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SmileDirectClub, Inc. reported a loss of 18 cents in third-quarter 2022, narrower than the year-ago quarter’s loss of 23 cents and the Zacks Consensus Estimate of a loss of 22 cents.
Revenues
Revenues in the third quarter totaled $106.8 million, exceeding the Zacks Consensus Estimate by 7.3%. The top line declined 15.1% from the year-ago quarter’s number.
The company shipped 52,367 unique aligner orders, down 16.5% sequentially. The quarter’s average aligner gross sales price (ASP) came in at $1,902, down 0.8% on a sequential basis.
SmileDirectClub, Inc. Price, Consensus and EPS Surprise
Net revenues (related to retainers, whitening and other ancillary products) came in at $98.5 million, down 22.3% from the year-ago quarter’s levels. Financing revenues (interest associated with the SmilePay program) in the reported quarter were $8.2 million, down 24.3% from the year-ago quarter’s figure.
Margins
Gross profit in the reported quarter was $74.8 million, down 23.9% from the prior-year quarter’s level. The gross margin of 70% contracted 134 basis points (bps).
Marketing and selling expenses declined 39.5% to $58.2 million. General and administrative expenses were $75.5 million, down 11.9% year over year. The company incurred an adjusted operating loss of $58.9 million in the quarter, narrower than the year-ago adjusted operating loss of $83.6 million.
Financial Updates
SmileDirectClub exited the third quarter of 2022 with cash and cash equivalents of $120.2 million compared with $158.3 million at the end of the second quarter of 2022. Total debt (short and long-term) at the end of the second quarter of 2022 was $792.4 million compared with $792.2 million at the end of the second quarter of 2022.
The cumulative net cash flow used in operating activities at the end of the third quarter of 2022 was $106.7 million compared with $98.1 million in the year-ago period.
Guidance
SmileDirectClub narrowed its guidance for 2022.
The company narrowed total revenue guidance in the range of $470-$500 million (from the earlier projection of $450-$500 million). The Zacks Consensus Estimate for the same is pegged at $484.1 million.
Gross margin (as a percentage of total revenues) is expected in the range of 70.5-71.5% ( from 69.5-71.5% guided earlier) for the full-year 2022.
Our Take
SmileDirectClub exited the third quarter of 2022 with better-than-expected earnings and revenues. However, the company registered a year-over-year revenue decline in the quarter due to lower unique aligner shipments. The company also witnessed a drop in net and financing revenues on a year-over-year basis. The contraction of gross margin does not bode well. Escalating operating costs are exerting pressure on the bottom line.
Throughout the third quarter, the macroeconomic challenges continued to impact SmileDirectClub’s core demographic and business spending. According to the company, challenges to consumer spending and sustained high inflation continue to impact its overall expected demand for the rest of the year.
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).
The Zacks Consensus Estimate for ShockWave Medical’s earnings per share (EPS) is stable at $2.57 for 2022 and rose from $3.42 to $3.56 for 2023 in the past 60 days. SWAV has gained 43.1% so far this year.
ShockWave Medical delivered an earnings surprise of 146.1%, on average, in the last four quarters.
Estimates for AMN Healthcare Services have improved from earnings of $11.26 to $11.43 for 2022 and $8.30 to $8.39 for 2023 in the past 60 days. AMN has declined 1.6% so far this year.
AMN Healthcare Services delivered an earnings surprise of 10.96%, on average, in the last four quarters.
McKesson’s EPS estimates have increased from $24.42 to $24.75 for fiscal 2023 and $26.04 to $26.40 for fiscal 2024 in the past 60 days. MCK has gained 55.2% so far this year.
McKesson delivered an earnings surprise of 4.79%, on average, in the last four quarters.
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SmileDirectClub (SDC) Q3 Earnings Beat, Gross Margin Dips
SmileDirectClub, Inc. reported a loss of 18 cents in third-quarter 2022, narrower than the year-ago quarter’s loss of 23 cents and the Zacks Consensus Estimate of a loss of 22 cents.
Revenues
Revenues in the third quarter totaled $106.8 million, exceeding the Zacks Consensus Estimate by 7.3%. The top line declined 15.1% from the year-ago quarter’s number.
The company shipped 52,367 unique aligner orders, down 16.5% sequentially. The quarter’s average aligner gross sales price (ASP) came in at $1,902, down 0.8% on a sequential basis.
SmileDirectClub, Inc. Price, Consensus and EPS Surprise
SmileDirectClub, Inc. price-consensus-eps-surprise-chart | SmileDirectClub, Inc. Quote
Net revenues (related to retainers, whitening and other ancillary products) came in at $98.5 million, down 22.3% from the year-ago quarter’s levels. Financing revenues (interest associated with the SmilePay program) in the reported quarter were $8.2 million, down 24.3% from the year-ago quarter’s figure.
Margins
Gross profit in the reported quarter was $74.8 million, down 23.9% from the prior-year quarter’s level. The gross margin of 70% contracted 134 basis points (bps).
Marketing and selling expenses declined 39.5% to $58.2 million. General and administrative expenses were $75.5 million, down 11.9% year over year. The company incurred an adjusted operating loss of $58.9 million in the quarter, narrower than the year-ago adjusted operating loss of $83.6 million.
Financial Updates
SmileDirectClub exited the third quarter of 2022 with cash and cash equivalents of $120.2 million compared with $158.3 million at the end of the second quarter of 2022. Total debt (short and long-term) at the end of the second quarter of 2022 was $792.4 million compared with $792.2 million at the end of the second quarter of 2022.
The cumulative net cash flow used in operating activities at the end of the third quarter of 2022 was $106.7 million compared with $98.1 million in the year-ago period.
Guidance
SmileDirectClub narrowed its guidance for 2022.
The company narrowed total revenue guidance in the range of $470-$500 million (from the earlier projection of $450-$500 million). The Zacks Consensus Estimate for the same is pegged at $484.1 million.
Gross margin (as a percentage of total revenues) is expected in the range of 70.5-71.5% ( from 69.5-71.5% guided earlier) for the full-year 2022.
Our Take
SmileDirectClub exited the third quarter of 2022 with better-than-expected earnings and revenues. However, the company registered a year-over-year revenue decline in the quarter due to lower unique aligner shipments. The company also witnessed a drop in net and financing revenues on a year-over-year basis. The contraction of gross margin does not bode well. Escalating operating costs are exerting pressure on the bottom line.
Throughout the third quarter, the macroeconomic challenges continued to impact SmileDirectClub’s core demographic and business spending. According to the company, challenges to consumer spending and sustained high inflation continue to impact its overall expected demand for the rest of the year.
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 are ShockWave Medical (SWAV - Free Report) , AMN Healthcare Services (AMN - Free Report) and McKesson (MCK - Free Report) , all carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for ShockWave Medical’s earnings per share (EPS) is stable at $2.57 for 2022 and rose from $3.42 to $3.56 for 2023 in the past 60 days. SWAV has gained 43.1% so far this year.
ShockWave Medical delivered an earnings surprise of 146.1%, on average, in the last four quarters.
Estimates for AMN Healthcare Services have improved from earnings of $11.26 to $11.43 for 2022 and $8.30 to $8.39 for 2023 in the past 60 days. AMN has declined 1.6% so far this year.
AMN Healthcare Services delivered an earnings surprise of 10.96%, on average, in the last four quarters.
McKesson’s EPS estimates have increased from $24.42 to $24.75 for fiscal 2023 and $26.04 to $26.40 for fiscal 2024 in the past 60 days. MCK has gained 55.2% so far this year.
McKesson delivered an earnings surprise of 4.79%, on average, in the last four quarters.