SmileDirectClub (SDCCQ) 9 Nov 212021 Q3 Earnings call transcript

Greetings. Welcome to the SmileDirectClub Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. the to turn Sullivan, host, now Relations. Investor will conference your over Tripp I you. Thank

begin. may You

Thank afternoon. operator. you, Good

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

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

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

I’m and We on by Chief also this presentation measures. non-GAAP financial Wailes. call for the to Financial Chairman, Officer measures David to Kyle refer Katzman; Chief appropriate Officer, GAAP reconciliation Executive of today the a you certain joined and

me Let David. now turn the to call over

as and on XD for or a that at in provide at manufacturers opportunity. to stores in building fleets one training. and XD aligner U.S. are created partner million the efficient concept, registered products and to that founded access one and the taken to new mission, available the mission loves treatment that treatment to these abroad it made that democratize which proprietary and network has to care over joining manufacturing, SmileDirectClub a pipeline with into live growth aligners, person brand was areas manufacturing, is within potential. care so variety and teeth moment, technologies that scanning, planning, teeth state-of-the-art today. a SDC the vertically recent products. We approach this and by monitoring, straightening. unparalleled That’s automated U.S. We’ve matters an the integrated to and support to cases, enabled making disruption. I FDA-certified and you XX,XXX We our in there of expand of Each a founded and highlight led every us and various achieve only data what but relating everyone. largest global home dental straightening have printers consumer practices have four ago Tripp, affordable types for complex everyone. years with and convenient for for convenient afternoon, now oral deserves long-term many innovations Thanks the decision the half been Thank led. source had are us we’ve platform, are issued SmileBus scanning nationwide that then of XX good smile We have company and built oral our in decisions seven medtech the pending a more for more capture, one granted retail want and will patents first lead pending customers why image serve and the every I our to enable continue to created of will was XXX us each for capture, same largest our technologies, and a far. treatment most platform get experience. enabling scale, highly smile We’ve and customer I of The to of patent products, and other over affordable includes that clear This a since telehealth facility enable intraoral

through ancillary and available portfolio Our e-commerce. product grocery stores, channel, stores, through club every is retail including stores, mass retailers, drug

We That’s approximately Within global why is but countries and would and counting. long total to achievements matter. inappropriate addressable assets than these treat treatment And direct less tremendous orthodontic starts ours, that clear people are is and unique opportunity. of a market malocclusion there differential here’s be afford million for there rest XX need program. world, innovation that building a XX orthodontics in can our to aligners list, U.S. you assets global the experience is underserved. aligners and annually It’s within the have approximately case entered and million The between expanding, who disrupt. of half. whom the large market clear that, It’s those worldwide my are businesses and means using XXX and still SmilePay penetration been like

and customer to You you flexibility acquisition. of needs agility need adjust channels need in multiple marketplace. the the to the invest and customer And of to

mind unaided to You prize, of and capture their profitably always building has lose efficiently That awareness which a never to top also need consumers is demonstrated is with of brand. both through the sustainable sight bigger attention. aided and

We prices try have only over would the straightening and time disrupters those teeth have challengers and prevent such traditional that opportunity. as face this market from high to benefited three done with markups consistent all the it’s six participating of in natural past plus from SmileDirectClub in this adversity who years,

regulatory convenience anticipated legal to have rest we’ve Bureau Business access and it in Better and cases, and and marketing Dental statements in seen propelled numerous we’ve as have to DIY, the industry participants teledentistry, of the curtail. pushback engaged forward. misrepresented Advertising The of try the or FTC have teledentistry. that engaged have and National associations The Division to to intentionally and responded. made market yourself. example, trade been customer investigate and We prevent teledentistry Other the to do of in wins allow boards had affordability many the and practices For have the

and come. Association of these the Dental We’ve We of convert American and the expect more able American Association, National to many the many others. recent Women join us a Association, industry been their Academy become Boards, actively to to American campaigning has Aligners of Clear also member Dental us as turned from the of to demonstrated Telemedicine in leading the by as asking such against organizations, retraction. DSO, organization of Even wins

could space and clear said million incremental last the price customers customer that world. our support I earlier, to is massive over as XXXX and been will As a said, afford aligner. Americas are and grow continue the core to business quarter, one, $X,XXX as a the macroeconomic we’ve has base not our customers challenged has we been And tailwind counting. tag in been this to have these orthodontic a we the the environment. half current entirely our for of and with with historically demographic day $X,XXX cases And From one by That These rest progressed. discussed time. to

core the our As would believe throughout is impacted. QX to results to and continue QX. to changes impact to near-term we make this macro demographic we outlook That this continues expect impact. transitory. remain our revised And said, minimize And indicate be we still

campaign in constraining payments inflation launch data This in campaign the is But campaigns outlined are in demographic plan record ease launching and research and for our now on of XXXX, shown our rolling The factors till others, will Just a to during this has likely be will burden economic some core contributing customers. we this We in spending the does the we holiday monthly discretionary then core our want now. Last November. headwinds, tested headwinds QX us demographic. is are multiple of quarter, XXXX third-party we our deferred to up time, is facing. it backed so help combination with SmilePay. of to week out

has As household customer a of income a reminder, $XX,XXX. our core median

and increased This impact to earnings first non-discretionary of likely increase as is is spend discretionary release. is by accelerated those competitor. limiting ability The demographic inflationary appears services versus since inflation. $XX,XXX on other the This goods have $XX,XXX The X.X% largest serve to higher goods for and headwind QX relative QX. our cost services. to income to income Inflation averaged X.X% of such demographics QX an the the larger increase

