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  "documentTitle": "Hims & Hers Health, Inc. (HIMS)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Spruce Point Capital Management",
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  "presentationDate": "2023-07-13 00:00:00",
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  "notes": "Slide 13 of a Spruce Point Capital Management activist deck.",
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      "text": "In reality, we estimate that HIMS churns well over 50% of customers by the end of year 1 and nearly 80% by the end of year 2.",
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      "text": "Finally, we are troubled that as pressures have begun to show in HIMS' business that it has subtly reduced supplemental financial disclosures that would help investors develop a more accurate picture of its business.",
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      "text": "And while average order value (AOV) has increased over the past two years largely due to pushing longer term subscriptions, we find that CAC has grown much faster YoY in 2022 than AOV.",
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      "text": "We also disagree with management's claim that HIMS is a low customer acquisition costs (CAC) business. For starters, we believe total marketing expenses and marketing-related stock based compensation (most of which we suspect relates to compensation for celebrity endorsements) should be added to acquisition costs, which adds an average of about $40 million in costs for each of the past two years. While we cannot replicate HIMS's CAC calculation based on unique subscribers, our estimates of gross subscriber additions lead us to believe that CAC rose year-over-year for much of 2022 and, relative to revenue, remains materially above 2020 levels.",
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      "text": "HIMS likes to represent that its achievement of positive adjusted EBITDA in Q4 2022 demonstrates that it can generate operating leverage. However, when we include stock-based compensation, we note that HIMS remains far away from breakeven and note that the Company has not demonstrated that it can temper the marketing expense firehose and still grow revenue.",
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      "text": "We believe the notion that HIMS is a recurring revenue business to be unsupportable given how quickly we estimate it churns customers. HIMS deflects a complete picture of the its customer churn by quoting “long-term retention rates” and implying that the metric is representative of how well HIMS retains customers over time. In contrast, we believe this metric is largely meaningless, as it only captures retention from the end of year two to the end of year three, meaning (1) it cannot be easily compared with others as a non-standard metric, and (2) it only references what we estimate to be 16% of customer value generated through year three and so reveals shockingly little on retention.",
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      "text": "In reality, we estimate that HIMS churns well over 50% of customers by the end of year 1 and nearly 80% by the end of year 2.",
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      "text": "CEO Dudum has often represented that HIMS customers are spending more on a broader set of products on the platform. However, our analysis calls that into question. We find that subscriptions and orders per subscriber have both declined since early 2021. Moreover, although HIMS claims to have materially increased the percentage of subscribers on multi-month plans, we find it dubious that online revenue per subscriber, per subscription, and per order barely budged from Q1 2021 to Q2 2022 despite an 11% estimated increase in revenue per order. Suspiciously, HIMS no longer discloses revenue mix by product type, further supporting our view that revenue diversification has been modest.",
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      "text": "customer churn: 80%",
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      "kind": "paragraph",
      "text": "HIMS likes to sell itself as a recurring revenue, low customer acquisition cost business. However, we believe HIMS' disclosures regarding core business metrics are incomplete, being eliminated, and that several key measures are under increasing pressure.",
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      "text": "We Believe HIMS Misrepresents Major Business Metrics, And We See Deteriorating Momentum",
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