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SmileDirectClub (SDC) Q2 Earnings Lag Estimates, Guidance Cut
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SmileDirectClub, Inc. reported a loss of 17 cents for second-quarter 2022, wider than the year-ago loss as well as the Zacks Consensus Estimate of a loss of 14 cents.
Revenues
Revenues in the second quarter totaled $116.8 million, missing the Zacks Consensus Estimate by 19.4%. The top line also declined 28.2% from the year-ago number. The company shipped roughly 62,705 unique aligner orders, down 17.8% sequentially. The quarter’s average aligner gross sales price (ASP) came in at $1,917, up 1.4% on a sequential basis.
Net revenues (related to retainers, whitening, and other ancillary products) came in at $116.8 million, down 28.2% from the year-ago quarter. Financing revenues (interest associated with SmilePay program) in the reported quarter were $8.9 million, down 22.4% from the year-ago quarter.
Margins
Gross profit in the reported quarter was $125.8 million, down 27.8% from the prior-year quarter. The gross margin of 72.9% contracted 76 basis points (bps).
SmileDirectClub, Inc. Price, Consensus and EPS Surprise
Meanwhile, marketing and selling expenses contracted 25.7% to $71.2 million. General and administrative expenses were $72.3 million, down 14.9% year over year. The company incurred an adjusted operating loss of $51.8 million in the quarter, marginally narrower than the year-ago adjusted operating loss of $52.7 million.
Financial Updates
SmileDirectClub exited the second quarter of 2022 with cash and cash equivalents of $158.3 million compared with $144.7 million at the end of the first quarter of 2022. Total debt (short and long-term) at the end of the second quarter of 2022 was $792.2 million compared with $739.6 million at the end of the first quarter of 2022.
Cumulative net cash flow used in operating activities at the end of the second quarter of 2022 was $79.1 million compared with $59.4 million in the year-ago period.
Guidance
Burdened by the ongoing unfavorable consumer spending and inflationary issues, SmileDirectClub has reduced its guidance for 2022.
The company now expects total revenues in the range of $450 million to $500 million (from the earlier band of $600 million to $650 million). The Zacks Consensus Estimate for the same is pegged at $610.9 million.
Gross margin (as a percentage of total revenues) is expected in the range of 69.5% to 71.5% (72.5-75.0% guided earlier) for full-year 2022.
Our Take
SmileDirectClub exited the second quarter of 2022 with lower-than-expected earnings. The company registered a year-over-year decline in revenues in the quarter due to lower unique aligner shipments. The company also witnessed a drop in both net and financing revenues on a year-over-year basis. The contraction of gross margin does not bode well. Escalating operating costs are building pressure on the bottom line.
Throughout the second quarter, the macroeconomic challenges continued to impact SmileDirectClub’s core demographic and business spending. According to the company, challenges to consumer spending accelerated faster than anticipated during the quarter, which combined with reduced stimulus, sustained high inflation, and a shift in discretionary spending toward services, will result in less predictable demand curves and lower overall expected demand for the balance of the year. Accordingly, SmileDirectClub reduced its 2022 guidance.
On a positive note, a series of cutting-edge innovations, strategic distribution and insurance partnerships are added positives. The company’s continued investments to influence consumer decision-making and penetrate new demographics also seem strategic.
Zacks Rank and Other Key Picks
SmileDirectClub currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Merck & Co. (MRK - Free Report) .
Quest Diagnostics, carrying a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quest Diagnostics has an earnings yield of 6.9% compared with the industry’s 3.9%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.
Molina Healthcare, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $ 4.55, which beat the Zacks Consensus Estimate by 4.8%. Revenues of $8.1 billion outpaced the consensus mark by 6.2%.
Molina Healthcare has a long-term estimated growth rate of 16.4%. MOH’s earnings surpassed estimates in the trailing four quarters, the average being 3.2%.
Merck reported second-quarter 2022 adjusted earnings of $1.87 per share, beating the Zacks Consensus Estimate of $1.67. Revenues of $14.6 billion surpassed the Zacks Consensus Estimate by 5.4%. It currently has a Zacks Rank #2.
Merck has a long-term estimated growth rate of 10.1%. MRK’s earnings surpassed estimates in the trailing four quarters, the average surprise being 16.8%.
