SmileDirectClub, Inc. (NASDAQ:SDC) Q4 2019 Earnings Conference Call February 25, 2020 4:30 PM ET
Alison Sternberg – Vice President Investor Relations
David Katzman – Chairman and Chief Executive Officer
Kyle Wailes – Chief Financial Officer
Susan Greenspon Rammelt – Chief Legal Officer
Conference Call Participants
Robbie Marcus – JP Morgan
Jon Block – Stifel
Glen Santangelo – Guggenheim
Alex Nowak – Craig-Hallum Group
Brandon Couillard – Jefferies
John Kreger – William Blair
Erin Wright – Credit Suisse
Nathan Rich – Goldman Sachs
Michael Ryskin – Bank of America
Kevin Caliendo – UBS
Greetings, welcome to the SmileDirectClub Fourth Quarter 2019 and a Year-End Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instruction]. Please note, this conference is being recorded.
I will now turn the conference over to your host, Alison Sternberg, Vice President Investor Relations. Ms. Sternberg, you may begin.
Thank you, operator. Good afternoon. Before we begin, let me remind you that this conference call includes forward-looking statements. For additional information on SmileDirectClub, please refer to the Company’s SEC filings, including the risk factors described there in. 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 refer you to slide two of our presentation, which can be explained on our website or 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 am joined in the call today by our Chairman and Chief Executive Officer, David Katzman; and our Chief Financial Officer, Kyle Wailes.
Let me now turn the call over to David.
Thanks, Allison, and good afternoon everyone. Thank you for joining us on the call today. 2019 was a major milestone year for SmileDirectClub, and I am extremely proud of the progress our team has made over the course of that time.
As I said before, we are in the very early innings of a massive untapped opportunity and before I go into the details associated with our adjusted EBITDA shortfall in the quarter and our associated thoughts, on 2019 and beyond, I’d like to start by walking through some key highlights from the past year.
In 2019, we shipped roughly 453,000 unique line orders of 75% year-over-year, and an ASP of $1,771, which we achieved $750.4 million in total revenue of 77% year-over-year. We saw a 790 basis point improvement year-over-year in gross margin, which came in at 76.2%. We laid the platform for global expansion and successfully entered five new countries outside North America including Australia, New Zealand, the United Kingdom, Ireland and Hong Kong, which strategically positions us for expansion across Europe and Asia.
We continue to cultivate relationships with major insurance providers such as Aetna and UnitedHealthcare, for in-network orthodontia coverage. Developed strategic partnerships with retailers such as Walgreens and CVS, we launched a very innovative nighttime-only clear aligners, launched an oral care product line in approximately 3,800 Walmart locations, which adds a new customer acquisition channel and increases the life time value of our club members.
And lastly, we completed our initial public offering. In isolation by any standards, it was another incredible year. Despite these accomplishments, we cannot ignore that we fell short our justice, even up goals in a quarter which came in a negative 60 million, resulting in a negative 108.2 million for the full year. This shortfall due to a combination of factors, most notably inefficiencies in our manufacturing, operations and inefficient back office process driving higher than expected general and administrative expense. We’ll elaborate on this later in the call.
That said, I think it’s important to keep things in perspective. We grew to a $750 million company with approximately 6,300 team members, across seven countries in just a few short years. Revenue in 2016, it was only 22 million and we had 6 SmilesShops. That being said, we own these results, we understand why we missed our profitability goals in the quarter, and we have plans in place to address it.
I’ll highlight a few of the areas which contribute to a negative EBITDA and Kyle will specifically address the Q4 profitability miss. Substantial investments in our infrastructure to support our continued growth in international expansion over the next few years, continue to elevated legal and lobbying expenses to defend our mission against anti-competitive behavior and to protect our position as a disruptive innovator in the oral care space.
Inefficiencies in our manufacturing facilities caused by a delay in automation of our manufacturing and treatment planning operations, aggressive hiring plans to support future growth, inefficient back office processes driving higher than expected general and administrative expenses.
Additionally, as noted that our website in the fourth quarter of 2019, we experienced shipping delays which had a broad impact on customer experience and shipping delays occur in LA impacts the time it takes for November to receive their liners that also causes downstream impacts for our customer care team as well. This impacts overall member experience as we saw in our NPS score in the fourth quarter, which dropped a few points, but it’s still above 50.
As CEO of this business, I am faced with numerous decisions every day. And as Kyle will elaborate upon later, one very difficult but important decision, they are making given our club members experience profitability in Q4 is to control our growth in order to provide the best consumer experience and reduce our costs to be adjusted EBITDA profitable by Q4 of 2020.
Our customer experience is the cornerstone of our business and we cannot sacrifice this in order to maintain our historical growth rates. Now, it is a critical time for us to do this to ensure we are providing the best experience to every club member while also positioning us to capitalize on our global opportunity. To accomplish this objective and achieve these savings, we are focused on the following.
Continued advancement in automating and streamlining our manufacturing and treatment planning operations to allow us to stay ahead of consumer demand, rightsizing our production teams, which can flex up and down to conform to our business priorities and long-term growth rates, continued discipline around the deployment of marketing and selling dollars including a focus on pushing more demand to our existing SmileShop network, which has already been scaled in anticipation of future demand and overall rigorous cost discipline across the business.
With the past three years, we have overinvested to own the category and dominate the space, and we have accomplished this with over 50% of the awareness and a membership base that positions us as one of the largest providers of clear aligner therapy in North America. These investments will pays huge dividends as we expand globally in the future.
As I stated up, 2020 is a year controlled growth SmileDiretClub and we see this year as our opportunity to fortify the foundation of our business, position us for strong revenue growth and margin expansion overtime. We have tremendous in economics with over 70% gross margins and no pricing pressure as the category leader. For full year 2020, we expect the following.
Revenue between 1 billion to 1.1 billion, representing growth of 40% year-over-year at the midpoint of the range and adjusted EBITDA for the fiscal year is expected to be between negative 50 million to negative 75 million including turning adjusted EBITDA positive by Q4 2020.
Beyond 2020, we believe the actions we are taking now will position us to achieve the following over the next five years. Average revenue growth of 20% or 30% per year for the next five years, adjusted EBITDA margins of 25 to 30% by the end of that time period, driven by achieving positive adjusted EBITDA by the fourth quarter this year, 2020 and ramping up each year thereafter.