Second economy reopening of is more services. been over goods on has focused the preferences. The

QX. goods So Census in with are services, customer. same being that it a In vein, household being of made, QX high difficult Bureau to an prioritized pay especially the XX% $XX,XXX our up in when expense, by finding difficulty also wall the over XX% income in surveyed are from choices already is demographic household reported

we when the and their friend while to might could underemployment, improved these disruption trends partner wave Challenger the growth. know recent their Based teeth, initiatives our understand efforts employment the our the and share. of and competitive is tougher marketing next in phase macroeconomic network to We options. considering do they a change market since they our channels in typically high expensive, the and habits, critical our or continue to which customer three, in One, household key growth August our in following. building of are for ask of they one our is our product of why end are Invisalign might on option quits out beliefs our demographic. series times but search have or might That’s family these finances. Third might with XX% recommend. campaign they suggest would to gain have is straighten online and across to a they less that core customer member, to of three next continue QX, experience Changing ask perception with dentist Two, research, to all perceptions,

from have to starts. million case could also material orthodontic partner encouraging nothing our surface throughout that and campaign continue We user fractional helping the to with Challenger opportunity expect third demographics early is A the The value or Our We’ve campaign we our in network. the majority to the on very while we is core given of proposition continuing and same XXXX. upstream end campaign, scratch our end with on previously an percentage up begun focused in this do this annual user early campaign. marketing results to users quarter demographic will This the time, launched on the to not ramp through the all the be advice not us. income the target which have all focused our quarter. at support well only Invisalign’s to move be XX been base, the into

we XXX in or States United of Our And new the signups. grow aggressive pending training. active rate office that hiring network now are has approximately our practices have to begun an sign program

platform. success and we because compelling share to can partners, for increase They’re We’re having minimal with referrals, introduce practice. practice proposition our increase time them our to their new with very value patients finding by using also into teledentistry clinical our revenue

the provide customer leads also and as practice profitable the added benefit well. highly of it’s So new into

and In impact spend brands, substantial call headwind material the a months, this not a companies, a we’re been more strategies. three to Apple’s of only quickly than game as lead and there required We’ve effective month portion but platforms lead ahead little sales our noting this we the to in first the the Facebook last these addition changes our business. digitally change out also being were space from marketing changes also of in to iOS Snapchat’s QX all privacy just these Facebook away in XX pivot no companies Similar conversion highly spend, the were ours. and as how the has platforms XX of privacy Historically, marketing earnings such to we’ve to also on TV, macro funnel. changed fewer to In our the strategy. terms QX. our reinforced in us have to been change of native past large shifting been impacts, and sales different of to and their

for the efficiently focused higher of long-term that respondents market higher over a awareness. base on each best including We more current, in effectively in on to customer we drive than less drive from brand stronger found recently X,XXX focused commissioned I This frequently focused in of we rather likely we SDC are smaller Overall, oral the in orthodontists study less we When on to categories, consumers and third-party firm I an and of our consequential optimizing its our are eyes growth. Invisalign. our is dentists satisfaction the and or At tied as greater significant provide and a other weight, customer to already such a the more experience and growth survey the that sale included awareness aware topic but XX% is and customers aided possible categories, longer-term building the percentage Aspire want We SDC. now has with funnel research important teledentistry are income SDC, convenient. where expertise – Invisalign. of who care on paying of can to Invisalign are This that a TV get. sits will strategy claiming a to our unaided consumer. consumers, drive statistically The also we leads of and between brand, cover most seems in trust. price what was SDC acquire network patients on players many especially Yes, are with charge and brand identical as care we it are last,

other players. for score and an Our XX was XX.X of to XX was Invisalign NPS compared teledentistry average

they that’s significantly would the also a less In teledentistry SDC individuals where XX% QX separation smiles and than is shift Invisalign’s comparison QX deliver of QX. brands that transform a I the platforms, for And similar SmileDirectClub time, Invisalign, sizeable satisfied while competent highlight would advantage. as The consumer continued Invisalign’s receipt XX%. is for in disruptive competitive By QX. fiercely and SmileDirectClub made significantly we for can to quarter XX% from on Aided other For is win. support significantly awareness for consumers legitimate view an through held to We’ve is in higher Invisalign competitors other SmileDirectClub population SmileDirectClub also a believe from customer teledentistry know at executive in brand on love”. whiteners more from Invisalign I other to fought competitors. in out call significantly QX a awareness increased industries. of the I’m care for customers. the teeth, X% to as showed We “helps move a battles brand. progress amount equally XX% with work QX they for do. with aligners option would with XX%. improving sign from compared up the compared SDC’s than also They awareness SDC general unaided our clear customers higher QX awareness fewer is also for also oral were those U.S. in with This survey of to XX%. lot XX% Invisalign orthodontic perceive short them and results Unaided trust XX% as the customer tracker closing a straightening XX% but QX teledentistry brand recommend study from a have satisfaction. significantly how

results members Kyle? massively QX call for financial turn And their this We ever our club we provide our we what our and fully who continue focused to more remain support like on will our the laser work mission need have thank detail to the best and team now I’ll execute as success. to over our on Kyle capture who have who I’d will seen underserved assembled to to into on I’ve bought market. outlook. accomplish initiatives,

