. is by of time our has the At a increased was SmilePay of a required facility end closing $XX most initial facility, draw million down under million

in mentioned, our on to any reduce targeted company our took January, meaningfully optimize actions near-term first of savings operations are reductions year. quarter plan with the anticipated impact previously actions to business full These Overall, tracking reorganize the with our costs. minimizing second As profitability and spending on to cost impact a while meaningful half our in in achieving revenue. refocus run realized rate these the we on according quarterly

XXXX aligners operator our provides our guidance selling a Oral our foundation plan. revenue both recognized help our accessed efficiency of as through increase long-term member experience. gross for a and We release, turn Thank line everyone margins, provided assumptions a XX% G&A solutions, we significant best achieve as compared and additional to Q&A. XX, financial our I'll to strength Overall, lower in targets we in of aligner are marketing and increased liquidity revenue call back in us across noted today. delivered and results deliver growth for pleased as percentage gains February solid long-term and orders QX with With and increased Care over with to XXXX both new to As we well on QX debt joining you provide have club and underlying reaffirmed and XXXX. press the the This to facility. that, the our that

Operator

Chris [Operator proceed your with Our of comes Please question Stephens. line with Cooley question. Instructions] first from the

Chris Cooley

an impressive the on start Congratulations to year. new

Just are maybe utilization better new growth you gains customers, a there strategically metrics you was color of hoping that And then just sounds practices. kind we offering. and but margin? could -- seeing around see get more definitely result thoughts of maybe the with of I'm in that network the your the not around some like only new little us just partner and what also you premium bit It in how terms terms of those within that do Lift, terms end give existing trending? some can Could think in and of you sorry,

David Katzman

I that take Chris, Yes, one. can

in deck our we That's that quarter. this today in seeing network in something our offering. premium what not is mentioned we're remarks. introduced and it partner We So prepared our

couple the income GP that but choose comes to local is quarters our we're the this of needs network their one they last that neighborhood a So of research do the to, where telehealth they that of lot we've or have ortho also use journey want using network platform. start to a neighborhood and to flexibility if over play done seeing that consumer, of the from higher

point. it doing network offering to base This wants patient have straight service associated more SmileDirectClub GP's with It partner of the cross, And in higher-income today new the very which service was at -- today. consumer. a initiatives in that network. offering, of partner it not to market the is started strategy as of for exciting. both out the who network it. was two not which for a be new that come going well us. the and So initiatives, consumer, to more we're so been use 'XX, rolling happens just that exciting the when what It it's is independent network, the is we were we the we've partner the comes to partner by complete inside as end is together design more premium are circles price the now GP, higher to not appeal that higher-income with There's in the have them There's now out which

our to of and it's are call consistent right level out. state certain it's more We're because for practice. today on new a getting So GP to we're when still about start then gas get to seeing profitable, practices in is network where going offering. what And the practices. talk patients. we're now And we been hard and pour we in with it productivity That's this, seeing submissions, what what really those we're premium go on the up. Every opening roll productivity plus, term a working core per partner to we're more month, very it where that's the we SDC of it's which we've the

that to X/X It's practice. partner partner coming or a to We've dental patients operatories those really good offices. coming the inside two have our SmileShops a our to good inside We in at Many partner but about the utilizing being But of and in. getting a been and it already are more going practice, will core it's network. model we over services. helps dental for shops scanned operate network customers inside There's comfort with space and requires model. our least network be of have of our XXX the inside them, open up got also some

they partner inside having treat to consumers income the plus. most those SDC move network and SmallShops plus. expand partner come we'll support that service as eventually, and network So of the just the We'll through or SDC higher beyond then also

Operator

of next comes with Nowak question. proceed with Alex Our question the line your from Craig-Hallum.Please

Unidentified Analyst

guess, does is off, it saw on obviously starting Alex. first the environment here. look improve for are but This to worse Conor like in we results QX, your I inflationary