Our leadership and value proposition in the market provides us an opportunity to grow faster than this; however based on the current maturity of our business, we are making the strategic decision to further enhance our continued focus on our customer experience and our infrastructure, which we believe we can do while maintaining the growth rates noted above. Kyle will walk through these estimates in more detail later in the call.
Turning to growth drivers that will enable us to achieve these results, make no mistake about it we are a growth company and will continue to be a growth company in the future, albeit it at a more controlled, profitable pace. Over the course of 2020, we will continue to execute against a significant opportunity to grow beyond the approximately 850,000 plus members soon to hit our millionth customer, we’ve got smile as they love using our platform.
In particular, we will continue to improve conversion and member experience at every touch point across our acquisition funnel. We remain focused on expanding our club members across all age demographics especially teens, who represent approximately 5% of our business today, at two thirds of the total industry case starts. We’re also focused on leveraging our aided awareness by acquiring club members and new acquisition channels, which is our partnership with Walmart and our entrance into wholesale.
In both cases, we are expanding the lens of the business to accommodate different our rack for both consumers and clinicians, into the case of Walmart also increasing the lifetime value of our club members. International expansion as a key growth driver for us and now is the right time for us to continue to expand quickly. As we’ve alluded to before, approximately 75% of the market opportunity is outside of the U.S. and we continue to focus on expanding our international footprint.
Since the middle of 2019, we have entered five new countries, added two in 2020 already with Hong Kong and now Germany, and we expect this pace to continue. We have a robust international roadmap with an extremely strong and effective international team, with plans to launch into additional regions throughout this year. We’ve continued to refine and improve our new market launch strategies, execution and started early uptake in these new geographies further demonstrates our unique value proposition is successfully meeting a significant unmet need across the globe.
2019 was a great year for innovation and we will remain focused on product development. As mentioned in December, we launched an expanded suite of oral care products including our patent pending toothbrush, Smile Style water flosser, bright on premium whitening and sensitive and whitening toothpaste. In late July, we launched our very innovative nighttime clear liner product, which enables our club members to straighten their teeth only while they sleep and there’s more to come.
We continue to deploy resources towards our research and development efforts and support of lengthening our relationship with our members while also enhancing our recurring stream of revenue and most importantly, continuing to improve our clinical outcomes with our better is better approach. I spoken about the competitive moats around our business model, which are significant individually over selectively make it incredibly difficult for anyone to replicate what we have built.
Calling a few here, our mission driven brand with a positive customer experience, our omnichannel approach, our exclusive affiliated doctor network, our SmilePay cap to financing, a completely vertically integrated med tech platform, delivering a true end to end consumer experience with six issued patents and dozens pending in our manufacturing and customer frequent plane operation.
These most especially important as they allow us to stay nimble and provide many levers for us to grow profitably as our business matures, and as we continue to execute against our mission to democratize access to smile each and every person loves by making it affordable and convenient for everyone.
Before I conclude, I do want to take a moment to address a topic that is very important to me. As a healthcare business, nothing is more important than the safety and efficacy of our product. And given the misinformation about our product and clinical outcomes, I felt it was important to take a moment to address this. Our SmileDirectClub, clear aligner therapy is safe and efficacious.
With over 850,000 club members, including coworkers, personal friends of mine, my nieces, nephews and countless other relatives, our model is safe and effective, providing great outcomes for our club members and thereby transforming their lives for the better. The data speaks for itself. We have over 65,000 Google reviews and a 4.9 star rating and approximately 170,000 normal reviews on sdc.com for the 4.6 star rating.
Our network of experienced and skilled dentists and orthodontists to treat over 850,000 patients find the same standard of care that they do in their brick-and-mortar offices. As with any medical procedure, there are sometimes risks that the procedures is not go completely as plans are there as a result of patient compliance or other individual factors. But as is the case in our traditional brick-and-mortar practice, our doctors do the best to correct any contraindications.
Our Mid-Course Correction refine aligners are in line, if not better than industry norms and our satisfaction ratings are better than industry norms. Approximately 5% of our club members ask for some sort of refund and the vast majority of instances concerns are not clinical in nature. Our NPS is among the best healthcare consumer brands in the world.
Looking at all of this collectively, it clearly demonstrates that our product is safe and effective. That said, we will continue to fight the misinformation about our products, our platform, and the clinical care provided by our affiliated network of dentists and orthodontists, all at the same time remain laser focused on improving the experience for club members for investments in technology, product innovation, and address consumer pain points.
Our mission to defend access to care relies upon us standing up to those who are threatened by what our company represents, and the access to care we provide. Consumers deserve a safe, affordable, and convenient option. If it weren’t for SmileDirectClub, many of our club members would not be able to improve their smile and their confidence through the high prices in the marketplace, and the fact that over 60% of counties in the U.S. don’t even have an orthodontic office.
Lastly, I would like to announce that you may be building an independent clinical advisory board, made up of some of the best orthodontists and dentists around the globe that will report directly to our Board of Directors. We expect this advisory board to help set industry standards for teledentistry quality measures, advise ensuring quality data and help with strategies for continuous quality improvement among other things.
As entrepreneurs and disruptors, we fight every day against the backdrop of this information, industry backlash and continued attempts on the part of big dental to engage in anti-competitive behavior. None of this would be possible without the support of our team members, club members and investors, and we thank you for your support.
Now, I will turn the call over to Kyle, who will provide a more detailed review of our Q4 results and walk you through our financial outlook.
Thank you, David. As David mentioned, while we are pleased with our accomplishments over the course of the past year, our fourth quarter results have provoked a deliberate set of strategic decisions impacting our plans for the ensuing year and beyond.
To ensure long-term global growth, we need to provide the best customer experience and this can be accomplished in the short term by controlling growth, managing profitability, strategically selecting our international footprint, and making very targeted investments. Before I address our outlook for 2020 and beyond, I would like to walk through our result for the quarter and provide some additional context.
Turning to the income statement, revenue for the quarter was 196.7 million which represents an increase of 53% of the fourth quarter of 2018. This increase was driven primarily by a 50.6% year-over-year increase in aligner shipments, which came in at 115,042. ASP came in at 1,771, which was down 1.4% year-over-year. It’s important to highlight that we actually would have come in at the high end of our revenue range and we’ve been able to keep pace with the orders in the quarter.
