SmileDirectClub has maintained substantial growth over its seven-year history, and growth investors have benefited greatly from the company’s quick expansion. Going forward, investors will want to see continued new growth — which is exactly what the company’s recently announced Lifetime Smile Guarantee™ program is set up to do.
SmileDirectClub Has Grown Since Listing on the Nasdaq
SmileDirectClub issued an initial public offering (IPO) on the Nasdaq stock exchange in 2019, and the company was able to use the funds raised from this offering to invest in growth opportunities.
A significant portion of the capital raised from the IPO went into building a state-of-the-art production facility in Nashville, Tennessee. The facility was necessary to produce SmileDirectClub’s Comfort Sense aligners, which provide a competitive advantage by offering greater comfort during wear than their SmileDirectClub’s predecessors and other competitors’ aligners. The Nashville facility has an enormous production capacity and remains one of the largest 3D printing facilities in all of North America.
Some of the capital raised was also put toward expanding into new markets. The company initially targeted only the United States’ market, but it now has operations in four different continents. Customers in Asia (Hong Kong), Australia (Australia and New Zealand), Europe (Austria, Germany, Ireland, Spain and the United Kingdom) and North America (Canada and the United States) can purchase Comfort Sense aligners.
SmileDirectClub also invested in domestic growth around the time of its IPO. Domestic investment was multifaceted, but one notable example was a partnership with MetLife. The MetLife partnership qualified SmileDirectClub as an in-network provider for the insurance company’s approximately 20 million dental members at the time.
Investors Want to See Continued Growth
To continue realizing returns on their investments, investors will want to continue seeing growth going forward. They’ll be watching for growth in Q1 2021 numbers when SmileDirectClub reports earnings on May 10, and they’ll want to hear about plans to increase revenue going forward. To maintain SmileDirectClub’s position as a desirable stock, the company will have to continue showing growth throughout the foreseeable future.
Continued Domestic and International Expansion Will Provide Growth
Some of SmileDirectClub’s growth will undoubtedly continue to come from expanding both domestic and international operations.
Within the United States, SmileDirectClub’s leadership has estimated the potential market for aligners to be around 125 million people. This includes teenagers, three-quarters of whom traditionally get braces from orthodontists but may be good candidates for aligners. SmileDirectClub has only penetrated about 10 percent of this specific demographic thus far, leaving plenty of room for future growth.
Outside of the United States, SmileDirectClub continues to open markets in new countries. It most recently introduced telehealth aligner solutions into Mexico, beginning to tap into a large market throughout Latin America.
As SmileDirectClub further infiltrates the most promising domestic and international markets, however, expansion into new territories won’t be enough to sustain growth at levels that investors want to see. The company will also need to create new revenue streams — something they hope to capture with the Lifetime Smile Guarantee™.
Lifetime Smile Guarantee™ Generates Recurring Revenue Through Retainer Sales
The Lifetime Smile Guarantee™ provides customers with a free yearly aligner, so long as a dental provider deems another aligner necessary, and the customer remains eligible for the guarantee. To remain eligible, customers must stay a Club Member of SmileDirectClub. Remaining a Club Member requires purchasing two retainers per year.
Thus, customers must purchase two retainers per year to maintain their Lifetime Smile Guarantee™ protection. The purchase of these retainers will serve as a new source of revenue that increases growth without expanding into new markets, and the revenue has some particularly important features.
The annual retainer purchases represent a subscription-based revenue model that will turn one-time customers into repeat buyers and extend customer lifetime value. The retainers will also become more valuable to customers as they age, and their teeth are more prone to shift from the desired positions. Thus, the incentive to remain within the subscription program will only increase with time.
Subscription Revenue Should Please Investors
The addition of a subscription revenue model should please investors. This is a business model that has worked for many other companies, and the addition of the Lifetime Smile Guarantee™ to incentivize continued purchases shows that SmileDirectClub continues to innovatively grow with investors’ interests in mind.
SmileDirectClub is a telehealth company that specializes in teeth aligners. The company was founded in 2014 and listed on the Nasdaq in 2019.
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