HIMS Shares Plunge As Pivot To Branded GLP-1s Weighs On Outlook

Hims & Hers shares tumbled in premarket trading in New York, the most in three months, after the company posted a first-quarter loss and revenue that missed analyst estimates tracked by Bloomberg, as costs rose amid a massive pivot from selling copycat GLP-1 drugs toward branded obesity drugs from Novo Nordisk and Eli Lilly.

Revenue for the first quarter came in at $608 million versus the $617.5 million Bloomberg Consensus estimate, while the telehealth firm swung to a loss of 40 cents a share from a 20-cent profit a year earlier. 

HIMS recorded $33.5 million in restructuring charges, including inventory write-downs and transition costs. 

“This was an incredibly valuable transition,” HIMS CEO Andrew Dudum told analysts on an earnings call. “We are seeing adoption and weight-loss near-record levels, even beyond the demand we saw following this year’s New Year’s and Super Bowl campaigns.”

Here’s a snapshot of the 1Q earnings (courtesy of Bloomberg):

Revenue $608.1 million, +3.8% y/y, estimate $617.5 million (Bloomberg Consensus)

Loss per share 40c vs. EPS 20c y/y

Adjusted Ebitda $44.3 million, -51% y/y, estimate $46.1 million

Gross margin 65% vs. 73% y/y, estimate 71.7%

Total subscribers 2.58 million, +9.2% y/y, estimate 2.58 million

Operating expense $475.1 million, +27% y/y, estimate $446.2 million

HIMS issued a mixed outlook: It raised its full-year revenue outlook to $2.8 billion to $3 billion, while slashing adjusted Ebitda guidance to $275 million to $350 million.

2Q Forecast:

Sees revenue $680 million to $700 million, estimate $644.5 million

Sees adjusted Ebitda $35 million to $55 million, estimate $70.1 million

Full Year Forecast:

Sees adjusted Ebitda $275 million to $350 million, saw $300 million to $375 million, estimate $319.3 million

Sees revenue $2.8 billion to $3.0 billion, estimate $2.75 billion

In premarket trading, HIMS shares fell 15%, the most since early February. The stock is down about 10% on the year, as of Monday’s close.

Wall Street analysts described the first quarter as messy:

Citi (neutral/high risk)

• Hims is in a transition phase as it reduces reliance on compounded GLP-1s and refocuses its business on branded products, new offerings and international expansion, says analyst Daniel Grosslight

• While that has led to impressive revenue growth, near-term profitability will likely suffer

• With gross margin under pressure and limited ability to reduce operating expenses, much of the margin uplift must come from expanding monthly GLP-1 subscribers, which introduces incremental risks to financial models

Morgan Stanley (equal-weight)

• While management has an ambitious strategy on prioritizing growth, that will require some patience on margins, says analyst Craig Hettenbach

• On a brighter note, international sales appeared strong

• For more durable gains in the stock, positive Ebitda revisions are likely needed

Keybanc Capital Markets (sector weight)

• Hims’ product transitions are creating near-term noise in financials, says analyst Justin Patterson

• Annual guidance suggests that cost headwinds should moderate in 2H, creating potential for revenue re-acceleration with better margins

• Given the historical volatility in the stock, preference is to revisit the equity when new products are showing more traction and margins are starting to improve

Evercore ISI (in-line)

• “At the margin, we are more cautious,” says analyst Mark Mahaney

• Suggests investors to wait for a better entry point as Hims transitions to branded GLP-1 products, or proves out either leg of the bull case: international expansion or diversification of products beyond weight loss

• “We believe the right call here on HIMS shares is to stay on the sidelines and remain patient”

HIMS’ pivot from copycat GLP-1 drugs to branded therapies follows its new partnership with Novo, which ended months of legal battles between the two companies. Under the agreement, HIMS said it would prioritize FDA-approved obesity drugs.