SmileDirect Shares Plunge on ‘Sour’ Q4 Report

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SmileDirectClub shares fell for a second straight day after the teledentistry company posted a larger-than-expected loss and pledged to control its growth to achieve profitability.

The stock set a new post-IPO low of $7.92 on Wednesday after plunging 20{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} in extended trading Tuesday.

“The sour Q4 report is the second piece of bad news this month for SmileDirect: On Valentine’s Day, its shares fell nearly 20 percent after an NBC News report questioned its products,” the NashvillePost reported.

For the fourth quarter, the company posted a loss of 25 cents per share as revenue rose 53{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} to $197 million. It shipped 115,042 unique dental aligners, compared with 76,372 a year ago.

Analysts had expected a loss of 9 cents per share.

SmileDirect blamed the shortfall on manufacturing headwinds and an inefficient back-office process, which contributed to marketing and selling expenses more than doubling to $141.1 million. Management indicated they would be focusing on profitability this year.

“As CEO of this business, I am faced with numerous decisions every day, and one important decision that I am making given our club member experience and 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,” CEO David Katzman said in a news release.

“We understand the levers we have to pull to achieve profitability,” CFO Kyle Wailes added.

During the earnings call, executives said revenue, post-2020, would grow at an average rate of 20{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} to 30{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} a year for the next five years. “Compared with revenue of $750 million and growth of 77{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca} in 2019, that statement was a major disappointment for analysts,” some of whom had been expecting growth rates of more than 40{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca}, MarketWatch said.

SmileDirect went public at $23 per share in September but the IPO ranked as the worst in two decades as the share price fell to $11.08 within two months. For 2020, the company sees revenue between $1 billion and $1.10 billion, the midpoint of which is below Wall Street estimates.

Presley Ann/Getty Images for SmileDirectClub