-- more there just you some would color the color in helpful? here? less those be and some challenges just quarter first So Or more where on exposed to

David Katzman

can take Yes. Conor, one. that I

$XXX million, over definitely up a yes, pleased little So XX% with the revenue. quarter,

seasonally. that, First this better new of not quarter inflation But shape new every than you is environment. seen operating QX. the level it's just takes in QX is higher it's year, used beyond at QX we're than getting that effect anything, a have a if subside, all, There been. I to think we

weren't Some mail, marketing we XX. of money doing starting efficient are to of really those being start We're those which becoming getting we channels direct Facebook, the because money in our get spending learn more all we're of wasn't Podcast, some spending were proficient We exposed to on as more the levels legs. things in we -- in TikTok channels more. newer and performing. to spend, iOS and our each channels channels the Snapchat sea forced in today, of that that are less marketing at and We're

that The a other about is talk improvement. we one conversion lot don't

there's within So We're kit improvement always tweaking. conversion each channel, scan. and

better are We philosophy. better have Everything rates up, kit up. from a are acceptance return and rates

back for spend, your kit, you aligners. problem there's kit a through same to the order a if So dollars successful you of to go marketing a have that get real

has And so making funnel conversion. We're really improvement years, there. after There that been focus in five, six on strides improving

good some QX saw conversion. in we So improvement in

doing kit is into in a some The kit. taking a the at a better other funnel experience the someone ultimately a than with themselves conversion shops improvement conversion from have scan it home

has starting we're to the And that well channel. as a out our that push so COVID, conversion, which more of see customers shops, in an better to we've continue going coming we're of uptick to starting seen and

And more opened incremental, They shops mentioned, you. in that in say let up we have define when We're opening seven QX for we the see new as be shops we to incremental. me As incrementality. we quarter.

more would because someone with started get a they kid there, not if have That's we in only to us home. do that we one starts didn't a not it's want in shop don't have do case because DMA, at incrementality. So

have The you a who large kits percentage other incrementality were a to can market higher so in -- of is shop, a you the that to conversion. doing the people convert

covers it shop thousand is incrementally. say, same of higher the a let's there, who the have cost started to over you and then if convert kits the DMA of in people shop shop half the that profitable certain So them conversion, now with now with

one things and think inches. not why plan we of our really QX, in hit numbers. game it's of that's thing. And all It's to these performed So a I

Troy Crawford

just of sales in expect bit our will seasonal And expect XX% XX% bit. the did lower the the And rest be with rest the Conor for get front outlook to to that, about uptick in range as about our that build guidance a of on from we XX% little impacted -- through on the little million of to in half the year just $XXX the QX. that, guidance end still of year to back range end a XX% at the sales based We with we on the of at macroeconomic to half build being with standpoint improvement an continued full year. million by difficulty the the that we $XXX an of in environment inflationary high look

color. to I you So wanted that just additional give

Unidentified Analyst

just in. marketing with if and defend alike. do more those second, Candid update, how And seeing from bit those now? a What are helpful. budgets intend And on I little then, a to environment. competitive potentially just against quick super kind bigger I That's one squeeze guess, of the you another We're could seeing? update Perfect. you

David Katzman

has DTC that. space. We're Candid out you not direct. going I'm say to They're surprised not really of that seeing really dropped the

from see as time numbers the far all. at can't marketing those competitors. in. -- on changed But other own through product or the don't I in call as mean, the out their the conference from than them a see of I -- real so spend marketplace. GPs buy increasing any they're network from have now, don't any increased Quite, reporting see a that spend of nothing us, with see we'll standpoint has competitive how they're I so to right our we same You

these think the like curves, was we -- think that website. a that coming conversion when in, lot traffic demand meaningful levers, kind of that we environment, said, million a in work I conversion inflationary into have be of the achieved we're very and I just all the the the to that a levers have spend, of our game And this marketing we channels data-driven company. quarter X%, $XXX metric we have visitor have is in X% this I moving you -- it's very the we're this understanding business