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SmileDirectClub (SDC) Q2 Earnings Lag Estimates, Guidance Cut
SmileDirectClub, Inc. reported a loss of 17 cents for second-quarter 2022, wider than the year-ago loss as well as the Zacks Consensus Estimate of a loss of 14 cents.
Revenues
Revenues in the second quarter totaled $116.8 million, missing the Zacks Consensus Estimate by 19.4%. The top line also declined 28.2% from the year-ago number. The company shipped roughly 62,705 unique aligner orders, down 17.8% sequentially. The quarter’s average aligner gross sales price (ASP) came in at $1,917, up 1.4% on a sequential basis.
Net revenues (related to retainers, whitening, and other ancillary products) came in at $116.8 million, down 28.2% from the year-ago quarter. Financing revenues (interest associated with SmilePay program) in the reported quarter were $8.9 million, down 22.4% from the year-ago quarter.
Margins
Gross profit in the reported quarter was $125.8 million, down 27.8% from the prior-year quarter. The gross margin of 72.9% contracted 76 basis points (bps).
SmileDirectClub, Inc. Price, Consensus and EPS Surprise
SmileDirectClub, Inc. price-consensus-eps-surprise-chart | SmileDirectClub, Inc. Quote
Meanwhile, marketing and selling expenses contracted 25.7% to $71.2 million. General and administrative expenses were $72.3 million, down 14.9% year over year. The company incurred an adjusted operating loss of $51.8 million in the quarter, marginally narrower than the year-ago adjusted operating loss of $52.7 million.
Financial Updates
SmileDirectClub exited the second quarter of 2022 with cash and cash equivalents of $158.3 million compared with $144.7 million at the end of the first quarter of 2022. Total debt (short and long-term) at the end of the second quarter of 2022 was $792.2 million compared with $739.6 million at the end of the first quarter of 2022.
Cumulative net cash flow used in operating activities at the end of the second quarter of 2022 was $79.1 million compared with $59.4 million in the year-ago period.
Guidance
Burdened by the ongoing unfavorable consumer spending and inflationary issues, SmileDirectClub has reduced its guidance for 2022.
The company now expects total revenues in the range of $450 million to $500 million (from the earlier band of $600 million to $650 million). The Zacks Consensus Estimate for the same is pegged at $610.9 million.
Gross margin (as a percentage of total revenues) is expected in the range of 69.5% to 71.5% (72.5-75.0% guided earlier) for full-year 2022.
Our Take
SmileDirectClub exited the second quarter of 2022 with lower-than-expected earnings. The company registered a year-over-year decline in revenues in the quarter due to lower unique aligner shipments. The company also witnessed a drop in both net and financing revenues on a year-over-year basis. The contraction of gross margin does not bode well. Escalating operating costs are building pressure on the bottom line.
Throughout the second quarter, the macroeconomic challenges continued to impact SmileDirectClub’s core demographic and business spending. According to the company, challenges to consumer spending accelerated faster than anticipated during the quarter, which combined with reduced stimulus, sustained high inflation, and a shift in discretionary spending toward services, will result in less predictable demand curves and lower overall expected demand for the balance of the year. Accordingly, SmileDirectClub reduced its 2022 guidance.
On a positive note, a series of cutting-edge innovations, strategic distribution and insurance partnerships are added positives. The company’s continued investments to influence consumer decision-making and penetrate new demographics also seem strategic.
Zacks Rank and Other Key Picks
SmileDirectClub currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Merck & Co. (MRK - Free Report) .
Quest Diagnostics, carrying a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quest Diagnostics has an earnings yield of 6.9% compared with the industry’s 3.9%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.
Molina Healthcare, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $ 4.55, which beat the Zacks Consensus Estimate by 4.8%. Revenues of $8.1 billion outpaced the consensus mark by 6.2%.
Molina Healthcare has a long-term estimated growth rate of 16.4%. MOH’s earnings surpassed estimates in the trailing four quarters, the average being 3.2%.
Merck reported second-quarter 2022 adjusted earnings of $1.87 per share, beating the Zacks Consensus Estimate of $1.67. Revenues of $14.6 billion surpassed the Zacks Consensus Estimate by 5.4%. It currently has a Zacks Rank #2.
Merck has a long-term estimated growth rate of 10.1%. MRK’s earnings surpassed estimates in the trailing four quarters, the average surprise being 16.8%.