SmileDirectClub (SDCCQ) 9 Aug 232023 Q2 Earnings call transcript

Greetings and welcome to the SmileDirectClub's Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, mr. Jonathan Fleetwood, Director of Investor Relations. Mr. you, Thank Fleetwood.

begin. You may

operator. Good you, morning. Thank

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

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

our forward-looking should events. rely You statements not predictions of as future on

we XXXX statements applicable this on measures, a by forward-looking In such discussion of cash information earnings and presentation EBITDA that on except refer you statements. call, call today. undertake certain also this and as for no obligation we of required All conference to update I based of as We to assumptions make certain forward-looking including are beliefs our free law. QX have a non-GAAP flow. financial description adjusted

respect the financial is obtained Information required by slides Regulation presentation on G which with such included our measures to of can in this Act the call, for be website. non-GAAP Exchange

We measures. also non-GAAP this to certain to measures the for of reconciliation presentation a refer you appropriate GAAP financial

call Executive I'm Officer, on and Officer Troy Crawford. by Financial Katzman David the Chief joined Chairman, and today Chief

Let the over call to turn me David. now

to our upsells expanding by everyone. our good the us footprint SDC Jonathan congratulating for the our for scanning initiatives entire include today. strategic from our offering. both my launch mobile drive to comments leveraging Thank platform SmileShop growing now to XXXX morning, you by of the for and team CarePlus Australia on delivering I two Thanks, key want SmileMaker of joining U.S. and begin market

impacting customer. our us economic despite management continuing to core allowed innovative deliver disciplined backdrop results solutions the cost technology-driven solid challenging with combined our

the of $XXX million, from prior-year period. revenue Our decreased $XX QX million

and the fourth and by $XX free adjusted free compared $X flow EBITDA fifth of year-over-year marks straight the straight adjusted quarter improvement year-over-year This improvement. cash million, year. of cash However, flow improved prior by quarter million EBITDA to

and growth. insights how provide can key efficiencies regarding transformative show to our they that drive have me started meaningful two more Let initiatives

start our artificial begin I'll images treatment SMP. technology submitting XD enhanced develop mobile to with engine SMP is by customers First, or intelligence teeth smile their of to digitally an a XD platform, on their journey plan. scanning an images XD the allows mobile and device our to straightening our automated existing SmileMaker that capturing draft

launch for and made After our launched a month. iOS in top pilot app end in the and category. on at been of enhancements U.S. the Australia on medical Android expect SMP Since being later follow updated still in Store time modifications, we latest November, number first U.S. late the limited platform. May our launch, the basis of the a this Apple's of in a we on, the in fast is the XX but the worked consistently version has

SMP and uses from test channels marketing demographics. to for as different will different get customer We learnings continue we

visualization An teeth consumer's showing customers used capability the SMP of result look what like enhancement mouth. alignment a will in launch now the we renderings, new of AI enhanced the after the is mouth. exciting that with with of new creates photorealistic in have developed that provides to more This the our their be final

opportunity Additionally, which additional users, of new are SMP sharing text the our custom drive viral providing customer's smiles, referrals. via draft SMP plans sent promote to the potential consumers smile for to

of by top driving benefits tangible together marketing efficiencies signs is of benefits SMP stronger Leveraging drives our financial cost showing our SMP core the of business. improved per all performance on reducing lead. through

underpenetrated access SDC and orthodontists, parents and are follow-up to the to care. orthodontic specifically, in-person the with customers' we desire and professionals, dentists added also for higher about excited our dental meet more the teens, Practitioners second of developments aligners at our to both households demands but model premium telehealth market allows CarePlus, growth robust telehealth initiative. service General our this utilize elevated to priced the income, convenience $X,XXX. turning traditional Now, service who want platform of and of