Operator

Block with the Stifel.Please with proceed question. from of comes Jon line your question next Our

Unidentified Analyst

Jon. you is price, the it talk XH. your and this inflationary maybe reflected around execute about on And effectively just fully This Troy, terms? price can If year, in price cadence then, through you, this with longer starting Great. maybe I just on additional Will P&L? thought there [indiscernible] then recent for environment monthly start can ability given . is increases the with how be through any to of the increase the flows David,

Troy Crawford

So price just to address increase. the

during in QX. U.S., rolled So out have the we'll that

fully it to QX, So internationally out we baked get end we're it that. then for the the in be by QX, and of will rolling after time

of to half back price effect see the the yes, of when So year the increase. we'll full start is

David Katzman

to add that. just And Yes. on

CRM, from that be does take to it website have this media, a So through paid has system of while to adjusted. to flow our all

market. the with going take price the countries the QX biggest all X% U.S. to it's being to U.K., started coming up we increase. through get X% We've So got but to the next, to six Canada

looking the don't another aligners. anticipate are we we increase on Now price -- at

now. retainers We are looking at

It's Our retainers flow, subscription, are of more we months. so people good a retainer It's every a but annuity. in a some $XX. six good flow have coming have a business

since it. started gone seven up retain our customer business expect ago. We to has not years That store

exactly retainers. new talking that So And out offering we're premium We're we on helps. much little then how is, price helpful. bit a we which will Every trying will this just about. to take anticipate figure be increase

come model. the increase even which out the until of retainer that SDC the into the built going almost both price isn't that's offering premium Now of year. is end really to plus, None for

are those the a So added model. to if we increase retain additive price

Unidentified Analyst

just just we inside pre-COVID. doing Got as like more as sustainability . per is it. SmileShop importantly, relates profitability? It then to to now and And what talk store second sort it relative And about shops you the my profitability sounds the question, what you're differently That's about expansion helpful. there, of then the offices is think helping?

Troy Crawford

Yes.

Shop over strategic the growing and footprint. were XXX our first Walmart, shop, opened the our take we're 'XX, in crazy When and much with U.S. We in. shop would like about we So a more with summer. partnership shops and our surgical Walgreens XXXX XXXX a much in shop we got who to in up in more put CVS, anyone

David Katzman

seeing really real at with a COVID, shops cetera. In look these is monthly to take all shutdown rent, hard incrementality before we the There with associated labor, the the long of allowed COVID shops. the of them, et started us it expense the

look most So way all that's kit, could to even them, shop, incrementally gotten associated lower the not it if that so if But X-wall. profitable costs we it an even of say they're a not because the of conversion profitable. business profitable that within to were and with if looking is otherwise it, in conversion and a you factor is, of at that's the what were with shop within a of impression higher in the at with a the conversion lower the -- at have X-wall, kit all them, you I how have market

Jesse, that's with who's against point So a are FP&A -- by they still we're along and look test match team call they our data have this And team from on and markets, imaginable analytics. at we every headed learning.

new those seven shops markets. So both seven we in QX, and open markets, up

to then incremental hypothesis is It's then Some sure to that once round in shops next next wait pretty accurate obviously. weeks easy are six, see they to new we open, incremental. within the eight this are was measure going to that our And markets, round. we're markets. some the make existing And

at shops cannibalistic we're have but more we today help were well They as oversaturated. talking XXX starts. like just the numbers, that get that will we're that because were about to we have well, So -- and other, new going back XXX I don't case with to each conversion anticipate shops as to when than we does look we the

