The future of TeleHealth is here: Hims & Hers Health

Hims & Hers is a one-stop telehealth service for men and women’s wellness and care, providing a multitude of treatment options. The company was founded in 2017, and IPOd on the NYSE after reaching a deal with Howard Mark’s Oaktree Capital Management.

To date, the share price has returned 47.2%, but only breaking through the deal price in recent months. HIMS is up nearly 50% in the last 3 weeks. Operating as a pioneering tele-health enterprise, facilitating patient-physician connections through an app and streamlining medication distribution via automated pharmacy setups, HIMS has a lot of potential for growth in the coming years.

Financials

Over the past 2 years, HIMS has seen a steady growth in revenues and profits. Over the last 8 quarters, revenues have grown 143%, and gross profits 174%.

As we can see from the chart above, net income flipped positive for the first time in Q4 of 2023, up from a net income loss of -$19.5 Million in Q1 2022. Additionally, free cash flow has also been steadily growing, reaching $13.35 Million as of Q4 2023. This gives the company capital to invest in new verticals. The company is highly efficient, with a gross margin of 82%. Additionally, total assets have reached $441.9 Million, whilst total liabilities on lay at $97.6 Million, with cash on hand accounting for a staggering $96.6 Million.

Artificial Intelligence

Hims is positioning itself for long-term success through its unique combination of AI-driven healthcare and personalized treatment plans. As a leader in AI-powered closed-loop healthcare systems, Hims utilizes data insights to continuously improve its underlying infrastructure. This strategic advantage allows HIMS to potentially outpace competitors in the long run. Additionally, by expanding its offerings to address a wider range of medical conditions, Hims anticipates decreasing customer acquisition costs while increasing customer lifetime value. This focus on personalization is designed to foster stronger customer retention and loyalty.

Operational Excellency

HIMS is taking a multi-pronged approach to achieve long-term growth and solidify its position in the healthcare market. The company is laser-focused on operational efficiency, aiming to create a competitive edge through a combination of strategic expansion and cost-effectiveness.

Firstly, HIMS is meticulously expanding its service offerings (verticals) while simultaneously optimizing its automated pharmacy operations. This allows them to deliver unparalleled levels of personalization to their customers. This personalized approach is difficult for competitors to replicate at scale, creating a significant barrier to entry. The efficiency gains from optimizing their pharmacy operations are expected to translate to improved unit economics, a key metric that measures profitability per customer. Additionally, a streamlined operational structure should lead to a strengthened cash flow profile over time, providing the resources needed for further growth and development.

Secondly, HIMS demonstrates exceptional organizational prowess by seamlessly integrating the software (the app) with the hardware (pharmacies) within the complex healthcare landscape. This is evident in the rapid success of their iOS app, which climbed to the 16th rank in the US healthcare category within just two short years.

Finally, HIMS leverages its expanding service portfolio to achieve cost efficiency. They offer treatment options for a wider range of medical conditions at costs that are often lower than what patients would typically pay through traditional insurance. This creates a significant competitive advantage in an industry known for rising healthcare costs. By strategically selecting new verticals for expansion, Hims is able to diversify its revenue streams while also bolstering its cash flow.

Conclusion

All in all, the company does come with some risks as seen by the failure of Teledoc, with its share price down 94% since its peak. However, HIMS is a much better efficiently operated company as seen by steady growth in all financial metrics. HIMS has the potential to be a long term winner in the market if the share price can follow its financial growth. A now positive cash flow gives HIMS the ability to increase its vertical expansion growth, possibly increasing the rate at which revenues grow. Furthermore, as the company becomes more efficient, they can begin to see more net income margin growth.