Executive Summary

Q1 2023 revenue was $119.8M, up 38.4% q/q; adjusted EBITDA improved to $(26.5)M; diluted EPS was $(0.16); unique aligner shipments rose 43.9% q/q to 59,645 .
Year-over-year, total revenues fell versus $151.6M in Q1 2022, while net loss improved by $7M YoY to $(65.7)M and adjusted EBITDA improved by $8M YoY .
Management reaffirmed FY 2023 guidance: core revenue $400–$450M, gross margin 72–75%, adjusted EBITDA $(35)M to $(5)M with positive adjusted EBITDA by Q3 2023; CapEx $35–$45M; one-time costs $12–$15M .
Near-term catalysts: SmileMaker U.S. launch “in the next two weeks” (from May 9), CarePlus pilot expansion into additional markets by end of Q3, and progress on convertible notes financing to improve capital structure .

What Went Well and What Went Wrong

What Went Well

Sequential demand rebound: revenue +38.4% q/q; shipments +43.9% q/q; gross profit +64.6% q/q, driven by improving conversion and cost discipline .
Cost actions drove bottom-line improvements: net loss improved by $7M YoY; adjusted EBITDA improved $8M YoY; operating cash outflows declined by $29M YoY, improving free cash flow by $36M YoY .
Product innovation momentum: CarePlus launched in four U.S. pilot markets with positive reception; SmileMaker performing well in Australia with U.S. launch imminent; management targeting positive adjusted EBITDA in Q3 and positive cash flow run rates by year-end .

What Went Wrong

Top-line still below prior year: total revenues $119.8M vs $151.6M in Q1 2022; net loss remained large at $(65.7)M .
Higher financing burden and restructuring: interest expense $7.7M vs $1.6M prior year; restructuring/related costs $7.8M, reflecting ongoing cost realignment .
Free cash flow remained negative at $(40.6)M and operating cash flow was $(32.6)M; cash (including restricted) ended at $86.3M, underscoring continued liquidity management needs amid macro headwinds .

Financial Results

Metric	Q3 2022	Q4 2022	Q1 2023
Total Revenues ($USD Millions)	$106.8	$86.5	$119.8
Net Loss ($USD Millions)	$(69.7)	$(69.4)	$(65.7)
Diluted EPS ($USD)	$(0.18)	$(0.18)	$(0.16)
Adjusted EBITDA ($USD Millions)	$(29.7)	$(47.3)	$(26.5)
Gross Profit ($USD Millions)	$74.8	$52.8	$86.9
Free Cash Flow ($USD Millions)	$(34.9)	$(63.3)	$(40.6)
Unique Aligner Shipments (Units)	52,367	41,462	59,645
Average Aligner ASP ($USD)	$1,902	$1,960	$1,949

Notes:

Q4 2022 gross margin was 61.0%; Q3 2022 gross margin was 70.0% (management data) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Core Total Revenue ($USD Millions)	FY 2023	$400–$450	Reaffirmed $400–$450	Maintained
Gross Margin (%)	FY 2023	72.0%–75.0%	Reaffirmed 72.0%–75.0%	Maintained
Adjusted EBITDA ($USD Millions)	FY 2023	$(35) to $(5); positive by Q3	Reaffirmed; positive by Q3	Maintained
CapEx ($USD Millions)	FY 2023	$35–$45	Reaffirmed $35–$45	Maintained
One-time Costs ($USD Millions)	FY 2023	$12–$15	Reaffirmed $12–$15	Maintained
Growth Initiatives Potential (Revenue)	FY 2023	+$125 incremental potential	No change disclosed	Maintained potential
Growth Initiatives Potential (Adj. EBITDA)	FY 2023	+$80 incremental potential	No change disclosed	Maintained potential

