Q3 2022 SmileDirectClub Inc Earnings Call
Greetings and welcome to the Smile direct club third quarter 2022 earnings call. At this time, all participants are in a listen only mode.
And answer session will follow the formal presentation.
Once you require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I would now let's turn the call over to Jonathan Fleet works, operator, and 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 Smile direct club. Please refer to the company's SEC filings, including the risk factors described there and 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'll refer you to our Q3 2022 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'm joined on the call today by Chief Executive Officer, and Chairman, David Katzman, and Chief Financial Officer, Troy Crawford.
Now I'll turn the call over to David.
Thanks, Jonathan and good morning, everyone. Thank you for joining us today.
I wanted to start off by congratulating the entire S. D C team for staying focused and delivering on both our key strategic initiatives as well as financial results.
Which are in line with the updated full year outlook that we provided on last quarter's call.
In spite of the macroeconomic challenges that we're all facing our team has remained tirelessly focused on delivering on our mission.
And that several wins throughout the quarter that further our progress toward democratizing access to a smile, each and every person loves I'm, making it affordable and convenient for everyone.
In line with our overarching theme of delivering transformative innovations to market through rigorous financial discipline.
I am pleased to report that our cost cutting initiatives from Q1 that paid off during the last quarter and we were we were able to improve year over year, adjusted EBITDA by 24 million and free cash flow by $29 million in.
In spite of a 31 million drop in revenue from Q3 of last year.
Troy will go into the details on how we were able to achieve these results during the quarter, but I do want to thank the team again for their tireless efforts during the past three quarters to further optimize our business operations.
With the leverage in our operating model. These results reflect a much more efficient organization that is better positioned to achieve profitability with modest topline growth.
During the quarter. The team has also made significant progress on our future growth initiatives and I'm pleased to announce that we were on track for our fourth quarter test market launch of our innovative patented smile make a platform.
Between our mobile <unk> scanning technology.
This exciting solution combines many technology developments, including the functionality digitally capture images with a mobile device and submit to our enhanced AI engine in order to develop an automated draft treatment plan.
This will allow our customers to buy their liners immediately after seeing both their new smile and how long it will take to straighten their teeth.
As we discussed on our last call. This will shorten the buying cycle from days or weeks to minutes and provide our customers with a great experience.
A small change of only 25 basis points increase in website sales conversions from our historical 50 basis points site conversion rate could drive an incremental $200 million of revenue and up to $160 million in EBITDA.
Many developments and initial learnings from the small maker platform launch will factor into our STC plus offering.
Which is our elevated service model that we have now officially branded a smile direct club careplus.
Our team's current focus is on our successful small maker platform launch and to leverage our learnings and our careplus launch into four test markets.
There are now targeted for early Q1 2023.
We are extremely excited for this pilot and the increased interest we've seen from professionals in the quarter. There was an even stronger foundation for a successful pure plus launched in the first quarter of next year.
The breadth of our developments in this quarter is not limited to just the small maker platform and our Careplus solutions.
We also rolled out our gen. Two retainer manufacturing technology that improves both retainer comfort and drives manufacturing and cost efficiencies.
With Gen. Two retainer manufacturing, we can now produce twice as many retainers with approximately the same head count.
As a refresher our gen. Two aligner manufacturing produces twice as many liners with approximately one third of the head count that was needed and Gen. One.
Our retail offerings are also gaining greater share of the consumer's bathroom countertop.
We released our new Countertop philosophy, which offers another premium convenience smile solution for customers available both from our online store and leading retail locations nationwide.
As we work to continuously expand our reach it is imperative that we continue to win the hearts and minds of the dental community and during the quarter, we were able to further solidify our credibility within the dental industry through membership and the dental trade Alliance.
This builds upon our existing memberships partnerships and affiliations within the dental community, including influential organizations such as the American Academy of clear liners.
The American Association of dental boards, the National Dental Association and women in DSO.
I also want to recognize our customer care team for their relentless efforts to provide our customers with the level of service and support that come to expect from our brands.
As we have discussed in our previous calls our contact center team was able to overcome some temporary challenges in the first quarter of 2022.
And quickly get back to industry, leading service levels, which are reflected in our updated third quarter NPS scores.
Our third party NPS score increased four points to 41 in our third quarter.
Providing further evidence that we are making progress towards becoming the aligner brand of choice and delivering a superior customer experience.
Finally, I am pleased to welcome us not only to the team as vice president of product.
