SmileDirectClub (SDC) is scheduled to report results of its fourth fiscal quarter after the market close on Tuesday, February 25, with a conference call scheduled for 4:30 pm EDT.
1. GUIDANCE: In November, SmileDirectClub reported better than expected results for its third quarter and forecast fourth quarter revenue of $196M-$201M and adjusted EBITDA of ($37M)-($30M). At the time, the company forecast fiscal 2019 revenue of $750M-$755M and adjusted EBITDA of ($80M)-($73M). Analysts previously expected Q4 revenue of $207.57M and FY19 revenue of $746.5M, but the estimates have shifted to $199.93M and $753.57M, respectively. Citi analyst Stephanie Demko attributed the Q4 revenue guidance shortfall to conservatism given the magnitude of the Q3 beat, and she noted that management projections do not include expansion into incremental geographies, the nighttime aligner opportunity and other adjacent opportunities. Jefferies analyst Brandon Couillard said that after a "spate of headline noise," investor focus should pivot back to SmileDirectClub's "strong" underlying fundamentals, reaccelerating Q4 growth and "attractive" valuation. JPMorgan analyst Robbie Marcus said he remains bullish on the company's ability to post another beat in Q4 and provide initial 2020 guidance "that sets up another year of beat-and-raise quarters."
2. CHIEF CLINICAL OFFICER: Jeffrey Sulitzer, SmileDirectClub's Chief Clinical Officer, is at risk of losing his California license after a two-year state dental board probe, Reuters reported, saying that in a complaint filed by the office of California's Attorney General, Sulitzer is accused of violating state law, defrauding state dental regulators and acting with gross negligence toward patients while assisting in SmileDirectClub's growth. SmileDirectClub defended Suliutzer, saying the allegations are "unfounded" and "untrue." "As admitted by the Dental Board of California, Dr. Sulitzer's license remains in good standing, as it does in every state in which he is licensed," the company said in a statement.
3. LAWSUITS: On February 18, the U.S. District Court for the Southern District of New York dismissed plaintiffs' putative consumer class action lawsuit against SmileDirectClub, with the company stating that "This court decision verifies that these kinds of claims have no place in court." This was the last consumer class action lawsuit pending against the company and marked the second time in two months that a consumer class action complaint against SmileDirectClub has been dismissed in its entirety. The Florida Board of Dentistry ruled on January 10 to close its investigation into SmileDirectClub's business model.
4. PROBLEMS WITH ALIGNERS: SmileDirectClub promises to fix customers' smiles for about a third of the cost of traditional braces with at-home teeth straightening, but a number of patients say the aligners instead caused painful problems, NBC News reported. The Better Business Bureau reports more than 1,800 complaints nationwide involving SmileDirectClub, according to the report. Last month, nine members of Congress asked the Food and Drug Administration and the Federal Trade Commission to investigate SmileDirectClub "to ensure that it is not misleading consumers or causing patient harm." The company says the problems are likely the fault of the patients not following the recommendations.
5. EXPANSION: In January, SmileDirectClub, one of the worst performing IPOs of 2019, announced an exclusive deal with Walmart (WMT) to offer a line of oral care products to consumers. Additionally, the company announced that it is expanding into Asia and "bringing doctor-directed remote clear aligner therapy" to Hong Kong. Craig-Hallum analyst Alexander Nowak said he believes SmileDirectClub is setting itself up for "many years of share gains while insulating itself from potential copy-cats."
SmileDirectClub
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