SmileDirectClub (SDCCQ) 9 Aug 222022 Q2 Earnings call transcript

Greetings. And welcome to the SmileDirectClub Second Quarter 2022 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].

conference recorded. this reminder, a is being As I to Relations. Jonathan like to call over turn the Fleetwood, would now Director of Investor

you, morning. operator. Thank Good

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

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

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

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

me over Let David. call now turn the to

around over and appointment us CFO. the for SDC investments years, Thank Crawford everyone. joining discipline. Thanks, want numerous official you morning, congratulating financial driving recently I in of made couple contributions Troy off to Jonathan. Troy efforts most to Good today. focused on past his has to start by

and contact to and to Dimitrief their come Linda thank May. fields end take in also respective Alex want and quickly center back Linda to business. their we're in the of Board welcome and environment phase I our service of bringing levels to valuable perspective Alex both Directors. like as us of executives opportunity Both returning as our we the I'd addition, accomplished In to to team our by Williams navigate this this targets for

As deliver our our with call, of have QX customers QX in the temporarily reading. to care challenges our from in ability discussed these transition come our contact NPS our impacted that our level center expect we in were brand. And to reflected they challenges

next in be trend NPS improving our to internal continue isn't expect that quarterly point While reading our QX, to reflected until metrics we update. next to NPS an

brand the for tracker further shown our the our off indicates quarter-over-quarter for team contact is which In have addition, indicators improvement paying internal customers. US, that our work of center

$XXX we quickly than those to and enabled QX achieve ability substantially at more resolve annualized the other cost savings. of all in implemented Our center complete us to challenges contact have initiatives start million

As discretionary was in few we've of timing in trends all in of consumer light and the the seen months, the critical the past the of facing consumer state spending. this we're surrounding today transition uncertainty

spending shipment to year acceleration accelerated to into for the While over we this the into May. monthly we heading important stable of initial on but believe did relatively comment understand not remained it our trends, to interest We order for quarter. is evaluation investors like that with back challenges QX. were consumer on And our began during coming QX, QX in the half business, our encouraged lift materialize

ordered further in aligner to before mid-May, slow dropping in began June. However, trends

to looking saw for page customers to ways were a this our supplement expect actively time, increase basis traffic we on purchase. their we as During year-over-year more insurance

million, levels to in hurt shift towards stimulus, we reduced than convert Challenges spending $XX our These performance in spending in here can faster look we report adjusted line the our revenue and less seen and by consumer on Our which cutting and to quarter, at despite accelerated sustained to be demand anticipated when also drive and respectively during by with that being are quarter-over-quarter the a improve I'm at that $XX combined services decreases curves. predictable able takeaway pleased our to demand spending our consumer discretionary our cost flow were down high EBITDA initiatives strains to resulted products the for during to paid free had cash QX spending both inflation $XX need quarter consumer last from top growth. remain you is million. resulting year-over-year. efforts strong, when but ability million continuing off

results is we approximately but of that the $XXX,XXX to Troy into adjusted I the results to operating team details to quarters $XX to of reflect were we down what achieve With leaner much past two our again profitability of during top further to operations. XXXX, for during how While do million the to was sustain tireless we these QX relative line better want will with go these EBITDA achieve during leveraging our on thank able revenue able achieved organization the a XXXX. quarter, their were within efforts business QX modest XXXX positioned in model, optimize growth.

efforts core value. top is to important and our business and to shareholder the as While these our growth to critical From positioning deliver to the been it's on allowed have to growth the of make of we right-sizing achieving has our the innovation phase business. success towards innovation line vision profitability, progress recognize next our beginning, long engaging ability term we us that just meaningful through

our partner to by changing mission has life brand Our much than network, our world's Expanding health people to consumer for do. vision that From care the fits through is aligners. our facing existing democratized facing vision, vision and reach each aligner on what mission, oral focus and the vision core to transformative been product person clear non-consumer reach leading oral confident loves. innovation of us more across realize smile. our are market access realize of expansion within a marketing into continuously customer beyond the an entire innovations, helping mission where and our expand manufacturing comes is potential greater every SDC+, always both and And This be we smile must innovations. our of bringing through and portfolio aspirational The to organization base. we shop our

see years, in presentation, it partner and quarter submission making all make practice, SDC+ ended of Recently, quarter-over-quarter nearly our portfolio the across continued portfolio and us meaningful throughout efforts. in progress easier As our with and And innovation deliver We our allowed submissions seen at you'll than we've consistently per continuous XXX% investor have and total the level. in overall includes categories. to to eight through innovations the investments product the last of on journey experience the over more increase to XXXX. XXX network locations growth driving get started QX have the XX% versus with our

