SDC - SmileDirectClub drops ~12% as Q2 miss and guidance cut weigh on shares

SmileDirectClub, Inc. ( NASDAQ: SDC ) extended post-earnings losses with a ~13% decline in the morning hours Tuesday after the clear aligner maker fell short of Street forecasts with its 2Q 2022 financials and drew bearish views from analysts.

The Nashville, Tennessee-based oral care company reported $126M in revenue with a ~17% sequential decline and ~28% drop from the prior year period.

“Despite top line challenges, our cost control actions taken in the first quarter reduced our expense base and minimized the impact to our bottom line,” Chief Executive David Katzman noted.

The net loss for the period narrowed to $65M, an improvement of $8M from the previous quarter and $10M from Q2 2022, while the gross margin slipped to ~73% from ~74% in the prior year period.

However, marketing & selling expenses and general & administrative expenses contracted ~26% YoY and ~15% YoY to $71.2M and $72.3M.

In reaction to earnings, Morgan Stanley, with an Equal Weight rating on the stock, lowered the price target to $1.15 from $2.00. The analyst Erin Wright argues that despite low expectations ahead of the results, the quarterly miss and guidance cut looked worse than feared.

For 2022, SmileDirectClub ( SDC ) expects revenue and gross margin to reach $450M – $500M and 69.5% – 71.5%, down from the previous estimates of $600M – $650M and 72.5% – 75.0%, respectively.

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