As Matt brings a wealth of experience to us from his roles at Lyft Logitech and HP.
Where he led product marketing and innovation and incubation initiatives, which will be instrumental in executing our strategies to bring innovative solutions to the market.
As much as well as critical to our strategic direction of expanding our reach through our focused portfolio of transformative innovations.
While the platform. We have built was initially tailored to the needs of the DTC channel.
We recognize that fully unlocking the value of our business and truly expanding our reach requires looking at how the strategic assets. We have built can be leveraged across the industry to serve more customers globally.
We have built a robust manufacturing and innovative treatment planning infrastructure utilizing next generation technologies.
We recognize the potential value of these assets have for outside parties, who have approached us to discuss partnership opportunities for wholesale and or white label Aligner products.
We're proud to be the largest USA based aligner manufacturing with our headquarters here in Tennessee.
And with one of the largest three D printing fleets in North America.
We believe unlocking the potential for these partnerships is strong and additive to our current focus on building the future 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.
And we'll share more on this progress in the coming months.
In addition to the introduction of our patented Snowmaker platform expanding the reach of our solutions. We have continued to make progress on our Careplus pilot, which.
It allows us to effectively compete in the broader addressable market both in terms of teens and higher income demographics.
Our 3900 dollar Careplus solution that provides additional in person Doctor access in addition to our robust virtual platform.
We will leverage our growing partner network 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 for their treatment journey.
We recently held an event at our ADL facilities in Nashville, with some influential dental professionals and received overwhelmingly positive feedback on the care plus solution.
Including strong interest and a compelling value proposition offered to our partner network doctors.
The incremental 1800 and $50 from our standard offering provides additional economics for the added level of service and share time, often by the partner practice.
In addition to the economics of the care plus solution dental leaders have also expressed enthusiasm for the unique turnkey orthodontics as a service nature of our solution, which requires no incremental investment for equipment minimal product training and zero liability.
From an operations perspective doctors appreciate the ability to supplement our telehealth platform and the customers overall clear aligner treatment experience.
Also adding that teeth straightening solution at a competitive price across their customer base.
As I mentioned earlier the launch of this pilot is on track for early Q1.
Alongside care pluses to continue investment, we're making in our partner network program, which is currently the primary channels through which our customers will be able to receive our careplus offering.
As we continue to optimize and scale our partner network program, our care plus offering will be available to a broader audience, both in terms of geographies and demographics.
We ended the quarter with 950 active locations, which is a meaningful increase of 260 locations from the second quarter footprint.
While our team is focused on productivity within our existing partners. This increase in locations illustrates that the seasoning of our sales force and announcement of our Careplus solution has generated strong interest and have a partner network.
We have a growing pipeline for practitioners that we anticipate will continue to drive growth of our network and increase the breadth of our care plus offering across an expanded addressable market.
Our team has worked hard over the last eight years to bring our innovative technologies to the market.
Allowing customers to begin their journey to a healthy smile through multiple channels that have evolved from our historical direct to consumer model.
Our small shops resonate with customers I want to start with in an in person retail location.
But the next step, allowing customers to begin their smile journey from their own handheld device through our smile make the platform.
In addition customers that wish to begin and have access to an in person doctor can leverage our careplus offering through our partner network locations.
All of these channels are supported by our telehealth platform that provides 24 southern access to dental professionals.
Current results and maintaining access to a high quality of care.
We have built an integrated pure play clear aligner business that participates in all areas of the value chain and the growing market of consumers searching for teeth straightening solutions.
We are fully invested and committed to C N SBC reach its full potential.
With over 500 million globally that need and can afford our clear aligner solutions, we have a tremendous opportunity to grow our business to date, we've been able to help more than 1.8 million customers gets a smile they love while saving them over $5 billion. The investments we have made to develop our product portfolio and build strong brand awareness.
US in a great position to capitalize on this large market opportunity.
We recently added an entire innovations section on our Investor Relations website that provides additional details regarding our innovation strategy and product portfolio.
Including a five minute video presented by just a few of our incredible team members that are bringing our innovations to the market.
I encourage you to review these new materials on our website for more information regarding our strategic pillars, and how we are driving our company forward.
And now I'll turn the call over to Troy, who will provide more detail on our Q3 financial results and full year outlook.
Alright.
Thank you David.
I will jump right to the results for the quarter. Please be sure to review our supplemental materials posted to our Investor website, which provides additional details on everything I will cover.