But doing a certain challenges associated with the pace of fully automating our manufacturing capabilities, we were enable us to fulfill the volume of demand. As I will address more fully in a moment, automating our manufacturing and treatment plan facilities is one of our top priorities in 2020 to improve the member experience and reduce their costs.
Turning to expenses and margins, gross margin for the quarter was 73%, a 200 basis point improvement versus the prior year. This was driven by 100% in-house in manufacturing. Sequentially, gross margin was down by 415 basis points, which was largely due to certain manufacturing and efficiencies that David alluded to earlier. This decrease quarter-over-quarter contributed half of our mid on adjusted EBITDA in the fourth quarter of 2020.
I want to elaborate on what we mean by manufacturing and efficiencies. Our manufacturing facilities are personally automated today. While components like thermoforming and aligner trimming are automated, there’s still heavy labor component to operations. Oftentimes, as an arcs moves down the production line, there’s rework and scrap involved, which causes lower production output for the same labor spend and thereby higher cost per aligner. This is what you saw in the fourth quarter of 2019.
Out IT, quality and operations teams understand how to fix this problem and are actively addressing it. Part of achieving positive adjusted EBITDA in the fourth quarter of 2020 is addressing this problem which we have incorporated it into the back half of 2020. Marketing and selling expenses we’re in line with our expectation at 141 million or 72% of net revenue in the quarter and for the 54% of net revenue in Q4 of 2018.
Sequentially, marketing and selling as a percentage of revenue improved by a 100 basis points. During the quarter, we continue to make significant strategic investments in launching international markets and building on our already strong brand recognition in the phase of anti-competitive behavior against their business model.
General and administrative expenses were 94.5 million in Q4 or 44.2 million in the prior year period. Excluding stock based compensation in onetime costs G&A expenses were at 14 million sequentially. This increase quarter-over-quarter is over half of our adjusted EBITDA missing the quarter and as part of the reason for the pivot to rationalize our costs in 2020 and beyond.
Our legal and lobbying expenses increased 18% sequentially, quarter-over-quarter as we stated before, you can expect to see elevated legal spend continue as we maintain our proactive and defend our mission and supportive consumer access to care. Looking at G&A overall, it’s important to note that our G&A structure was conceived based on aggressive higher plans designed to conform to an earlier revenue outlook for 2020.
Additionally, we saw higher than expected spend across the following categories, legal technology, consulting, D&O insurance coverage, and international expansion. Some of these were one-time in nature such as D&O IPO insurance, stocks compliance and lease accounting standards. All the other expense items are associated with the need for broader cost controls that we will be implementing in 2020 and beyond.
As David mentioned earlier, we’ve grown to 750 million in revenue with approximately 6,300 team members across seven countries over the course of just a few years. That’s rapid growth also comes with increased challenges as the growth of our business has outpaced the maturity of their infrastructure as demonstrated by the customer experience issues we had in the fourth quarter. Accordingly, we have given a set of considerations are occurring operations and we’ve already enacted a plan to right size our production teams to support our plan for controlled growth in 2020 and beyond.
Q4 net loss was 95.7 million compared to 26 million net loss in Q4 2018. In summary, there were two factors that influenced our adjusted EBITDA for the quarter. One, inefficiencies in our manufacturing operations; and two, increased non-labor G&A expenses on a quarter-over-quarter basis. Adjusted EBITDA came in at negative 60 million. Our adjusted EBITDA margin was negative 31%.
Moving to the balance sheet, we ended the fourth quarter with 318 million in cash and cash equivalents. Cash from operations for the fourth quarter was negative 141 million, cash spent on investment for the fourth quarter was 40 million, mainly associated with leasehold improvements, capitalized software and building our manufacturing automation. Free cash flow for the fourth quarter defined as cash from operations less cash from investing was negative 181 million but includes approximately 40 million of onetime payments associated with the IPO.
Quickly turning to SmilePay, in Q4 of 2019 65% of members elected to purchase using SmilePay, which is down from 66% in Q4 2018. Implicit price concessions as a percentage of total revenue has also trended down with an associated delinquency rate of 9% of gross line of revenue in Q4 2019, which is down from 10% of gross aligner revenue Q4 2018.
Now turning to 2020 and beyond, as we have stated, 2020 is a year of significant albeit controlled growth for SmileDirectClub. Our number one priority is to improve our club member experience. We will also build on the international infrastructure we have already built and position our business for long term global growth. Profitability will be a big focus for us in 2020 and we understand the levers we have to pull to achieve profitability. Our revenue growth will come from following areas.
Continued penetration into our core North American market, we intend to expand farther into our core demographics while also penetrating new ones such as teens. Teens represent two thirds of industry case starts yet approximately 5% of our business. We also intend to focus on new acquisition channels such as wholesale and retail. Our growth will also come from international markets where we have already made meaningful progress in our existing overseas markets and have architected a strategic roadmap for continued expansion throughout 2020 and beyond. You’ll recall that we see 75% of the total market opportunity outside of North America.
On the cost side, as David referenced earlier, we have already enacted initiatives designed to put us on track for profitability in the fourth quarter of 2020 including rightsizing our production team to conform to our business priorities and long term growth targets, continued advancing and automating and streamlining our manufacturing and certain planning operations to allow us to reduce our scrap, to keep pace with consumer demand, continued discipline around the deployment of marketing and selling dollars, including a focus on pushing more demand for our existing SmileShop Network, which has already been scaled in anticipation of future demand.
And with rigorous cost discipline across the business, we believe streamlining our cost profile through operational efficiencies will not only improve our margin profile, but more importantly will improve and provide consistent customer experience that meets our demanding expectations. With all of this in mind, I’d like to turn to the outlook for 2020 and beyond. For fiscal year 2020, we expect the following. Revenue between 1 billion and 1.1 billion representing growth of 40% year over year at the midpoint of the range, a limiting factor on this growth is controlling our club member experience and growing our profitability.
Adjusted EBITDA for the fiscal year is expected to be between negative 50 and negative 75 million, mostly associated with losses in the first half of the year as we right size our cost profile and maintain positive adjusted EBITDA this year in Q4. I’d like to highlight that for now, we do not plan to provide quarterly guidance for 2020 given the intro quarterly dynamics of our business, and specifically given our investments in rapidly scaling new markets. We do envision providing one quarter forward guidance at some point in the future as our operations continue to revolve.
