SmileDirectClub Stocks Plummet Even After Beating Analyst Expectations

Online membership clubs are all the rage, these days, as they help many fledgling companies avoid some of the overhead associated with running a business.  For example, online dentistry company SmileDirectClub just announced that third-quarter revenue soared more than 50 percent over the same period from one year ago.  And they managed to do this even with a swell of losses.

This is the company’s first earnings report since they went public just two months ago. 

Now, it is important to note that while revenue is up, shares are still down. Shares closed down 8 percent, on Tuesday, after a bit of a seesaw kind of day.  Stocks rose slightly after news of the revenue bump but then plunged 10 percent. 

Specifically, the company reported reported a loss of 89 cents per share and revenue of $180.2 million. This is better than the $165.4 million analysts had forecast, and up 50 percent from the $119.7 million reported just one year ago. 

In other figures, SmileDirectClub shipped 106,070 teeth aligners for the quarter, which is significantly higher than the 72,387 from the same period one year ago.  It might also be worth noting that the average price of these teeth aligners increased from $1,773 last year to $1,788 this year. 

SmileDiretClub CFO Kyle Wailes comments, “We are focused on creating long-term value and the business. We think the third quarter was a great quarter, we beat all of our expectations,” adding that the company will definitely be profitable next year; its just that for now they are focused on growing the business. 

All this said, the revenue beat for the quarter has motivated the company to extend its full-year guidance.  SmileDirectClub now expects full-year sales to reach the $750 million to $755 million range.  Wall Street was expected $732 million in sales.  As such, SmileDirectClub said adjusted EBITDA will rest in the $73 million to $80 million range.  Analysts had only expected an adjusted EBITDA loss at the lower end of that range.

Wailes adds, “Profitability for us is a managed outcome, we are balancing growth versus profitability. We are continuing to invest in marketing and sales and other infrastructure. For us, we are making that decision. We feel good about the long-term 25 to 30 percent EBITDA target we put out there long-term, and it will be a steady walk over the next several years ultimately to get there.”