Shares of SmileDirectClub Tank After Earnings Miss

The company’s first post-IPO earnings report disappointed investors.

This week, SmileDirectClub released its third-quarter earnings report, which is its first earnings report as a publicly-traded company. However, the results failed to excite investors, and the company’s shares fell more than 20%. 

SmileDirectClub fell short on earnings, revenue, and its fourth-quarter guidance. Here is an overview of what happened during the third quarter, and what this means for SmileDirectClub going forward.

An overview of SDC’s earnings report

During the third quarter, SmileDirectClub earned $180.2 million in revenue, falling short of the $207.6 million analysts were expecting. And the company reported net losses of $0.89 per share. Analysts were expecting the company to lose money, but they were only anticipating losses of $0.04 per share.

SmileDirectClub’s fourth-quarter guidance also fell short of Wall Street’s expectations. And the company’s legal expenses doubled from a year earlier due to stronger regulations on online dental companies.

However, it wasn’t all bad news for SmileDirectClub. Although revenue wasn’t as high as Wall Street had forecasted, it is up more than 60% from a year earlier. Shipments for the company’s clear dental aligners grew by 47% year over year. And the company’s average sale per item is up from a year earlier, from $1,773 to $1,788.

SmileDirectClub expects its full-year revenue to fall between $750 million and $755 million. This is slightly higher than what analysts were calling for and would represent growth of more than 70% from a year earlier. 

What’s next for the company?

A huge part of being a publicly-traded company is learning how to manage investor expectations. And this was where SmileDirectClub really fell short this month. Often, earnings reports are less about what’s being said and more about how management delivers the news. 

SmileDirectClub went public in September, and its share fell by 28% within its first day of trading. This made the company’s public debut the worst IPO of 2019 for a company valued at over $1 billion. 

However, it’s too soon to rule out the company’s chances for success after just one earnings report. The company is still considered a strong buy on Wall Street, with an average price target of $21.11. This represents a potential upside of more than 133%.