Revenue for the third quarter was $107 million, which is a decrease of 15% sequentially and 23% on a year over year basis. This.
This was primarily driven by worsening of the macroeconomic conditions and increasing inflation, which has been particularly difficult for our core customer.
We shipped approximately 52000 initial of liners in the quarter down 16% sequentially at an ASP of 19 O two.
Our ASP decreased to $15 over the second quarter was primarily driven by FX conversion rates and some promotional activity in the third quarter.
Our year over year revenue results are largely reflective of what we have seen play out in the economy over the last 12 months.
Providing some details on the other revenue items implicit price concessions were 10% of gross aligner revenue in line with the second quarter.
We continue to see no significant deterioration in the quality of our receivables portfolio.
Any fluctuation in our quarterly IPC percentages impacted by the overall level of revenue recorded in the period as well as the rebalancing of reserves as we've mentioned in prior quarters, we maintain separate reserves for IPC and cancellations.
Analyzing regularly rebalance those reserves based on current information.
While our third quarter revenue was impacted by the continued macro headwinds affecting our customers. Our restructuring plan implemented in January is driving meaningful improvements in our cost structure and free cash flow.
Much like we saw in our Q2 results despite a $31 million year over year decline in revenue from the third quarter of 2021, we.
We improved EBITDA by $24 million and improved free cash flow by $29 million.
These improvements in EBITDA and free cash flow to show the discipline and financial rigor that we put in place since the beginning of the year in the face made very difficult macroeconomic environment.
Reserves and other adjustments, which include impression kit revenue refunds and sales tax came in at 10% across Atlanta revenue compared to 8% in the second quarter.
Financing revenue, which is interest associated with our small pay program came in at approximately $8 million, which is a decrease of 1 million from Q2 and down approximately $3 million year over year due to the lower accounts receivable balance.
Other revenue and adjustments, which include net revenue relates to retainers widening and other ancillary products came in at $18 million or 17% of total third quarter revenue.
Now turning to smile pay in Q3, the share of initial aligner purchases financed there are small pay program came in at approximately 60%, which is in line with historical levels.
Our small pay program is an important component to drive affordability with our customer base and overall the program has continued to perform well with our delinquency rates in Q3 consistent with prior quarters.
The fact that we keep a credit card on file and have a low monthly payment gives us the confidence in the small pay will continue to perform well.
Turning to the results on the cost side of the business.
Gross margin for the quarter was 70%, which was a 288 basis point decrease.
From the second quarter.
The lower margin rate was impacted by an inventory write down of $1 1 million related to our retail business.
Normalizing for this one time item yields a 71% gross margin in the quarter.
The continued strength of our margin rate. Despite the decline in aligner shipments showcases the significant leverage we have built in our business from a productivity enhancements along with other cost control initiatives.
Marketing and selling expenses came in at 58 million or 55% of net revenue in the quarter compared to 57% of net revenue in the second quarter.
The sequential decrease as a percent of revenue was primarily a result of a continued focus by our teams on driving increased marketing efficiency across platforms.
As a reminder, our typical seasonal trends, including an uptick in the fourth quarter in marketing and selling cost to support promotions during the holiday season, and capture sales driven by new year, New you demand in the first quarter.
So we do anticipate a sequential increase in marketing and selling as a percent of revenue during Q4, but we are remaining focused on maintaining continued efficiency improvements on a year over year basis.
A key focus for 2022 is seeking to find efficiency in our spend.
We have been experimenting more with pulping bandwidth targeted dark woods versus having an always on strategy and our top of funnel channels, such as TV, which.
It allows us to take advantage of our approximate 60% aided awareness and optimize our marketing spend.
It is important to keep in mind that digital marketing is a highly fluid process. It requires daily discipline of spend analysis assessment and reallocation.
With a targeted focus on efficiency and quality leads we are continuing to calibrate spend across a diversified platform base optimize continuously throughout the period to treat the right balance of high funnel leads and bottom funnel align ourselves.
On small shops, we had 117 permanent location as of quarter end and held 116 pop up events over the course of the quarter for a total of 233 location site with a net decrease of one shop location from the second quarter.
As we increase customer access to our solutions through both the scaling of our partner network channel and the upcoming launch of our Smile maker platform, we anticipate a reduction in the number of pop up events hosted in future quarters. We will continue to monitor our strategies to expand our reach that supports incremental demand without cannibalizing sales from existing channels.
