SmileDirectClub, Inc.

Greetings and welcome to Smile Direct Club fourth 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Jonathan Fleetwood, Director of Investor Relations. Thank you. You may begin.

Thank you, Operator. Good morning. Before we begin, let me remind you that this conference call includes forward-looking statements. For additional information on SmileDirectClub, please refer to the company's SEC filings, including the risk factors described therein. You should not rely on our forward-looking statements as 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 2022 earnings presentation for 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'm joined on the call today by Chief Executive Officer and Chairman David Katzmann and Chief Financial Officer Troy Crawford. Let me now turn the call over to David.

Thanks, Jonathan, and good morning, everyone. Thank you for joining us today. Let me begin my comments by congratulating the entire SDC team for delivering on both our key strategic initiatives as well as financial results in 2022 in line with the updated full-year outlook that we provided on last quarter's call. Our disciplined cost management throughout 2022 allowed us to deliver comparable adjusted EBITDA, even though we saw a decline in full-year revenue. And we were able to produce a $38 million improvement in free cash flow over 2021. The leverage that we have built in our operating model reflects a much more efficient organization that is better positioned to achieve profitability with modest top-line growth. Despite the macroeconomic challenges we are all facing, our team continues to execute at a high level on our mission to democratize access to a smile each and every person loves by making it affordable and convenient for everyone. As we've discussed throughout the year, our four strategic pillars to fulfill our mission are to expand our reach through transformative innovation, given by a winning team with rigorous financial discipline. Let me review our fourth quarter and full year 2022 results in this context to illustrate how we're performing along these pillars. First, let me start with our pillar to expand our reach. This expansion not only relates to our existing customer base, which currently consists of households with annual incomes of approximately $65,000, but also includes plans to serve entirely new customer segments with our solutions-based on their unique needs and preferences for their teeth straightening journey. Our company's foundation began by serving those without any access to orthodontic care by providing doctor-directed teeth straightening, leveraging our telehealth platform through a direct-to-consumer business model. As I'll discuss later in my comments, we have made investments in our technology platform over the years to expand our reach to new customer segments that would like to begin their journey through different channels rather than a pure telehealth avenue. including by visiting our small shop retail locations, in-person doctor visits leveraging our partner network, including our new SDC Care Plus model, and by utilizing our proprietary AI technologies that we have developed for customers to utilize their own mobile device to begin their treatment planning journey with SDC. Our goal is to not only expand within our current customer base, but to also provide compelling solutions for higher-income demographics, along with capturing a larger share of the team market. Our second pillar is creating transformative innovations to serve the growing and unique needs for both our current customer base as well as expanded segments of higher income demographics and teams. We have invested over $400 million in capital expenditures during the past five years to develop both our state-of-the-art production facility and robust technology platform. Our wholly-owned FDA-registered facility in Nashville, Tennessee, uses one of North America's largest fleets of 3D printers. to manufacture both clear aligners and retainers utilizing our proprietary Gen2 manufacturing technologies. Our Gen2 aligner manufacturing produces twice as many aligners with approximately one-third the number of team members and twice as many retainers with the same headcount. Our key transformative innovations that we have been developing over the years and began discussing on our 22 earnings calls will fully roll out in 2023. These key growth drivers include our innovative SmileMaker platform featuring our mobile 3D scanning technology and our Care Plus offering, which provides an in-person doctor access channel for customers to begin their Smile Direct Club journey, leveraging our expanding partner network locations. I'm pleased to report that our SmileMaker platform, or SMP, successfully launched in Australia in late November and achieved our goal of offering a technology that allows customers to digitally capture images of their existing smile with their own mobile device, and submit those images to our enhanced AI engine to develop an automated draft treatment plan that allows customers to buy their aligners immediately after seeing their potential new smile. This innovative technology shortens the buying cycle from days or even weeks to mere minutes, while providing our customers with a great digital experience. As we anticipated would be the case in our Australian test launch of our SmileMaker platform and the app that enables its use, We