David. I our on for aligner of to website, review a a of million, which results X% the up everything shipments decline jump Revenue and Please primarily you, which be posted to our of initial The will by $XXX ASP This on $X,XXX. XX,XXX a supplemental basis. will sure the provide was X% of decline XX% up XX% our was which driven year-over-year. Thank for quarter year-over-year in cover. is sequentially an sequentially, quarter. latter to at investor is details additional materials I right

X% to is macro say year headwinds outlook baked decline the year. is XXXX. we were what later into versus September, of to our we mentioned factored revenue For David have quarter, that continued below factors $XXX macro results our The much full into prior for headwind accelerate. earlier. forecast These last the to this new due in We’ll shared million, nine the the as front regarding primarily which that more up have how have QX on was months ending

particular, our have our seeing. last and scans outlined kits has has up it did more supporting earning macroeconomic impact of than data We in the number of an that that had shown customer’s are In economic the trends quarter. in wallet requests. the inflation we on deck And supplemental even

also changes more through and of We investment funnel. our require continue that brand strategy the at work in to the top lead generation lead awareness the

retargeting everything expect showing to with returning utilizing scan. social will kit We earlier funnel that of from these requesting and as to or middle profitable funnel efficient or tactics prior more efforts Recall such noted David top a kit a for long-term in the means the compared over the scan requesting funnel media. be or the scan on means lower a up kit of

flat As were the reach Australia. details X% are EMEA, given in Providing particularly previously in slightly quarter. shift. typically those were down you as and second results, they that seasonality take prevalence largest to was for our net from quarter to kit current can associated level which IPC see cancellation X% sales see UK Financing aligner two revenue, for and $XX revenue We by approximately and achieved separate down the in in products net relative other adjustments, given implicit is of to in reserves of adjustments, Germany reserve revenue, refunds, was in offset we related offset revenue, gross current but deck, amount markets program flat strong on retainers, ancillary reserves at other quarter revenue includes those aligner cancellations. some some from came and re-launch and on Other revenue. on rest and effect and includes Germany, vacations, SmilePay aligner impression due regularly Reserves at came QX. early Spain will tax $XX higher which IPC based we’ve revenue million believe maintain performers is it XX% which to shipments the interest the of versus of from particular million, Based The world QX. currently lower rebalance items, investor in reserves. the some our the to other We which the but us helped primarily analyze the markets is at of the is our QX, in due competition whitening to the lower time slightly QX, QX. will We gross a that and previous these in trends. revenue, with which in price EMEA be in to concessions up and of

full in QX than SmilePay, at purchases the and view slightly price due below U.S. purchases. Overall, in well to we’re XX.X% Since is decline strain customers sensitive prior We U.S. financial additional QX more delinquency decreases to in customers. XXXX, as believe historical levels. our down QX, quarters. according Now, came consistent core consumers of an the the with pay date relative initial aligner rates rates SmilePay SmilePay of and this This in SmilePay our in indicator continued to in has to to in perform on QX SmilePay is we customer.

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

basis side manufacturing of decline. quarter the the continued impact. our for margin representing of This decline performance a primarily offset the the the points with on Turning XX%, Gross to is streamlining attributed to XXX to helping sequential cost the revenue business. results was

network of challenges demand had small primarily our have us function seeing shops, an been that $XX also the targeting with On with popup even location the time, reduction environment. and XXX sequential of our quarter. as basis coming the and XXXX. for producing our This of primarily a at XXXX, be QX as quarter generation, XXX fulfillment held came spend attributed now in with quarter, of and to XX expenses fully higher end second The partner end been though course benefit XX% the demand Facebook more with XXXX and club re-launch XXX streamlining of associated turnaround the our XX% can order for up versus is of members. net XXX by of looking have when Marketing selling recall globally approximately QX marketing. and QX set helping financial XXX these on the aligners scrap but are XX% of percentage increased resources the active in increased revenue of Germany over training increase for partner improvement pipeline That to And and automation of marketing of network. have the in at The now and end X,XXX SmileShops as investments as locations up in efficient volumes. from efficiency and Our These QX. locations. marketing from XX% total aided QX from XX% consistent in the They revenue of active productivity, quarter seen referrals, is demand Spain, XX% at XXXX. the over through target compared a product awareness, superior revenue, locations leverage the pending end net is we the or XXX the of popup approximately a fulfill million critical aligners, is is QX, at are of centers in and the generation we pace as events at events that We and machines to or permanent result that also pressure well sites. instead macroeconomic to an revenue to shipment had sources supporting of for they decline total we’re point way to meet of in enable end

of international sales to that in is with last and markets, revenue brand to growth our rest investment bear rest marketing invest reflects expenses we in a with and quarter to brand. to earlier, a XX% XX% world what markets in those in is and investment The results percentage consistent and marketing this in of world the Canada. regions of referenced up quarter significant XXX% quarter’s launch signaled selling emphasis. and marketing the As out long-term of building to Sales and the our with U.S. need support revenue compared the