We now have over 950, North America partner network locations that are active or pending training, increasing our footprint by 260 practices from Q2.
While the partner network team has been focused on optimizing productivity and preparing for our Careplus solution launched with existing practices. We're also seeing positive momentum from interested providers due to the seasoning of our existing sales team and interest from our announcement in the second quarter, our upcoming Careplus offering.
Our growing partner network footprint will not only scale our operations for our current submission trajectory, but will also serve as a key channel. When we began operating our careplus premium service offering to the market in 2023.
General and administrative expenses were $76 million in Q3 compared to 72 million in the second quarter.
Sequential increase from the second quarter was primarily driven by higher one time legal and consulting costs.
Excluding stock based compensation and depreciation and amortization costs G&A expense decreased 10 million compared to the prior year as a result of the cost savings initiatives taken back in January .
Other expenses include interest expense of $5 4 million of which $4. One thing is related to our new secured debt facility issued in April and 1 million is related to deferred loan costs associated with the convert we issued in 2021.
Additionally, onetime costs related to lease abandonment and impairment and other store and restructuring costs was $3 4 million, consisting primarily of costs related to our January restructuring action, including costs associated with severance and retention as well as store and facility closure costs related to our international operations.
We also incurred $1 3 million in other expenses, primarily related to the impact of unrealized foreign currency translation adjustments.
All of the above produced adjusted EBITDA negative $30 million in the third quarter, which is a $24 million improvement over the third quarter of 2021, despite a $31 million decrease in revenue.
Our third quarter net loss was $70 million compared to Q3 2021 net loss of 89 million.
Breaking out adjusted EBITDA regionally the U S and Canada came in at negative 22 million and rest of world adjusted EBITDA was negative eight months.
Moving to the balance sheet, we ended the third quarter with 120 million in cash and cash equivalents 202 million of net accounts receivable were $66 million drawn on our new $255 million debt facility with H P. S.
Cash from operations for the third quarter was negative $24 million or cash spent on investing for the quarter was negative 11.
Free cash flow for the third quarter defined as cash from operations less cash from investing was negative $35 million, which is a $1 million improvement over the second quarter of 2022 and $29 million improvement over the third quarter of 2021.
With our Q3 results in line with our Q2 updated guidance and with only two months remaining until year end, we are tightening and in some cases, raising the midpoint of our full year 2022 guidance range.
We are increasing the bottom end of our revenue range based on the solid Q3 performance and the continued traction that we're seeing with customers as we progress in the fourth quarter.
We're also pushing through some of the positive EBITDA impact we have seen from our cost savings initiatives that drove our Q3 results.
For full year 2022, we now expect to deliver.
Revenue between $470 million and 500 million.
Gross margin between 75% and 71, 5%.
Adjusted EBITDA between negative 155 million and negative $135 million.
Capex between $55 million to $60 million and our onetime costs from our reorganization action in January remains the same between 20 and $25 million.
Our yearend cash balance for the range of $110 million to $130 million, which includes an estimated $60 million to $70 million financing, primarily coming from utilization of the existing H P. S facility.
We continue to maintain focus on our cost structure and executing on plans to drive additional efficiency to offset the impact of this challenging macroeconomic environment those.
Those efforts are driving meaningful results to the bottom line evidenced by our improved year over year, EBITDA and cash flow results.
We are excited about the future of our company with the pending launches of our new small micro platform and care plus solution.
Innovations are just the beginning of what's to come from Smile direct club stem from our robust innovation portfolio.
We are leveraging the proprietary end to end business model that we've built to lead the industry on many fronts.
Thanks to the investments we have made in our vertical integration, we are well positioned to participate across an increasing number of channels in the clear aligner category and ultimately drive growth in the future.
With that I would like to turn the call back over to David for some closing remarks. Thanks.
Thanks Troy.
I am pleased with the financial results that we delivered this quarter and look forward to our upcoming launch of our smile make or platform in the fourth quarter and the release of our care plus offering in early 2023.
We will continue to update the market with additional insights regarding these initiatives along with any of our other exciting innovations and achievements of key milestones.
Finally, we are targeting an investor day in late March 2023, which we will host our smile lab facilities in Nashville to provide comprehensive.
Prehensile insights regarding our company from our business leaders, along with tours of our manufacturing facility.
Thank you to everyone for joining today with that I'll turn the call back over to the operator for Q&A.