We piece the consumers. as and as for consumer who will care, other footprint provide and income strategy the in-person and larger capture a along premium our of this growing SDC teen SmileShop leverages want option markets, offering believe a CarePlus we only of learnings to a go-to-market higher existing from to the offering benefits. that option launch the both CarePlus our U.S., virtual customers, well position that identified implemented our with in to private expand have

consumers opt In U.S. the our SmileShop point. CarePlus who trained for a customers awareness offerings, their of by and a care benefits well CarePlus upsell existing the to the traditional rate location locations appointment, and educating insights then members customers CarePlus as pilot consumers network to SmileShops, for By offering. the our refer customers, solution have take our team CarePlus all despite driving end have price an our with journey. members, who will provide SmileShop with our August, to meaningful added ability to our partner both their can our from opportunity and a at for provides journey This dual as nearby in our team seen premium we higher

streams a process revenue customers continuing scale channel our foundational locations presence of an offering. with X,XXX programs, our providing the in-person plan short last the receive support visit. drive X,XXX on half the a build quarter members. offering ended with been through in to from network commute We partner CarePlus steady launch, the has back positive active to dental additional also coverage a solution exclusive sales but by with our to for key compared locations, as pilot to Feedback also growing in to the our which customer CarePlus able the progress our from markets will all referral be completed practitioners make to quarter, practice, by CarePlus we for the of to we provides being bulk this piloting continue as our of team CarePlus SmileShop UK in our the the CarePlus year. customers we in

strong practices the their business benefits the marketing CarePlus with and This the is we SmileShops our sales SDC. discipline leveraging from and partner with to a network of to to commitment our our proposition consumers firepower discipline, paying financial continue the of rigorous for manage benefit efforts to by value sales of drive full off.

on Although based quarter structure. to results QX seasonal and the underlying second top-line our improved were our stronger we cash continued followed downward to able QX bottom-line cost typical results trends. flow revenue focus our on deliver

my and year-over-year cash free I straight fourth remarks, the adjusted quarter year-over-year improvement. this straight quarter mentioned As fifth improvement of in marks EBITDA opening of flow

have SDC improve expanding by our successful our investors, key straightening, backed initiatives. facility, to liquidity our see our to discussions affordable We leader SmilePay parties Collateral, as interested the position in two the well ABL continue as the in of teeth interested especially with with successful value who other by launch as

who been the to team our worked a to begin members, but these and all long thank road, hours I of bring sacrifice off. to initiatives as want SMP worth market. important CarePlus have two long the It's to pay

one customers saving single bringing over you and over $X to million new smiles X Every for collectively billion. them of responsible is

and will throughout and XXXX. enable dedication and macroeconomic to continue controls deployments, cost to our success our to addition business business, a of cash through maintaining for us manage discipline unpredictable and difficult environment our we the new While initial initiatives core face our financial our

We business and and our achieve discipline have financial technology team strategies members, targets. platforms, financial the to solutions, operational

more now, And the turn our provide Troy? to over who Troy, QX I'll call will detail results. on

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

by EBITDA positive for focus, the cash Let year. next to quarter of and the maintaining free begin flow me us SDC in adjusted entire track thanking quarter team on which positive target our fourth hit this cost keeps

in While cost restructuring the of affecting a our the plans meaningful quarter's flow. core cash our structure results reflect drove improvements continued headwinds free macroeconomic and impact our customers,

was As a flow last adjusted $XX million the revenue on quarter, and a improved from year-over-year a the XX% of the XX% quarter. have decrease second in the consecutive for by we a cash XXXX, mentioned, quarter current improved million, is year-over-year we for EBITDA compared year-over-year second free decrease of David basis. by to improved sequentially $XXX in $X decline the million current and four quarter $XX million of despite EBITDA. the revenue which quarters,

range aligner improved driven the compared The results an our revenue was off was sequential despite by -- guidance our our Year overperforming initial of and $X,XXX. our expectations. The driven quarter at Year aligners seasonal in trend sequential by coming within of effect from over new last the ASP was decline typical XX,XXX the shipment new to of QX. decline the year QX

driven our to on efficiencies focused been in revenue all our processes, has other time-high. discounting We and have which an reduced ASP

price to continue initiative, As as introduction launched increase. ASP that increases of revenue were July, a late as the result in the items, the on of we details CarePlus expect well the some performance aligner other first quarter current providing line from were is quarter. our price in of concessions implicit the improvements down XX% some percentage in the in the The revenue, since with recognized XX% first with quarter. gross historical to

to seen to The which we impression macroeconomic of seen have revenue, tax aligner conditions. despite our and X% the of adjustments, the quarter. change revenue, show in IPC in XX% sales consistency Reserves that any include in continues receivables in compared quality and not gross the kit other we refunds have challenging came at first material

