The COVID-19 pandemic spurred new players into the virtual care space, along with booming investments, but the increased competition is not slowing down Hims & Hers' growth.
The consumer telehealth and wellness brand reported second-quarter 2021 revenue grew 69% to $61 million, compared to $36 million for the second quarter of 2020, according to its second-quarter earnings report.
The company's second-quarter top line beat both the company's expectations and Wall Street estimates. The consensus estimate of Wall Street analysts was second-quarter revenue of $56 million.
This follows strong growth in the first quarter of 2021 as revenue jumped 74% to $52 million.
The company, which combines telehealth and medication delivery, started with four products and has since added a women’s health business, called Hers, that focuses on birth control, sexual health and skin and hair care products.
In response to the COVID-19 pandemic, Hims & Hers fast-tracked an expansion of its telehealth services to offer access to primary care and also rolled out online mental health services.
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But the virtual care market is getting increasingly competitive with large-scale players like Optum, Amazon and Walmart jumping in with telehealth services.
Back in April, UnitedHealth Group's Optum healthcare services unit announced the launch of a virtual care business that would expand telehealth across the U.S. with more specialized medical care providers and services.
According to a transcript of an April 15 earnings call, executives from both UnitedHealth and Optum said the software aims to integrate physical care, telehealth, home care and behavioral care.
"I'm excited that there are investment dollars moving into the space, because, frankly, a lot of people need help in this country," Andrew Dudum, CEO and co-founder of Hims & Hers, told investors during the company's second-quarter earnings call last week.
Dudum projected that 80% of the $4 trillion healthcare market will move toward a delivery service that "looks like Hims & Hers" in the next five to 10 years.
"This market is massive," he said. "I think one of the things that is practically a reality is that there have been a tremendous amount of investments in this space in the last couple of years, especially going into COVID. And none of these external factors have frankly impacted our core business at all, right? We've got increasing revenue growth accelerating 70% upwards guidance this year, subscriptions growing incredibly, gross margins growing to an all-time high, as we expand and innovate into new categories and new services."
Hims & Hers has been able to differentiate itself in the market by building a "world-class consumer experience," he said.
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The digital health company reported a net loss of $9.2 million for the second quarter of 2021 compared to a loss of $1 million for the same period a year ago. Hims & Hers' adjusted EBITDA for the quarter was a loss of $4.7 million compared to a loss of $1.2 million for the second quarter of 2020. Despite the year-over-year increase, the result still beat the company's expectation of a loss between $10 million and $12 million for the quarter.
In the second quarter, the company expensed $2.9 million in costs related to the acquisitions of Honest Health and Apostrophe, Chief Financial Officer Spencer Lee said during the earnings call.
In June, Hims & Hers scooped up personalized health company Honest Health for $10 million, primarily in stock, Lee said. That acquisition will expand the company's U.K. footprint. In July, Hims & Hers completed the acquisition of direct-to-consumer dermatology startup Apostrophe for $150 million, of which approximately $50 million was paid in cash, he said.
The company reported earnings per share of a loss of five cents, topping the analysts' consensus estimate of a loss of 10 cents in the quarter, according to Street Insider.
Shares of Hims & Hers jumped 12% in extended trading Wednesday after the company reported second-quarter results, MarketWatch reported.
The quarter’s gross profit margin was 78% for the second quarter, up from 71% in the first quarter of 2020. The company ended the quarter with 453,000 subscriptions on its platform, up 76% year over year, or adding 200,000 subscriptions versus the second quarter of 2020.
Hims & Hers reported that its net orders during the second quarter increased to 786,000 and averaged $74 per order, compared to 687,000 orders at the same price during the same period a year ago.
Geographic expansion, new product lines
During the earnings call, Dudum offered some details about the company's plans for continued specialty expansion, international ambitions and strategic technologies.
Hims & Hers is focused on building its virtual behavioral health services to offer the full spectrum of care, he said.
"Each specialty is growing quickly, layering diversity into our business as we scale. And while early categories such as sexual health continue to scale, our newest categories such as psychiatric services, therapy and broad behavioral health are growing the fastest," he said.
The company plans to rapidly expand into new specialties, likely doubling the number of core categories it's in by 2025, he noted.
"We are building Hims & Hers into the new front door to healthcare, a new front door that will span dozens of medical specialties, welcoming customers of all demographics into a unified consumer platform that looks and feels and talks to them in a way that gives them confidence they're in the right hands," Dudum said.
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Hims & Hers also is building out pharmacy and fulfillment capabilities. Nearly 50% of the company's order volume is now being fulfilled out of its Ohio pharmacy and fulfillment center. "I'm excited to share by year-end 2022, we believe nearly 100% of our services and treatments will be filled via our verticalized infrastructure, further unlocking efficiencies and capabilities consumers are looking for," Dudum told investors.
Hims & Hers aims to double down on virtual behavioral health services and invest in chronic care management as consumers in their 30s and 40s become increasingly concerned about weight management, diabetes and high cholesterol, he said.
"Those are also categories we really believe are widespread within our customer base and is an opportunity for us to grow with these patients and increase the lifetime value with these patients in the next five and 10 years," he said.
As far as international expansion, Hims & Hers is eyeing markets in the U.K., Australia, Germany and Canada with a longer-term goal of moving into key Asian and Middle Eastern markets, Dudum said.
For the third quarter of 2021, the company raised its guidance for revenue to be in the range of $69 million to $71 million and adjusted EBITDA to be a loss of $9 million to a loss of $11 million, with approximately $4 million to $5 million in additional costs associated with the Honest Health and Apostrophe acquisitions.
The company raised its revenue guidance for the full-year 2021 to be in the range of $251 million to $255 million, an increase of $29 million at the midpoint versus its previous guidance. Adjusted EBITDA is expected to be a loss of $35 million to a loss of $40 million for the year.