increase revenue a long-term and as members the U.S. spend. our overall an aware $X U.S. with were in changes SDC. of building of composition Canada, funnel, absolute efficient and but prospective the expect will we volatile and and we effective strategy, do lead increased pool aided capture percentage our not will more greater lead our of be Canada, club We that also our timing strategy million this response will and in that up TV the in While dollars with of of performance sensitive down the expect business Recall Overtime, to result customer in spend we less do as have sequentially. the our the consideration approach the to unaided our to will emphasis Facebook, change investing and being through on marketing awareness. network direct high of believe improved partner brand this platforms such because much at

interest were $XX million as U.S. trend in QX QX, with year. compared expect capture one $X in the QX costs website increases the visit capital $XX expected, expenses of long-term in in this XXXX. earlier we $XXX,XXX and administrative were QX from expenses the million strategy flat After lean into and was the General leases. and As continue time deferred million, convert with to associated per expenses and which QX Canada associated the of accounting impacts issued $X.X in to early was into to million associated through showing lease are indicators with our we lead was loan we $XXX,XXX quarter-over-quarter. XXXX. expense for adjusting include and Other

of closure expense $X.X and Rica unrealized costs loss. other to our $X.X of related onetime to resident currency million of $X.X Additionally, office, facility million Cartago, million Costa of

adjusted million this and in due of of the negative an for factors. under-performance above aligns $XX out loss Canada, negative which region the million. the with $XX quarter produces at EBITDA All macro net in of came Breaking U.S. million regionally, of adjusted it all-in $XX their to with the EBITDA

of in and was million rest For to over these due in marketing regions. $XX the negative markets sales in to adjusted key world, EBITDA investments launch

the third spent cash cash equivalents. the the to Moving with quarter quarter million and third $XX we operations on Cash was Cash for quarter the negative for ended $XXX investing was balance $XX from million, million. Free sheet, in the and as automation defined from capitalized manufacturing negative hold lease mainly for with less operations investing of building from million. software, labor third cash cash flow associated and quarter, cash improvements. shop was third $XX

environment to throughout Turning to the would I the the underlying point for affect year. macro QX. supplemental our are earning for guidance customer updated deck continue our assumptions a forecast. the to will There our key to few points note. believe We

start and expect greater that be but benefits our not efficient and in toward, versus success Spain, we impact each and we these $XXX occur QX The France. to around factoring potential calendar, our number Germany, the the accelerated includes the during partner a as you were campaign seasonality and seeing in retail could There to that driving $XXX of impact. year outlook challenger improvement adoption are time to contributions the we to QX improvements holiday normal network between lead and success strategy to have This profitable QX still at into present. our million. revenue update and leads, quarter we’ll more we full continue take this, will expect, Given million emphasize we with

an impact in We’re also making operational to deferred QX. changes program and the payment we expect have

as And our in on financing and it working more and for to to make marketing also also customers, XX% expansion affordable. help of We’ve to with additional QX. markets. to changes expected And line We’re QX focused support ramp outlook. margin the rate U.S. released SmilePay near update QX, they’re throughout our we’ll dollars but you headwinds adjusted to deleverage a strategy Sales Gross Canada. percentage expected from reflecting network. term headwinds. of percentage up of experiencing G&A revenues to the potential and revenues. our to lead and in revenues growth approximately continued a from for selling in investments are total as support of of reflecting margin range rate pressure QX added plan as marketing flat total XXXX, XX% be investment Accelerated marketing XX% top lastly, XXXX, partner international QX relaunching continued

not that, experience. over provide us growth consumers results, solid joining a the Q&A. to evolving in return demographic among for The mining current we something our turn we fully fall operator We to and and moving across were anticipated, and and and but that not world. par which positioned million care. competitive there for you making were believe best environment perception and by While core service strengthening long-term long-term our lead balance product in offering on clear the Invisalign member brand biggest for With Thank is affordability available and disappointed grow targets our with is to market could into on a has one to of the our macro back opportunity provide we that quickly responded were the help to brand investments a the But the people yet space. more Liquidity opportunity reflect higher business, everyone success our brand have being today. barriers the XXX of club our globally, much rapidly we we of our price do at have in is sheet credibility demographics. who they and the upstream foundation income line strategy with a call well anticipate the to our pivoting I’ll

first [Operator this session. your from Kreger proceed of Instructions] John Our Thank Blair. be with question. comes William conducting time, Please question the with question-and-answer line you. a will At we

very Hi. Thanks much. Hey, Kyle.

the it’ll long-term final for – guidance that have do on that think Thanks. articulated? you updated us thinking the of the does With to the to got? of XXXX? model you can XXXX, this guys guess, to that, of you sort one how kind I give many EBITDA take any clarify, long-term And margin you just change years related kind model And early get you’ve could

