[Generated Title]: Hims & Hers Q3: Growth Engine or Just Good Marketing?
Alright, let's dissect Hims & Hers' Q3 performance. The headline screams growth, but as any seasoned analyst knows, you gotta dig deeper than the press release.
Revenue's up 49% year-over-year, hitting nearly $600 million. Subscribers? Almost 2.5 million, a 21% jump. Net income shows a profit of nearly $16 million. On the surface, it looks like a telehealth rocketship. But let's not pop the champagne just yet.
Here's where things get interesting. While revenue soared, gross margin took a hit, dropping from 79% to 74%. Net income also took a massive hit, falling from $75.6 million to $15.8 million. That previous year's income had a $60.8 million tax benefit, but still, that's a drop. This suggests that while Hims & Hers is selling more, it's costing them more to do so. A classic growth-at-all-costs scenario, perhaps?
And here’s another discrepancy: The first source predicted revenue to grow 44.3% year on year to $579.6 million, but the company reported revenue of nearly $600 million. So, it beat expectations. But the stock only popped 6.44% in extended trading. The market seems cautiously optimistic, which aligns with my own view.
Adjusted EBITDA, which is a non-GAAP measure, is up 53% year-over-year. The company touts this as "strong, profitable growth." But remember, adjusted EBITDA excludes a whole bunch of stuff—stock-based compensation, depreciation, amortization (the list goes on). It's a rosy picture, but not the full canvas.
Hims is banking big on its weight loss program, projecting $725 million in revenue for 2025. But here's my question: How sustainable is this? The article mentions "offboarding customers from commercial GLP-1 dosages." That suggests they're moving people off the most effective drugs. Are they replacing them with oral semaglutide? Or are these customers churning out entirely? Details on retention rates here are suspiciously absent.
The discussions with Novo Nordisk to offer Wegovy injections and oral Wegovy (if approved) through the platform are noteworthy. But discussions aren't deals. And even if they ink a deal, what's the margin structure going to look like? Novo Nordisk isn't exactly known for giving away its profits.
I've looked at hundreds of these filings, and the reliance on one drug class (GLP-1s) for such a large chunk of projected revenue feels…risky. What happens when the next miracle weight loss drug hits the market? Or when insurance companies start pushing back on GLP-1 coverage?
The lab testing and preventative care ecosystem they're building is interesting. The idea of integrating biomarker data into personalized treatment plans sounds great (in theory). But it also sounds expensive. And complex. And heavily regulated. Can Hims & Hers execute this vision without burning through cash at an alarming rate?
The company has consistently outperformed expectations—last quarter’s $0.17 EPS topped estimates by 6%, marking its fourth straight beat. Subscription growth and operating leverage remain core drivers, with gross margins improving to 76% and adjusted EBITDA topping $80 million last quarter. But can they maintain that momentum with the margin pressure and the uncertainty around weight loss drugs?
The ZAVA acquisition gives Hims & Hers a foothold in Europe. Canada is next. International expansion sounds great on paper (bigger market, more subscribers, etc.). But it also introduces a whole new set of challenges: regulatory hurdles, cultural differences, and increased competition. The company sees multibillion-dollar international potential. But potential is just that—potential.
And this is the part of the report that I find genuinely puzzling: They’re launching new specialties at an increasing pace, partnering with leaders across healthcare, and making significant progress in establishing themselves as a truly global brand. But are they spreading themselves too thin? Are they chasing too many shiny objects at once?
Hims & Hers is growing, no doubt. But it's a growth story with caveats. The margin pressure, the reliance on weight loss drugs, and the ambitious international expansion plans all add up to a high-risk, high-reward scenario. It's not a slam dunk. It's a calculated gamble.