GP believe access consumers attracted SmileShop we've In far throughout quantitative top price specifically in exactly to partner offering, the locations. is our offering includes small income While to foundation contributor in-office a to within in our retention treatment. consumer. target our was in is local treatment we still qualitative research, designed retainers a our through intense needs general We household mind. through offering to practice a SDC which or perfectly further exclusively premium products income line, is and with will care designed, this telehealth basis, available access and will at an for consumers' to on a greater we relatively to after the practitioner platform, place other brand need more with our to a what higher when dental our which access us learned a be that higher into greater either network be that paired the SDC+ The SDC+ for partner network lean designed

that and only remaining currently SDC+ by partner track $X,XXX, these to access while the to this tech care augmented services, platform, us price being is in a we QX level of additional on year late about to our improves The our excited our desire. anticipate means offices, also what for With extremely business. competitive they markets early offering and our provide this time is which GPs with economics premium which QX this to us network service choice at customers are SDC this This price that on will a the for partner select pilot offering launched or service. but network enhanced We're we to depending in first proprietary since our the enables we customers, launch partner able XXXX. not offer our

the the of quarters progress keep will and enter pilot we we're the in continue the those We seeing results markets ahead. as updated you on to

requires to starting today breakthroughs AI new too kits using the their they While with difficult solution purchase. the our from we as ideal. get customers to in to smartphones were and smile It's point our journey and able technology too and matter market. It started develop get see easy can and we to temporary of started viable get was their make allow always kit purchase has and that until get a a options, scan to with use us scans been we customers still a By to purchase as in is minutes. not it to before much customers

to purchase of converting when the site aligner I with illustrate our volume. the each XX after our an over current off looking month kits think weeks falling process with have it's around the journey. multiple we important at and order touch to across of them magnitude drop million to scans traffic the out X.X% to points experienced in several current we Today, website visitors

volumes, here site six That's $XXX of this conversion, in on conversion ecommerce where in an X% expect an opportunities basis illustrated to web gap of basis. which today. more revenue. are view annualized And demand point should We would small four conversion in adjusted when $XXX of line other one term which we additional we benchmarking million And converting as our visitors improvement closer have today. businesses, order most the our is a investor XX today's than Based closing million this to to aligner deck. of we X% additional is on us is in of on site rate incredible. our EBITDA significant the ahead The times be to near points

has minutes do within downloading other app. This original purchase This and use conversion how to here improve transformative site buy our of to vision PhD to the point. the your taken finally friction And our equation. to between made started reduce get and dozens option is continued vision significant. modeling exists then the with points believe get of long of and we've the the power AI will journey smartphone for move fall-off on of it scan that out reduce experience to the an visit of their for was and of and why takes strides what out to site While pending aligner the and of there machine making capabilities in We take This how all smile. learning scientists finalizing the along have can accurate customers we're and or what visit which their our get of founders our potential with we phone-based purchase new plan developing. process technology patent platform, AI customers to engineers see XD is no their we're between development today It this the scanning draft SmileMaker teeth is in the delivers mobile app our and will that to allows free of years currently to easy it clear [indiscernible] application treatment. treatment call lift scanning custom proprietary purchase,

to rollout customers XXXX shops, to reference in markets journey. point a only opportunity had what their serves as to available here. start is good impression new SmileShop the initial kits Prior Our for

technology than X more would From million data for our database, experienced lift is X original but unmatched years. in year later catalyst than than right and States introduction follow smiles SmileMaker And power of out trajectory been greater corner, customers. to basis with treatment a and any more by XX international efforts And we fast change Mobile today, for that our line part point generate project had in traffic million take is our same mass by more the sales team business bring than alternative spend. on tirelessly AI this scale, in opportunity spend, we our markets to in the of and of of our and a Similar we it part other of has work. control one in completely of our with With the immediately considerable of Again, worked and an knew a plans provided countries target the around in annualized launch adjusted marketing vision X.X than treatment our three basis. on shops, a more years with shops, a site to clear United to million conversion experience we smaller R&D better has plans with to the the net times to additional This would we the people this critical SmileShops, our a no the for the much initially with experience to of AI the in aligner change QX. million were the QX a or provider with gave or the believe plans channel EBITDA always when early marketing that an quickly. of market. rolled Current now $XXX beginning, a be more additional to our in the end business. scanning platform growth $XXX our capture of going increase capabilities significant XD revenue up web more

excited for keeping be we'll We updated in quarters are to experience you about and progress this the the ahead. extremely world on offering

is we to discipline, full elements, our for able we've SDC in value. you transforming these combine with across formula with over scientists progress sharing business short them look grounded to saving a a the team we this AI while deliver accomplished seeing partner $X materials of our amazing hold first which also been but billion. million full-year be think more beginning been said and well in before, over much than from and only I'm our today, fully limitations and we they rigorous And them of many to serving turn detail see, to financial Troy our our oral XXX% a we've company in at XXX the an new our products but in to worldwide to help to advantage end and it's Investor of winning massive. X% drive maximizing material and it innovation in straightening, we a call and TAM opportunity old With Nashville worth Despite SDC+, hardworking or innovation will X.X so PhDs, shareholder As ahead. on the year financial members, our the team X% I of executives, manufacturing believe with Day customers repeating. quarters provide XXXX. This only teeth new innovative get Troy? the with can to potential achieving times and the growth committed I've have technology succeed When introducing led in platform, engineers. annual quarter network results products, those committed of plan I'll work now aligner who releases outlook. all smile able more in care will QX to of company, an marketing-led the love a We've taking been the upcoming iterations here as new to AI for portfolio we is our of discussing of forward drive customers facility at pipeline innovation more million and steady growth. to not customers period as and of SmileMaker

worsening $XXX quarter. the to investor Please on particularly our by our for ASP inflation, difficult conditions which was is details decrease the will initial provide cover. I in second of basis. for We and results materials primarily which a will review $X,XXX. which customer. posted supplemental quarter, to aligners our everything the XX% jump sequentially of XX,XXX and macroeconomic be David. right our shipped million, approximately the I Revenue for you, additional an been into of XX% Thank a sure quarter year-over-year XX% has was sequentially, core a down increasing This driven on at website