XXXX the we which at over which adjustments, related first and due overall other $XX net our a by becoming in of is $X quarter. in which to with increase Other approximately other revenue, products program, million, both revenue with came was larger million percentage in QX ancillary primarily SmilePay driven in interest and grow is to approximately customer retainers, down of prior-year and base, retainer and Financing whitening the receivable approximately sales, million revenue. which, million, at revenue consistent $X is associated balance. the increase quarter XXXX an year-over-year accounts lower as an increase $X our The of includes came revenue

our the at QX, to customer. and came levels our having historical turning in reflective of the is is in core of financed SmilePay aligner purchases approximately of macroeconomic which on share Now, above XX.X%, the environments SmilePay. program XX% difficult the initial impact through

with our important low is that fact that program an we affordability to to customer and a file well. delinquency with QX, historical rates have perform consistent gives continued card program component a well drive confidence overall, perform the base, continue credit levels. and monthly in payment will the keep our the to on with us has SmilePay Our SmilePay

lower on the lower by in for rate was margin the primarily manufacturing cost on fixed the first cost sales. results deleveraging gross driven quarter side business. from The of XX.X%, down was in which of our the the process to was gross Turning XX.X% margin quarter. the

$XX and in selling at and XX% basis the the dollars of of second compared represent to marketing both by XXXX. quarter targeting. of XX% $XX in efficiency terms driven largely quarter, revenue the expenses of point million year-over-year $XX improvements marketing net came decrease, a in revenue or The million, in net across or a million, media and in advanced XXX rate, business,

we drive legacy customer these to With for are lower costs our business. improvements, continuing acquisition

seeing to the addition, soft cost launch funnel SmileMaker are channels of and aligner reduced download. on focus across and in significant improvements lead with to per our and optimize multiple we costs, leads bottom sales. the In balance of lead per funnel are With high app continuing right a app, cost efficiency achieve spend we

which efficiently XXX had XX like existing the cannibalizing new expand of as sites. our its we SmileShops we customer quarter quarter-end, service pop-up reach to generated increase XXXX, the location initiative. over company and for AI-powered the platform, is incremental of outlets on without permanent XXX as will course new quarter CarePlus held channels since demand locations first shops events an SmileMaker a as of to allow The by and well total the XX SmileShops, of of the

expansion team that to continue SmileShop members upsell will portfolio analyze opportunity leveraging our offering. provides strategy store our our the journey CarePlus to support growth, for opportunities We to our dual our CarePlus

partner access customer footprint SmileShop the our that scaling to network partner SmileMaker expansion end active We locations solutions of of through X,XXX have goal the network app. now training. channel, Our are adoption of our or increase to America is our North pending our market and

partner footprint for on this CarePlus our SmileShop our in rolled business, the and from operations key will markets will service serve as the for our U.S. all learnings but The partner productivity our preparing our four focused network been broader launch both month. has also in CarePlus markets test channel based our launch out scale to team care traditional offering network on solution February. beginning premium as is optimizing

driven the initiatives the a million the as focus the expenses savings prior-year the million place $XX to was compared quarter in $XX and of The the of in control. XXXX cost beginning in decrease by quarter and in the were quarter General last and XXXX. second first continued quarter from we of administrative well at million quarter, on year, put as cost $XX

As end control the have of of of most initiatives the the quarter, completed. cost G&A second been

see However, as savings the effect you the place XXXX the in QX full and the execution throughout of took will of 'XX. QX initiatives QX

associated related million This to the secured include result costs maintain the expenses other is expectations. our million expense million, rest issued of revenue we our the XXXX. right-sizing $X.X throughout loan on the convert which lower and in in core issued is will overall G&A the $X.X April facility debt costs focus based with deferred expenses related in operating of and XXXX, year of to interest $X.X on

