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SmileDirectClub IPO: What You Need To Know.

Byline: Shanthi Rexaline

A medtech platform that was founded on the philosophy that "everyone deserves a smile" is headed for the public markets soon.

Will the offering make investors smile?

The IPO Terms

Nashville, Tennessee-based SmileDirectClub, Inc. is looking to raise $100 million in its offering, although the number of shares and the price range for the proposed offering have yet to be determined, according to the company's S-1 filing.

The company has applied to list its Class A shares on the Nasdaq under the ticker symbol "SDC."

JPMorgan and Citigroup are the lead book-running managers for the proposed offering, and Bank of America Merrill Lynch, Jefferies, UBS and Credit Suisse are also acting as book-running managers.

The company intends to use the net proceeds from the offering to purchase newly issued liability company units from SDC Financial, its subsidiary.

The Company

Founded in 2014, SmileDirectClub is a direct-to-consumer medtech platform that owns cutting-edge teledentistry technology and has a vertically integrated model.

The company's aligner treatment targets the underserved global orthodontics market. The company's business model bypasses the traditional orthodontic market in providing inexpensive orthodontic solutions delivered at the convenience of the consumer.

SmileDirectClub offers its services in four countries and has 5 million unique monthly web visitors.

About 85% of people worldwide have malocclusion and less than 1% are treated annually, according to the company. The global orthodontic market is estimated at $945 million.

The company has competition from a few smaller companies such as Candid Co., Smilelove and SnapCorrect, which collectively have limited market share in the direct-to-consumer clear aligner industry. It also faces competition from the traditional orthodontic company Align Technology, Inc. (NASDAQ: ALGN).

Align Issues

Align has an exclusive third-party supplier relationship with SmileDirectClub for supplying its non-invisalign clear aligners, with the agreement running through 2019.

When Align opened Invisalign retail stores, SmileDirectClub brought an arbitration against the former.

An arbitration panel found that Align breached a non-compete and other restrictive provisions applicable to the members of the SmileDirectClub. Align had to wind up its retail stores and sell back its stake in SmileDirectClub.

The Finances

SmileDirectClub reported revenue of $423.23 million for the fiscal year ended in December 2018, a 190% year-over-year increase. Revenue for the six months ended June 30 came in at $373.53 million, a 113.4% increase.

The net loss in 2018 widened from $32.78 million to $74.77 million. The loss for the six months ended June 30 was $52.92 million, wider than the year-ago loss of $33.81 million.

Related Links:

A Halftime Report Of The IPO Market In 2019

2019: A Record Year For IPOs?

Photo courtesy of SmileDirectClub.

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Date:Aug 23, 2019
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