Investors simmer on Hims & Hers despite strong revenue growth in 2020

The telehealth brand's annual revenue increased 80% YoY to $148.8 million in 2020, although its quarterly YoY growth dipped in Q4 compared to the months prior.
By Dave Muoio
03:17 pm
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(Image courtesy of Hims & Hers)

Shares of consumer-friendly telehealth and wellness company Hims & Hers took a hit late last week when the company pulled back the curtain on its first quarterly earnings since going public through a special purpose acquisition company (SPAC) merger.

While the company posted 2020 revenue that beat market expectations, its roughly $16 trading price immediately dipped from about $16 to the $14 range (around -12%) and, as of today, has continued to slide to the lower $13 area (around -18% from pre-earnings).

Analysts have broadly called out Hims & Hers' growth projections as the cause of the decline, which seem to be lower than traders expected, despite surpassing the company's initial projections from its recent road show.

Still, the company and its CEO and cofounder, Andrew Dudum, were generally optimistic about the company's recent performance and long-term prospects. He highlighted major investments made and new offerings launched, such as mental health and dermatology, as key moves to fuel future performance, and said that each is seeing early demand from customers.

"During the course of 2020, we took big, important steps from an operational standpoint that led to an incredibly successful year. I'm very pleased that we were able to meet and exceed the expectations for 2020 performance shared in our road show this fall, with no surprises.

"We are a team that prides itself on prudent execution and focus. We ended the year significantly ahead of our internal plan on both the top and bottom line."

TOP LINE

During the fourth quarter of 2020, Hims & Hers reported revenue growth for a total of $41.5 million – a 67% year-over-year (YoY) increase, but a bit of a deceleration compared to the gains of its Q3 (91% YoY), Q2 (76% YoY) and Q1 (91% YoY).

Quarterly gross profit margin inched up to 77%. Net loss for Q4 was $5.2 million, a drop from Q4 2019's $12.4 million, while adjusted EBITDA similarly declined to -$3.1 million from Q4 2019's -$11.9 million.

Looking across the full year, revenue grew 80% YoY to $148.8 million. Gross margin for the year was 74%, well surpassing last year's 54%. Full-year net loss was $18.1 million compared to 2019's $72.1 million, with adjusted EBITDA shrinking to -$8.1 million from $66.1 million.

Dudum also took time to note that the company delivered three million medical visits during the past year, and now has more than 300,000 subscriptions spread across several different medical offerings.

ON THE RECORD

"During the fourth quarter, with the 2020 election and a particularly unique holiday season as the backdrop, we saw advertising rates spike, so we took deliberate and careful steps to manage our expenses in the fourth quarter, which led to moderate quarter-over-quarter sales growth, while still exceeding our full-year 2020 revenue plan," Dudum said in a press release statement.

"These dynamics have normalized in the first quarter and we are seeing improved opportunities to invest in growth."

LOOKING AHEAD

In the coming quarter, Hims & Hers projected revenue to fall between $48 million and $50 million, while adjusted EBITDA is expected to land within -$9.5 million and -$11.5 million. For the full course of 2021, those same metrics range from $195 million to $205 million, and -$35 million and -$45 million.

Outside of these top-line financial projections, Dudum also told investors to expect aggressive moves from the company should an opportunity for growth present itself.

"Hims & Hers is in a leadership position today because we boldly and deliberately invested hundreds of millions of dollars and hundreds of thousands of person-hours to rapidly build a next-generation, digitally native platform, clinical protocols and a brand with meaning. Looking to the future, you would expect us to follow the same path – investing to unlock and drive future growth."

LOOKING BACK

Hims & Hers chose to enter the market when the iron was hot, both in terms of telehealth's blockbuster year of demand and the flurry of digital health SPACs. The company – which got its start mail-ordering sensitive over-the-counter and prescription health products for men – first announced its plans at the top of October and closed the deal in January.

Investors were buoyed during the run-up by the company's Q3 report detailing rising revenues and accelerating growth.

Beyond Hims & Hers, there's been no shortage of business activity among telehealth's biggest players.

Ro, probably its closest parallel, was recently reported by Reuters to be on the hunt for a SPAC partner of its own, and just a few weeks ago made the push into COVID-19 vaccination support.

Teladoc Health outlined a year of knockout growth in its late February earnings call, while others like Doctor on Demand and MDLive have become the focal point of major virtual care M&A deals.

There's also the case of Amazon, the elephant in the room when it comes to broad-scale telehealth. The company recently went public with long-rumored plans to expand its Amazon Care app-based services across the U.S. during the summer, with more than a few market watchers anticipating a major impact from the tech giant.

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