Hims & Hers bucks health tech's downward trend, boosts 2022 revenue guidance

Hims & Hers shares rose 25% Tuesday as investors were buoyed by the direct-to-consumer health and wellness brand's sunny outlook for the remainder of the year.

The telehealth company, which sells prescription and over-the-counter drugs online as well as personal care products, reported better-than-expected revenue growth in the latest quarter, reporting its top line grew 95% to reach $144.8 million mostly due to its online business segment. The company's top line beat Wall Street estimates as analysts expected revenue of $130.3 million in the third quarter.

This was the company's third consecutive quarter posting more than $100 million in revenue.

Hims & Hers also netted 70,000 new subscribers during the quarter, bringing the total subscriber count to 991,000, up 80% year over year.

The company boosted its fourth-quarter and 2022 guidance as it again charted strong revenue and subscription growth in the most recent quarter.

Hims & Hers forecast revenue of $159 million to $162 million for the fourth quarter of 2022 and revenue of $519 million to $522 million for the full year, executives said during the company's third-quarter earnings call Monday. That beats analysts' expectations of $143.7 million for the fourth quarter and $493.3 million for 2022. At the low end, Hims & Hers' top line for the year would jump 90% from the $272 million the company pulled in during 2021.

That's also up from the company's previous revenue guidance provided in the second quarter in which executives projected between $470 million and $485 million in full-year revenue. In its first-quarter earnings call in May, Hims & Hers projected 2022 revenue in the range of $410 million to $425 million.

Based on its accelerated growth, the company now expects to achieve adjusted EBITDA profitability in the fourth quarter of this year.

Hims & Hers Chief Financial Officer Yemi Okupe told analysts the company expects to remain profitable "for the foreseeable future."

"Q4 will mark a new moment in our history where we do expect to generate profitability on a go-forward basis. With that said, we still have an immense growth opportunity ahead of us," Okupe said.

"We have been on this path since inception, and it is particularly gratifying to see this organically materialize. The underlying strength of our model and ongoing momentum across the business gives us confidence that we can operate profitably on a go-forward basis while continuing to invest for growth," Andrew Dudum, CEO and co-founder of Hims & Hers, said during the earnings call.

Dudum said growth was driven by multiple offerings, strong consumer adoption of the Hims & Hers platform and record subscription growth. 

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.

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.

The company's online revenue grew 94% year over year to $139.8 million. Wholesale revenue increased 136% year over year to $5.1 million, down $1 million relative to the second quarter.

Dudum said the company is performing well despite the macroeconomic headwinds as it offers products that are top-of-mind with consumers.

"We're focusing on conditions and categories and services that are highly emotional, right? These really impact people's lives on a daily basis when they wake up in the morning, like things like mental health, how you feel in your own mind, how you feel in your own body, how you feel when you look in the mirror," he told analysts. "So I think it's really the emotional nature of them, the high-sensitivity nature of these conditions that really impact people's lives. And that's something that even in recessionary times is proving to be incredibly meaningful to people."

"Now, at a time when others may be pulling back or fully hitting the brakes on new investments, we are taking advantage of marketplace opportunities to continue building long-term foundational elements throughout our business," Dudum said, noting that the company has expanded its bench with key hires in R&D, fulfillment, communications and finance. 

Dudum said the direct-to-consumer company has ramped up its marketing initiatives, including launching Hims campaigns with the NFL during prime-time games and promoting Hers on Hulu. He also teased a new celebrity partnership that will begin in early 2023.

The company still has sizable operating losses and reported a loss of $18.8 million, or a loss of 9 cents a share, for the third quarter, from a loss of $16 million, or a loss of 8 cents a share, a year earlier. Wall Street analysts had expected a loss of 11 cents a share.

Hims & Hers Health shares have lost about 35.1% since the beginning of the year versus the S&P 500's decline of 20.9%.

Gross margin during the third quarter was 79% compared to 74% for the third quarter of 2021. Adjusted EBITDA was a loss of $6.1 million for the third quarter of 2022 compared to a loss of $9.8 million for the third quarter of 2021.

Cash, cash equivalents and short-term investments balance increased $3.4 million in comparison to the prior quarter to $198 million during the third quarter.

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 fourth quarter, Hims & Hers projected revenue between $159 million to $162 million and adjusted EBITDA to be in the range of $0 million to $2 million.

For full-year 2022, the company projects adjusted EBITDA to be in the range of a loss of $18 million to a loss of $20 million.