A narrower than expected net loss in the third quarter provides validation to SmileDirectClub Inc. (NASDAQ:SDC)'s business model. It also underscores the impact of continued focus on controlled growth and profitability while focusing on cost controls.
Continued Growth
Flexibility and scalability of the underlying business model also continue to serve SmileDirectClub well amid the challenging COVID-19 environment. The Nashville provider of teeth straightening appliances has since confirmed it remains laser-focused in providing the best Club member experience in a bid to drive controlled profitable growth.
In the most recent quarter, SmileDirectClub expanded its core customer acquisition channels as it sought to strengthen its prospects in the burgeoning teledentistry sector. The company expanded its value proposition to the teen demographic while maintaining an eye on international expansion.
Favorable industry dynamics coupled by acceptance of telehealth affirm tremendous growth opportunities in the segment. Likewise, the company faces minimal competition as there is no real competitor that provides end to end vertically integrated platform for consumers and clear teeth aligners.
The favorable market dynamics should accrue to more efficient customer acquisition costs that should allow SmileDirectClub to enjoy higher margins while executing against 20-30% annualized revenue growth targets. Likewise, the lack of an immediate competitor presents a favorable climate for the company to accrue sufficient market share in the growing teledentistry industry as a low-cost provider.
Narrowing Net Loss
The company’s net loss shrunk to 11 cents a share against 89 cents a share reported last year in the third quarter. Earnings also topped an expected net loss of 15 cents expected by analysts. However, the teeth straightening Appliances Company suffered a major blow as revenues slipped to $168.5 million from $180.2 million reported last year.
Earnings beat was sufficient to catapult the stock up the charts. While the stock has more than doubled from 52-week lows of $3.64, it is still down by more than 30% from its 52-week highs of $15. A surge in covid-19 cases has taken a toll on the stock’s sentiments in recent weeks amid growing concerns that the pandemic will affect its operations.