HIMS Q1'25 Earnings Leaves Investors In A Holding Pattern
Why we think the guidance plays a bigger role than most think going into the rest of the year
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Immediate Takeaway
Hims & Hers Health (HIMS) reported their Q1’25 earnings yesterday, and frankly, it was anything but exciting. The biggest takeaway was that the revenue guidance for the full year was reiterated - no raise! However, EBITDA guidance was raised as the shift from a GLP-1 heavy product segment (lower margins) to core product offerings (higher margins) will help the bottom line.
The reiteration of guidance was telling considering management was hyping up their expected launch of Liraglutide (originally slated for end of Q2/beginning of Q3 but brought up one full quarter), conversion of subs to their oral offering, and the anticipated launch of hormonal therapy services.
Without a raise to guidance, investors are definitely left wondering if the core business (+30% y/y and decelerating) will actually be able to drive incremental growth in a post-shortage world, even after the recent Novo Nordisk (NVO) partnership.
We see no reason why the stock is up 15% today (+$1.4 billion in market cap) other than short covering or why bulls are excited for a reiteration of guidance going into macro uncertainty.
Disclaimer: We are short Hims & Hers Health (HIMS) at the time of this report being published.
Key Points
Compounded GLP-1 Giveth, and Taketh Away
If you’ve been following us, it’s no surprise that they beat earnings (Sales: $586 million vs $539 million, +111% y/y). CC data was suggesting it a while ago, and we shared that commentary on Twitter as early as the second week of April.
But with an over-reliance on GLP-1s going into the new year, which we shared on February 18th (below), it’s telling for management to just reiterate topline guidance despite overselling Liraglutide offering (which launched a full quarter ahead of schedule) and the recent partnership with Novo Nordisk (NVO).
We’ll touch upon the NVO partnership further below as it’s own segment which was announced last week prior to earnings.
With the growth engine of GLP-1s being cut at the knees, all eyes are on management’s ability to
Return to focusing on core and accelerating growth (i.e., everything except weight loss).
Successfully launch hormone treatment offerings (low testosterone and menopause support) later this year + expand peptide service offerings.
The guide down in Q2 to between $530 million and $550 million (prev consensus was $565 million) signals a sizable deceleration Q/Q as the company figures out how to get back on its feet since Semaglutide was removed.
To note, 503a pharmacies are no longer allowed to compound Semaglutide as of April 22nd, and 503b pharmacies will see their off-ramp one month later (May 22nd).
Return to Core
With investors now needing to bet on a future without rocket fuel to a business segment that was taking up nearly ~50% of their quarterly sales (and growing), the question now is, can management get core back on track?
In their shareholder letter, they mentioned that growth outside GLP-1s was “nearly +30% y/y”. That is both a sequential decline of 210 bps Q/Q and a massive deceleration of 1,580 bps y/y.
If you were able to read our report after Q4’24 earnings, we hinted that even being able to achieve the $725 million in weight loss sales seemed to be a stretch, which implied that core would need to grow >40% on the year to meet those now reiterated expectations.
Without factoring in any other tricks up Andrew’s sleeve, we already have the NVO partnership, which is meant to replace the commercially available compounded GLP-1 offering, the launched Liraglutide offering, and the near-term launch of hormone offerings (which will roll up into core). That’s already a significant pipeline to work through, so we’ll have to see how well they execute and how well they can attract new subs to these offerings.
Subs Growth
But what’s interesting to note, which I will go ahead and label a quarterly anomaly, is two-fold.
The number of net new subscribers to the platform during the quarter.
The “CAC” that stemmed from the result of those adds.
Starting with subs, it was a pretty lackluster figure. During the quarter, they only added 137k subs, which is a sequential decline of nearly 25%.
We like to use sequential in this context and not Y/Y because of how quickly compounded GLP-1s were supercharging growth and thus, overly dramaticizing Y/Y figures, which wouldn’t be apples to apples.
Consequently, this meant that “CAC” was blown out to the highest point in at least a couple of years. For reference, because we don’t know how many new subscribers were brought onto the platform during any given quarter, our “CAC” calculation is limited to net new subscriber adds that also takes into account a proxy for retention (i.e., if retention was high and new subscribers were also high, then our CAC would be lower).