Our plan for 2020 are designed to optimize our club member experience or positioning us for long-term over growth. Beyond 2020, we expect 20% to 30% annual top line growth and long-term EBITDA margins of 25% to 30%. Our long-term revenue targets are derived from 10% to 20% annual top line growth in North America, which is in line with the clear aligner market. A 20% to 30% annual top line growth from our existing international markets and approximately a $100 million per year from new international markets, these forecasts do not include material expansion in the wholesale channel.
We will update our forecast at the appropriate time as we begin to penetrate that market. We’re also still in the early stages of our launch. We are very excited about this opportunity. Let me be clear by saying that we believe that we’re taking the important and necessary steps to drive the best customer experience along with disciplined global growth and margin expansion. This approach along with product innovation will best position the Company as a global leader in the oral care category.
With that, I’ll turn the call back over to the operator for Q&A.
At this time, we will be conducting a question-and-answer session. [Operator Instruction] Our first question is from Robbie Marcus, JP Morgan. Please proceed with your question.
Hi. Thanks for taking the question. This is actually Lilly for Robbie. So, a few questions here all rolled into one. Starting with the guidance for 2020, the range came in a little bit below the Street. What do you think the primary attractor of that is? The second, how should we be thinking about U.S. versus the non-U.S. adoption, particularly in the new markets to launching in? And one more, can you comment on any negative trends that you’ve seen falling our New York trends and NBC segments that were published in the last few weeks?
Yes, so this is Kyle, I’ll take the first part and then David will take the last part. So if you think about 2020, it’s really about controlling our growth and that’s really in an effort to provide the best member of club members for instance, we talked about on the call, we believe by doing that in 2020 to ensure our long-term global growth, it’s about strategically positioning ourselves around the world to support that growth as well as, so if you look at the U.S. today, we’ve got a great head start.
We’ve over invested over the past three years to gain market share and we believe the investments that we’ve made in that market are going to pay off and continue to payoff in terms of referrals and even awareness and overall margin expansion in the future. If you look at the U.S. today, we are the low cost provider, we’ve put the brand presence that we have and we have no pricing pressures. So we think right now, given all of that, it’s the right time to position ourselves for the global footprint.
And that at the same time it’s also making strategic investments as we’ve talked about in wholesale, in product innovation, investing new demographics like the key market as well and again, all of this to position us for sustainable long-term growth. And last but not least obviously on profitability. We talked about being profitable in the fourth quarter of 2020 and that is very a big focus for us.
Yes, so on the third part of your question really the negative question I think you mentioned New York Time is NBC specifically. This has been going on since we started the business. It’s been in every disruptive business I’ve been in for the last 30 years. It’s been in the model. We knew it was coming. I think it’s been a heightened and highlighted since we put the Company public. It’s been a lot more attacks on it. In turn, there’s a lot of attention to it, and strategically as I stated last time on the call, we’re going to be shifting from being more reactionary to more proactive.
Really calling out how effective and safe our teledentistry platform is, working with state dental boards across the country to put model, teledentistry legislation in place that truly protects the patients by sharing access to care, but we’re working with some now hope have announcement shortly. And we’re in agreement with what it takes to have a true teledentistry platform. It’s been out there for years and we’re just following the same type of model, but we really going and see in the next few weeks and months to come is exposing those we’re using their platform for anti-competitive behavior cause that’s what’s going on out there right now.
What’s troubling is the outright lies that protect higher prices and fair competition that we will expose and you’ll see. It’s only hurting access to care by millions of people who couldn’t otherwise afford the high cost of getting a better smile and we look forward to getting to the truth of this, educating, the various legislatures, the various trade organizations about our model and how safe and effective it is.
Great. Thank you. And one more quick one. With the push out of EBITDA profitability, how confident do you feel that you won’t have to raise additional capital in the next few years?
Yes, so if you look at our cash position today, we’ve got about 318 million a year end. We also have a $500 million facility with JP and both of those together are really supporting the growth that we have. I will say, we will look at additional options to better support our international growth in particular because the ABS facility that we have today does not fund that international growth overall.
If you look at 2020 at the midpoint of the range, obviously, we’ve got it to about negative 63.5 million of EBITDA. That is a great proxy overall as you know for cash. We expect about a 100 million in CapEx similar to what you saw in 2019, and then working capital and percentage change in revenue trending similar also to what you saw in 2019 as well. So putting all that together and we feel good about our test.
Our next question is from Jon Block with Stifel. Please proceed with your question.
Maybe some more details in 2020, so just kind of low revenue guidance, anything that you can break down in terms of U.S. contribution versus international as you alluded to, you did launch in a bunch of markets? And then also from the 2020 guidance, what are the assumptions from a regulatory standpoint? In other words, is it sort of business as usual? Or is there some buffer in there from an AB 1519 standpoint? And then I’ve got a follow-up. Thanks.
Yes. So on regulatory, it’s business as usual as we’ve talked about in the past for maybe 1519, we haven’t seen an impact on our business and more operating as normally in California. If you look at the breakdown, Jon in international versus the U.S. so we’re not providing that level of detail yet. I think if you look at how we’re trending, it’ll likely be at some point later this year we’ll start to break that out as it crosses the 10% barrier, but for now we’re not breaking up that level of detail.
The overall what breaks it down and look at 2020 in particular because we’re not giving quarterly guidance. I think it would be helpful just to go and get a little more details around what that looks like, in 2019 in particular, we saw about 24% of our revenue in the first quarter. We saw 26% of our revenue in the second quarter. We saw about 26 again in the third quarter — 24 in the third and 26 in the fourth.
So fairly evenly split throughout the quarter, as a result of the international expansion that we had in particular approximately 15 countries coming online throughout the course of this year. I would expect Q3 and Q4 to be a little bit higher than those percentages in 2019 in comparison in 2020 in comparison to what you saw in 2019.
Okay, very helpful and the next one might a little bit long, but anymore color on the wholesale initiative. In other words you mentioned it a couple of times, but in all due respect our due diligence from a couple of weeks ago was a little bit more tepid. So why are the [indiscernible] braces? What is the price point need to be? And David sort of as a follow-up, you mentioned also on the call a couple of times, you know, ramping up your teen initiative and how does that improve the customer experience if by default teens are usually more complex cases, are those the right cases to take on from a teledentistry standpoint? Thanks for your time guys.
