SmileDirectClub (SDC) bets on rapid telemedicine-adoption to drive growth

The adoption of telemedicine accelerated in recent months, especially after the pandemic-related shelter-in-place orders came into effect. The trend will likely continue even after the crisis subsides, thanks to the ongoing innovations in that area and the convenience it offers to both patients and caregivers. SmileDirectClub, Inc. (NASDAQ: SDC), an emerging teledentistry company, registered sequential revenue growth in each of the trailing four quarters, after recovering from the initial slowdown.

Profitability

The Tennessee-based oral care company is yet to generate profit, after going public more than a year ago. On the positive side, the bottom-line numbers came in above analysts’ forecast in recent quarters. Taking a cue from the growing adoption of remote medical care, analysts in general recommend investing in the company’s stock, which according to them would grow double digits in the next twelve months. However, the lackluster performance of the stock, which has been witnessing significant insider activity, shows investors are cautious.

From SmileDirectClub’s Q1 2021 earnings conference call:

On growth, we are making good progress against our initiatives. And excluding the impact of the cyberattack in Q2, we’re executing against our long-term revenue growth targets. On cost, we saw continued gross margin expansion in the quarter, enabled by our manufacturing initiatives. This, in combination with our sales and marketing efficiency and our continued cost discipline across the business, puts us well on our way to achieving our long-term targets. Since the enactment of our control growth plan in Q4 of 2019, we have completely reset the cost profile of the business.

Bullish Outlook

SmileDirectClub’s executives look to expand the customer base by leveraging the company’s competitive prices and by offering a better customer experience. Currently, they are targetting annual average revenue growth of 20-30% for the next five years. Meanwhile, the ongoing investments in international expansion and the high costs related to customer acquisition are expected to affect the company’s turnaround plan. Recently, SmileDirectClub commenced operations in Mexico, marking its entry into Latin America.

Read management/analysts comments on SmileDirectClub’s Q1 report

The company offers doctor-directed digital end-to-end experience in teledentistry, with round-the-clock access to orthodontic care. In the first quarter, net loss narrowed slightly to $0.25 per share but missed Wall Street’s prediction. Revenues edged up 1% to a record high of about $200 million as an uptick in the core business was nearly offset by weakness in the financing segment.

Earlier this year, operations were disrupted by a cyberattack that raised concerns about the safety of the digital platform. While timely intervention averted further damages, costs related to the recovery process affected the company’s financial performance.

At the Bourses

SmileDirectClub’s stock is yet to bounce back from the post-IPO slump of September 2019, though it has recovered from last year’s record lows. The shares slipped into the single-digit territory recently and lost further after Monday’s earnings report.