Capital structure: management disclosed ongoing negotiations with holders of 2021 convertible notes toward a potential transaction to add funding and lower debt .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2022 and Q4 2022)	Current Period (Q1 2023)	Trend
AI/Technology (SmileMaker)	Q3: on track for test market launch in Q4 with expanded release early 2023 . Q4: launched in Australia; U.S. release targeted by end of Q2 2023 .	U.S. launch “in the next two weeks”; platform performing well in Australia .	Advancing from pilot to U.S. market scale.
Hybrid product (CarePlus)	Q3: targeted for Q1 2023 test release . Q4: launched in four U.S. pilot markets .	Well-received in pilots; planning second wave of additional markets by end of Q3 .	Scaling across partner network.
Macro/Consumer headwinds	Q3: tightened 2022 outlook due to inflation and demand pressure . Q4: actions to realign cost structure; core customer pressured by non-discretionary inflation .	“Core business continued to perform well despite continuing macroeconomic challenges” .	Persistent, with mitigation via cost actions and product mix.
Regulatory/Legal & Capital Markets	Q3: cyber incident and legal risks noted in forward-looking disclosures . Q4: legal matters and restructuring outlined in 10-K .	Discussions with noteholders on delayed-draw term loan and uptier exchange; intent to improve capital structure –.	Active capital structure workstreams.
Geographic/Channel	Q4: 1,078 partner network locations live/pending; 124 SmileShops; ROW contribution detailed .	Focus on expanding CarePlus via partner network; SmileMaker to compress time from scan to order .	Building channel breadth and conversion efficiency.

Management Commentary

“We delivered financial results and completed operating benchmarks positioning us well to achieve our full year financial outlook. Our core business continued to perform well despite the continuing macroeconomic challenges... CarePlus [pilot] has been well-received... we remain on target to release SmileMaker in the U.S in the next two weeks... tracking on our path to achieving EBITDA profitability in the third quarter and positive cash flow run rates by the end of the year.” — David Katzman, CEO .
“Negotiations with certain holders of convertible notes issued in 2021 have progressed... Any financing transaction the Company would enter into will be focused on improving our capital structure by bringing in additional funding and lowering our overall debt.” — Company statement .

Q&A Highlights

Timing and scope of SmileMaker U.S. launch and expected conversion impacts; management reiterated imminent launch and strategic rationale for compressing scan-to-order timelines .
Path to positive adjusted EBITDA by Q3 2023 and cash flow run-rate by year-end; management emphasized cost discipline and operating leverage .
CarePlus rollout cadence and uptake in pilot markets; management discussed strong reception and additional markets planned by end of Q3 .
Capital structure and noteholder negotiations; management noted progress and goal of lowering debt with new financing –.

Estimates Context

Wall Street consensus (S&P Global Capital IQ) for Q1 2023 was unavailable due to missing mapping for ticker SDCCQ in the SPGI CIQ company map, so estimate comparisons could not be performed. We attempted retrieval via S&P Global but received a mapping error (SpgiEstimatesError).
Given the unavailability, we anchor results to company-reported actuals and management guidance .

Key Takeaways for Investors

Sequential inflection: demand and shipments rebounded sharply q/q, with adjusted EBITDA improving materially; monitor sustainability of conversion gains as SmileMaker launches in the U.S. .
Execution on innovation: CarePlus and SmileMaker are core to the strategy; successful scale-up could lift mix and margins and bring forward profitability targets .
Cost discipline remains central: YoY improvements in net loss and adjusted EBITDA despite lower YoY revenue underscore operating leverage from restructuring actions .
Liquidity and capital structure are focal: continued negative free cash flow and higher interest expense increase urgency; noteholder negotiations aim to add funding and reduce debt burden –.
FY 2023 outlook intact: reaffirmed guidance provides a framework—watch for Q3 profitability milestone and H2 contributions from growth initiatives .
Macro sensitivity: core customer still pressured; channel expansion toward higher-income segments via CarePlus may mitigate demand cyclicality .
Trading lens: near-term catalysts (SmileMaker U.S. launch; CarePlus market additions; capital structure update) could drive volatility; risk skew hinges on conversion uplift vs. cash burn trajectory .

References:
Q1 2023 Form 8-K and press release .
Q4 2022 Form 8-K and press release .
Q3 2022 Form 8-K and press release .
Investor materials and additional disclosures – .
Earnings call transcript and earnings materials: Motley Fool transcript (Q1 2023) and slide deck (Q1 2023) .
Press release distribution (Q1 2023) .

SmileDirectClub, Inc. (SDCCQ)·Q1 2023 Earnings Summary