Troy Crawford

we just are changed the we couple as too, to look pointed crawl-walk-run we have David, and today, It's those, do bit. shops, the have little One, has build a the you for thing, distribution if the in shops. back company could say would of out in when into States. do now today we fully when XXX time we shops can pre-COVID United that is the can the control I of kind have test optimized I since over call and number mean had on that saturated that to things where well what that at out, company incrementality what tease set. look internally of you and hard a and we good the at ability those data its go-to-market And terms evolved so models. is other then of I have

our David stages, to probably can I that focus is today. what And more thread on that incrementality said, out opportunity we distribution out continue call that sort appropriate contribution tweak the market practice David we'll pop-up. be structure guide obviously a So And to could and stand-alone. the a or even leases we what then with and are we what for we've temporary or than the in of two model work of to And different one innovation capturing we process a we're the highest very and opportunities margin. these early marry and we can it what to it, But a learning. allows just dental think that stand-alone evolve increment as are in test market a shops we week we're that days with for model, dental practice the to estimate get can there's as as different we us the have culture. because see short-term a to these and of a in have single pointed models, Today, or an really operating really model, events don't all a got go has in pop-up cost still operating flexibility a lot shop find at shop

we'll a talk it, coming really more quarters. exciting it's and about sure, So thing, the in I'm

Operator

with Our next of the your from with Suisse.Please Matt Miksic question comes question. line Credit proceed

Matt Miksic

good year. a Congrats the to on start

just a cadence questions here. on maybe You're from couple of -- so

quarter. mentioned maybe sequential financing your and on bit restructuring follow-up you Can of partial as top the given as your And QX, a remarks, you I've any QX flows, into use some cash as of efforts during little get during prepared on that of about the those improvements announced first got cadence So a impact QX? talk in then then the And as the question operating we cash well. front and stabilize you line?

Troy Crawford

that. I'll Sure. take

million in to overall So the restructuring was just related we the events cash QX. executed It for that $XX flow was impacted negative the quarter. by free

CapEx. way look you If the at just what flow, free cash about think before about to the is minus of we've talked EBITDA kind

and severance CapEx flow restructuring that So EBITDA related as million, million. which from of was cash $XX international related of and million costs well costs But $XX to $XX about perspective. made. as event the had us a cost to spent changes majority our we then some was a was in exit retention that were facilities minus the

say, one time. $XX that million of about So million was $XX would I overall

the QX, on P&L, item. statements, line about of all not of that broke out restructuring million was Now through a $XX only financial that -- ran the within the which we in in P&L

impact off of as million of of that range amortize the as year, rest and into $XXX impact the then certainly as our back we in QX those year. perspective we changes $X still from of rest go a year. we of that and million made that We're within QX, the the identified, the year have half through to quarter see million savings million in the we about from the we expenses about that full start for in in remember, QX the you some we'll the we'll $XX $XX guidance So restructuring. originally gave rest But the to of

have changes define rightsize things the goes we and to we're year in as the model get and an the flexibility the So with to really free aspect, the made better cash changes should talked year. to to standpoint. we which impact the well And that international then the changes analysis cash that I of from we personnel a we expect some of without better flow flow throughout the And from from as higher better see the we'll expect throughout markets, the to be G&A well coming about, efficiency. onetime rest see free efficiency margins, impacts changes, made we positive that we've as as go marketing down. that exited those do savings Jesse costs think related making the ASP But all the we to marketing price of come business as some

Matt Miksic

does That's that, that just kind consistent steady great. And as the Or well? there with CapEx XX of element -- to of that in is that QX? still a is trajectory number

Troy Crawford

$XX We've those to we're that are gave going The this can fit we million range. that was some million now. business, but right to to the got think we $XX for going to original guidance that year. guidance CapEx investments guidance We're into make be important that we sticking very for

Matt Miksic

on of number marketing mentioned you expect then is last in And think, you're a customer of and that great. I expect we sort to different acquisition embarking that which and should -- profitability, sort be investors should Wondering question of and of Great. sort quarters couple shape exercises of new you the fine-tuning when by the think sharp a in benefits take QX? the growth affecting programs does start view have see are trends? end to of or Or of of the some you'll of do really that these how take clear those a just, year,

