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SmileDirectClub shares plunge in public debut, CFO says he's not concerned

Brian Sozzi

The market should turn its frown upside down on newly minted public company SmileDirectClub (SDC).

That’s because in a sea of unicorn companies that can care less about near-term profits, the smile enhancement outfit actually wants to achieve profits right now. And the early numbers suggest they can actually do just that.

SmileDirectClub opened down about 14% Thursday on its debut at the Nasdaq after pricing at the top of its $19 to $23 range Wednesday evening. The stock fell 16% to $19.23 by early afternoon trading.

SmileDirectClub Chief Financial Officer Kyle Wailes tells Yahoo Finance the company isn’t getting caught up in the first day response, emphasizing the long-term potential for the company.

SmileDirectClub was founded in 2014 by one-time metal braces wearers — and longtime pals — Alex Fenkel and Jordan Katzman. Since their debut, SmileDirectClub has expanded into new products such as teeth whitening, overnight retailers and lip balm.

David Katzman, CEO of SmileDirectClub stands with founders Jordan Katzman (R) and Alex Fenkell as the company debuts its IPO at the Nasdaq MarketSite in New York, U.S. September 12, 2019. REUTERS/Lucas Jackson

It has also launched in three countries besides the U.S., and inked deals with CVS Health (CVS) and Walgreen Boots Alliance (WBA) to open hundreds of shops in their stores. Fenkel says he is particularly upbeat on the prospect to open close to 1,500 stores inside CVS over time. Wailes says the company is in talks with other retailers for similar relationships.

Those expansion efforts have taken SmileDirectClub to the cusp of profitability unlike other hot IPOs this year such as Uber (UBER), Lyft (LYFT) and Slack (WORK).

For the six months ended June 30, SmileDirectClub’s sales surged 113% to $373 million. Operating losses tallied $15.7 million down from $19 million a year ago. But on an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) basis, the company eked out a $2.3 million profit versus a $8.5 million loss a year earlier.

David Katzman, Jordan’s father, is chairman and CEO. Following the IPO, David Katzman — who oversees 15 other businesses (excluding SmileDirectClub) as managing partner of Camelot Venture Group — will have majority voting control over decisions at the company.

Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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