Thank you we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
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For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Our first questions come from the line of Robbie Marcus with JP Morgan. Please proceed with your questions.
Hi, This is actually Lili on for Robbie. Thanks, So much for taking the question maybe I'll start.
No it might be a little bit early but there's obviously a lot of moving pieces in terms of macro and all these new product updates you have planned. So are there any early thoughts you can share on 2023.
In terms of how you're thinking about these dynamics and how that should affect the top and bottom line growth next year.
Yeah.
Yes, I can take that one.
We're really not going to give guidance on this call for 2023.
The two big initiatives aren't even in the marketplace, yet small maker platform and our STC care plus.
We did.
Revise our guidance from last quarter increase.
Increasing the bottom range and what we're seeing is from our core business. We're seeing some market efficiencies that the team has done a really nice job both the analytics team and the marketing team.
As far as data modeling in this very challenging environment. We're now in the fourth quarter of this high inflation period and it took some time, but we are finally seeing some breakthroughs in the modeling of targeting the right consumer in this challenged market and that's how that's how you have to look at it you know the demand is still down.
We've seen it from competitors we've seen it all.
Any kind of discretionary spending, but what we've been able to do through a lot of good data work data science scientists and our analytics team is to figure out and target the right customer who is buying in this environment and that's what we saw and that's why we revised our guidance. So I can give you guidance through the end of the year very favorable we're very excited about it.
But as far as 2023 of how some of these new initiatives are going up.
Effect that we plan on doing that at our next quarterly call.
Got it and just to follow up on that can you talk a little bit about on how these macro trends that affected you in the U S versus internationally and how we think how we should be thinking about growth by geography, moving forward and what does it take for you to get back to that previous.
Strategy, a more aggressive international expansion is it improvements in the macro is it competition. So any color that would be helpful. Thanks.
So overall, we're seeing the same effect in all countries. We're in six countries right now the same high inflationary period, it's not unique to one country, it's not worse not better it's pretty much universal. Good news is that what we've seen through this this targeting are in.
In our marketing initiatives and this quarter is it has.
Ben.
Let out amongst all countries. So it's not unique to the U S that we found this this marketing efficiency, we're seeing it in all countries. So that's good news as far as the ability to make our marketing dollars work harder.
But troy unless you want to add anything there, but as far as the macros and international growth.
We're not focused on international growth right now we've got our six countries, we want to get these two initiatives launched.
And work out all the bugs and get efficiencies from from both the smile make our platform an STC plus and once those are in the market fully baked into the market. We can then look again at some international growth that should be a little bit easier with small maker.
Because of how we've shortened the funnel.
And the need.
To start with a kit or at a smile shop. So as we look back at those countries and I think that's in outer years as once we.
Get all of these new initiatives into the marketplace, it should be less costly and a little bit easier.
To get back on the international expansion.
I would just say just overall from a U S versus international perspective, we're still running in that 85%, 15% split with international being about 15%. So I'd say, it's been pretty consistent throughout.
Throughout the year once we made the changes coming out of 'twenty one.
Okay.
Got it that's helpful. Thank you.
Thank you. Our next question is coming from the line of Michael Raskin with Bank of America. Please proceed with your questions.
Hi, Thanks, you have Peter on for Mike Here can you just discuss that step up and burn implied fourth quarter or is that just primarily driven from the knee you'd be marketing spend.
I just wanted to confirm that any color there.
Youre talking about the quarter over quarter.
Yes, yes.
Yes, it was.
Slightly up and I think it's just the results of the individual month, our G&A expense was up a little bit on legal costs, but we were able to offset most of the.
Most of the increase of that by by other cost savings and things of that nature. So.
I think in Q4, if you back into what our guidance is for the full year, you can kind of see what that cash burn looks like what are the things that we talked about was that marketing spend will go up a little bit in Q4 getting ready for the new year, New you. We expect obviously volume to be up in Q1 from Q4.
Bit of spend in Q4 related to marketing, which dropped a little bit of the of the cash burn, but I think when you look when we look at this year versus last year, you can see significant improvement in both our EBITDA and free cash flow. Despite the despite the declining sales.
Okay. Thank you that was helpful. And then just any sort of framework or color you can provide on how we should be thinking about.
Contribution from some of the initiatives plus next year.
So overall for Q4, we really havent baked anything in for the new initiatives I would say, we've got an international launch related to the small maker platform.
Probably not a lot of benefit there just because.