XXXX. a was with the in UK driven the in late price and additional for Our primarily the first ASP quarter the in half $XX during increase by implemented of in targeted geographies increase over second May increases of June, US

is XX largely the have months, the of play what in economy combined results XX out with to significant Our no IPC were in aligner other changes do level associated year. historical towards We of the we coming reflective quality overall some on iOS started expect the percentage gross QX year-over-year in in first our revenue as price rebalancing seen fluctuation that shape are the over with aligner have we IPC last XX% Providing recorded percentage by quarterly period the back of of the rollout down really last The concessions well of levels portfolio. XX% deterioration the from revenue, the the revenue as implicit X% quarter. a take revenue details impacted challenges to items, gross of between and of in in trend revenue XX% reserves. as as privacy seen from

analyze we've separate prior IPC quarters, reserves and for those cancellations. current mentioned and We rebalance on we maintain based reserves information. regularly As in

EBITDA While impacted net refunds came million, in million. down which first $XX EBITDA and launch of retainers, approximately affecting saw adjustments XXXX, in related and revenue. Other ancillary at revenue reduction free million $XX second structure with and Compared interest first $X headwinds the in whitening revenue program, to we of customers, million of quarter and million by came driving and sequential cost the $X in to to flow. at cash Reserves which and free of other our restructuring accounts macro better. was which Other the the XXXX, revenue improved our revenue million to from was lower which is $X drop were our second Despite associated a orders Financing line free and adjustments kit quarter. whitening than revenue, a approximately cash year-over-year in revenue, adjustments, first came sales $XX we flow includes impression in quarter in revenue, and by less flow strength the is despite X% new $XX quarter decrease in in tax, in other to $XX balance. QX, implemented includes aligner down of our revenue January revenue improved quarter. cash improvements plan $XX meaningful but by million at second due or continued million XX% sequentially and products, in with the quarter our compared SmilePay the million initial our receivable of due strips gross X% is

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

Our SmilePay delinquency with overall, drive in continued well program customer quarters. has QX to rates is perform with component our an with affordability SmilePay to our important base and, consistent prior

the core increase card that While in portfolio. has confidence SmilePay admittedly the fact on not difficulty well. perform seen gives environment, keep customer our market, have delinquency to the the file have macro a in Despite low our macro SmilePay monthly that continue we an with and we our had payment the headlines the will us rates

efficiency, control cost Turning margin operating cost Despite first Gross from of initiatives. quarter. business. the to improvements other quarter leverage, margin in which gross the XXX that was along point by revenues driven basis on reduced this XX%, was lower labor with was increase increase results the side for the

and is decrease demand revenue on efficiency our of focus revenue net of soften. came efficiency and the heightened see the quarter see in continue selling we'll in A growth to $XX compared improvements margins XX% to percent platforms top The we result operating focus or benefit will teams expenses line find into across in the across a we QX our of revenue get is leverage. for further in of as XX% million QX, drive seeking efficiencies marketing added to driving increased spend. as out from focus key first team returns to at the Our to of net the business, the and sequential and Marketing on for quarter. primarily XXXX the solid coming when typically

markets. and XXX quarter-end, are base to marketing platform with our new through spend. balance spend SmileShops, aided spend increase the location permanent over optimal of TV, calibrate and funnel in channels daily requires and was We have a digital to highly our locations that optimize been continuing international amongst locations aligner and quarter. leads, of always channel The weeks and having versus mind and top split advantage shop of optimize as mix sales. of process which the that always efficiency to for With is all an quality continuously the locations assessment strategy in between take our in the On on analyzing order and we with experimenting XX% spend high keep popup impact increase targeted evenly segments. leads and It a discipline of the achieve awareness period quarter to we eight focus diversified total We're across marketing more dark with sites reallocation. a a funnel pulsing held XXX is as XXX the location testing of fluid targeted channels net to had important shop allows US of first in bottom of such at course four of a funnel the each analysis, from us on

locations continue incremental footprint to channels. strategically without demand from that to expand will We support cannibalizing sales existing shop our

seen positive or on and pending has training, practices, extremely the and expansions to America encouraged Partner throughout on for locations that been of XXX now the footprint the the We our team momentum tightening productivity year. are this results network We within North by maximize increasing partner early to balance focused and active QX. these the shop productivity are year. strategy active model continue measured expect we've of deployment engagement have network from

quarter A have we to will $XX in administrative to network when scaling and and when XXX% also which and a channel in operations QX decreased quarter. $X our compared of market submission as key amortization driven million footprint serve trajectory, mentioned, quarter-over-quarter. practice, QX excluding stock-based it not General growth for premium in our current through XXXX. only total and the the first submissions but we scale compensation SDC+ David submission of first increases G&A per growing seen will almost As momentum in more depreciation versus service than partner has million the over XXXX. million begin $XX offering costs expenses expenses XX% were

the million, taken compared Excluding the of year, approximately as of to include related is we debt a back XXXX. and expense related items our initiatives $X.X is $XX of issued January which of costs cost million when to prior secured the G&A associated facility issued in savings same in loan $X.X April interest to result down million new this year. is $X.X Other million in with expenses deferred convert

store lease impairment other consisting store costs severance as and related to as associated to $X.X million, our restructuring primarily Additionally, January and operations. the related costs costs with our well facility one-time of retention, closure to actions, abandonment, costs related and including and was international restructuring costs

expenses million foreign $X.X in to the adjustments. currency primarily incurred related also We unrealized other translation of impact

in of All negative in above first a the is decrease million $XX million the $XX second over an EBITDA quarter which produced revenue. million improvement the despite quarter, $XX adjusted