I’ll start with your question on the teens. We’re not going to take on cases that we can’t handle. We do teens now. We have not actively gone and marketed to those teens. It was ironic that when we launched last year, the nighttime only product. We had a lot of inbound requests from parents who said, but for compliance I would go clear aligners. But if I’m going to spend $5,000, I’m going to make sure they’re strapped down nice and tight. And so, that compliance issue is one that parents wrestle with while teens want the clear aligners versus pain for it says, I don’t want to risk that teeth don’t straighten because of compliance.
So, the nighttime product is perfect, it’s still mild to moderate. There’s a lot of teens out there, big category. So, we’re going to go after what we can do and do well, and it’s both for marketing and moving into more, I wouldn’t say complex, but mixed dentition. We’re working on some of that in our treatment planning down in Costa Rica, so more of that to come. With wholesale, wholesale was really derived out of a lot of inbound requests. We had a lot of our doctors, dentists who said their the patients because of our strength and brand, 50% of the awareness and the marketing spend that we have, there a lot of patients coming into these dentists and orthodontists office saying, we have the SmileDirectClub brand and so we got inbound requests.
We developed these programs, the first of which we’re testing currently. That’s what we call the collaborative model. It’s a very low touch for us as far as IT and CapEx to convert into that. It’s, it’s something that it’s explained in our website and those are really designed for dentists currently do not offer a clear line of products because 150,000 that don’t. And so you know we’ll into that market and then eventually go straight wholesale like other wholesale products out there. That’s going to take a little more development time for us but we do anticipate that to launch in 2020.
Our next question is from Glen Santangelo, Guggenheim. Please proceed with your question.
Thanks for taking the questions. David just to sort of follow up on this controlled growth point you’re making to improve the customer experience. You highlighted some operational issues such as shipping delays, but if controlling growth that all related to the clinical issues raised by your members, particularly as it relates to the regulatory landscape, and kind of as a follow-up to that. How do you go about controlling the growth is the point ultimately spend less on marketing or slow the international expansion, relative to your thought? How are you going to put the brakes on it?
The control growth was really a reflection of what you saw the fourth quarter and some of the operational difficulties we had in manufacturing. It was not related to the clinical outcomes, our clinical outcomes are improving all the time, I guess somehow relatives, I’ve nieces, nephews, my sister in law, Kyle’s, wife is in it. Susan, our Chief Legal Counsel, her daughter’s in it. So that has nothing to do with our slowing down our growth to become positive in Q4. And at the second part of the question, what was the second part?
The question was how do you slow the growth? I mean, do you expect to spend less on marketing? Or slowly international expansion, how do you put the brakes on it?
Yes, I can take that one. I would say overall, as we’ve always said, especially over a long period of time, there’s a good correlation between our sales and marketing spend and how that correlates to revenue. And so we have that lever, particular within the U.S. as well. But as you look at the international side further the limiting factor on that growth is optimizing the club members experience obviously there’s a doing there for what we can push through the channel.
We believe, given all the dynamics that I talked about earlier in the call around the U.S. market that now is the right time to position our self globally around the world, which will optimize that long-term growth. So it’s a combination of controlling that span within the U.S. that has a high correlation regard our sales and marketing span. We’re also positioning ourselves around the world in certain regions and spending appropriately within those regions as well.
Kyle that was moving on be my follow-up questions to you that we get a lot of questions around the correlation between the marketing spend and customer volumes, and as your base of members gets bigger. Are you seeing know you being able to leverage those marketing dollars and your customer acquisition cost at all? Or is it still pretty clearly that as you’re suggesting? And I’ll hop off?
Yes, so obviously we don’t break out our acquisition costs from our SmileShop span, but I’ll talk about in a couple of different ways. We do see about a 100 basis point improvement sequentially, quarter-over-quarter, within our sales and marketing spend overall. I think, when you look at the marketing side and some of the things that we’re doing this year, if you look at Walmart, if you look at wholesale for example, have opportunities to both increase the lifetime value of our club members. But are also new acquisition channels and give us the opportunity to reduce our acquisition costs over time.
If you look at the big ramp that we’ve had over the past several years in sales and marketing, a big portion of that is associated with building or SmileShop network in advance or future demand. And one of the things that we’re looking at in 2020 is putting more demands for the existing network that we built out. We believe that we’ve right that the operations that we have and we have an opportunity to push more leverage or push more demand through that. And start to get leveraged from that footprint 2020 and beyond. So the front of our attorney, EBITDA profitable by the fourth quarter of 2020, we are expecting to get more leverage from that SmileShop network.
Our next question is from Alex Nowak, Craig-Hallum Group. Please proceed with your question.
Good afternoon, everyone. David, just want to follow up on another question there just on the team. What you do actually from a marketing perspective on teams because this needs to be more parent-focused instead of the actual patients is going to be using?
We’re doing plans right now that I’m working with the marketing teams that will be launching in May, which is sort of the beginning of the team’s season. It’s going after both the team and the parents as well you’ll see in it social media, we actually have a TV ads that we’re producing that really speak to the products, the components of what our life time products and teams want our product, are asking about ads social media, so I don’t think it’s a difficult task.
We just, it’s something that we just hadn’t focused on in the past and once again to with demand, and I think it was when we launched our life time product, seeing all the parents that came out that these it what looking for my team has wanted clear aligners and that was hesitant to do it. So we’re very excited about it.
Okay. Understood. And now how is the dentist recruitment going personnel director within the recent months? Because what I mean is there’s been a lot of negative commentary going around with the dental boards pulling or potentially pulling licenses from those who are working with SmileDirect. So I’m just curious, are you hearing any concern within your dentist’s install base and is it a team finding it’s hard of the recruit dentists because of this?
Not at all. And when you said that in the room the things is kind of dry, you know, listen, there’s been a lot of inquiries study when we launched it and it was coming from the shifted in some of the dental boards. We have never lost any case we’ve never had any of our network lose their license or have any kind of negative adverse reaction. We have not lost any single dentist in that network 250 of them to all of this publicity and investigation and media attention.
So, I’m not sure where you heard that, but what I’ve seen that at all, it’s matter of fact, it makes them stronger. It makes them want to fight for access to care more that’s what we hear. Pushback from our desks, let’s go, let’s fight we see more than come out and be more noticeable we’ve got some of them on talk shows recently talking about how they are providing so I don’t agree with that opinion.
