With the country settling down after the election and a new year upon us, I felt it was time to get back into the market. A company by the name of Hims & Hers Health, Inc. (HIMS) caught my attention and became available to trade January 21st on NYSE @ $16 per share. The firm avoided a sticky IPO and instead choose a SPAC, (Special Purpose Acquisition Corp) with Oaktree Acquisition, who was sitting on a pile of cash, ($200 million plus), and looking for a deal. This kind of initial offering is great for small time investors to have a chance of a huge return at the ground floor, as opposed to buying Air B n B at a jacked up premium from larger institutions. I believe it to have HUGE growth potential!
Hims & Hers Health, Inc. (HIMS) offers teleconferencing with physicians for $39, (Comparable to insurance co-pay) and can then subscribe and ship medications to your door. Primarily, at this point in their growth, HIMS is focused on ED, hair loss, STD’s, birth control, mental health, and supplements. But what happens when they expand to blood pressure, cholesterol, and diabetes medications as their customer-base ages or expands?
In 2 years HIMS has had 2 million consoles, while a feat of 1 million consoles took its main competitor, TeleDoc, 13 years to accomplish. (Although, let’s factor in Covid-19) This is not where they make their revenue, on consoles, but on subscriptions; 90% of their revenue stream. Currently they have 260,000 subscribers, the majority being millennials, with a $20-$30 price point. This was reinforced by a friend who uses their hair products, unbeknownst to me.
The company has seen some encouraging numbers growing 209% in 2019 and an additional 70% in 2020. With margins close to 70%, with their own generic branded meds, losses of $29 million projected this year, and $9 million for 2022; leaves plenty in the bank of their $245 million cash on hand from the SPAC. In addition, HIMS customer acquisition cost has dropped from $153 in 2019 to $110 in Q2 of 2020, earning back 3x over the life of the customer. And even before Oaktree came into the picture, Founders Fund, a Peter Thiel venture, (Space X, FB, Etc.), had an investment made.
The technological disruption of the last decade has seen us change the way we shop, (Amazon), get rides, (Uber) stream music, (Spotify) watch TV, (Netflix); why so should healthcare be immune? For an uninsured American, like myself, $39 is an affordable visit; plus it’s a virtual visit, (I’m additionally saving time, gas, n mental stress). Every Spring my allergies are intense and I require an inhaler, but with HIMS service I would save 50% on my cost to the walk-in clinic and the trip to CVS. Hims & Hers Health, Inc. has received a Net Promoter Score of 65 to the standard healthcare rate of 9. Meaning 65% of customers would recommend their services. Dealing with healthcare includes private and embarrassing conversations with doctors at times; being able to do it from the comfort of one’s home has some advantages. Plus, if you have a STD there’s no awkward pharmacy visit and you’re awarded more privacy.
HIMS potential growth to own a chunk of the physician teleconferencing sector can be seen in past years revenue; 2018 at $27 million, 2019 at $83 million, 2020 at $138 million, and a projection of $179 million this year. In the medications I mentioned earlier, the market for just 18-40 year olds, (Current target consumer) is $35 Billion a year! If it was only this window I would be onboard, but let us take into consideration $900 Billion for 40+ yr. olds and the fact I would assume they will be expanding medications, (i.e. blood pressure). Also, millennials will age and need more help; creating life-long subscription based customers. The current conditions of Covid-19 and the state of healthcare in this country; make this an ideal, affordable, and convenient platform for most Americans.