are seeing strong improvements in the outcomes and conversion metrics from this innovative platform. Based on the increased conversion from lead to aligner order in Australia with S&P, we believe the upcoming U.S. launch has the potential to add a meaningful increase in revenue and adjusted EBITDA in the second half of 2023. When combined with CARE+, S&P will have the potential to deliver approximately $125 million in incremental revenue and 80 million in adjusted EBITDA to our core business guidance for 23, which can be viewed in our investor deck beginning on slide 31. Troy will touch on this later in his remarks, but it's important to note that we have not factored any contributions from SMP into our current 2023 top line or bottom line guidance. We learned many lessons during this test launch, and our team has been working hard to make enhancements so that we can ensure a premium first-in-class experience for our customers in the U.S. before our launch in Q2. Everything from onboarding to the time it takes to complete a successful 3D scan and then render your new smile through an interactive custom treatment plan is being tweaked for optimal performance. Our second growth initiative that we began discussing in our 22 earnings call was our Care Plus offering. This elevated service model allows dentists and orthodontists, and specifically the under-penetrated general practitioners market, to utilize SDC aligners and our robust telehealth platform to meet the demands of the more traditional orthodontic customers, higher-income households, and parents of teens that desire added access to in-person dental professionals but also want the convenience of telehealth for follow-up care. Dental practices have expressed enthusiasm for the unique turnkey orthodontics as a service nature of this hybrid solution, which requires minimal incremental investment for equipment and product training and no upfront fees to be paid to the manufacturer. We have launched this premium service care plus offering at a price of $3,900 for our pilot phase through certain of our participating partner network doctors in Denver, Orlando, Sacramento, and San Diego. As with our SMP launch in Australia, we will factor any learnings from this pilot launch to fast follow a rollout more broadly to all of our partner network locations throughout 2023. Early results from the pilot launch across these four key markets have been positive and we will share deeper insights in the potential growth and revenue from this offering on future calls. We will drive these transformative innovations with a winning team, our third pillar. We seek to attract and retain the top talent and partners across not only Orthodontia, but the entire medical technology industry. Our achievements building and supporting our team has been recognized by third parties in 22, including awards from Comparably for both Best Place to Work for Career Growth and Best Leadership Team, but also named to Forbes Best Employers for Diversity list. Our team has gained valuable insights both from experience within the industry as well as supplementing with top talent from other industries and functions across product development, sales and marketing, research and development, and partnership engagements. Underlying the advancements of these strategic priorities is our commitment to rigorous financial discipline, our fourth and one of our most important pillars. We took action in January to reduce roughly $120 million in costs so that we can accomplish our objective of positive free cash flow by Q4. Our continued focus is to prioritize investments across all areas of our organization that will drive profitable revenue growth and improve cash flows. Despite the tough macroeconomic environment that is forecasted to continue in 23, we are dedicated to maintaining financial discipline through our cost controls and cash deployments as we manage our business during the year. We'll provide details regarding our 2023 outlook. However, it's important to highlight that we plan to exit 2023 with positive quarterly adjusted EBITDA and free cash flow run rates. We have the solutions, technology platform, team members, and financial discipline to achieve this target. In addition to the exciting enhancements for our liner customers, we continue to enhance our retail portfolio as evidenced by the recent launch of our sensitivity whitening kit in February. This is in addition to the October release of our new countertop flosser, which offers another premium convenient smile solution for customers and is available both from our online store and over 12,000 retail locations like Walmart, CVS, Walgreens, and others. I also want to recognize our customer care team for their relentless efforts to provide our customers with the level of service and support they've come to expect from our brand. As we've discussed in our previous calls, our contact center team was able to overcome some temporary challenges in the first quarter of 22 and quickly get back to industry-leading service and delivering a superior customer experience. On last quarter's call, we highlighted that we have built a robust manufacturing and innovative treatment planning infrastructure utilizing next-generation technologies. We recognize the value of these assets and continue to have discussions with industry leaders on partnership opportunities, including licensing our breakthrough technologies