Oral care company SmileDirectClub announced late last week that it will file for Chapter 11 bankruptcy as part of an organizational restructuring.
SmileDirectClub voluntarily filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas on Friday. The company stated that it does not expect the filing to disrupt patient access to its oral care offerings.
Co-founders Jordan Katzman and Alex Fenkell also committed to invest at least $20 million to bolster the company’s balance sheet to protect its near- and long-term operations. The company also has access to up to $60 million of additional capital upon completion of certain conditions, including the favorable conclusion of a marketing process.
“At SmileDirectClub, we are committed to delivering a premium customer experience and helping over 2 million customers achieve a smile they love. We are taking this step today to help ensure we are well positioned to build upon the success of our SmileMaker Platform and CarePlus offering and to continue our mission of providing safe, convenient, and effective oral care to our customers,” SmileDirectClub CEO David Katzman said in a statement. “This transaction is designed to ensure our future financial structure reflects the talent of our team members and the quality of our business, and I am excited about the future ahead. I look forward to continuing to work alongside leadership and our talented team to transform smiles with the reliability and quality our customers deserve.”
Prior to the decision of its founders to utilize different levers to provide the company with additional liquidity, SmileDirectClub had been struggling on the financial side.
The bankruptcy announcement came nearly two months after SmileDirectClub released its latest earnings report.
In Q2, the company recorded total revenues of $102 million, down 19% year-over-year, while tallying a net loss of $54 million during the quarter. The company’s net cash used in operating activities was a loss of $18 million, marking a $15 million quarter-over-quarter decrease, and its unique aligner shipments during Q2 2023 declined 21.6% compared to Q1 2023.
As part of that earnings release, SmileDirectClub implemented a $10 million founder funded revolving credit facility to be used for working capital and funding the SmileMaker Platform and CarePlus initiatives.
