An overview of the Hims business model can be found here.
a. Demand
- Beat revenue estimate by 3% & beat guidance by 9%.
- Eucalyptus M&A closing added $40M in quarterly revenue. Without this help, which was likely baked into forecasts, revenue missed by 2.3%.
- U.S. revenue was greatly pressured by their GLP-1 business model change last quarter to pivot to branded drugs with partners like Novo Nordisk. This led to a very easy Q/Q comparison as they re-filled product gaps. For context, revenue fell by 4.5% Q/Q last quarter.
- Hers business revenue rose by 30% Y/Y. It should cross $1B annualized this year.
- Beat subscriber estimate by 5%. This was also helped by the Eucalyptus deal closing.
b. Profits
- Missed 68.5% GPM estimate by 470 bps.
- Missed -$0.10 GAAP EPS estimate by $0.27.
- Beat EBITDA estimate by 28% & beat guide by 34%.
HIMS incurred $81M in GAAP one-time costs driven by Eucalyptus M&A, restructuring its weight loss business and legal charges. The legal charges are from the FTC and include accusations of impermissible data sharing with Meta and other 3rd-party platforms, as well as making it intentionally difficult to cancel a subscription. The first part of that is the potentially much more serious piece to me, as violating customer privacy for a healthcare platform is a gigantic and illegal no-no. The team vehemently denies wrongdoing and will fight the accusations. This had no impact on GPM. The shift to lower-margin branded weight loss products, as well as investments in new specialties, new markets and AI technology are all greatly weighing on this margin line. Much more on this throughout the piece. It did, however, lead to GAAP EPS missing by $0.27 instead of $0.03. GAAP net income margin without these charges would have been -6.2%. Still significant Y/Y worsening tied to the investment areas just mentioned.
EBITDA margin fell sharply Y/Y but still was able to expand Q/Q due to operating efficiency gains across marketing + operations and support offsetting intense GPM pressures. Again, this margin excludes the $81M in aforementioned GAAP charges.
c. Balance Sheet
- $840M cash & equivalents. This includes $225M in upfront cash payments tied to its Eucalyptus acquisition.
- $1.37B notes.
- Basic share count +3% Y/Y.
- They added a $400M credit facility using accounts receivable as collateral to turn that source of liquid assets into more immediate cash. It also raised $400M in convertible debt during the quarter.