Consumer products seller Hims & Hers didn’t impress investors on its first day of trading as a public company on Thursday, but that hasn’t derailed the growth plans of co-founder Andrew Dudum.
“I think most importantly we are excited about the next five and 10 tears of us innovating in the health care system,” Dudum told Yahoo Finance Live when asked about the muted market reception.
But first, about the optics of that stock price.
Trading on the New York Stock Exchange under the ticker symbol ‘HIMS’, the stock fell 7% Thursday. The response isn’t the typical overly enthusiastic day one move investors have come to expect from a company arriving to market via a SPAC deal, as is the case with Hims & Hers.
The business merged with a blank-check company called Oaktree Acquisition Corp. (firm led by well-known money manager Howard Marks) in a deal announced on Oct. 1. Dudum is quick to point out that shares of Oaktree Acquisition Corp. (OAC) have gained since the merger was announced (up 45%) and that, in fact, better reflects the company’s potential.
Nevertheless, it’s not exactly the debut one would be looking for a company that is easy for investors to understand, has a real business powered by the always sought after recurring revenue model (91% of sales are on subscription) and has gotten in the minds (and wallets) of consumers via years of TV marketing blitzes for erectile dysfunction (ED) pills (when it started out as just Hims focused on mens’ health). Some of the caution on the part of investors could reflect the financial projections put out by Hims & Hers in an investor presentation in the lead-up to the first day of trading.
The company is looking for a 30% revenue increase this year, which would be slower than the 67% gain in 2020. As for profits, Hims & Hers sees an adjusted EBITDA (earnings before interest, taxes depreciation and amortization) loss of $29 million this year versus a loss of $20 million in 2020.
Dudum says the guidance errs on the side of caution.
“We like to be conservative out of the gate and make sure we can hit and beat expectations we put out. As a young company, I think that’s really important to build credibility and trust with the Street. But when you look at the business, even if you look at last quarter, the business is growing 90% year over year with 76% gross margins and increasingly improved cash efficiency quarter over quarter. And so I think what we have here is a business that inherently robust revenue potential,” Dudum says.
There is a good deal to like about the company.
For starters, the company has close to 300,000 paying subscribers for its various health and wellness products. Those products — sold through a direct-to-consumer digital model — have expanded well beyond ED medications to include everything from face cleaners for women backed by brand sponsor Jennifer Lopez to mental health pills. Dudum says he is eyeing expansions into sleep, fertility, diabetes and cholesterol medications.
Meanwhile, the company could get a financial boost if it were to begin accepting insurance. Dudum is hopeful that will become a reality later this year or 2022.
Hims & Hers also has some solid backers — besides Oaktree — in the mix that should give the company credibility with investors. Former long-time Netflix CFO David Wells joined the board in November. Drug distributor McKesson — through its venture arm McKesson Ventures — has rolled over its early investment into the public entity.
So in the end, there is a decent enough chance the stock will be able to get it up on the charts.
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