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SmileDirectClub, Inc. (SDCCQ)·Q3 2022 Earnings Summary

Executive Summary

  • Q3 revenue of $106.8M declined 15.1% q/q and 22.5% y/y; net loss was $69.7M, with Adjusted EBITDA of $(29.7)M, reflecting continued top-line pressure but improved y/y bottom line from cost control .
  • Management raised the midpoint of full‑year 2022 revenue guidance to $485M and Adjusted EBITDA midpoint to $(145)M, citing improved marketing efficiencies and disciplined expense management .
  • Key operating metrics weakened sequentially: unique aligner shipments fell 16.5% q/q to 52,367 and ASP edged down to $1,902 (from $1,917 in Q2), underscoring softer consumer demand amid inflationary headwinds .
  • Liquidity: year‑end cash is guided to $110–$130M, including an estimated $60–$70M from outside funding, primarily the HPS facility—reducing near‑term liquidity risk but increasing reliance on external financing .
  • Strategic pipeline progressing: the AI‑enabled SmileMaker smartphone scanning app targeted a Q4 test launch (broader in early 2023), and Care+ in‑person offering targeted Q1 2023 test; partner network expanded by 260 in Q3 (to 950 live/pending), supporting a pivot to tech‑led growth .

What Went Well and What Went Wrong

  • What Went Well

    • Guidance tightening with higher midpoints for revenue and Adjusted EBITDA highlights execution on marketing efficiency and cost management despite demand headwinds .
    • Year‑over‑year improvement in net loss and Adjusted EBITDA (loss improved by $20M and $24M respectively) demonstrates operating leverage from expense actions .
    • Strategic initiatives advanced: “Our innovative SmileMaker mobile scanning app for 3D treatment planning is on track to launch in a test market in the fourth quarter… Care+ is targeted for test market release in the first quarter of 2023” — CEO David Katzman .

  • What Went Wrong

    • Top‑line softness: total revenue down 15.1% q/q and 22.5% y/y; unique shipments fell 16.5% q/q to 52,367, indicating weaker conversion/volume in a tough macro environment .
    • Profitability pressure: Adjusted EBITDA declined sequentially to $(29.7)M from $(23.2)M in Q2 on lower revenue, despite ongoing cost controls .
    • Cash burn: Free Cash Flow was $(34.9)M in Q3 (modestly better y/y), and operating cash outflow increased q/q to $(24.1)M, underscoring ongoing cash needs until growth re-accelerates .

Financial Results

MetricQ3 2021Q1 2022Q2 2022Q3 2022
Total Revenues ($M)$137.7 $151.6 $125.8 $106.8
Net Loss ($M)$(89.4) $(73.2) $(65.5) $(69.7)
Diluted EPS ($)$(0.23) $(0.19) $(0.17) $(0.18)
Gross Profit ($M)$98.3 $108.6 $91.7 $74.8
Adjusted EBITDA ($M)$(54.0) $(34.4) $(23.2) $(29.7)

KPIs

  • Aligner Shipments (units): 76,254 (Q1 2022) ; 62,705 (Q2 2022) ; 52,367 (Q3 2022) .
  • ASP ($): $1,917 (Q2 2022) ; $1,902 (Q3 2022) . (Q1 ASP not disclosed in the 8‑K press release) .

Estimates vs. Actuals

  • S&P Global (Capital IQ) consensus mapping for this ticker was unavailable in our tool, so consensus estimates could not be retrieved for Q3 2022. As a result, we cannot formally classify beats/misses vs Wall Street for this quarter via S&P Global. Values retrieved from S&P Global were unavailable due to missing company mapping.*

Guidance Changes

MetricPeriodPrevious Guidance (as of Q2 release)Current Guidance (Q3 release)Change
Total Revenue ($M)FY 2022$450–$500 $470–$500 Midpoint raised ($475 → $485)
Gross Margin (%)FY 202269.5%–71.5% 70.5%–71.5% Range tightened higher at the low end
Adjusted EBITDA ($M)FY 2022$(180)–$(140) $(155)–$(135) Midpoint raised (less negative): $(160) → $(145)
CapEx ($M)FY 2022$60–$70 $55–$60 Lowered
One‑time Costs ($M)FY 2022$20–$25 $20–$25 Maintained
Year‑end Cash ($M)FY 2022$120–$160 $110–$130 Lowered; includes $60–$70 from outside funding (primarily HPS)

Earnings Call Themes & Trends

Note: The full Q3 2022 earnings call transcript is hosted externally (examples: Motley Fool, MLQ.ai). Direct ingestion into this workspace was unavailable; links provided for reference.