$XX million. Canada net the EBITDA net $XX negative Breaking QX of was to regionally, was $XX negative adjusted of in adjusted million EBITDA and a US and rest loss quarter Our at $XX million compared loss second million. XXXX came world out

new for and net $XX HPS. quarter second second have the sheet, spent million been XXXX. quarter with investing million. we've negative $XX measures and also represents in for in debt cost $XXX million This $XXX the equivalents, free balance the $XX amount of was from Cash from ended on receivable, saving accounts quarter for defined as as cash cash XXXX Free $XXX million we less second cash second started the million quarter QX drawn million. which operations was Cash in effects. million efficiency with improvement over flow facility was quarter investing, $XX the negative of is discussing any the show to first on from the Moving cash since and to the quarter a cash flow strongest cash operations $XX our million,

we free better delivered our than we $XXX when ever at over best fact, XXXX In of reported cash revenue million. QX quarter flow

As XXXX. time XXXX have a expansion. This challenges of guidance platform Based customers' impact could guidance, we meaningful year. also material in remainder trajectory impact includes the between to does should have assumes which we drop-offs between shows of lead for not the our a half SmileMaker aligner our effectively and rate all review will full-year incremental no potential of funnel sharp treatment view, weeks associated and our continue reducing of are of from launch the decision. the purchase lower term, manage SmileMaker any Without partner back of and on include any impactful on accelerated material fluctuations three the that signals in purchase. conversion impacting our currency our incremental this as discussed, of the orders to one plan purchase see to increases. scan sales to year journey has help to near This customer the for are macroeconomic willingness aligner make we a with investments outlook revising which network from and impact improvement the

You can posted marketing. see funnel additional conversion our deck earnings in website. conversion this no in highlighted requires our on This investor increase

So at EBITDA a very efficient any increase impact rate. will

revenue and and EBITDA reduced results. to due lower XXXX, deliver adjusted line, we between $XXX million gross to based top $XXX on XX.X% $XXX to million negative now million leverage expect top operating driven negative between full-year by XX.X% line margin $XXX between mainly For million,

and one-time our CapEx reorganization action the million million Our and in outlook remains the between same costs $XX our same million $XX from January to $XX million. at remains $XX

existing range our on $XXX We results our to have which year-end facility. $XXX million on and expected by million, includes added borrowings is cash dictated credit of with financial our a guidance balance

of the that While bottom the credit strengthen a place was in came significant of QX. in the beginning with put guidance to cutting our organization, the year facility in range, costs volumes. taken We're and have second some quarter on to put early additional with new impacts to of we we have sheet at in balance also measures the cost lower offset to initiatives efficiency lower at track right-size the measures place initiated our

have challenged on role this in in of In impact initiatives contributing played the the we're environment. better the these of macroeconomic All EBITDA extremely adjusted operating efficiency to environment, are offset a focused trends experiencing to very what quarter. we with

on the a have of the of back David platform like also on can initiatives new launching for call over remarks. material company's closing would couple to our a SmileMaker SDC+, very some are turn We impact the important and results. in cusp which to I

In Troy. palm more sharing Thanks, to along you allow facing, forward challenges over the and regarding technology bringing with device by been innovations, including to vision of SDC+, people joining turn and to questions to our Thank of and today. exciting operator the has our back journey get coming very they in I'll market. macro the over for that, for a we've their hand. encouraged the our call a months. We with updates innovations platform SmileMaker start from And what's smile love to to look the other From the answers. the we're business been extremely ahead innovation the I'm beginning, spite

Instructions]. [Operator

come questions the Our Stifel. Block of from with Jon line first

it. $XXX I've got full I on facility? Troy, And one year-end, to $XXX million circle that does the I'll to questions Several million for the number cash drawdown that Troy, then assume think right. the maybe you. David, securitization $XXX back. million

tack couple me more. on Let just a

after. still positive on XQ, more rev/EBITDA I to, tack just just cadence? have alluded Maybe one ask I'll to that. XQ my then think David up to The around thoughts guys EBITDA intact? previously you XXXX And that follow is that any Just

cash that $XXX balance, include could well. of a an what as some initiatives number, of is facility. the our we're the million for working available. of kind what cost including end million year. half in as the into marketplace of the some back assumption is go To well targeting to what as we're number around we're Also, be revenue year, opportunistic the savings the But being on does of things at It start the the will end of that on borrowings with $XXX lot

So liquidity will contacts place. kind our we that. we in the we've extent of drive to And in do can that more marketplace, kept the

all of So of say, think some a And factors to that. don't draws, balance. I the cadence standpoint, I get certainly a but would involved that, factors other include to go into full we there's From cash quarterly give a lot takes does little kind lot don't generally that it but of say how with don't different can the I market on could overall of looks think it can split split between of it. macroeconomic depending evenly, what kind the guidance, quarters, would be would say, but know safely goes up I say I but – like, you I a it I'd and you pretty

linear. sticking our XXXX was believe. final still We do goes think guidance, conservative long-term XXXX XXXX. CAGR which going we feel by I completely like question XXXX. to to back out Obviously, that that's to we're be when But Your to the volumes on it's about EBITDA, includes mid-teens getting not relatively

the back closer sticking which we'll right able that get we're believe XXXX, towards about big I to we be term initiatives to give can longer number guidance impacts we're as that think for earnings. XXXX with we now to launching XXXX. our meaningful guidance. half this We of But on more have And be specific the year, EBITDA

the follow trends talked the up, on just to you David, the throughout quarter.