XXXX just the is impacts overall, we too say, business given would on that to really sit early macro we’re I and where seeing Look, John. Thanks, today predict. the some Yes. of

thinking let’s for say in so and we’re now, and I around that. QX would And how more about focus

in the a at I what believe mean, transitory impact that from our back some changed, a customers will I to well. throughout point long-term demographic environment think and that’s we has that impact guided continue QX. return to, core our And that’s right. will normal as we perspective, we’re to believe macro nothing we’ve that on fully but

outlined. we’ve that, to long-term no with targets that so And there changes is the

sort and EBITDA the of And a in is think think light you at look adjusted look I today if by XX% back gross five-year what period. so the at get you we and we’ve to as to in more XX% normalized margin outlined particular I our you which similar to normalize I of trends the expect we us, you’ve again, that, impact top-line look past, P&L, at profitability, when as to you amortization. margins macro adding where back volume from over that some depreciation to come if growth, passes for would in are ramping seen the here

on term, we’ve XX% We’re target that right outlined. top that of longer

against really good think progress I we’ve so made And that.

and if pretty headwinds think think of in side macro the look short as get sales you and G&A look the a I profitability on there, historically, term, the there’s cost but I if to marketing line, demonstrated leverage with clearly quickly. ability control at the lot from well, to you we’ve some that perspective,

macro So numbers we that as from the I back would five-year the growth. perspective, And those period conviction that timeframe the bottom we think same get over high returns. be line to as about a line longer term still in environment have top

next follow-up, year That’s we Thanks. you quick more you sign even one the maybe And your the two? of tapping or sort international healthier core the for helpful. as Are of a international just Or are should a here thinking customer? wait with about you brakes think aggressive in strategy is strategy.

Yes. it’s what say, to a I would historically. similar outlined we’ve very strategy

into, about world look just the I year return about of right QX seen support XX% you cash We newer to expect in going XX% remains you the a our look in same. us that strategy given and at representing expect which for we’ve ramp business it in of and good we opportunity and to the markets markets And sheer got growth. I the And the it as beyond, about see think to as quarter. time overall, at particular. up invested markets. if gain we these look of you next that at same newer markets, business the revenue to rest on it’s total in was the the we’ve our there penetrate the market overall think would to as continue be foothold is and longer-term a in

are and France well. expecting well into now. got more that We’ve we’re year some Germany we’re up which countries getting So right And to we’ve performing got we’ve we’re ramping there. that a traction Spain, handful as and next launch relaunched

Okay. Thank you.

Thank you.

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

Lily taking a question. on for actually for is this the Hey, Robbie. Thanks

dive fourth in hoping these quarter quarter quarter. to And how you the so fourth little you third have the confidence now. of for where guidance deeper a I as into was is visibility do what just and tended On much into exiting bit could some you fourth how Thanks. saw have of headwinds quarter far relative guidance,

and we’re macro when step the sort factors think I we QX, on the the overall look, impact sustained where Yes, if business, of take – you entirely not of pervasiveness a we look and at back exited clear. just

perspective a or give macro because we of of did anticipating guidance the than time, we certainly not in were our rather – over core sort but of that that, the quarterly at QX demographics QX. worsening in annual from Given course year a on that

you that to see that the sort we’re now end the So around look as year. right looked given put of of assume the and that outlined said, and if the more here at quarter you sort we’ve weeks environment macro that at of ranges same ranges look the between into we the of now, we’ve four that. had about And we’ve

about could we’re into deck driving outlook the call well, in several that those there contributions clearly at we and QX during on occur the talked factoring also we’re as the towards, but benefits potential present. are outlined not As that

in holiday improvements And Cyber some Monday in so QX Black seasonality in generally see the over we the particular calendar around QX there. Friday,

making partner good and we’ve for got network, with the QX. We’re progress good hiring there the plans

And any additional material We’re ramps that. the assuming challenger sort not well. same on from campaign as thing of

starts that not to quarter. take the within off assuming We’re really

but to are as David them the we upsides included a outlined and here. So to making lot changes we’ve haven’t outlined well million talked $XXX to And a nice as some in we we also with impact. what that, launching of there program that that that the now, in a saw we million in I have think will script impact launched $XXX we’ve we’re as right which think operational payment XXXX nice we’re deferred the back when about well. And we

thank Great, you.

you’re this Just a that challenger a bit with you competitor. the campaign, as as much obviously obviously, on really shifted past, direct quick taking. a strategy viewed that’s follow-up in them the haven’t But

share time any bit So can successful metrics up against you the there has more on been? going to align Thanks. you are a it’s and talk how early about this us right be can little to why,

Kyle. Yes, I one, that can take

demographics. about category. orders overlap we were there’s today, X.X to incremental served million the the the start very measure orders road, are those to aligner that that where it’s all really coming down little ultimately as customers So based a we’ve from and Currently aligner on income

we this, spots a from so some at in progression in at to it. a out challenger. a it’s rolled kind little started we July against money And disruptor And earlier this of spend year, going natural started and the very looking TV we looking

In marketing at our example and GPs we’re with consumers credibility as term, is short a up one it ramping now looking a trust, We’re the brand KPI. total spend budget. of against

awareness also our are TV measuring that campaign. the and centered We’re challenger with around brand spots recall

Invisalign. we’re like Phoenix, And the as as spots understand us just are giving the of script to indicators there’s in very And well to So three we we companies treatment, us is customers survey it’s how what a customers where last X,XXX and months. then tracking actually these that are the mentioned that to tracking, in them. did that YouGo we’re completed memorable consumers, telling now