Okay. No, that’s good to hear. And then when did the decision to switch to more controlled growth? You only got to the lower end of the guide here that you gave back in Q3. So I’m curious, did the growth slow in Q4 and that kind of span this decision to pivot to a slower growth, more controlled growth in 2020 and focused on profitability?
Yes, I do think you’re just to point out, as I mentioned on the call, so it’s important to remember we did have the demand to hit the high end of our range and because of the manufacturing issues that drove some of the poor customer experience issues that we had in the fourth quarter, we weren’t able to ship it out. So it definitely evolved over the course of the quarter where we got more backed up within our shipments in particular at MCC and refinements, shipments as well we continue to get back up there.
That’s been improved over the course of January and February we’re back within the normal shipping times and we’ve seen the sentiment online change as a result of that. So it’s not a demand issue, it’s a function of us making commitment to our customers where we believe the right thing to do is make sure we control our growth so that every single customer all 850,000 to be a million, get the same experience across the board, and that’s why we’re doing it.
Hey, it’s David. These are our discussions we had internally. If you are in a dog fight, Lyft, Uber, Lowe’s, Home Depot, Officemax, you know, there’s a reason that you got to gain market share and sometimes investors will give you a break and say let’s grab market share and worry about profit profitability later. For us, it’s about customer experience we don’t have those competitive threats. We own this space. We were the pioneers in it. There are no other med tech direct to consumer platforms out there.
So it’s only about getting ourselves as we tried to maintain the 70% plus growth rate as we are larger, we realized really hurting ourselves in the consumer experience. And we’re not tolerance for that we’re very, very consumer focused and you can see that pretty quickly, a lot of it, you know, the sentiment out there and the complaints of social media about nicotine, my aligners on time, we took that to heart and said, we don’t need to go this fast but slipped down as a result of that and the better customers thinks you get profitability.
And so, you know, it’s a win for everybody we all feel good about it in a company, and I think it’s a testament to this platform has extreme moats and barriers to entry. It’s been five years now. We haven’t had any real competitive threat. There is no one in the space like us and we don’t see anybody in the foreseeable future. So let’s grow at a pace that makes sense and that we can provide a good customer experience.
Our next question is from Brandon Couillard, Jefferies. Please proceed with your question.
Thanks. Good afternoon. Maybe a question for you Kyle, just curious if you could sort of elaborate kind of what’s going on in the US I mean by our mass and it kind of suggests that the U.S. market was maybe only up single digit sequentially, even coming out of a depressed third quarter, can you confirm whether that’s in fact the case?
Yes. So like I said earlier, you know, we don’t want to break down the international versus domestic versus North America. I think as we get to a point later this year international becomes a bigger portion of our business, then we’ll start to provide more granular details around the individual markets in particular. But I think you can look at your Q4 in particular. You know, we were up 53% year over year in the fourth quarter. Obviously we’re not providing quarterly guidance for this year, but you can see at the midpoint of the range, 40% that we’ve put out there we still see very strong growth across the business.
Okay. Maybe as far as the ’20 outlook is concerned, can you help us with maybe a couple of numbers as far as the number of planned SmileShop openings? would also love the CapEx excuse me the OpEx number if you can as well as the stock comp add back for the year? Thank you.
Yes, so I think I can start on the stock based comp side to start. I would estimate about 90 million in stock-based comp for 2020. There’s still a portion of the IVH from the IPO that are running through that on a normalized basis and outer years are expected to be about half that, approximately 90 million for 2020. On shop openings I think if you look at what we said overall in 2020, our focus is really to push more demand through the existing footprint. And that’s part of our strategy to be profitable by the fourth quarter. So, we’ve built a network over the past several years to support the future growth in 2020 and beyond. So as of now, I would not expect material openings in 2020.
Now that said, we are working with Buxton to test certain geographies and those tests are looking at if we can have better locations or optimized locations to improve things like booking rates in the DMA or so rates and ultimately thereby conversion and also Tesco. Well, we started those tests. We expect those to be done by middle of the year. You could see some adds in the back half if those goes well, but the numbers you see here for 2020 I would not expect additional material adds in the U.S. On international basis we’ve modeled approximately a hundred locations across the countries that we’re entering into for this year.
Anything as far as just the operating expenses goes sales and marketing, G&A for the year?
Yes, I’m not giving an exact number within sales and marketing in particular, but what I would say overall is, you know, we are expecting leverage. We ended the fourth quarter at 72% of sales and marketing on revenue. You know, given the demand that we’re picking up, it is an important component of our strategy overall to achieve that profitability by the fourth quarter. If you look at our cost of goods sold in particular, I would expect over the course of the year as we continue to improve our manufacturing automation to have about a 200 basis point improvement in the second half of the year over the first half of the year, as we execute on those problems.
There is additional upside to that so we talked about it in the past about moving to a second generation of manufacturing. We haven’t factored those into the numbers that we have here. And that could be additional upside to the 200 basis point improvement in the second half of the year. And then on the G&A side, obviously, if you look at the numbers for the full year ’19, it’s a little bit distorted because of the IPO at 77% of revenue overall, Q4 we ended up 46% of revenue and we are expecting incremental improvements in 2020 over the course of the year to achieve that profitability in Q4.
Our next question is from John Kreger, William Blair. Please proceed with your question.
Kyle may be sticking with that same line of questions. If we think about the $16 million in EBITDA losses this quarter, and it sounds like you guys are firmly committed to being profitable by the fourth quarter of next year. Can you just maybe take us — give us a bit of a bridge, how you get there? Did I just hear you say that you think about 200 basis points of gross margin improvement? Is one of the keys? Or does it need to be higher than that?
No, that’s right. That’s one of the keys that we have to execute over the back half of the year versus the first half of the year. I think if you look at the bridge overall and we’ve said this before over a long period of time, we’re competent in the revenue projection, but you can look at 2019 as a good example. With our sales and marketing spend we have fairly good correlation with sales and marketing to revenue overall.
Where that correlation breaks down is over a four to 12 week period because if you look at Q4 as an example, even in the period where we have the ability to add the demand, it doesn’t necessarily mean that we can fulfill that demand within manufacturing. So, there a little bit loss of a correlation there over a short-term period. But if you look at the bridge itself, obviously, we have the costs coming out in late Q1 on the headcount side. That’s mostly going to have an impact on Q2 through Q4 for the costs.
