SmileDirectClub from 2014 to the IPO: the model as its own filings described it

What it says#

The founding date is the company's own. Its press release of October 18, 2017 ends with the standard boilerplate: "SmileDirectClub was founded on July 16, 2014 on a simple belief: everyone deserves a smile they love." The same release names Alex Fenkell and Jordan Katzman as co-founders, and says that "In July 2016 Align Technology (NASDAQ: ALGN), owner of Invisalign, entered into a supply agreement with SmileDirectClub, acquired a 19% stake in SmileDirectClub and gained a seat on its Board." The Form S-1 filed two years later describes both men as co-founders who had earlier built two e-commerce ventures together before "shifting to the direct-to-consumer strategy model via SmileDirectClub." The company was headquartered in Nashville.

The S-1 of August 16, 2019 is where the model is set out in the detail a dentist should read. The customer journey has two front doors: "a member books an appointment to take a free, in-person 3D oral image at any of our over 300 retail stores ('SmileShops')," or "orders an easy-to-use doctor prescribed impression kit online, which we mail directly to their door." From there: "Using the image or impression, we create a draft custom treatment plan." Then, "via SmileCheck, a state licensed doctor within our network reviews and approves the member's clinical information and treatment plan. If the member is a good candidate for clear aligners and decides to purchase, the treating doctor prescribes custom-made clear aligners, which we then manufacture and ship directly to the member." SmileCheck also handled monitoring. There is no in-person examination by the prescribing doctor anywhere in that sequence.

Price and financing were the product. The S-1 states "professional-level service and high-quality clear aligners at a cost of $1,895, up to 60% less than traditional orthodontic solutions." Roughly 65 percent of members financed through SmilePay: "a $250 down payment and an average monthly payment of only $85," on terms the filing describes as "an APR of approximately 17%," with "an associated delinquency rate of approximately 10% of revenue for the year ended December 31, 2018," and no credit check. SmilePay receivables were about $174.2 million at the end of 2018 and $275.1 million at June 30, 2019. The company also offered a Smile Guarantee, described as "a refund or additional treatment, at no extra cost, if they are not entirely satisfied."

The regulatory risk is stated by the company itself, and it is the clearest short summary of the doctrine in any of these documents: "There is a risk that state authorities may find that our contractual relationships with our doctors violate laws and regulations prohibiting the corporate practice of dentistry, which generally bar the practice of dentistry by entities." The filing goes on to say that the Georgia Board of Dentistry "passed a new rule that requires a licensed dentist to be present when 3D oral images are taken by a dental assistant," that the Board of Dental Examiners of Alabama interpreted its rules to require direct supervision for digital oral images, and that "in both Georgia and Alabama, we have filed lawsuits in Federal court against the dental boards and their individual members alleging, among other things, violations of the Sherman Act." It also notes that a national dental association had filed a citizen petition with the FDA about prescription-only requirements.

The money. Revenue went from $146.0 million in 2017 to $423.2 million in 2018, with net losses of $32.8 million and $74.8 million in those years. The IPO closed on September 16, 2019: 58,537,000 Class A shares at $23.00, about $1.28 billion net to the company after underwriting costs and repurchases. Revenue peaked at $637.6 million in 2021. The fiscal 2022 Form 10-K, the company's last, reports revenue of $470.7 million, a net loss of $277.9 million, 125 SmileShops, a Partner Network of over 1,000 dental practices, approximately 2,700 team members, and "over 1,900,000 customers helped to date." What happened after that is documented separately in the entry smiledirectclub-wind-down-2023: Chapter 11 on September 29, 2023, a wind-down announced on December 8, 2023, and conversion to Chapter 7 in January 2024.

Who it applies to#

Every general dentist and orthodontist, because the model was built to route around the operatory. The S-1's stated rationale is access: "Over 60% of counties in the U.S. do not have an orthodontist's office," and the company said it had treated members in more than 80 percent of those underserved counties. Whatever a reader thinks of that argument, it is the argument that moved several hundred thousand people into tooth movement without a chairside examination, and those people are patients of record somewhere.

Practices that took part are covered too. By 2022 the company was recruiting a Partner Network of over 1,000 dental offices to take the scans, and offering a "collaborative model" in which "their regular dentist's office will collect the same patient information that our SmileShops and popup locations collect for subsequent review and assessment by one of the dentists or orthodontists in our affiliated network." That is a materially different arrangement from treating your own patient, and the contract terms for it are not in these filings.

Front desks are covered for a plainer reason: this is where the price question in your consult room came from. A patient comparing $1,895 with $250 down against your fee is comparing two different things, and the filings are a fair place to see exactly what the cheaper thing included.

What changed#

Before 2014 tooth movement in the United States was, as a practical matter, sold by the doctor who examined the patient. The S-1 documents the separation of those roles into a manufacturer, a retail network, a remote prescriber, a finance company and a monitoring app, all inside one corporation that also sold the aligners. Align Technology's involvement, a supply agreement and a 19 percent stake in 2016, meant the incumbent supplied the challenger for a period; Align's own patent position is covered in a separate entry here.

The second change was the fight it started. The 2017 release is the company on the offensive against the American Association of Orthodontists, comparing the dispute to taxi regulators against ride hailing. The 2019 S-1 shows the same fight in the formal register of a risk factor: two state dental boards, two federal lawsuits, one FDA citizen petition. That is the live tension between state licensure and a national direct-to-consumer model, and it did not end with this company.

Where the source is#

The primary documents are on EDGAR under SmileDirectClub, Inc., CIK 0001775625: the Form S-1 registration statement of August 16, 2019, which carries the business description, the price, the SmilePay terms and the corporate practice risk factor; the final prospectus on Form 424(b)(4) of September 13, 2019; the Form 10-K for fiscal 2019, which records the IPO share count and price in the notes; and the Form 10-K for fiscal 2022, the last annual report, for the closing revenue, loss, SmileShop and customer figures. The July 16, 2014 founding date and the Align Technology stake come from the company's own press release on PR Newswire dated October 18, 2017, which is the company speaking about itself and is cited that way. The SEC asks that automated requests identify the requester, which is how these filings were fetched for this page. Nothing here is an evaluation of the treatment.