Hims, a direct-to-consumer company selling health products and services, announced on October 1 that it will raise $280 million through a merger with a SPAC sponsored by Oaktree Capital Management that will value the company at a $1.9 billion equity value and a $1.6 billion enterprise value. Once the transaction is completed the company will begin trading on the NYSE under the symbol “HIMS,” which they expect will be by the end of 2020.
2020 has been transformational year for the company. In the wake of the pandemic, the company saw continued growth as more people flocked to virtual health care. As a result, as of June 2020, the company said it had 260,000 paid subscribers.
This growth in users and popularity has siphoned into stellar financial performance highlighted in the company’s investor presentation. The company expects to finish 2020 with $138M in revenue, displaying a 128% CAGR from 2018-2020E. Through that time, the company has been able to leverage greater efficiency, translating gross margins from just 29% in 2018 to 71% in 2020E. The business combination represents a pro-forma multiple of 8.9x 2021E revenue and 12.2x 2021E Gross Profit.
Public market Telehealth companies have continued to outperform and drive strong investor appetite in 2020. GoodRx & American Well both went public in 2020, rising 53% and 28% on the first of day of trading. The peer group average, highlighted in the Hims presentation, trades at a 21.7x EV / 2021 Revenue and a 31.0x EV / 2021 Gross Profit multiple, respectively.
When benchmarking hims & hers to a telehealth public market peer set, the company sits squarely in the top-quartile of best performers for top-line growth and gross margin profile, providing significant upside for the business from this initial entry price.
7GC invested in hims & hers in September of 2018 as the company was looking to expand internationally and seek connectivity with select 7GC Limited Partners. Given the company’s revenue acceleration and product development, the team at 7GC has always continued to look for ways to grow its position since inception, participating in the company’s following Series C and Series D rounds in 2019 and 2020.
In the process, 7GC had the pleasure of investing in hims & hers alongside partner funds FoundersFund, IVP, 8VC, Thrive Capital, SV Angel, Redpoint, CPP Investment Board, andForerunner Ventures.
CNBC Interview with CEO Andrew Dudum