We’ve got to continue to execute on the automation that we’re talking about here, pushing more demand for the SmileShop network, which we expect to happen from Q2 to Q4. And then it’s also implementing the new international markets. As I talked about before on the call, if you look at 2019 at 24% to 26% of revenue on a quarterly basis was fairly evenly dispersed across the year. I want to expect this year to be a little more back-end weighted as we continue to ramp-up the international markets that have already been gated in here.
Can you talk a little bit more about how the Aetna United relationships are doing? Did you get any uptake on January 1? And do you expect to add other payers to the list in ’20?
So well we do expect to add other payers. We’re in discussions and negotiations right now with many payers and they expect to sign more in the near future and we will be announcing those when we do. In terms of the uptake, it’s a much longer term growth strategy for us. So we do have a recent win that be talking about here in the near future where we partnered with United in one a self insured, a large self insured employer where they’re actually now adopting adult ortho coverage and we’ll have that release coming out here in the near future. But that’s the opportunity that we see. It’s a much longer term place to sell adult ortho coverage for self insured employers, but it’s not having a material near term impact from the numbers you have here for 2020.
Great, thank you. And just one last thing. Can you clarify, are your manufacturing issues largely resolved at this point? And have you altered the plans to bring on a second production facility?
Yes, on the resolution from the labor side, yes. So, we right size the team that we need to be able to fulfill that demand that we’ve outlined here for 2020. If you look at the overall rework and the scrap and the inefficiencies that we talked about, that’s a continual evolution. We know — we know exactly what we have to do to address those. But that’s not a fix that happens overnight. That’ll happen over several months as we iterate and improve those processes, which is why you see that improvement not come online immediately within Q2 it comes online over the course of the year as we implement that and you see that within the gross margin.
Right. So, as part of the savings, we decided while we had the bourbon, we have not fully built that out and invested, invested all the capital needed to bring that online. As of now the plans are exploring that whole of Q1 possibly we’ll see where it goes as far as dental automation, which is in the works, the prototype should be on the floor here in Nashville in the next month or so. So that is potential savings of not being that second facility online until 2021.
Our next question comes from Erin Wright, Credit Suisse. Please proceed with your question.
Can you break out how much is embedded in your guidance in terms of legal expense in 2020? Or how much is incremental relative to your experience in 2019 from a legal expense perspective? Thanks.
Yes, so we haven’t given an exact number directly from legal and lobbying, our legal and lobbying expenses we were up about 18% sequentially in Q4 over Q3 we had also talked about in the third quarter, obviously our costs doubled from the second quarter as well. We would expect the trend to continue from where we are today. As we stated talking about earlier, become much more proactive on the regulatory side compared to where we’ve been historically, so built into the model.
Okay, great. And then can you give us an update on the regulatory dynamics in other countries outside of the U.S. here with recent news out I guess today in the UK? Thanks.
I’m not aware of the news. Are you? Okay, we have Susan is here who is our Chief Legal Officer.
Susan Greenspon Rammelt
Hi, so the news that came out in the UK as you know, is just guidance. A lot of the concern expressed by the GDC is similar to what we have seen here in the United States. The difference being that we are far more experienced in handling these sorts of questions as to the safety and efficacy of our model.
We’ve already been in communication with the GDC in terms of educating them as to all clinical decisions being made by the dentist and orthodontist in our network and not by SmileDirectClub and it’s really just a question of educating them and making sure that they’re aware of but not something we’re concerned about.
Our next question is from Nathan Rich, Goldman Sachs. Please proceed with your question.
I just wanted to start with the longer term revenue outlook for 20% to 30%. I think that was a little bit lower than maybe what the initial expectations are I understand some of the near term challenges, but you know it would just be curious to kind of get your view on what’s kind of changed on the longer term outlook relative to what those initial expectations might’ve been?
Yes, I feel like it goes back to exactly what we had said before. The outlook that we have here is really about controlling our growth to provide the best club member experience. And as we sit here today, we believe we can achieve the growth rates that you’ve seen here and be able to do that. If you look at the U.S. in particular we’ve outlined 10% to 20%, the rationale behind that is really won in line with the market. But two, we want to position ourselves strategically around the world so that we optimize our long term growth and given the manufacturing issues that we had within the fourth quarter, we felt it was important to control our growth for the next several years so that we pride everyone that’s the best experience possible.
You’ve been well under that kind of 10 to 20 assumes no additional penetration of new demographics. So 5% of our business today is teens and 50%, or excuse me, 20% is 50 and older. It assumes the same penetration. The high end of that range, 10 to 20 in the U.S. would assume more penetration into the teen market in particular. Also factored into that, as I mentioned on the call, we’ve assumed about 20 to 30% from our current international markets that we’re in today like UK, Australia. They would grow at about 20 to 30% on an annual basis and about a hundred million per year from new international markets as well.
Okay, great, and then Kyle, a follow-up on the 2020 revenue guidance. The guidance for ASP looks like it’s a pretty significant step down from just where you ended the fourth quarter. So I was wondering if you could just kind of help us think through what’s the dynamic there? Thank you.
Yes. So it is, and it’s lower as we push more international. So what happens is as we expand international, we typically launch with a lower price point to bring price out of the equation. And then we typically bring that up over a period of about six months or so. And that’s our expectation for 2020 as well. We definitely book in Canada. We launched, then we raised prices we just did it in Australia, expect UK will do the same thing. It’s kind of the plan. There’s an opportunity to raise our price here in United States.
We’ve had five price increases over five years. We got asked that question in the last call. We have no plans to break the 2000 barrier. Our research shows that that would not be wise, even though the next competitor is so in long ways away from 2000. Just from a consumer’s mindset, you know, 1895 there’s a price point possibly somewhere in between in there’s also on the roadmap, a possibility of getting a premium price for a premium product and our night time only product. So that’s something that’s on the roadmap as well. Not built into the model today, but opportunities for increased price.
The next question is from Michael Ryskin, Bank of America. Please proceed with your question.
Thanks guys. I want to talk about the small shops and some of the, your comments on, you know, putting more into the existing network. So you have the staff that you see to the small shops is currently being only 25% utilized. I was wondering if that was for a lot of your more stable shops or that sort of the average including a lot of the new shops you have international. Just could you give us an update on how that’s trended over time and sort of, you know, why isn’t that number higher given the massive demand you’re seeing in terms of shipments?
