Earnings Outcomes: SmileDirectClub inventory rallies on price cuts, workforce ‘realignment’

Shares of SmileDirectClub Inc. rallied after hours on Tuesday after the oral-care company said it planned a round of cost cuts and a “realignment” of its workforce — even as its sales forecasts came up short of expectations.

The company did not directly say whether that “realignment” included layoffs. SmileDirectClub
which according to its most recent annual report had 3,200 employees, was not immediately available for comment.

Management for SmileDirectClub — a “tele-dentistry” service that sends customers customized teeth-alignment kits in the mail — said they expected the cost-cutting plans to save an extra $120 million to $140 million this year. The moves include $50 million to $55 million in cuts to general and administrative expenses and another $60 million to $65 million in cuts to marketing and selling costs.

Executives said the cuts would help put the company “on a path to positive cash flow in late 2023” and open up the “potential to drive positive adjusted EBITDA by Q3 2023.” EBITDA stands for earnings before interest, taxes, depreciation and amortization.

SmileDirectClub stock jumped 12.6% after hours. However, its sales forecasts for this year and the end of last year came up short of Wall Street’s expectations.

The company forecast full-year sales of $400 million to $450 million, below FactSet forecasts for $479.5 million. Management forecast an adjusted EBITDA loss of $5 million to $35 million for the year.

For the fourth quarter, SmileDirectClub said it expected $86 million to $88 million in sales. That was also below FactSet estimates for $98.8 million.

The company said it expected full-year 2022 sales of $470 million to $472 million, with a net loss of $278 million to $286 million and a cash balance of $118 million to $119 million.

SmileDirectClub makes a 3-D image of a person’s teeth — either via a scan in-person or via a kit sent to them directly at home — before developing a plan to straighten them. The company then ships customized teeth aligners to the customer, with follow-up appointments done remotely.

SmileDirectClub has made cutbacks and faced other difficulties in the past. Roughly a year ago, SmileDirectClub said it would lay off staff and stop service in several nations amid efforts to turn a profit. Some customers have said they’ve had problems with the aligners, including teeth damage, and the company has faced lawsuits over allegations of misleading claims. The company has said those allegations are meritless, and has said thousands of its customers were satisfied with the service.

SmileDirectClub shares are down around 71% over the past 12 months. By comparison, the S&P 500 Index
is down 13% over that time.

Related Articles