Bottom Line. HIMS shares have been under pressure recently from the continuing negativity associated with SPACs, concerns around rising advertisement costs (as raised by some other DTC companies), and recent rollout of competing solutions by Optum. In midst of all this, HIMS has continued to post consecutive “Beat and Raise” quarters and is now on track to exceed its 2022 De-SPAC revenue outlook by almost 10% a year earlier than previously projected (current 2021 revs outlook of $251-$255 mln vs De-SPAC 2022 revs outlook of $233 mln). Q2 results were solid across the board, and at 4x our pre-Q2 2022 revenue estimates, valuations are compelling. While LT concerns around pricing pressure and increased competition driving higher marketing/acquisition costs remain, we see the near-term risk reward attractive.
▪ 2Q21 Results Strong Across the Board. HIMS reported 2Q21 revenue of $60.7 mln (vs guidance of $55-$57 mln; CSe: $56.6 mln), up 69% Y/Y. Adjusted EBITDA for 2Q21 was negative $4.7 mln (vs guidance of negative $10-$12 mln), compared to $1.2 mln in the prior year. Gross margin was 77.9% (CSe: 76.0%) versus 71.5% in the prior year.
▪ Performance by Business Line & Other Metrics. Online revenues came in at $58.1 mln (CSe: $54.9 mln), up 75% Y/Y. Net orders were 786K (CSe: 720K), up from 572K in the prior year. Average order value (AOV) was $74 (CSe: $76.3), up from $58 in the prior year. Wholesale revenue was $2.55 mln (CSe: $1.68 mln) versus $2.62 mln in the prior year. HIMS ended the quarter with 453K subscriptions, an increase of 76% Y/Y and added an incremental 62K subscriptions compared to the end 1Q21.
▪ 2021 Guidance. HIMS updated its annual guidance for 2021 for 2Q as well as to include Apostrophe & Honest Health. Total revs now expected at $251-$255 mln ($221-$227 mln prev) and adjusted EBITDA of negative $35-$40 mln (vs negative $35-$45 mln prev). For 3Q21, total revs are expected at $69-$71 mln (Cons/CSe: $58.4 mln), including $4-$5 mln from M&A & $65-$66 mln in core HIMS (core Y/Y growth of 57-60%). Adjusted EBITDA for 3Q of negative $9-$11 mln (Cons/CSe: -$10.5/-$11.0 mln). Implied guidance for 4Q21 has revenues of $69-$71 mln and EBITDA of negative $13-$16 mln.
Outperform, TP $16 (Currently $8).