Direct-to-consumer health and wellness brand Hims & Hers appears to be thriving despite the market downturn as it charted strong revenue and subscription growth in the second quarter.
The telehealth company, which sells prescription and over-the-counter drugs online as well as personal care products, is well positioned to "not only thrive in a recessionary dynamic but also to take meaningful market share," the company's CEO, Andrew Dudum, said during Hims & Hers' second-quarter earnings call this week.
"I think this quarter is a great example. We leaned in aggressively to efficient marketing where it was working as others were pulling back," he told investors and analysts on the earnings call.
The company's core products include solutions for men for dermatology issues, hair loss and sexual health. Hims has since added a women’s health business, called Hers, that focuses on birth control, sexual health and skin and hair care products.
"The categories that we're operating in are very emotionally challenged, top-of-mind customer needs that when these customers are waking up, looking in the mirror, these are the things they're thinking about," Dudum said. "We've got a diversified set of customers that are coming to us with deep emotional relationships for things they care about. And ultimately, that's just a really sticky relationship that I think is really different from most of the market."
Hims & Hers sells its health and wellness products directly to consumers through its online store, its app and through 13 retail partners including CVS, Walgreens, Walmart and GNC. The virtual care company also is teaming up with Carbon Health to offer patients in California direct access to providers for in-person medical appointments at clinics.
Dudum also said the company's cash-pay model gives it a competitive edge in the current market environment.
"I think what it's actually maybe counterintuitive is that during recessionary times, cash pay options where patients can pay $20 or $30 for the complete experience, the access to the specialty care, the access to the products and all of that delivered to their door is actually increasingly beneficial," he said, noting that the majority of Hims & Hers customers have a very high deductible insurance plan.
"We continue to evaluate insurance as a benefit where it might be beneficial. I think mostly because of the verticalization of what we've built and the leverage we're able to get out of the system, those cash pay prices are better than the co-pay prices," Dudum said.
The company charted 87% revenue growth in the most recent quarter. The company's top line of $114 million beat both the company's expectations and Wall Street estimates. Hims & Hers reported $61 million in quarterly revenue a year ago.
Online revenue increased 85% year over year to $107.5 million from $58 million a year ago. Revenue through the company's wholesale channel increased 140% from $2.5 million in the second quarter of last year to $6.1 million.
Year to date in 2022, the company's revenue is up 90% to $215 million.
As of Jan. 31, 2021, Hims & Hers had approximately $340 million of cash and cash equivalents and short-term investments on the balance sheet and no debt outstanding.
Membership subscriptions, a core driver of the company's recurring revenue model, added 100,000 new membership subscriptions and ended the second quarter at 817,000, which represents 80% growth from a year ago, Dudum said.
The company said it powered north of 350,000 medical visits on average per month.
Based on its strong start to 2022, the company again upped its revenue guidance for the year, now projecting around 73% to 78% growth with revenue coming in between $470 million and $485 million. In its first-quarter earnings call in May, Hims & Hers projected 2022 revenue in the range of $410 million to $425 million.
But the digital health company is still not profitable and reported widening losses in the most recent quarter. Hims & Hers posted a loss of $19.7 million in the second quarter of 2022 compared to a loss of $9.2 million for the same period a year ago. Hims & Hers' adjusted EBITDA for the quarter was a loss of $7.5 million compared to a loss of $4.7 million for the second quarter of 2021.
The company reported earnings per share of a loss of 10 cents, missing Wall Street analysts' consensus estimate of a loss of nine cents in the quarter.
The company's shares are down 75% from its previous highs in early 2021. Hims & Hers' stock was down 6.90% to $6.21 in after-hours trading Monday. The company's stock recovered Wednesday, rising 7%.
Hims & Hers has an enterprise value of about $1.1 billion.
Dudum said the company's strong financial performance is accelerating its path to profitability. The company expects to hit adjusted EBITDA profitability within the next four quarters, he said.
For full-year 2022, the company projects adjusted EBITDA to be in the range of a loss of $27 million to a loss of $20 million, which would reflect an adjusted EBITDA margin in the range of a loss of 6% to a loss of 4%.
Hims & Hers went public in January 2021 via a merger with special purpose acquisition company Oaktree Acquisition Corp. in a deal that valued the company at $1.6 billion.
For the third quarter, the company expects revenue to be in the range of $129 million to $132 million and adjusted EBITDA to be in the range of a loss of $9 million to a loss of $7 million.