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: SmileDirect to quit some countries, lay off workers in bid to become profitable

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SmileDirectClub Inc. late Monday unveiled layoffs and sweeping operational changes, including halting operations in several countries, as it seeks to turn a profit more than two years after it became a public company.

SmileDirect SDC, +2.05% stock rose as much as 7% in the extended session as the maker of clear aligners and other dental equipment said the changes are aimed at trimming costs and investing in countries and ventures “with the greatest potential for near-term profitability.”

SmileDirect has turned quarterly losses since it went public in 2019. The company has faced criticism that its “teledentistry” methods allegedly are detrimental to patients, which it has refuted, pointing to thousands of satisfied customers. The stock has lost 82% in the past 12 months, contrasting with a 15% advance for the S&P 500 index SPX, +0.28%.

The company said Monday that it will focus on expanding its partner network and oral-care business, and on growing its market share in aligners geared to teens and higher-income households.

SmileDirect will halt operations in Mexico and in several other countries such as Germany, Spain and New Zealand. It said it will continues to operate “and grow” in the U.S. and Canada as well as in Australia, France, Ireland and the U.K. Expansions to other countries are halted for now, it said.

The changes will lead to layoffs, which the company did not detail on Monday.

The decisions were “difficult and will impact many of our team members,” Chief Executive David Katzman said in the statement. They are, however, “the right thing to do at this time for our business so that we may continue to innovate and lead the industry to a better oral-care solution for all.”

SmileDirect estimated it will save about $120 million in costs and capital this year with the changes. It calculated one-time costs of about $25 million, with about $3 million booked in the fourth quarter and $22 million though the year, to cover lease buyouts, severance and other costs.

SmileDirectClub affirmed its previously issued sales guidance for the full-year 2021 revenue in a range between $630 million and $650 million. Analysts polled by FactSet expect 2021 sales to fall to $641 million, from 2020 sales of $657 million. SmileDirect is expected to report fourth-quarter earnings in early March.

The changes are “the right strategy for the future of SmileDirectClub by stabilizing the balance sheet and having sufficient cash to operate and invest in the business,” Katzman said.

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