David Katzman

QX. that we we or incrementality in the that in the of was saw make, things two the Yes, question. One process that benefits improvements

is up as that's some that marketing all because plus, see we'll almost getting one so campaign continue new it, I and far these you'll The premium that that those doing those off to targeted XXXX with numbers -- in and our to in initiatives partner metrics to working incrementality, about, that see can that's higher the start going a now We're be and our we stood see always initiative for conversion, efficiency, diligently are of national give on far QX, offering. is things that 'XX. as of comes as more -- roll initiative as they out at a KPIs kit this other. each inches, into that That in we some big our start with probably in as in the roll So model. it. as SDC networks model little late on that the shop we guidance working partner we consumer network as XXXX started you'll and It's we're something talked to you'll out, that feed But income report on that. out,

Operator

your JPMorgan.Please comes Our line next the question. with with of proceed Robbie question from Marcus

Lilia-Celine Breton Lozada

the any worsen? you few today. how Robbie on color This of And all these as have any shifted is for sort macro on challenges, to to share is SmilePay there Lili quarters? can dynamics risk . with financial you on over what last inflation continues doing mitigate actually side that are

Troy Crawford

Yes, take I'll that.

degradation, haven't in the portfolio say, we despite overall to related our any seen situation. I macroeconomic So SmilePay really would

I card payment allows the of think the XX. a easy offsetting XX to prices, terms we're have that impact one certainly versus raise of the of by out to but for kind is months the that extending on for things helps credit which us payments. We did the kind file of with customer, customer

their $XX. low keeps So it payment at

major years that performance I we offsetting where the between from month-to-month. performance I watch SmilePay haven't prior There we're of consistent for consumer. with somewhat But consumer. any quarters, impacts say think still an standpoint closely. the that say, I'd we overall, that price individual downs ups amongst the But very performance overall, some considering we're impact are So would the increase even and seen of and economic from

Lilia-Celine Breton Lozada

Okay. That's helpful.

follow-up. a Just quick

core You've headwinds your really these demographic. are mentioned affecting that

some moved Challenger teams the and recently how of So into the recently? trending like you've have noncore been markets campaign

David Katzman

Yes.

There you as SDC by using local of way teams. high This also tell after consumer So very, to a partner I that parent that team a initiative. the really one. I'll office direct our start. will GP take with network very Plus income going the higher resonated wasn't

a outcome for So that us. good was

really up, So too. after but goes after really gone that I the team think also SDC income that Plus under-index market. after goes only kind not of market rolled higher we consumer, We've never that

I as any yes, mean, that really more I things on half year. of or initiatives that? doing, and don't any add other And the color as know, if will back we're And Jesse, want initiative shape. that of Troy far take you it's to So

Troy Crawford

by I right for say, the our that's are it's would results now, and model. core driven built just most the our our yes, way -- consumer we part,

make investments higher opportunity all that's and to the we consumer, income So us. extent into that additional inroads for make

focused all part. network So and on I other it initiatives, think of say, that front trying would most while us, we've grow in to these of some partner really been and I for the is of

Operator

Michael of And proceed the with from next Bank America.Please Ryskin comes with question. our your question of line

Michael Ryskin

I've seems if the player increasingly in changed not and did the big lower the you and and also like sort of doctor-directed If picture little the that align want obviously, access the one And follow-on it's didn't number methodology the on other got of and one, the of the really it you've a but shifting you're price of big into channel time step a on continually specifically a on. at have market who channel. your sort a guiding business, the two and got of world, point. -- if the to of offering and lot a at was sort point; the or was fast forward more take to back dentist IPO, is. focus one, more part Plus, but bit we last today, back for to now or couple, dentists. look heavily picture, the has dentist customers that was it the SDC the There are the or where you're the And targets were premium patients two, of emphasizing the go or we focusing

any small could in the So the it's recognize platform on still opportunity. the former on a in the part with you the head-to-head longer market can it's term the the still thoughts how where And that of a stack shift, DTC size and the still players that captures channel? Truly the market platform take you any there? Doctor-Directed more the from we going be established majority category I learnings up -- business opportunity at-home of But and of and

