SmileDirectClub plummets 24% after missing quarterly estimates and reining in expansion plans (SDC)

Reuters

• SmileDirectClub missed Wall Street’s expectations for fourth-quarter losses and revenue on Tuesday, citing back-office expenses and inefficient manufacturing operations.
• The company will shift focus to “controlled growth” in 2020 to reach profitability by the fourth quarter, CEO David Katzman said.
• SmileDirectClub stock slumped as much as 24% in early Wednesday trading.
• Watch SmileDirectClub trade live here.

SmileDirectClub announced fiscal fourth-quarter earnings on Tuesday that landed below analyst expectations and drove outsized selling Wednesday morning.

The company missed Wall Street estimates for revenue and losses per share in the quarter ended December 31. SmileDirectClub’s projection for full-year revenue in 2020 landed just below analysts’ estimates.

The firm, which went public on September 3, will focus on “controlling growth” as it aims for profitability in 2020, CEO David Katzman said in the Tuesday report.

SmileDirectClub shares tanked as much as 24% in early Wednesday trading, wiping out nearly all of its year-to-date gains.

Here are the key numbers:

Revenue: $197 million, versus the $199.9 million estimate

Loss per share: 25 cents, versus the 11 cents estimate

2020 revenue guidance: $1 billion to $1.1 billion, versus the $1.14 billion estimate

2020 adjusted earnings loss: $50 million to $75 million

“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,” Katzman said in a call with analysts. “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.”

Katzman attributed the end-of-year losses to higher expenses within its back-office process and inefficient production operations. Shipping delays also caused a “broad impact on customer experience,” the chief executive said.

The company will work to boost demand within its existing network instead of push rapid expansion, according to the quarterly report. SmileDirectClub expects to reach profitability by the fourth quarter of 2020.

SmileDirectClub closed at $11.33 per share on Tuesday, up 38% year-to-date.

The company has eight “buy” ratings, two “hold” ratings, and one “sell” rating from analysts, with a consensus price target of $14.10, according to Bloomberg data.

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