It's a smaller country and as we launch in the U S. It'll be mid to late in the in Q4, and therefore, probably won't have a big impact on Q4 as well, we really expect that to be driving our 2023 guidance is the result of that based on conversion rate improvement and things of that nature.
Okay, great. Thanks.
Thank you. Our next question will come from the line of Jon Block with Stifel. Please proceed with your questions.
Hi, guys. This is Tom on for Jon Thanks for the questions. If I can start on the <unk>.
Long term plan or the ORP and apologies if I missed this but are those targets still intact I don't know if I saw that in the slides and then.
Maybe as a tack onto that do you still feel confident in generating positive EBITDA in 'twenty, three and positive free cash flow in 'twenty four I think.
Those were on prior calls maybe the targets, but any color there just on the the long term targets.
So just to answer the first part of your question, we didn't address the long range plan.
Revised guidance in Q2, I'd say, it's long range is exactly has lifted so I think as we come out of 2022, that's definitely going to impact.
And guide what we'll do for 'twenty three as far as.
As far as guidance goes.
2022 will definitely be the jumping off point.
<unk> and 'twenty three will be very dependent on how these initiatives go so those small maker a platform launch in Q4 and then in Q1, we will have the launch of STC plus.
As well so both of those things will be very impactful for 'twenty three.
More innovation in the pipeline as well I think will also help help impact those results and cost control initiatives will be in place as well. So I think what you can think about for 'twenty three 'twenty three guidance is that.
However, we ended up getting on sales, we'll look for leverage in the operating model and certainly have a cost structure that fits.
Revenue structure.
Okay got it so just TBD on on some of those positive EBITDA targets it sounds like.
That's right I mean, if you think about those things they have very high flow through to the bottom line. So we really want to get some idea of how those.
Initiatives launch before we give adjustments to our long range guidance.
Got it that's helpful. And then if I can pivot to competition. You know you had one key player somewhat recently exit the DTC market.
I guess, what are you seeing out there from some of the other DTC competitors, maybe around things like pricing and promotional strategies and then just as a tack on to that you guys took some price this year can that be a lever next year in 2023.
Would love your thoughts there thanks guys.
Yes, I can take that one as far as DTC competitors like I said candid exited the DTC market.
They're really only one that known competitor that's life and.
We really don't see a lot from them, they're not vertically integrated like we are they don't have treatment planning software. They don't manufacture they don't have the captive finance a lot of the innovations in technology that we built it really all go to market his company.
No shops and.
We just haven't seen a lot of them recently.
Not really sure what the plans are but then supply with since they acquire them, but I'm sure we're going to hear on their upcoming earnings call.
Yes, we really think we have a very unique offering.
We've got this fully vertical vertically integrated telehealth platform. We're now bolting on a new service offering where we can have for our customers starting to local G. P office and the combination of two is very powerful as far as the price increase that that is on the table, we will see where the the macro goes in 2012.
Three another $100 price increase will get us about four 5%. If we went up to $21 50, we're still at a low low price leader.
With a model that where do we go to market with.
And we were effective at keeping the monthly.
$9 for a smile pay customers at the same rate. We just added on two extra months. We can do the same thing here. If you want to go to 28 months at $89 a month.
It is a possibility we really want to see the biggest driver is going to be the smile maker platform as it gets into the market and we've said before on a 25 basis conversion improvement.
Looking at 200 million at 80% plus margins on the aligner product most of that flows all the way through so very effective cash flow EBITDA.
And so we're gonna know shortly how that does in the market and that'll that'll answer a lot of the questions that youre looking for here on can we get to positive EBITDA in 'twenty three can we get the cash flow by 24, even sooner, possibly depending on the conversion curves with small maker.
And then do we need to take a price increase or can we hold price based on the conversions, we see with some of these initiatives.
Very helpful. Thanks, Dave.
So.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next questions come from the line of Laura Champine with loop capital markets. Please proceed with your questions Hi.
Hi, Thanks for taking my question I noted that hey, it looks like other revenue as a percentage of total has increased sequentially from 14% to 28% is that the right math and what's driving that.
Part of that is certainly the retail business, we had a spike in retail a couple of quarters ago, I think that flowed through a little bit, but that's really the majority of it a retainer revenues in there as well and we've seen nice flow through on retainers, just as our overall customer base has increased.
So I think yes, youre on the right track there.
Got it so it mostly to the oral care line, that's that's working.
Thank you.
Okay.
Thank you there are no further questions at this time with that this does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.