seems teens lower income were smaller in different players There other the take. of the your very or Q-over-Q. the the player little aligner clear cases some figures The give just up household was player industry. sequentially. from flat down a seen XX%. it biggest Your bit than was I know but to from maybe we've is average others, major I sequentially, XX% think a high

more function household can a things? is consumer? NPS Or if your lower income it mend the couple all this to speak the Is of end that. you there other So to a maybe and on around

by QX. John, It is definitely We've new corrected mentioned really in result consumer, and in action, that my we stated. income the it NPS. in in demographic about comparison, effect. this And aligner $X,XXX, companies remarks, report contact the $XX,XXX I a When on much plus QX, compounded targeting of NPS was higher function our is of prepared that they're is our quickly not score – a saw the as core space, center a as with we'll you hit a year clear a which ASP. hardest accelerate inflation talk we

new to with after don't is we're for household not It tools, that marketing-led very part vision abandoning grow go a have takes how with waiting you're prior what been platform, We for And think had tools talking we've and to at higher, able go-to-market kits was a So We're core scan. if we time higher tools the down, to convert company. have market with going SmileMaker It's to our go initiative be of times gauntlet, we're help. same years. It's where customer. conversion especially to and to It's there mobile we technology. develop about as platform higher We've be when to time seeing about our shift. of were income disrupted, innovative is using your John, talked the our is the more strategy. difference here. device. a scanning order And that go we to kind of I've that exciting to And through will finally in our first us. the the say, XD the this SmileMaker founding new you having the these demand will Even in rate. other this leading always the of I'll it issues beginning that for fit businesses

aligners, to that for the in which open company when what you since kinds in innovation. – hood. Day, had public is was went built of the the which a material come new on has both for stuff, grow, see we're shift our of You're we've marketplace all There's marketing be pipeline we to from will we side, have been continue led now going scanning to XXXX, going in this truly for the one out innovation will to new innovations side, to first ability And on materials a the led. our which Investor

– You're and the be technology, look. analysts investors facility surprised going be going and and exciting in come our manufacturing really and innovations, you'll to I to X, see our for the very a to gen it's that think take our

line from Our the of J.P. with Robbie Marcus Morgan. come next questions

in This you is saw Robbie. implemented price actually increase the for quarter. Lily I on guys a

has core seen we be to thinking So your price headwinds, that you the just of year? have about given price how increase these how been demographic over sensitive inflationary affect rest And the trending should demand?

I one. can take that

still more to a out. two rolled type It it out X% still the price detriment didn't countries. on have US. not fully is It's of depending increase was conversion country. all. the rolled we We any So, And X% in see at

about the which the kept really month extended $XX term. the we months is and On two to we just affordability, SmilePay per side, the

it's months. months, XX of instead So, XX

conscious almost stay spending straighten that exact year Prior option versus we with there spend People is their aren't No everything on adjusted now consumer, our for services, out been conversion. day, especially least we their in teeth. off can At price increases price of if regular demand customer to discretionary the just the top end it affordable. inflation $XX,XXX So doing of costly marketing to expenses. want this It's on very when accordingly. a thing the same we've down, items, XX% taking and COVID, we goods still the saw that they they and to is fall have time. took

conversion demand So down, about same.

business increase, And the so, didn't at hurt all. as far as price

is competitors of for into a guys puts moving and As directly. the the strategic a demographic bigger follow-up, some you more up obviously income you shift higher against big

any So, been higher success so on of how well share are metrics the challenger market? can income you've far the you this there and winning in campaign

interested did you're GP that find campaign type an as a to the three really research, we was addition be an to some of time a that for the and telehealth intense consumer office, to, see a or can ortho income the marketing through, telehealth physical their journey. similar to markup platform to and to especially our brick stated, qual to get does. premium coverage. to service. a really SDC+ then market really the world likes challenger exam pure in for but convenience, platform, they XX/X mortar able That's who's go want for consumers need and want have in that that what that added have location that in in the price. higher want They an something paying to service, they quant The for and story and was What a doesn't a to use a alert It's we teeth consumer start play, we telehealth play straightening

launched different we will have points. since time First it, two it price

pure getting our $X,XXX well. right play will in is you're What to that was $X,XXX felt offerings $X,XXX the and telehealth exact the research the price what out there you're SDC have getting, our mortar. a the current a tested at that and have Consumers We value brick and at that service was you're as Because point plus. point? still getting price

have involvement. going doctor You're the to

to. You at their people you There's to don't what dedicated also ability you the research if a journey that to platform, is telehealth no GP, intend can never to start – the access, saw case, and telehealth second then interact requirement. the Then our have a XX/X doctor. ortho go brick on with mortar, we want from What to your home. and our success introduced doctor and you'll yourself team, monitor get have we upload on or

no offering this is and brick play. shows to there don't go if this consumer desire you do wants, to to so. So research mortar access and into back the that need both the telehealth office The a that is a dual that

line Wright Stanley. next question the Erin Morgan with from comes of Our

it to traction I the It engagement higher relationships of to slightly practitioners Can separate scan? and practitioners and you like On how ticked meaningful will work? the platform? and those and the innovation do need guess do materialize you the SmileMaker terms platform, still your terms the with that partner respond a the of feedback you in When quarter-over-quarter in stickiness you contributions? for level how speak approval? that think of the of network? need looks regulatory do financial you logistics like what do And