Yes, so that’s an average across all shops. We have some that are higher, we have some that are lower, but that’s an average across all. You know, over time we’ve had a strategic plan to add those shops in advance of future demand. And so you’ve seen utilization in the shops go down as we’ve done that, if you were to go back, you know, to 2017 and as an example, we had significantly fewer shops and where we had today, utilization was as high as 75% or above in some of those shops.
We haven’t modeled them to get back to those levels in 2020. But we have assumed incremental improvements and utilization as we push more demands throughout the footprint. We are getting smarter with it. And we did internal modeling, and we’ve now hired Buxton. They’re world renowned for retail footprint modeling. They work with DSOs, other professional health companies and we’re doing it where we get having 75% utilization is not smart either because you’re leaving customers on the table who can’t get time.
You’re never going to be 100% utilized, if you open from 9 to 7:00 PM, if on the fringes, you’re not going to fill up. Everybody wants the one shower. Everyone wants Saturdays, so you’ve got to be up in the right number of hours. That’s 25% we believe is there’s too much access capacity there and so we’re trying to find the optimal level.
I think working with Buxton some of the testing that we’re doing over the next two months will really give us some answers there as to exactly how many shots we need, where they should be placed, the hours that you need to be open I think they don’t drive demand but when someone comes to the site, if they don’t see available, something that’s convenient that the right hours, the booking percentage will go down or the show rates. So it’s something we thinking on a more professional approach to it, I think we’ll get to the right answers.
All right, thanks. And the follow-up is just to follow up on some of the prior questions just to reconcile, 2019 results the 2020 outlook could you have some of the longer term points. The way I see it and correct me if I’m wrong, the slightly more conservative view on 2020 deals with some of the manufacturing issues you had, and some of the customer experience sort of letting the Company right size itself as you grow into the footprint you’ve established both in G&A, sales and marketing and things like with the SmileShops.
So then if you do correct those issues and you do work through over the course of the year end you’re turning profit by the end of the year, then why is your longer term growth rates sort of down much more below? Because if you’re, if that 10% to 20% in North America for example, as you said, that’s sort of the five year average, you’ve got into 40% overall in 2020s that implies in the out years, you’re even well below that average. So just can you help me bridge why, once you get through the 2020 firm period and you’re turning profitable, you’re not able to reaccelerate back to us an improved growth rate?
Yes. Obviously in the near years, we’d expect to be at the higher end of that range, and as we continue to mature at the lower end, but an average of that 20% to 30% over that time period. Again, it’s all driven by the customer experience. So as we get to the Q4 2020 into 2021, if we have the infrastructure and the capability to grow quicker than this, then we certainly will. And it’s not a market issue that’s causing the limiting growth that we’ve put in here for 2020 and beyond. It’s really is what we believe the business can absorb on an annual basis from net new business and still provide the best.
We maintain our NPS score customer experience — the customer experience entering being a foothold in all the new markets plans to see, we believe this is the right approach. And that could change, but there’s no growth area. We don’t have to grow faster. Customer experience number one, profitability number two is getting the cash flow positive within the timeframes that we’ve laid out. That’d be the driver of this, not to be a 50% or 60% growth company. There’s no reason for — we don’t need to do it. This would be a trillion dollar company, five years in growing 30%. It’s not such a bad thing. And having great unique economics with no competition, I think it’s a good investment.
And just to be clear on that last point. You did say that following some of the work you did with the manufacturing in January and February, you are seeing a customer experience and some of those NPS scores trend back higher to start the year. Is that correct?
Absolutely, yes, you can see it now. We live in that as social media. We’re a social media company, right? What happens on social media 850,000 customers, the overwhelmingly majority of those have a great experience. Doesn’t take many start getting loud on social media. And that’s the power of Instagram and Facebook. And so it was real. It really was real.
We got behind. We were out eight weeks to get peoples MCC refinements. My own daughter had a MCC that she wasn’t getting on time. And so listen we — that’s not who we are. We didn’t need to do that and we’re already seeing better social media sentiment and from our own customers thanking us for turning things around. So, we are very excited about the approach we’re taking out.
Our next question is from Kevin Caliendo, UBS. Please proceed with your question.
Kyle, I just want to go back through the statement around the cash and the cash burn. You made a comment that the working capital is likely to be the same. I think working capital in 2019 was like a negative $200 million. Is there any reason why it would be better any chance you know, the DSOs or AR? Or is there any improvements you can make and working cap?
Yes, so just to clarify, that’s the comment is that the change in working capital as percentage change in revenue, you would expect those percentages to be similar to what you’ve seen historically. As the business does grow we talked about this before. If we’re growing quicker this year than the prior two years combined, then there’s a burden associated with that because small share programming and it of itself. But as we continue to do control growth in the base of receivables that we have in the prior two years is bigger than the current year, we do see ourselves turning cash flow positive. And as we’ve said before, we still expect that to occur in 2022.
Is there a SmilePay as a percent still in the 65% range? Is there any change in the fourth quarter there in terms of [indiscernible]?
That’s right. So 65% of members who purchased, that was down from 66% the prior year. Implicit price concessions, we’ve seen continue to trend down as well, down to about 9% of gross aligner revenue from 10% the prior year. So, we’ve seen you’ve seen good progress there as well.
All right, so I guess what I’m confused about then the DSOs have come up, are they spiked up in the third quarter and that could have been because of the revenue issue in the quarter, but even this quarter the DSOs are up a couple of days sequentially again? Is this the new normal level that we should be thinking about or is there an opportunity on the receivable side? Is there anything there that we should be thinking about going forward?
Yes, look, we’ve talked about it in the past, we don’t, we don’t think DSOs as a metric is necessarily the right metric to be managing how to model AR. I think you really got to look at it on a curve basis for the 65% of our members and how that cash comes in over a period of 24 months, which is offset by the implicit price concessions or the 9% of revenue that we’ve talked about. So there is continued opportunity for improvement there we’ve seen improvements, you know, even in the past several months that we’ve continued to optimize our processes we’ve hired and other consumer financing companies and so we continue to make progress there and that’s definitely on the roadmap for 2020 and beyond.
We have reached the end of question-and-answer session and that conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation. And have a great day.