Additionally, the as and lease costs of $X.X consisting as store to closure store our costs well facility to and costs, related other and one-time impairment including were severance, actions, primarily abandonment, restructuring costs. million related restructuring

recognized we unrealized million, of the in translation primarily foreign expenses, currency $X.X losses quarter. to recorded adjustments other due In

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

$XX for improved has full year, compared year. EBITDA the prior the to adjusted by million,

continued $X results, improvement $XX million, quarter, year-over-year represents million and an world adjusted in are of and delivering quarter of third fourth period. second quarter. is negative the EBITDA EBITDA adjusted loss track out the and Canada and which net improvement in negative prior-year a EBITDA quarter adjusted the adjusted $X over quarter the on positive came our was for reporting regionally This our Breaking was second we $XX as consecutive EBITDA U.S. rest at for million. improving million

ended million $XXX and net million our negative sheet. cash to quarter second in we Cash the facility second while $XXX $XX million, negative $XX cash Moving quarter investing million $XXX with operations the million for spent million. was and on receivable balance the equivalents, was in debt from cash the accounts on $XX HPS. with for drawn quarter

million million, over Free XXXX. less discipline quarter, free flow our on has negative improved defined as cash has an is by over cash from as efficiency. on cash basis, second year-to-date the operations the was which for million from $XX of improved $XX cash $X flow our second investing improvement focus our quarter financial a rigorous

flows cash progressed quarter we Our free just to consecutive consistently year cash year-over-year improve as flow. of improving our free posted fifth the have through continued we and

in towards positive have the EBITDA our fourth quarter we business, very We EBITDA the recognize are the for by and financial profitability be will level. to goals upside as structure see we maintaining adjusted positive put in attain from to our that year place that in quarter. cash initiative also realign cost flow changes drive difficult our us the to and XXXX additive environment, launches We the on continue a of any third needed to results efficiency sales at cost we our this high core free

network of As quarter, noted we originally volume on our until release, have overall SMP year. primarily throughout changes new relate XX, will across available initiatives to press they impact progress half begin our our fully to that and in not while and back as launched the earnings updated XXXX have which guidance our XXXX. later the in this expectations we CarePlus, February the we The guidance provided

meeting result, delayed the year new this guidance goals. the initiatives for our our way for original up compared continued the was our on our focus we efficiency to year. in adjusting guidance due expectations somewhat adding are while to best launching initiatives core were to a sales The As new and that a our customers

our XXXX at expectation core consumer as somewhat sustained not so the environment far. in would inflation that and same seen challenges play the to expected started out our year an to impact spending that demand the the overall we and We have with inflationary time, business. improve to high continue

as our invested growth have CarePlus additional they returning component and SmileMaker key a initiatives. We in to also driving and are in SmileShops,

these a result, for from sales new the added impact the the a cautionary As as margin environment; well added initiatives. costs, offset as

positive in in CarePlus expect in the EBITDA year. the of the of still our to flow we cash full-year we free of rollout positive revenue XXXX outlook launch the continue the However, XXXX, costs QX half and to adjusted and 'XX and EBITDA QX which the and scale contribute deliver of the revenue from expect include contributions platform based and on to guidance. now back for investment 'XX and solution, to of SmileMaker original

XXXX $XXX EBITDA EBITDA and between our by negative $XXX positive with and action expect we and of one-time $XX guidance, million January from million, $XX XX%, million between million and XXXX, and third revenue reorganization million, gross For our $XX adjusted $XX million negative costs largely between between full-year XX% in million to quarter. $XX results top-line our by revenue between CapEx and adjusted margin achieved deliver driven the the million. $XX

of related our the company founders and capital provide sheet SMP restructuring entered newly balance credit working growth sheet. work of launched agreement a continues to initiatives to general the help to the SDC million into as toward balance the fund and revolving $XX its to CarePlus in amount liquidity,