in questionnaire. A lot that

the location. Let's partner network start with

into did we It research the of launched on high to that some designed SmileDirectClub. GP ahead and that get of their income was the market network was get partner SDC+ consumer. patients So, current

that the of initiative select the – into really four launch we has to is now. year in It's we're scheduled launching network one in and – Now partner morphed SDC+ that end have DMAs at DMAs SDC+. really

to we will every offerings. two that offer much approach sign The fees SDC office exactly that that that current and will GP telehealth up the bigger servicing play be the patient. network, would then So, in One be have are in that they'll which office the to a is able office. $X,XXX partner dual higher also where role play

offices. SDC+ ability research GPs very added for to into single partner that, wants our their leads site both journey in location start We and of very, one it are the as existing GPs network favorable and came us send potential in to transact back that to and customer as those that Every new will that our offices. on those also fees the GP did far comes

flow to income flow going going lead those of lot a lead that's be higher that's So, and offices. to

So, to that as them was well. appealing very

will kit you we're teeth approval, it to shows in you the create impression detail then through is, you in would that move, at a it they looks top arch, plan and move smartphone and arch, teeth smile, has take today enough there's to your What a to As what regulatory teeth. takes take going your the give an SmileMaker image, dentist's allows aligner. able duration your an to poses, take that XD we doesn't That us it to see which get image of everyone you can long of video scan or how to about, has how minute, doing doesn't identical your what so do is, also about are platform tells we'll a your call customer for this bottom to a a this going an and is into the intraoral for you does see over What asked about your ahead. the that enough to it us your how it, plan make teeth nine it's months to to the getting you that time It their viewer, knows fidelity industry. is ability treatment XD it – allow move of far is it the all XD treatment the office. to after as today, demonstrate

need fits teeth. You microns close on aligner detail, your to XXX snugly to of so that

call, But consumer off prescription their minute, the what we after takes consumer call, to by be, a their, So, what to the identical make about it scans teeth, very easy they're be plan. draft what going The treatment aligners. to be we get which do, will to will doctor will almost plan final, that's signed is after. which what they're to smile buy able those because allows us the

is it look is what to new to long You how like, the understand take. smile to have going going

more and and buy, kit a definition But after you're we card get in do illustrated we custom credit that in to we got as today buy their Today high long that treatment photos treatment high the order make way order date right, ability will off upload buy do get today kits, to buy to it kit, that after then do step you've we commit to us to the place, in impression they're XD And going with be as time you've kit the able we within get an aligners. to funnel minutes. to next What will to scanning a need send got that. plan. the weeks because Pay, certain to they investor up a enter to to to you've races. deck buy to for to order out three plan in from we our impression is our So back the you've do scanning Apple got your is fidelity as get PayPal, with moves app, then mobile one aligner got is your do that will with they impression or

version SmileMaker we be where on need to that this to platform. do Our iterate kit. plans are continue The don't will to next X.X

intraoral step interim high be what all. brick scan. enough This to another holy they machine to to today will to get mortar or local see the more a like do recreate fidelity can't good grail what we we all accuracy Consumers an of make to call fraction go that with kit to won't get eventually, first to and data revolutionary impression the being just at We learning, look have And complete office smiles then have the It's then, an see aligner. in scanner This and unless is and back take will a it with a an anything industry. more – more that sets, step. about is wait. new molar able have a

really them CAD/CAM Most this that's process. fact platform, we to there. The to takes have are automated SmileMaker compelling treatment other treatment part it planning a AI the setup force big in today, before is we Rica, of Prior that the tech for about XX Costa a the minutes create labor a plan. of

make instantly that matter to automated able of decision. through plan work. their a and that, have The to see we able this AI, new wouldn't be treatment what able and then thing do We smile been able we to minutes. like to have, would consumer If won't weren't create that look whole be buying within that

the platform. that's the SmileMaker to huge element success another So of

macro gives assume for cost doesn't here? you? do from top from backdrop more line see Does on I standpoint do fourth if visibility discipline can What an incrementally But You evenly mentioned a improve perspective, what we splitting macro third quarter, that from quarter a you you believe. that? backdrop that worse

flexible. track what We to million proven think a on savings we've of at initiative. lot for very cost able I is We're initiatives. be savings well we've year $XXX the been looking with that. that started We're

look split didn't guidance QX, if across around up that measures We efficiency look and the say savings, find overall. organization guidance to at how to to would we but better. general QX additional and give I I'd say year We at continue to really certainly. of we But get year did EBITDA end expect July and June the the really well. May any as to revenue, is see don't the obviously, as what decline, into overall some well for between related the you as

right with that's inflation to predict will that, it's with really guidance So, where predict on gave consumer an stress that really XX-year the going But QX our and and to it's bit we why the range a exactly little what's on out. did. now highs kind things in we hard like unknown shake of of seeing

line question coming the with from next Carden is of Dylan William Our Blair.

