{ "docId": "019dd923-622c-750b-8b99-62a16d2a2f71", "docSlug": "747988e81365", "documentTitle": "Hims & Hers Health, Inc. (HIMS)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2023-07-13 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 8, "pageCount": 105, "prevPage": 7, "nextPage": 9, "slideType": "executive_summary", "function": "summarize", "density": "overcrowded", "nDataPoints": 4, "notes": "This is a classic activist short thesis summary slide.", "elementsJson": [ "paragraph", "callout_box" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-62a16d2a2f71/8", "deckHref": "/decks/019dd923-622c-750b-8b99-62a16d2a2f71", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-62a16d2a2f71.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-62a16d2a2f71#slide-8", "components": [ { "bbox": null, "kind": "callout", "text": "We currently see 25% - 40% downside risk ($5.20 - $6.50) in HIMS' share price.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0f1d-76e6-8702-1ca15b709b5a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.25, "x": 0.02, "y": 0.03 }, "kind": "image", "text": "Spruce Point Capital Management Logo", "attrs": null, "subkind": "logo", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "0163ef29-0ae0-4f95-98a8-1fb984ee6b37", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "share price: $5.20-$6.50", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-0f1d-76e6-8702-23216b5ed7ab", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.9, "x": 0.05, "y": 0.8 }, "kind": "paragraph", "text": "We believe HIMS faces enormous competition while having developed no sustainable advantages beyond its brand, which we believe has been sustained by outrageously large marketing expenditures. Despite its growth, we believe that HIMS has failed to execute on just about every expansion opportunity it has pitched to investors since its IPO (e.g. health provider partnerships, insurance market, HIMS for Enterprise, international, women’s health, and wholesale), while vastly reducing key performance indicators once touted by management. Moreover, we believe management has misrepresented and understated its churn and CAC metrics and that HIMS’ inability to normalize marketing spend means true profitability will continue to suffer. Despite all this, HIMS trades at a premium to its e-commerce peers. We currently see 25% - 40% downside risk ($5.20 - $6.50) in HIMS’ share price.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "5c938248-0b83-44f6-a956-4a692c83b1c4", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.35, "w": 0.9, "x": 0.05, "y": 0.18 }, "kind": "paragraph", "text": "Hims & Hers Health, Inc. (NYSE: HIMS or “the Company”) is a $1.6 billion market capitalization health and wellness e-commerce Company. Founded in 2017, HIMS IPO’ed in January 2021 through a merger with SPAC Oaktree Acquisition Corp. HIMS provides online access to both prescription and over-the-counter (OTC) products, primarily for chronic conditions whose treatment is generally elective, not covered by insurance, and a source of social stigma. The Company’s big win was capitalizing on the explosion of demand for generic erectile dysfunction (ED) medications by prescription (Viagra and Cialis, estimated to be >50% of revenues), which it supplemented early on with men’s hair loss treatments. HIMS has since expanded into dermatology (acne, aging), mental health, and women’s sexual health (birth control, libido). HIMS uses an affiliated telehealth operation staffed by contract physicians to provide patient consultations and issue prescriptions. Giving credit where it is due, HIMS has grown revenue at an 88% CAGR since 2020 and, unlike many of its de-SPAC peers, has greatly exceeded its highly conservative (or sandbagged) SPAC transaction revenue forecasts, which called for 30% YoY growth each year. Yet, despite blistering top-line growth, cash flow remains elusive.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "81e73657-80cf-4503-875e-bf0981bbbeaa", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.9, "x": 0.05, "y": 0.54 }, "kind": "paragraph", "text": "However, we believe the image of its business presented to investors does not match reality and that fundamental changes to ED medication now becoming FDA approved for OTC sales (i.e. not requiring a HIMS prescription) are increasingly likely to thwart its revenue growth. We also believe HIMS has operated on shaky ground in relation to corporate practice of medicine provisions, risking serious legal and business repercussions. Also, HIMS positions itself as the ‘front door” to the healthcare system, with deep customer relationships and a platform that will scale to provide a broad range of medical treatments. In reality, we believe HIMS remains largely a quick and easy outlet for completely commoditized ED pills and hair loss solutions, and its physician consultations are overwhelmingly asynchronous, check-the-box affairs designed to maximize the issuance of prescriptions and sale of medications, endowing HIMS with questionable medical credibility or enduring brand equity. We find it troubling that HIMS’ early clinical guidelines were developed by a physician sanctioned by the Medical Board of California who went on to co-found controversial start-up Cerebral. To make matters worse, we find serious operational risks and embarrassing quality control issues plague a large portion of the pharmacy supply chain used by HIMS.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e374e3b7-9acc-4e36-835c-88342d5cfb8a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.68, "x": 0.28, "y": 0.05 }, "kind": "title", "text": "Spruce Point Sees 25% - 40% ($5.20 - $6.50) Downside Risk To Hims & Hers Health (HIMS) Share Price", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c7de07c6-dbeb-4cf7-82a8-74c98c0d740d", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Thesis archetype", "slug": "thesis-archetype", "agent": null, "layer": "slide", "matchId": "d3c40886-3df2-43d2-99a5-f195e83f5a91", "evidence": "We believe the image of its business presented to investors does not match reality and that fundamental changes to ED medication now becoming FDA approved for OTC sales", "confidence": 0.8 } ], "frameworks": [], "arcBeats": [ { "to": 53, "from": 4, "beatId": "80bd0218-c4cf-4186-b917-bf58199ab190", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "Villain Critique", "beatSlug": null, "evidence": "The document presents a thorough critique of HIMS, framing it as a villain in the healthcare market", "position": 4, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }