SmileDirectClub, Inc.

Greetings and welcome to the SmileDirectClub fourth quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to our host, Allison Sternberg, Vice President, Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon. Before we begin, let me remind you that this conference call includes forward-looking statements. For additional information on Tamal Direct Club, please refer to the company's SEC filings, including the risk factors described therein. You should not rely on our forward-looking statements and predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today. I refer you to our Q4 2020 earnings presentation, for a description of certain forward-looking statements. We undertake no obligation to update such information except as required by applicable law. In this conference call, we will also have a discussion of certain non-GAAP financial measures, including adjusted EBITDA and free cash flow. Information required by Regulation G of the Exchange Act with respect to such non-GAAP financial measures is included in the presentation slides for this call, which can be obtained on our website. We also refer you to this presentation for a reconciliation of certain non-GAAP financial measures to the appropriate GAAP measures. I am joined on the call today by Chairman and Chief Executive Officer David Katzmann and Chief Financial Officer Kyle Wales. Let me now turn the call over to David.

Thanks, Alison. Good afternoon and thank you for joining us today. I'm pleased to report that Q4 results came in ahead of expectations and are consistent with the cadence of our controlled growth plan. which was enacted almost one year ago. Our fourth quarter was a solid finish to a year characterized by an unprecedented operating environment, and I am extremely proud of the progress our team made throughout 2020. Despite the swift onset of the pandemic and the macro uncertainty throughout 2020, our performance throughout the year was continued validation of the strength of our business model and the power of the competitive moats around our platform. It also demonstrated our ability to deliver on our continued focus of controlled growth with profitability. We outlined this strategy in Q4 of 2019, and we have been executing against it in the four quarters since. As a reminder, our controlled growth plan is firmly rooted in the integrity of the customer experience, and that remains our central focus. As we have cited before, we are still in the early stages of a massive opportunity And we believe our focus on the customer experience is the most efficient way for us to capture long-term market share. With this strategy, we expect to achieve continued growth into 2021, consistent with our long-term targets, while also executing against our long-term margin goals. I would also like to reiterate what we highlighted last quarter, that we continue to see favorable industry dynamics and even broader acceptance of telehealth and specifically teledentistry. minimal penetration against our total addressable market, no real competitor that provides an end-to-end vertically integrated platform for the consumer, and clear aligners continuing to gain share in the overall industry. All of these are powerful tailwinds that over time will help drive our controlled growth strategy forward off an increasingly efficient cost structure. These are nice tailwinds to have, but they don't change our long-term financial targets. off of the amount of growth we believe we can achieve while optimizing our club member experience. That may change in the future as we mature as a business, but for now you should expect outperformance as a result of these tailwinds to accrue to more efficient customer acquisition costs versus outperformance against our 20% to 30% annualized revenue growth targets. Again, we believe that this is the right amount of growth to provide the optimal club member experience based on what we have seen in prior quarters. For today's call, I'd like to first call out some of the notable financial highlights from the quarter, then highlights from the past year, followed by a summary of industry dynamics. And finally, I will touch on the regulatory environment before turning it over to Kyle to walk through our growth initiatives, Q4 results, and our financial outlook. Turning to results within the quarter, in Q4, we achieved $185 million in total revenue, up 10% sequentially and 3% higher than the guidance we provided on our Q3 earnings call. shipped roughly 102,000 unique aligner orders up 9% sequentially. ASP came in at $1,820, which is up 1% on a sequential basis. We saw continued strong performance in our small pay program with delinquency rates remaining consistent with past history. We generated positive $7 million of adjusted EBITDA for the quarter, a $4 million sequential improvement, and a $67 million improvement year over year. I would also like to highlight that marketing and selling expenses came in at $79 million, or 43 percent of net revenue in the quarter, compared to 72 percent of net revenue in Q4 of 2019, a massive swing. While it is extremely difficult to predict the future given our current macro environment, I would like to try to provide some insights into the first quarter. In Q1, we expect revenue to be in line with our long-term targets on a sequential basis, meaning up 5 to 7 percent over Q4 2020. We expect adjusted EBITDA to be profitable, but not necessarily focused to the level of Q4 2020. As we continue to ramp marketing spending quarters like Q1, where the ad rates are lower and we can build our lead funnel, which we expect to pay off in future quarters. As a reminder, marketing dollars we spend now have a long tail. Over 15% of our orders in Q4 became a lead at least 24 months ago. Kyle will elaborate more on this later. Looking back at 2020, it was a pivotal year for SDC. The agility of our business model was truly put to the test. It forced us to stay nimble, innovate against the customer experience, and we achieved that while making great strides towards our long-term growth and margin targets. We have always, first and foremost, been a telehealth business. We are excited to see the growing level of understanding, acceptance, and use of telehealth, especially for orthodontics. Some notable 2020 accomplishments. We focused on improving the club member experience at every touch point. This is the cornerstone of what we do in our North Star. We made good improvements on this, and online consumer sentiment for SDC is at an all-time high. We surpassed more than 1.2 million smiles made, established the Smile Direct Club partner network, and have quickly grown to over 1,000 affiliated doctor's offices with robust pipeline for additional partners both domestically and abroad. We launched in Germany, Singapore, Austria, and Spain, bringing us to 11 countries globally at the end of the year. We expect four to six additional country launches in 2021, including our recent launch in the Netherlands. We kicked off SDC Team with plans to aggressively go after this segment in 2021 and beyond, as it represents 75% of the market opportunity, but only approximately 10% of our current business. We launched our innovative second-generation manufacturing technology to offer the most advanced made-in-the-USA aligners in the marketplace. Rolled out aligners with ComfortSense technology, making clear aligners more comfortable and tooth movement more predictable. We disrupted the oral care industry with products available at 6,800 Walmart and CVS stores and now Walgreens, expanding our oral care product footprint to over 10,000 retail stores nationwide. In 2020, SDC was the number one growth contributor to the U.S. whitening category and the U.S. power floss category. We now have the number one whitening gel product in the U.S. market. We launched insurance coverage on an in-network basis with Anthem, MetLife, and others so that we are now in network with most major dental insurance payers in the U.S. We had many new patents issued to add to our portfolio across manufacturing, scanning, oral care products, and our smile shops. This brings our total to 18 patents in our portfolio, with many more pending. We launched our enhanced tele-dentistry platform with advanced features, including a new updated consumer app and video chat, to improve the clinical experience for our members. Formalized our independent clinical advisory board, which is made up of some of the best orthodontists and dentists around the globe. And we achieved adjusted EBITDA profitability in Q3 one quarter ahead of plan and laid the foundation to execute against our long-term margin targets. Turning to our position within the market, I want to take a moment to remind everyone of our mission, to democratize access to a smile each and every person loves by making it affordable and convenient for everyone. Execution against this massive unmet need requires an unwavering commitment to a superior customer experience. Innovation and product development are also foundational to this. We are seeing great momentum across the business on these fronts, and they will continue to be an important investment area for us as we execute against our long-term plan. For too long, straightening teeth by orthodontists with invisible liners and braces has meant paying a huge three-time markup. Orthodontists have traditionally purchased invisible liners from a wholesaler or manufacturer, marked up the cost by three times, and then sold them to the consumer for $5,000 to $8,000. Our proprietary technology and platform offers consumers the ability to get the same clinically safe and effective treatment, but without the three-time mark. We do it by providing a doctor-directed digital end-to-end experience of teledentistry, 24-7 access to dental care, and it also comes with our lifetime smile guarantee. As long as our members are compliant with treatment protocols, we will guarantee their smile for life. This is the value proposition we are providing to consumers so that our mission becomes a reality. doctor-directed invisible aligner therapy with the ability to get the same clinically safe and effective treatment, but without the three-time markup. We took out the middleman markup and now provide a superior service. This is the same disintermediation that Amazon created, but in a much more complex healthcare procedure. That is what makes the barriers and moats so great. It is also a story that is just beginning to be told. Turning to the regulatory environment, As we noted in prior earnings calls, we are well-positioned in our continued efforts to protect the access to care that consumers want and deserve. We continue to see more states passing teledentistry-friendly laws and refusing to pass laws that put up artificial and clinically unsupported barriers to access to care. In addition, we continue to see growth in the adoption and use of teledentistry by the dental and orthodontic industries. This is underscored even further by the expansion of our professional partnership with well-established and respected national DSOs, which is further testament to the adoption of telehealth by the dental community. In addition, we are seeing acceptance of the use of telehealth for orthodontia by insurance providers, dental boards, and associations, as well as the ADA, which updated their guidelines to expand the use of teledentistry and to state that insurance providers should be covered in remote treatment by dentists. In summary, the most recent quarter brings a strong close to a year demonstrative of disciplined execution against our controlled growth plan and meaningful progress towards our long-term financial targets. On growth, we are making good progress against our initiatives, and we are executing against our long-term revenue growth targets. On cost, we saw continued margin expansion in the quarter, enabled by our manufacturing initiatives, our sales and marketing efficiency, and our continued cost discipline across the business. and we are on our way to achieving our long-term targets. Lastly, we continue to see favorable industry dynamics with broader acceptance of telehealth and specifically teledentistry, minimal penetration against our total addressable market, and clear aligners being shared in the overall industry. All these trends we expect to continue and position us well for long-term success. None of this would be possible without the support of our unwavering team members, club members, and investors, and we thank all of you for your support as we work to capture this massively underserved market. We remain laser-focused on our mission to provide doctor-directed T-straining without the three-time markup so that everyone has access to a smile they love by making it affordable and convenient for everyone. Now I'll turn the call over to Kyle, who will provide a detailed overview of our growth initiatives, Q4 results, and our financial outlook. Kyle?