NPS actually is XX Our were score We XX. at higher. versus

that The half players consumers of doctors, network want. deliver other us teledentistry the results our as we brand, a of at also, will how trusted And XX.X. view they were that

of campaign. those other and all the are tracking favorably. our just things all the So work doing very that’s we’re And customer service those not treatment challenger a in lot That’s things. planning,

we and going we that of orders we’re lot to When worldwide, in as that track that share. take align share. So, to you that to these us, play market a starts case from, taking where ultimately are coming start whole at case starts, XX look start million liner doesn’t plays success is the or It don’t really in, market sandbox.

has So our million a been half and incremental.

slowly we’ve does we that the comfort to pay our start want what if to some solutions customers for you a a overall financing, pay And and it’s safe focus macro place so treated got have that’s to chip in continue a know start effect, to and this to a can reason less, be platform, in then smile we especially our on and effective no superior core XX% And let markup. with we and demographic, that intermediary. if disruptor home. It’s your There’s treatment. of believe away

to continue on we’ll metrics start together. So, we as report we as

Thank you. helpful. That’s

Thank you.

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

Hey over guys, in one to $X out. year, $XXX million prior And want XX% XX% to that street intact, because for the applied this and of just XXXX, your billion I sure slides. the and around of is revenue I two the revenues me. took long-term good extrapolated it when and growth we in in was and margin Maybe XX% first afternoon. make Kyle saw EBITDA think one, I XX% to

EBITDA garner a ask of your prior getting I’ll tighter you’re curious And XX%, XX%, And if you’re that’s if at instead just revenue in how about thinking with of same cut a the you help number just are follow-up. how able run XX% margins? then is XX% can the annually, intact, Because, to we it growth? XX% half. I us XX% revenue sort So, margin EBITDA to

to back Look we’re to in targets passing market that’s And in business. be, the right? on changed is it that what I when to we’re that environment difficult nothing the we being And predict the right of has in in long-term impacted, the goes going before said that’s fundamentally Yes. terms environment believe macro first, obviously but really now transitory.

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we long-term see inflation So perspective. But obviously the changes environment as does this macro that we’ve an targets particular from it’s difficult that when to to does outlined. predict in pass, pass no

do, just but, navigating that these due SDC Okay, thanks. competing need with the That regulatory that’s environment, what’s respect states. from not you disruptors when was environment, And almost, that’s regulatory an it’s you investors the mean, CAC helpful. works. regulatory And preventing quite the all second then compete a a mentioned lot little in question, seem really David, I LTV think to that not doesn’t to been bit I And to that’s now to have seems guys that for work. does to honestly, more it, scary be conviction able it think I have of and be don’t

regard, And that help in difficult. you getting what iOS so because that? is with more out abates just can us

doesn’t LTV working itself going Thanks. just you that’s CAC LTV far, short do out. the going lower? be fallen rectify the Is denominator now, seem that that CAC, that? so think that we higher? Is right about to when how the Because numerator So, to

to targets. the of were talked XXXX. is our margins. COVID ago, part at in XX%, Yes. goal. marketing coming we And which brought We quarter being Jon, of of remainder had XXXX were short We profitable, only QX, I of were well, think a EBITDA sales ahead or a which in XX% were plan XXXX, those. quarter hitting QX and to prior hitting we the the of about And even into QX those to We we is that. out a demonstrating down get

that the really in bit So, We for quarter higher nice a than XX% little QX, was a achieved marketing. nice we QX. and had we in us. sales And actually QX invested a

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the in haven’t a price recession, is have we’re mean, staple It’s All up much and people most items than which we’re I to person. more seen. material $XX,XXX gone a it of a a to $XXX,XXX. in inflationary in not year an environment,

in doing aided the traction especially – about the things awareness with worried referral. aided brand our on on some and not I’m gaining are we that of in long-term, So our

hyper-focused experience. the We’re on customer

product X. better Gen have our with We today a

has years with to several We’re also probably week. been you do announcing, this which give week, I’ll we’ve next now. X.X, can’t for a but I remember early on the preview planning to later be it little working our treatment timing, going

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have of Rica So your And and it, at treatments a of referrals. look week. all better be come lower those actually that, next We’ll to more X.X more designed and it our on to can but on all all Costa week this have new treatment planning it, to experience, are had out trained you kinds been you more into CAC. on things customer have if will referrals, coming texts this there is our new of

there. I So, that we we think were proved

the the get there we’ll marketing think to trends. in the combat XX, silos implemented we’ve that macro with of some back I strategies some of

that get there. confident I’m so And we’ll

Thanks it. guys. Got

Thank you.