will the debt. additional by overall we future on structure lowering As company goal of in focused our into financing capital discussed transaction our be that previously, any have bringing enter improving would while funding

the would I to closing turn some for call to remarks. back that, over David like With

fully this half UK and rolling in Troy. the our month forward the launching the adoption offering market locations back of SmileShop all our look year. to We out U.S. and in platform Thanks, to careplus of SmileMaker continued

to a to access smile person team's on our continue each focus every democratize will developing loves. proud I'm mission of our making innovations delivering We and and a reality. long-term these on

are at now, preference. to multiple channel in options the convenient each to solutions bringing stage exciting these unique And we customer's through market the

with any our will of insights update key other to these with market regarding the achievements additional We initiatives, along continue innovations, and milestones.

Thank today. operator over back turn With you the for call that, joining I'll Q&A. to the for

first with question your line Michael America. the of [Operator Please with proceed bank Thank question. of Instructions] And from Ryskin you. our comes

guide embedded and the half not in taking Can the of that in Hi. thanks discuss kind on terms there? Thanks. you dollars for CarePlus This Peter business of the Mike. have is you existing you're second prior SmileMaker volume? And can for that contribution you the and question. discuss confidence cannibalizing the from

Yes, I can cover that.

we think, While of half just CarePlus some now. not into quite the two our and smile to with can typical to with break modeling initiatives too in are it's yet. quite I what SMP, typically order give those the the that contribute back launch ways don't morph two they early coming year, out an the or that both of phase we SmileMaker can But assessment in app launched, through early just itself. guidance almost frankly, And from different through

mix little So, a way as too, these versa of could understand and well, different early to if in we're you especially on working through there the there's which in bit a finish app, stages. started you vice

of year. of for broken haven't out we yet So, the those the back the impact half

you'll the to get we see more is of in of of see ASP start one the increasing the what back line. is from standpoint, there, to those an actually things you'll year. ASP color contributing our initiatives As that on we'll the half provide bottom each

the the I results contribute year. whole back the out, extent CarePlus happens of we just do to with expect a half bit record throughout we price ASPs well and which will in business, higher in year, on quarter think, half what of those determined, place the back initiatives increases the see aligner is what the contribute that. as as on we that actual the we little that to we'll as of back the associated half a year, But go with we be how to with based put see those break had can this actually yet and the We during the

if the the OpEx or need maybe on to that Okay. And flow to the to that is path then million even I beyond if further becoming profitability cash is revenue positive, that? and $XX cuts lead you kind declines more credit two flow agreement, bridge option next could of you what's financing fully to Thanks. be or enough guess cash available

Yes.

the to So, focused are liquidity There's as very on bridge. line million we Definitely, that provide reason the $XX improvement. entered that funded opportunities increased for founder to was we be into credit well. of

are through on ABL But to things those do We agreement have work that. to focused as we well. our

right I on additional restructuring working know, a been got on bankers finding think you the We've and what we've balance previously; As kind now. going released closely with we've sheet. process liquidity of

are on continued of there. very out interested and productive. have There discussions are lot parties Those a

I up that financing really to there. out transaction think to find us it's optimal

us, As I of we've well announced previously, others. out with lots goals And our as of to future financing current transaction that lowering one the capital overall there of debt. the as investors, improve to working while think structure we would be including options have

able So, cash and there. capital, mitigating manage some of we've to been we have the flow things the out the

revenue initiatives profitability And with new the half been I I then our we've we've on expenses to the got launching think, we've that are EBITDA. [ph] the in to mentioned that also the that will of back are sure consistent we've as three got think make guidance. contribute of is announced, our core positive you'd year. start And a cost-cutting kind to initiative G&A that

overall well So, path getting of and as structure towards working try focused EBITDA well. cash QX reduce capital growth, of overall that and to burn, we're on a we've positive to kind consistent the as been on kind to long with on back

thank guys. All right. you,

comes with your our proceed the JPMorgan. Robbie line And question you. of with next question. Marcus from Thank Please

put year. in with efforts are looks follow kind the for Thanks any the our sales end, then the taking you implies the consensus of commentary, and much half. on the new low end? tangible up of you were then middle of question. the for are raising and fourth range guidance how assumptions pretty in some first third in to some I much get big to the but that the the is and could quarter. appreciate ascribed From top-end around coming a What back great. there underlying line to guidance it and ended middle questions. numbers to of up step-up Maybe, high guidance Oh, like versus end pretty and