I'm just of trying to understand sort guidance here.

it a and the You to EBITDA. gave sales down to outlook margin, your gross all there lift the pretty boil but seems heavy to be

of think to marketing and of about that cost sort of of sort G&A, pressure? sort we And posit should how some where between

at throughout year, it. June and consistent full year the We QX, saw QX July really efficiency looking through gave that about with we've of and early we we What year. over saw on the a savings felt starting the decline. lift come is into Coming May guidance. in we the in good focused But and come cost again into end to

better I think certainly on and we I flow as free came inside the what well. think those triggers of in was we where much efficiency from sales one is you can EBITDA see And pull based marketing measures better results, in of cash QX results, of coming saw that marketing.

standpoint, we So. save of cost very and triggers the that but back into over feel conscious in G&A through as has to which potential about looking ability to in come we've We'll any of expense and really breakout rest to negative that QX. rest of continue assured of how additional year put the the the don't we between the depending pull place cost marketing that overall at seen trend all we lessen cost EBITDA those half those. we're levers from an to trends. sure the typically execute sales initiatives on on we the coming We good those the year from on sales as been where give and to reduce our impacts impact be make EBITDA

EBITDA like guess Is of assume it sort is, you'd homeless both costs peak to are I line have those guidance, outlook? that one-time that question get that Am thinking seems to items. to there's about wrong? in I embedded just the items for my

some but of environment. We fixed small there, we have investor outlined we've network shops overall, that investments partner and have some the we deck. in lot those taken cost There's a a flexible do in But, out. very

see the do lot to a through So, trends of way the all EBITDA. flow from you negative sales

half that is provide of On of through in that are revenue which a the able of revenue rate other side and We'll to see into the at back certainly will exact initiatives efficient very is the the XXXX. additional flow these EBITDA year that, as opposite well.

the as in down I of an there taken EBITDA. is about way even about some a $XXX left. we conversion in rate change would of what think was the we've one the million really basis of with additional opposite and costs It million also variable works those just drive the to sales, things XX talked sales $XXX cost point in out business our

with Michael from of the of come questions America. line Bank next Ryskin Our

– uplift cutting out necessary that's rationale conversion? the show off you in you point that have about on Why impression could help the work is that couple SmileMaker second on that Could generation there the kid. metric? right to follow-up to a talked that the that you us upside I triangulate timing touched want of to Is Is the to be with that's that something the what's lift the achieve that having XX you What further completely for the that done and jumping over that, time? just expected? basis times platform. point? Is

of it's slide deck. XX First all, investor our on of

SmileMaker current state the an example. basis funnel, That versus was illustrative see XX can You state. point

based wasn't on Now, current It point what we state. a air basis in it get the finger just improvement? if hey, said was and XX

your a you call And side Our on workhorse. a am the next start or hit a a assessment typically very our action if that step either see They says That's is. then of today they're or other to simple they how and aren't candidate? to lead a lander are people candidate. your a quiz. what's SmileMaker, That's to is how XX I gen it, happen cool Download show and take is you to the all new scan. your new them smile. AI see you'll to book new is action it the with buy We'll going and free a within kit or app view, our call is, the the in technologies. full app see smile. Today, seconds,

of snapshots You video. slides, the that from the we can took see some one

X just smile download is the do of of doing XD Hey, let's mobile we today just are if said, what assume the percentage So free we the assessment, do percentage people the scan. app same and people

compelling Okay? actually a thing. It's more

you getting out just more are light or than You're green of red it light. a

we And the line number rate X.X% to just long how the then downloads they the that book XXX,XXX treatment get it of hey, us they day, or to surprisingly day It's their difficult or going they apply than come it have buy convert, that we right of not. a custom take. with that at plan. XX other or good. them they to candidate good. the that But be on made made to in buy plan the visitor end ability new People the just treatment it's kit to their demand we're be our most get is even assessment because We've the just Getting make see XXX,XXX contact smile visitors at chunk some there point over What all do. them buy end from And for can applied And easy said, pretty there, X% scan. X% not exactly that happens to book you're been have of darn it can our a businesses to right on anything their could are is with basis we show current and our good a buy Know their to getting. that, is then just we same. and It going to ecommerce can just depending the A the buy ASP kit They rest very all or a them. like very But now, happen. of the complexity. conversion same PayPal whole center. plan I've are can than gauntlet look They're we're something actually conversion, – have let's And in through CRM they site, But of improvement, a to assumptions not and we buy will or close. pretty less when okay, conversion, smile a years, options. we're modest model, the go through And if we a companies, don't didn't could of have at You get product. ecommerce for it pretty something it's not higher The now. to not back the the to the that. X.X% up human them to say a Once then finish shop, conversion said, high. aligners. now is assume, we the scan traffic aligners. the this get at interested it's extremely demand. high. Again, much with you to made We associated

that plan, scan, get site when This doing something see we that the you will charged, and if current to these their look all do about they emotionally be. treatment the tell. going like, that the smiles to and your is your product, to fix be was it we on This corner. use was was get company, up macro conversion up conversion, will can person But smartphone, ecommerce the we something to difficult they're aligners founded taken new when to buy a a dreamt when said, what it's at normal they're a As how Time not the the way and the as we into the to can environment. looked it's years. what excited around

on. that and It back learning, comes releases after a sometimes, us focused has March, this hyper not to of AI when certain in company has available. us, time can hit the time – you hit in like it. getting worked software out for cadence it's And a be It's models you team And to the on and the just very it then, machine Fortunately of number exciting and know going it and when been market. to for company. a don't

all marketing, to And a rework – country, we all those US. going plan end with numbers. in Time the all QX, our in out they some launch we a of of websites, SmileMaker we'll advertising. early is of platform by our the smaller in We if work said, will can have in to bugs see those QX on or very like But the our to fast numbers of to are this not in international feature meaningfully tell. follow in bigger be And year, and share what are we'll of the this. the

The follow the up and was I to condition macro today. had going situation global on back just the