Chris with next Cooley your line Our comes of with proceed from Please question. question the Stephens.

you the seeing respective stickiness networks the questions. long-term patient for taking channels, and a rates in channels Good are can profile first, think follow-up. just channels those elaborate the you’re about when here growth thanks leads. through to for and direct-to-consumer bigger of on bit the you maybe in relative margin I and picture want Maybe now back acquisition just afternoon. internationally United come the of those partner But more then you the States, that little straight And my in the me, for your just

follow-up. either as anything conversion Just as you rate various come through a I a changing the kind have rate? growth the they those there of see curious pipeline, Then if or into consumers channels is quick from a back

I you perspective, from conversion think given macro would seeing a just the we’re as expect, trends impact. Yes,

their And so as along think the to funnel we’ve outlined So to lead has back that, But and talked if considered problem now and teeth. the look, that it. And we’ve want around right? it quarters. straighten the seen it’s of conversion been think of sort at that kind to is a look matter highly really a an it, lifelong Why for a strategy take people over that just throughout it’s the of couple I step we’ve impact about. past goes long-term important to I of strategy, want that a back is purchase right when, always This it’s generation time do who about you right?

leads focusing winning network they’re or through and efficient is that tactics profitable long-term most then other And consideration the partner so we CRM once in or on and believe approach.

someone is family in looking going as to dentist; ask talked they’re well, about are in look member. we ask talked lot to friend three, to past a we right? And two, things, consumers three online; their in this consideration and so they’re or really this about and going One, and once at the script, going the they’re

to and back you And channels. leads from so winning when think those convert those look I driving really a it for goes across perspective lead three us, to

can investments of that see the points data online, challenger you we’ve the credibility with made brand that really some improvements I campaign, big provided. we’ve in think in good in

customer with there. that the On that dentists put building investments goes all credibility win really into side, experience friends then and that’s to sure the and we And our family improving back good network there we’ve making a and and partner reaction.

that’s conversion from perspective it So, time. we’re a over and how about I think lead thinking gen

Thanks. and you’re the out long-term also leverage what about, one? perspective, top And think to from that I spend until we the you the time. XXXX I versus the can company’s redundant, in the the think laid least deck, increased But not Thanks. environment then marketing objectives, again, for this not clearly based bit Facebook as that. ad maintained be a similarly, slower when you’ve just over a invest you having giving about term, little see cost we realized of structurally in at uptake, more appreciate that that and outside but do if think the current to shorter guidance in TV but in the higher realize you other macro is think costs media, be we continuing to U.S. U.S., those think lift about, is a structure we should can yet, have

Yes, absolutely.

from look at cash cost think a I on –you look when at it it side. perspective the you

XXX over got cash we’ve as So end. million in quarter a

or also factor. either sheet the XXX AR in liquidity we balance million can salary another or We on have that

so we in have burns. our that well total control think XXX that we’ve also as you in levers total over at look the million liquidity, I in past the if And to demonstrated

for for the XXXX, to If we future we cash and the to is given you look of very have within quickly continue at market, invest growth. got we belief the that and just but and optimize QX where sit flow is positive now the right our very, approach liquidity

seeing, perspective, so of And about see from that a the certainly factors expect that it to we we on the in that targets the of of some that longer-term is outlined. cost we’ve as ahead performance the result think side, when near macro we’re term,

we to margin, we look liquidity marketing and approximately year, XX% to G&A for then XX% of in the it’d continuing for given have be we’d QX you this at XX% sales the dollars QX, relatively to revenue and that invest in expect gross overall to flat. longer right just growth, for be believe be term of QX, position that if and a our so decision. about But the that’s marketplace, And overall and

Understood. Thank you.

Thank you.

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

but flagging fluctuation XQ we’ve or lower I mean, consumers discretionary it I the on seems some taking in seen been tracking in discussion but happened question, to what I consumer especially on in like the spending what harp some XX,XXX the in week-to-week but anything for is be resilient. your inflation below XQ. there’s revisit XQ income, you’re latest indicating the in continues to want pivotal there’s that, data what Thanks guys. hasn’t the of outlook, terms higher, United on States. of, And, sorry Great. even the to forward really want it start outlook. I it pretty macro tick to, and to happened given mean, to so again, no economic doubt

in your affected. particularly X.X% And if swing X%, changes, X.X.X%. really inflation on at think, a additional uptick why The a these and X.X%, being paying So mean, magnitude. volumes. services business and XX% any such minor I can color you seeing XX%, dental is look difficulty you the we’re are provide to bills, business you

small to why is sensitive So a model does, so why the sequential deterioration? relatively

it core demographic. I to at Yes, look think you’ve from got our

several income core the a do if the bottom-line, over customer. most non-discretionary almost goods, income of non-discretionary of And dollars and Labor going to to XX,XXX on than household to more the is so a coming And be is their thousand math XX%, XX% you on inflation household that cost we X%, of a have spending clearly to at do analysis. right? out goods. the $X,XXX demographic direct of XX,XXX, data, is Bureau and their that there Right? median of spend, on and impact And And on on the a this look right we impact So that’s X% $XX,XXX. at given math It’s Statistics as aligners of has its so X% impact is the the $X,XXX. economic is our on

as in of factors someone demographic there So, $XXX,XXX our particular. to that’s demographic, It’s for XX,XXX impact for inflation well. a XX,XXX this is real as big of in and there’s about who other an big household above, variety impact a not, but is income. makes It for core at

there’s on economic the I that preferences, if look lot a services think spending more goods we’re looking you focus over at data from at.

continues we’re you the bills, If look household at on a ability pay quarter-over-quarter time to high. at quits all get to tougher surveys an basis,

at look of it’s XXXX. If as since quits January been they’ve of you August, highest the

the that think all there, we pulled really what supports, together it here. I a So from when we’re data look you perspective, macro at saying

too. confidence add purchases starting large fell. and a it’s deck there QX. in purchase falling is we mean, consumer in into And in we Yes. had I the fall, those Kyle think just a I $X,XXX and in this for and sharp the continued a had mean, I’ll index slide graph the – purchases. deck, QX about large I just