David Katzman

that Gen X as We customer. really win, a out as our that we abandoning that QX talked platform, customer. putting Michael, a better look outcomes. it this was to have team quarter.We're doing well. telehealth I Yes, which we headwind is as remarks comfort, great more core record that is and improved platform, not just million right in every far doing this have Smile customer. of business a for feel our the quarter will at have new a inflationary great for I have the the which $XX,XXX continue we positive was which platform, my up workhorse stated fit It OS, until we about product. We EBITDA to just us, is our a all pure we We're been has the really which in demographic was of think 'XX. way year manufacturing, engineers, customer cases, It's software really releases grow us, with we $XXX to of That -- have we

pure higher missing income to that What consumer, want So the we was time a feel right the didn't play. have that platform. do telehealth totally we to go after they is was

someone Our their neighborhood they to, the that research of they the the offers, love came that need can expense of least but go start convenience not telehealth aspects if to at the not at in journey. having to back or that, they it,

thing growth. regulatory of we're was hurdles not for right really to were that had in the shut as countries going a driver And to these a to that It growth these pivot it from prospects. a of So initiatives lot strain. us which for are we was countries overcome. a was these performing or Most talked down. lot was -- of that away be a cash There -- had we long-term do it was to international, about

gets less higher the that pivoting start up countries ROI. costly get by a model us appealing location, has then showing to into the really is the that and teen them end compete Plus that physical us, platform which income so research underserving and which year, And We have much best opening than which of can SDC to to to better telehealth more this as we're back for of this international the well. is something cases, up consumer, the very for also both and our

these more the not no segment out exactly we would So now consumer. We shift when way XX that what to convenience. It's that's adding pricing to one a put that each getting doing. were it, consumer, go category Street. to additive and incremental scheme it far, people of which a higher-income And under -- $X,XXX $X,XXX I consumers and for were We afford income so case were It's for getting. much higher that an after new product came of timing platform look we number by starts indexing with reason them. who Price you is were we're were category, And the which after. evolution disrupt it's typically not we came now a who the what go of world. not million-plus to as that's us the -- you at to who around there's the out can

Michael Ryskin

appreciate a quick I And Okay. that. follow-up.

what the on think steep it operational you as in you result pretty of you was little you a On on more the January, exactly can And concerns that, metric you on updates, from NPS ask impact you in led you to accounting-wise? have drop-off? a Do NPS order, hit an do business? that detail comes that that on back hyper-focused got bit called you've to any the clarify need think detrimental announcement want out just been prior disruption given how

David Katzman

organization internally our customer. customer extremely Yes, want good our about And at the out happened -- to XX/X all this Basically, We question. did what because restructuring looked is all this that. Horizon, our when And carefully DNA contact cost Everyone this and we the is our what in blame did savings modeling was our were in very needed. at and center. of was one the take which teams our Project focused. and happen, not one the executed was levels categories in is from service we hurts that I'll we to for January, take we of within

all Our realized we night felt dental have needed help can and shifts. support, we when team, was our some cost customer of savings IT that, care team, that there we our like SmilePay, our midnight some didn't When to that retention, servicing support. of XX/X. eliminating do be That these by

some were into of we to the move so going two other shifts. people And those

is And hindsight of have be thought moving when about what was them three many contact shifts, But -- our out we two and them of a had in just happy a shift is day shift big Rica XXXX. of We labor that Costa X-hour we they'd shifts. into what happened happened chunk force three center was midnight jobs. for a offered

