November and December 2020
Dear SDD Investors
I am pleased to share our monthly update for November and December 2020.
We closed November with $137K in total sales December with $147K in total sales. We continue to be ahead of prior year monthly performance. Given the seasonality in this business dental supply sales slow in November and December as fewer customers go to the dentist during the holiday period and during the holiday season and many dentists close shop at the end of the year for the holidays also.
As you recall from our previous memo, the Smile Dental team is focused on with several key initiatives: reducing order backlogs, adding new suppliers, improving accounting systems, implementing automated inventory management. These initiatives are progressing, and the work continues. We have implemented a process of daily KPI reporting which has resulted in improved operations and reduction in error rates.
On November 23, Smile Dental completed the acquisition of a second e-commerce dental supply company called Elite Dental based in Davie, FL. In December we transitioned Elite Dental to our ownership, integrated Elite into Smile’s processes, and began the process of relocating Smile Dental from NJ to the Elite Dental FL office and warehouse facility. This relocation will allow us to reduce overall overhead expenses quite substantially between the two businesses; we will maintain a small sales office in NJ to support sales to local dentist offices. Smile Dental incurred closing costs in the acquisition of Elite Dental and transition costs as Smile staff traveled to FL to integrate systems and consolidate the two facilities. As a reminder, Elite profits will be accretive to Smile Dental and so investors in Smile Dental will benefit from the combined profits of the two companies. The initial calculation for this will be for December 2020 profits.
We anticipate annual first year returns for Smile Dental investors to remain in line with investor expectations but continue to be conservative in distributions for November and December particularly given the costs incurred to acquire Elite Dental. November distributions will be sent on Tuesday Jan 19. December 2020 distributions will be sent no later than February 15. If you have any questions, please feel free to reach out by phone or email. Our next memo will be in February 2021.
Dear SDD Investors
I am pleased to share our monthly update for October 2020. We closed the month with $173,421 in total sales, a new record for the business. This is the third month in a row we have exceeded the expectation in the proforma. As compared to October 2019, Amazon sales were up 110%. This continues our trend of increasing year over year sales since we took control of the business.
In October we continued with several key initiatives to support long-term growth. These include: reducing order backlogs by adjusting purchasing practices and adding new suppliers; improving the accounting systems for inventory management and implementing automated inventory management system. Automating inventory management is a manual, time-intensive process that requires developing and implementing a uniform SKU coding of items across all items and all sales platforms. Led by our amazon consultant, our staff has made steady progress. Finally, to preview the November newsletter update, we completed the acquisition of a second e-commerce dental supply company and are now in the process of integrating into our portfolio. As we start distributing profits from Elite Dental three months forward from the acquisition close date, it will be accretive to Smile Dental and its investors.
As you know we adjusted our distribution timeline to make the first investor distribution at the end of month one post acquisition rather than wait until the end of month three as per the original investor agreement. We are pleased to communicate that we will be making a profit distribution for October.
Please note as we optimize working capital for Smile Dental, integrate the purchase of Elite Dental, which was financed through a debt offering, and reach a stable set of expectations about the joint business going forward, we are being conservative with distributions this month (and likely next month). The distribution for this month will be less than previous. However, as the acquisition of Elite will be accretive to Smile Dental, de-risk the Smile Dental investment and make SDD investors 40% equity more valuable over time, we anticipate annual first year returns for Smile Dental investors to remain in line with investor expectations. October results distribution payments will be sent by December 11. If you have any questions please feel free to reach out by phone or email.
Dear SDD Investors
I am pleased to share our monthly update for September 2020. We closed the month with $144,885 in total sales. This is the second month in a row we have exceeded the expectation in the proforma. As compared to September 2019, Amazon sales were up 104%. This continues our trend of increasing year over year sales since we took control of the business. (We do not have historical data from September 2019 for eBay sales as those reports are not available to us). Direct-to-dentist sales have increased as a percentage of total sales and we secured our first international sales.
In September we made several key investments to support long-term growth. These include: reducing order backlogs by adjusting purchasing practices and adding new suppliers; implementing automated inventory management systems and improving the accounting systems for inventory management (both efforts are continuing into October). We hired a new full-time field sales rep, and completed an exhaustive audit of product listings on our various ecommerce platforms going back through several years of entries. This audit was particularly important as prior owners do not appear to have updated or de-listed outdated product entries and so we undertook this step to prevent account management challenges with Amazon or eBay, and support the implementation work related to the inventory management system. Finally, we listed Smile Dental on Walrmart.com and Net32.com and so anticipate first sales from these two platforms soon.
As you know we adjusted our distribution timeline to make the first investor distribution for month one rather than wait until the end of month three as per the original investor agreement. We are pleased to communicate that we will also be making a distribution for September. Distribution payments will be sent by November 3rd. This communication was delayed due to the extent of changes/improvements we were implementing these last several weeks. Please note that going forward you will receive updates and distribution notices by the middle of the month including the update for October. If you have any questions please feel free to reach out by phone or email.
August 2020, which is the first full month of ownership post-acquisition, successfully closed with $158,177 in total sales. The sales breakdown by channel is as follows:
Direct to Dentist: $22,807.98
As compared to August 2019, for August 2020, Amazon sales were up 93% and Ebay Sales were up 88%. The company added two new online sales channels: Walmart.com and Net32.com. The company also added one new local dentist office client and recaptured 2 additional local offices that had lapsed in their ordering.
To further invest in sales growth, we hired an Amazon-expert to optimize site performance and implement strategies to grow in sales on Amazon. We are training one current staff person to develop local dentist office sales by going direct, door to door. In September we will be upgrading the Smile Dental website to attract more sales through that channel. We are exploring two strategic initiatives to expand market opportunity. First is growing sales internationally by opening the Smile Dental Amazon store to customers in Canada, Mexico and the UK. We will communicate more on this in subsequent reports, but are pleased to note that Smile Dental products are now shipping to these countries. Second is to introduce private label “Smile Dental” products. The first such item will be private label gowns for office use.
The management team made specific and important changes to further improve operational performance in the coming months. In vendor management, we established more favorable net terms with 5 suppliers and added 6 new suppliers. Adding suppliers will help reduce problems with back orders. We have identified software to integrate accounting, sales and inventory management and will be taking steps to implement. This technology will be critical to enabling growth at scale.
As you recall our first investor distribution is scheduled for November 2020. Based on first month performance I am pleased to share that SDD will be making distributions earlier than forecast. Distribution checks will be mailed on Sept 16th. If you would like your distribution to be wired to you please provide wiring details by Sept 14th. Otherwise your check will be mailed.