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3 2022)Trend
AI/Technology initiatives (SmileMaker app)Q1: Emphasis on technology/product innovation pipeline . Q2: Detailed “SmileMaker Platform” smartphone scanning app for 3D treatment planning; pivot to tech‑led growth .On track for Q4 test market launch; broader geographic release early 2023 .Execution milestones approaching; narrative strengthening .
Partner Network expansionQ1: 673 practices live/pending . Q2: 690 live/pending .950 live/pending; +260 partners added in Q3 .Accelerating network scale .
Care+ in‑person premium offeringNot highlighted in Q1/Q2 launch timing.Targeted for test market release in Q1 2023 .New offering near launch .
Macro/InflationQ2: Inflation and weaker consumer spending drove guidance cut .Sustained high inflation and challenged consumer spending; guidance tightened .Persistent headwind .
IP/Patents and R&DQ1: 36 patents; brand awareness lead in teledentistry . Q2: 43 patents; telehealth platform award .46 patents; continued telehealth leadership; 1.8M+ customers treated .Steady IP accumulation and installed base growth .
Liquidity/CapitalQ1: New $255M secured debt facility closed April 27, 2022 .YE cash guided $110–$130M incl. $60–$70M from HPS facility .Liquidity plan reliant on external facility .

Management Commentary

  • “We are raising our full year 2022 midpoint guidance for revenue and adjusted EBITDA based on better traction with customers driven by improving marketing efficiencies. Our disciplined cost management enabled us to produce improved year‑over‑year bottom line results despite top line headwinds.” — David Katzman, CEO & Chairman .
  • “Our innovative SmileMaker mobile scanning app for 3D treatment planning is on track to launch in a test market in the fourth quarter with an expanded geographic release in early 2023… Care+ is targeted for test market release in the first quarter of 2023.” — David Katzman .
  • Business outlook underscores strategic assets: 46 issued patents, ~1.8M customers treated, vertically integrated platform, 950 Dental Partner Network practices live/pending training, and significant brand awareness .

Q&A Highlights

  • Full transcript hosted externally (e.g., Motley Fool, MLQ.ai). We were unable to ingest the transcript text into this workspace; please refer to the links for complete prepared remarks and Q&A detail.

Estimates Context

  • S&P Global (Capital IQ) consensus estimates for Q3 2022 were unavailable in our tool due to missing company mapping for this ticker; consequently, we cannot present authoritative SPGI consensus comparisons or characterize beats/misses for revenue, EPS, or EBITDA this quarter. Values retrieved from S&P Global were unavailable due to missing company mapping.*

Key Takeaways for Investors

  • Near‑term revenue remains under pressure (shipments down 16.5% q/q), but expense discipline improved y/y bottom line and supported higher FY revenue/EBITDA midpoints—a constructive signal on execution quality amidst macro headwinds .
  • Strategic catalysts are imminent: AI‑enabled SmileMaker app (Q4 test) and Care+ in‑person offering (Q1 2023 test) could compress purchase timelines and expand addressable channels, supporting a transition to tech‑led growth .
  • Partner Network scaling (950 live/pending; +260 in Q3) strengthens the hybrid go‑to‑market and may diversify demand beyond direct‑to‑consumer .
  • Liquidity is adequate but partially dependent on external funding (HPS facility) to meet YE cash targets; monitoring cash burn and facility utilization remains critical .
  • Gross margin framework intact (FY 70.5%–71.5% guidance), supporting the thesis that fixed‑cost leverage can return with volume stabilization .
  • Absent SPGI consensus data, the Street may re‑anchor on company guidance and the pace of shipment recovery; watch for sequential inflections as SmileMaker/Care+ roll out .

Additional quantitative references

  • Free Cash Flow (definition and reconciliation): $(34.9)M in Q3 vs. $(35.6)M in Q2 and $(63.7)M in Q3 2021; Net cash used in operating activities $(24.1)M in Q3 (vs. $(17.8)M in Q2) .
  • Cash balance at 9/30/22: $120.2M; total liabilities $953.7M; long‑term debt (net of current) $788.2M .

Sources: Q3 2022 8‑K and Exhibit 99.1 (press release), SmileDirectClub ; Q2 2022 8‑K ; Q1 2022 8‑K . Earnings call transcript links: Motley Fool and MLQ.ai