X% I think but I teeth basic mean, are for over I you’re items, going, if, also So in the not that now a when $X,XXX $X,XXX where’s it’s doing only it’s right it’s prices all saying, well, going? straight this sure spending so from that where inflation, news. even to it’s this I’m confidence standpoint, next, Should more confidence $X,XXX be my

it You not to supply turn prices Gas see a tank on up than was year the news issues. and are doubled your fill ago. the can’t chain

So goods. and of there’s there’s a prices supply everywhere of shortage escalating

real. listen, it’s think, know I So we

The potential their miss their respect with bite well. QX about to and the week, as on they XXXX listen macro to call supply’s last If acquisition. guidance Dan and effect talked it bite you in earnings

So bit it quite those guys the call. time of a in spent talking about earnings

have I can financing. the here think we in everything surprised it’s and to of integrated it, vertically we’re little they think especially all but it’s to we that advantage aspects, were real, see part it. a combat with of that’s And company I being a doing

that our finance. only controls are the We company

good we it. have at so experience And real

be this, to of of in there going the our overcome that that announcing we’re out be we and some going these really billing things we’re the to doing, not customer today, some core in that’s with December stuff concerns. And only website late market on this the help demographic think will

I XQ mean XQ. that, Yes. Got Thanks, appreciate it I that. it. in just the X.X% was X.X% in

just pretty So versus well quick, a international follow-up where that’s at drill we about that’s Can on but U.S. bit can fine. a a in quick trending it basis, I a just you’ve talked on me. for for while, little OUS OUS, tell investment from still bigger and continue expansion was but year think fourth looking this we Real given next you you for allocating, given investment much the we much seemingly in are on opportunity? U.S. sort remain as of U.S. how about, environment base OUS versus to dollars the priorities revenue better and in challenge growth return as year, sequential

you expect be look at Yes, to QX would split. similar a if I revenue

XX%, approximately the also been some has little country, for lower with still from a margin then obviously perspective, cost to costs local assembly. shipping final a XX% bit in and international additional So

XX% rest but of expect international. So trend if little I than a the on similar lower there for asked bit QX, would world you so that average the a for about between

be U.S. expect break be basis of to a then like both the of XXX% XXX% at XX% France about off of And marketing example. for sales rest of in a to XX% would and down and revenue G&A dollars, that to relatively U.S. as continue in markets to XX% I total, if U.S. you ground you XX%, market rest world I If to look world, before, and that new world. said between get rest an flat quarter-over-quarter as as and the on we invest and overall

Great. Thanks.

Thank you.

Nathan with with Our proceed next Goldman of question Please comes from Rich the line Sachs. your question.

the question. marketing just in the go the, for to thanks Hi to I back wanted shift strategy.

of macro weeds moving talked funnel help like, You the of more any demographic macro you at the top given do extended do can know, or the it the from really it but about core need to price maybe more talked you to environment? but sounds David, the of more to to financing about help your point this And, program, like sounds customer make kind changes purchase. benefit environment, in you

point. at the don’t on that, $X,XXX a more price, what of I we’re seen, on a SmilePay It’s think our I earlier single was mentioned low how centers. we’ve here it’s lowering about, Yes, per and price like matter are the pay

We’re down long the that’s in affected first because time, in a the environment. time this under customer for XX% macro that’s

the of can monthly month, customer at looking affordable, So into stuff financing, around hurting and and more it make creative $XX that more most make how them the talking more rates. affordable December helping we for month our that even doing payment, this we’re delinquency about a that is without

think we’ve be some ideas that. going to that That’s I got you’ll help creative about. pretty with hearing

which as people So, marketer, the a digitally oriented the of ones first in or the a opted iOS you leads, mean, most as signal one we QX, were faced into listen, and from privacy. all know, being it opted is and out about out it, us to far of come effect the talk I gone. of

And really internet. optimizing can’t follow because that the heard retargeting so people that lower these you sales, funnel around to conversion, really

lot a of on weren’t we’re strategy, signal straight. a that it’s, we’re we conversion, kind fortunate stuck of that conversion, e-commerce they getting that that have rely lead So sale because companies

a can over of customer time. longer we that So get period

a SMS great platform, and CRM We have e-mail. both

of we’re leads. so, for And quality going

We’re all these we’re the other going going to educate customers we to them. to use that and mechanisms have convert

step XXXX? Kyle, some you’re think into And implies follow-up up the the new you. the base it. selling XXXX not the quarter. making Thank a Got marketing and for guidance one-time should might in expenses as that XQ that forward? we there Is investments head that about we fourth maybe are Or a as in pretty that we you, go continue in into as meaningful

but QX, very perspective, look, Yes, to XXXX, bit making at about it’s of to us. it start again, little a looking to that a top just from talked we’ve to as as the given continue which is lead look time adding a expect macro perspective, funnel, to we we build for I investments tunnel, at do continue we’re think good early

insight about you would continue future as overall the overall we’ll And runway, macro update an get now, as we, environment. sort and think that I but so quarters of more to into for

of hit call. you. you and the the your that Thank gentlemen, top attendance Thank We’ve hour, for ladies concludes today. earnings today’s