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.