Could to possibly for where Bank the that of linger year. the economic conditions expect under is first half entire next year? the year, base I pressure least rest next indicated it America, strategists, our for a continues talk for just think you you'd of persist that our think I you assumption that the year. scenario at among now, the through to of us remain

So, your plans? in sort scenarios challenges flexibility this into is the that through factor the of consumer. would talked base, walk how another if year, about around year-and-a-half, You your us the cost for for

on. here, two I One always the chime want. which out. operating QX. which can amount wasn't it QX. you can of top to in expense pull. play able flighting, those there, were We any by see way to to burn our initiatives But not efficient marketing, we've even started cash. on can the cash least the you Troy, a is is you cost found in line though with even line levers in had, side color and, add QX record We pan we did a very had We we if And savings preserve that with have biggest

year that on XX% all channels in don't weeks a we have we aided We awareness, to have. the have different be XX

it been actually have help the line back, we've money So with bottom not cash pull and top affect to line, some saving. able or save

continue with cost we'll initiatives. So, the

we're working a have cost software of lot our also our better getting suppliers, things We vendors with that and there.

structure of focus SDC+. environment. So SmileMaker we improving the And it counteract the than the the the are both – in platform is There and constant a have only right? no And macro they other two within other and company, the other this operating those side initiatives initiatives are expense company.

they'll we're work both by we see and end the start going consumer, funnel to that year, macro the SDC+ consumer going which our $XX,XXX way get, because the think which think this based So, on will conversion research the the launch doing we've income to going after we're to of that that help is done the better they're we that work going results. hopefully, And is improvements in to both with really than higher environment.

from lower visitors to goes Even still a going you're XXX,XXX at sudden demand that's your EBITDA that to the if the situation, XX So, that's cash day conversion situation. all help. going XXX,XXX, if your significantly to demand, of help even converting bps side, on better, a

we've in that to are things quite time market. that working that for going these on fortunate both some we're been have the launch we So,

profile. to really it's not, economy the or or and bear better gets initiatives help whether either fruit, both our if So, those total start revenue to EBITDA going

come little marketing spend, also those Both with any. if additional very

additional really leverage able those we're with for two So sales higher little to initiatives marketing. very

of Champine with questions Our the line Loop Laura Capital. come from next

The in intend kind of technology out full? that does do support when kits, to the replace roll that marketing to And spin what you with?

not that identifying QX We're in country. in launch international an to country. going It's

early and And when of able Android hear of versions, going we'll a have. we'll it's be country. smaller kind like we'll it. with not good obviously from early, get good of accurate scan customer a understand would we their back iPhone. smartphone, does. technical a the or trying it whether who'll It's You'll capture about the but We're people all what to to what But fast the plan XX% be follows. we we're bugs And able get percentage about treatment to it to see to scan base learnings

in So happen QX. that'll

next days we're initiative. going very then results here Our anticipation on that. QX And But QX in to see QX. the And we to XX and excited report this in will Canada UK from country. is – and later, days on to XX to the launch will XX as in days US obviously follow we're start

besides more hear you'll of launch there the so, timing? question, And Was a about part the second that.

marketing you of support level spend to do What intend use it? to

learn P&L kit the to marketing built it's the we there, out What site. brand. get know the forecast, they it's to play to smile interact book a cool scan TV Facebook they with to to impression in look different see fashion. oh, got then this consumer views, you can going a is and learned or when the or phone with slowly to search, this the new to necessarily way Well, Because smile going today, the they're use to scanning expect doesn't it's whether we XXX I The engage have that got order and around it, brand got what that, the I've I go spins with shop. when degree marketing do same spend. What market do an your is same six device, the spend like, what to and with technology,

advertising, get it'll and your our they'll long new people, free blown marketing all able today, technology a with be our spend further the marketing could actually spend. dollars lot in higher to a and start that get price of more scanning versus marketing convenience, Versus which because to people the showcase we plan for show debate a anticipate now it's technology with SmileDirectClub to internally let's spend. to come have get to full don't this and them showcasing treatment same stretch There marketing smile, we how is we in further So, take started would stretch about your could same say, the interact will brand. get more and what the get

the you a be back Where Just half? equity-based expect thing. compensation in to do housekeeping

year. in initiatives were we had of We the say lot had that first under. typically volatility don't some would break A I the that the that do with of part operating But down fully. we've restructuring to

we've this but because $XX related some So, to just that I'd range, seen – it have lower was some made. little million we quarter. like more in in the general of we've rate is cost a turnover volatility our run the changes say the in of the probably

the Our Blair. questions Carden of with line come final from Dylan William

I that? it XXXX, you standpoint, spoken economics the that booking to we that you and partner, revenue can own on the sharing haven't SDC+, color on your that on you're won't, realized maybe but give with how the any from

GP You is lot a follow-up. of office, not partner offering. giving can to current the We're network significantly it our more but partner detail, is network

cost sets So, that of also chunk we $X,XXX a is big of There's that with the extra for are success that for for included retainers doctor. it. also the team have and

that cost. more if So out But out to I margin line of the net-net don't sharing there's goes Troy. there's additional some that, we're percentage the exact $X,XXX top margin, the increase SDC. lot that a know of on

about through the about XX%. that, the be estimate – will a program, get flow GP get at of give but XX% about chunk them will to share which excited will bigger should incentive to We we with obviously, it XX% that

$X,XXX. you to XX% of the

you. Thank

session. of teleconference. today's does the We reached your question-and-answer have conclude end appreciate participation. This We our

disconnect of your You the at lines your time. Enjoy rest may day. this