It year. was half bit it little those Yes. new looked definitely, as back the new our a initiatives mix right results. we the of a launching these including of we're when like to was at start the initiatives, time we in felt

have previously, bit ultimately page. to mix what little and coming online, convert. fact either And said our a with they sales SmileMaker customer in takes we bit it Smile call And SmileMaker to there or as to customer, there's us assessment I'd web sometimes coming Smile of first could then Like there a impacting little for of end there's on a actually using could our the through convert. results months when through initially you a this, coming traditional the because be a app app a a mix our that SMP, assessment we started the do up

more guidance. see of wait now. we're little these break and to bit So, But can metrics provide out out some then mix we we going until to play hesitant that's there's of kind start there in a of why how and it

last the those, new would we half we in had and then that the very the we associated in challenging added plan original core beginning the half, effectively our how the repeat to out and initiatives We the we in the guidance break the improve. at expect don't new in actually year initiatives assumed reduced year. the We a somewhat of quarter back of sales back fourth the as year. economy far kind that As with this of year.

And of bit we kind of look and QX, QX a did as weakness. you little so at see

QX well little SmileMaker looking well. guidance. certainly bit new most that as is we of talk took increases when at that to of in our much of got QX, the also driven you So, And now initiatives. step-up marketplace there effectively about the by to as being was down as we've the QX a by there, core we've But price got carePlus. that right app offset

back to So, in drive those well. those things half the sales as help

If you we I see increase year QX from QX, think as the a kind of to an expect little and the would as about I bit to well don't a lot from QX of QX. hold. throughout of initiatives drop-off think take

that. I maybe, follow-up me. one Great. appreciate for And then

I XX%. Why the went seen about think much percentage since as you patients think that ticked pretty public, or new of referrals at you I've IPO Thanks. hasn't a sales up time? and over do metric higher

Yes. I consistent, been Robbie. right. It's one, that can take

and are So, to it's able based how on our refer. legacy business people

come actually they're teeth, gets sharing with with of their what to the or through and is positioning. the your the side new they take what's your see If smile. move app, I exciting someone are app, a And my think how actual actual when that other now, I go going we in seeing out mouth the a have especially of the new we lot you of image is your plan. treatment app the smile, mentioned paired remarks showing we're getting

people excited are what that's about. And

to And spouse, I And so costs their platforms, do about have And But think their excited number out champions XX% to that can drive I sharing whether overall with people I something that It's it with on a friend, parents, SmileMaker. there. to on it's seeing based you're across I our excited think to going getting you, will and tool our we smile. get if this the steady. see are that our really start number been what they sharing new we're will customers showing it's agree CAC media, social up. acquisition help think and their we start how up a and from tick with

lot. a Thanks Great.

Thank of [Operator Our from comes Jon question. your line Instructions] Stifel. next the you. with question Block proceed with Please

your what XXX and Thanks, what said HPS think of your the but the pretty filing, a $XX pretty XXX road. Call can line. now you're payment, with guys. the ARs remaining right, be the far I've material ongoing call it's believe that are a final-final, drawn. on look the just is it it XX-Q, that I I XXX And it then per not million drawn? hook litigation for morning. quick I It that's through if seems down align. covenants. Troy, know Good a but you got states to

finalized. the what happens So there. you about next the to if that talk sheet maybe, were can steps with be And balance

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the That well. being manage could the said, to expanded well. And that's again, liquidity been be credit that able we've this that I as of is from pretty line additional coming think funding the from intent founders,

what a kind in path our of towards we bigger be transaction would future. the consider that's could So that