in addition to wholesale and our white-label production opportunities for aligner products. We believe unlocking the potential for these partnerships is strong and additive to our current focus on building the future of technology-driven orthodontia. Combining our innovative solutions and available production capacity, along with our growing credibility in the dental market, places us in a great position with additional options to further monetize our collection of business assets. We look forward to sharing more on these opportunities in the coming months. We continue to make great progress in expanding our partner network program, the exclusive channel through which our customers will be able to receive our Care Plus offerings. We ended the quarter with 1,078 active locations, which is a meaningful increase of 128 locations from our third quarter footprint. Our Care Plus solution has generated stronger interest from practitioners to join our partner network, which aligns perfectly with our pillar to expand our reach across an expanded addressable market. It's important to highlight that we do not need to have coverage of every general practice in our network to drive scale, but want to ensure that we have a foundational presence in all key markets. that allows a customer a short commute for an in-person visit. A key part of the value proposition for the doctor's practice is the ability to leverage the sales and marketing firepower of SDC to drive customers to any of our partner network offices for our Care Plus offering. Some of our Care Plus pilot launch partners are already considering eliminating completely their own marketing efforts once they have time to evaluate the effectiveness of SDC-driven leads, their new traffic to their practice, and raising their overall profile within their market. Not only will this provide an untapped revenue opportunity for the practice with our Care Plus solution, it also provides the practice an opportunity to convert that Care Plus customer to a lifetime patient of their practice without any incremental orthodontia training or marketing dollars spent from the practice. We've already received direct feedback from some partners indicating that they see great value from the additional foot traffic from SDC Care Plus driven leads and eager to turn these customers into patients of their own practice for life. Regarding existing partner network patients, CarePlus provides the practice an additional T-straining offering at competitive price points for customers compared to existing market solutions. All the other CarePlus turnkey benefits for new patients also scale for existing practice patients. Minimal upfront or incremental costs, optimization of patient share time, leveraging SDC's brand awareness, and benefiting from the company's product and process innovations. Early feedback from our pilot launch from our four DMAs has shown these synergies playing out for both the practitioner as well as SDC, and capturing a greater piece of the addressable market of consumers looking for an accessible, affordable teeth straightening option. As we come upon our nine-year anniversary as a company in May, it's worth reflecting on how our model has evolved. While we initially started with only one channel for customers to start their journey through impression kits, Our business model now enables customers to begin their journey to an affordable, healthy smile through whichever channel meets their unique preference. Our historical direct-to-consumer model was soon enhanced with the addition of our Smile Shop in-person retail locations. A few short years later, recognizing that some customers want to start their journey in a doctor's office and that these same doctors wanted a more affordable and convenient solution for their patients so as to reach more than the top 1% who could afford traditional types of treatment, we created and brought to market our partner network program. Our partner network growth has not only provided access for a greater reach across customer geographies, but in 23, it will be the channel for our new premium service Care Plus solution. As we have continued to focus on innovation and access to care, we have brought the future forward and fully leveraged our in-house technology developments to bring our SmileMaker platform to life, allowing customers to begin their smile journey from their own handheld device. Regardless of which channel a customer chooses to begin a journey towards a healthy smile, all of these channels are supported by our telehealth platform that provides 24-7 access to dental professionals, ensuring results and maintaining access to a high quality of care. We have built a vertically integrated clear aligner business that participates in all areas of the value chain in the growing market of consumers searching for teeth straightening solutions. We are quickly changing the landscape of the clear aligner industry, and we are committed to seeing SDC reach its full potential with both customer satisfaction and financial returns for our shareholders. Troy will expand on our financial outlook, including our early look at sequentially delivering stronger aligner orders and company revenue in the first quarter over our recent fourth quarter results. And now I'll turn the call over to Troy, who will provide more detail on our Q4 and full-year financial results to present our full-year 2023 outlook. Troy?