Sorry, I were staffed. can't short it. kind do of caught and we

IT and still we other So desk to shut backfilling. support have the down and now to help we're save and on shifts those night

really to this to of service levels, by we're proud back get plan our a normal in important are good have which business mid-June. detailed and We

hiring, productivity just out from each now, week, and improvement seeing of team of we also things of having getting not because only each doing them. productivity hiring members, days So more the we within but XX we're are classes improved every are

as back see in back. XXXX, our scores. as that It's to not So going bounce in company. to It's upsetting QX time, quarter down very and or the and But all low it's to went on leadership last a levels which to long NPS we'll NPS, XX% get been of the was hands long at deck. service to going you're right take XX%

Operator

question Laura with with Capital Markets.Please comes the line of Loop from question. [Operator Instructions] Our Champine next your proceed

Laura Champine

get targets. targets knowing kick that in . today? XXXX short-term of still And view? performance your for out we all and know long-term presentation have see to get laid You've in, we do when Do you just in EBITDA those sort in current to long-term targets your positive,

Troy Crawford

that. take can I

original SDC some start say goes, So through positive understanding sticking EBITDA cash as initiatives get in I these guidance, mean. Plus far then flow would of these EBITDA other and we and and our some as of investments positive as positive is to initial with XXXX we're what 'XX/'XX. which

sticking I take I'd first change improvement. we relates as a not at from a I our say million million seen. see we've right it's of overall. -- a think kind marketplace look long-term to make the $XXX what we'll to ready more the of year, investments the potentially these with $XXX after on certainly guidance million of say little million, representative that a to guidance what take an and until the continued look environment of shorter-term business, bit the $XXX going guidance But make to a we a But guidance, perspective. that in how we now, with worsening the $XXX and based and sure are long-term get the investments perspective we'll rework half would out that at play on shorter-term we're yet of little win overall

Laura Champine

facility? think facility follow that Got about. the just you'll it. that reported And on do you credit see . a on you just then borrowings When peak

Troy Crawford

all I Well, it's operating say based on results.

have is what think lot a going that. to it gives want we the we we make, of us if flexibility do does investments of to to -- ability to the the I some forward ability extend want and

$XX on we all projecting capital, the overall, then we that well. not off. was on But million as Really, draw those and facility. year additional that that towards it the the to plays So we want just will certainly depend to but how initially, of initial year, start need investments out out took it play with necessarily make how and half see this back we this the we took

higher sure make I drive for we profitability. part to liquidity best term wanted shortest make we key Project David things growth. I return on those really if to earlier, we sheet that a to on investments think the additional as the of as had balance the have mentioned that one to and those is additional wanted thing to investments the we focus was trying Horizon, of us mean hard looked at the

investments we the drive So weather the make that those continue gave to the us need this as any well storms in to as ability in to business potentially growth. really future

David Katzman

to say just Troy. add I to that, would Yes.

$XXX the So roughly ending to million. $XXX balance million with plus cash

needed at million liquidity. available not for looking $XXX the model. You're of It's

liquidity. added So this is

accelerating, take partner to it. You accelerate we to and really funds growth can then when ROI, a want near-term you to there. network, good want we cash do payback And with there really start if those take we we have see results the in

things also, worse. Now really get if bad and

should models, and a in about So for working. at that heavily more things 'XX, plenty XXXX, what EBITDA you company our We not liquidity, burn based on in forward invest talking also of positive fast to of storm but we're perspective, are cash look cash like kind from this whether have

good the So we group and is again, folks We're AR balance, feel a excited past are This with really of in really we work. had worked a in that position. our them to good we're off HPS. we about working SmilePay, with with

Operator

the concludes And we have end the question-and-answer session, and reached of also conference. today's this

your disconnect for you at participation. this your may lines Thank time. You

Jonathan Fleetwood	Director, IR
David Katzman	Chairman & CEO
Troy Crawford	Interim CFO
Jesse Weaver	Global Head of FP&A & IR

SmileDirectClub (SDCCQ) 10 May 222022 Q1 Earnings call transcript