We've not award confirmed align As related payable award. It's yet. long-term. a to that petitions itself, at been not time. look filed and we to sheet restructure to this vacate there's final it's the balance not

in There's that. are of judge We're long-term. the some had we we'll look that We there's of continue that that week California see additional something an incorrect oral to like kind as much We've arguments remaining waiting be some we and but against feel Court. continue to the possible. get vigorously arguments defend that to work plays for is out how that last but at done. judgment, State oral through to

probably But multiple wouldn't we fund it. quite it time defend some continue could to ultimately, against that as be ways. due We in for

Jon. We're just court there's Also, sorry, I'm add the right I'll Troy. state rights. appeal now. in

good HPS expect currently are we but HPS. that with negotiations with have would at expand to what to outcome. facilities Also, or conversations expansion judgment, We that. also been other ABL facility, have there say, other I we a facilities which to we in but we the not, looking with back the for providing have an option ABL is if appeal HPS will do. us to in that going conversations,

out So, there's options lots of there.

our And really nice happening. plus SmileShops not with see at start be to said, a able it's offer to market is quarter. in that will XXX $X,XXX. you our all which dual to the and guys it think journey it's will initiatives conceptual our anymore, as in we upsell customers, quarter over actually Like I now U.S. increases AOV

SmileMaker. conference also, we're with seeing What in the of had we calls. efficiencies talked And previous about SmileMaker,

also that market, While are it's us more good dollar in the driver, customers brand. is conversion a it with interacting spent for showing

versus our down our cost Smile assessment So, typical is approach. lead

spend downloading greater the the you Smile the are dollar assessment. were the people So, the in and of number app that market with interacting a that people than is much

you you CAC. there, improves lead get you way, or whether conversion your increase either So lower it costs, your

mid-XXs should on the margin a quarters gross to at turn of but that's guide. does trends seem as to the all positive a And sales it can to rating the about run million EBITDA? that, done two same you be The great But the job quarters. efficiency of you've The OpEx the $XX call get the just to to you and of of Thanks your Because to $XXX implies XH enough G&A, generate midpoint million. Since sort how over for midpoint on roughly slides sort at like that, get the implied the per EBITDA past segue three XH. of David. guidance. Is the bit really marketing? guidance question. of XX-ish per sort XH in actually corner that it on guide XH good my higher go already it, you on you were answered but second elaborate The a is it,

better is biggest to the what's And pull? the it S&M the to just rates due to? lever you Thanks, conversion guys. So, that alluded

Yes, savings announced from that for I can we lot a initiatives the put somewhat of again, a to that. we QX get of combination cost things. were in of as a initiatives us it's And these been and in what place take well. journey what It's where

a it's for us. bit So, a been little of journey

combination a I things. So, it's of think

that more to sales. So, start new will you're initiatives the They're efficient. right drive very

if EBITDA through very get to a those at like product, versus dollars you $X,XXX we things our think the from So, high flow at that $X,XXX rate. efficiency additional CarePlus, CarePlus about

to flow with to sell through by more fed don't So, in CarePlus there. a the upsell We and drive store we can have our lot initiatives. what these opportunity at dollars XX%. associates marketing drive that spend that additional we It's about customers new expect really our market to of kind that

coming additional SMP, without through able we're are So, but from themselves to stores lower what explained drive acquisition the also is, we sales David marketing. additional seeing not only costs lead

we to far end that overall we profitable through will will future again, stores. certain flows more some spend in investment. down do smileShops. And we we've opened and a spend, And lower and driven additional consider I consider of that see a kind additional drive to the higher kind up marketing we've as that smileShops. efficiency more but consistent throughout on efficiency. our year, theirs. selling of to it's driven conversion be it experience the that expect because drive better thus money of have level kind for costs the we So, bit customer. there we our of that little We've just a in

we lower a from in was lower, last QX year, the perspective, driven initiatives certainly then the the that. in process all QX were beginning we've G&A year than about of from was down that But QX. of talked at G&A And still

QX QX savings from to well. rate standpoint we believe as from run into continue So, a QX have and we'll

that and it's are things as QX QX of higher all combination in a well. the driving So, those EBITDA

Thank you.

will We reached that, conclude the today's teleconference. question-and-answer with And have end our session. this of

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