- Costs swamped growth. Hims & Hers Health posted a third-quarter loss of $33 million, or 14 cents a share, compared with a profit of $15.8 million, or 6 cents a share, a year earlier, while analysts expected a profit of 6 cents a share, The Wall Street Journal reported.
- Margins compressed sharply. The cost of revenue more than doubled in the quarter and total operating expenses rose 34%, pushing gross margin down to 57% from 74% a year earlier, even as revenue jumped 49% to $890.4 million, slightly below the $893.1 million analysts surveyed by FactSet had forecast.
- The outlook disappointed. The digital healthcare company now expects full-year revenue of $3.13 billion to $3.15 billion, compared with its earlier projection of $3.1 billion to $3.3 billion, lowered its adjusted EBITDA outlook, and guided fourth-quarter revenue to $875 million to $895 million, below the $953.8 million analysts forecast.
- Hims is also paying up for star power. The company added podcaster and Stanford neurobiology professor Andrew Huberman to an expanded 10-member board and signed deals paying him $3.5 million in cash over two years for advisory services, plus up to $1 million a year for short-form ads, while his Scicomm Media will receive an annual fee of $5 million for up to three years of podcast advertising.
What Happened?
Hims reported its third-quarter results on Monday and narrowed its full-year outlook, citing the higher expenses that offset revenue growth. U.S. sales rose 21%, while revenue in the rest of the world more than quadrupled. Subscribers at the end of the quarter were up 13%, and monthly revenue per average subscriber climbed 30%. Huberman, 51, hosts The Huberman Lab, a podcast about neuroscience and personal health, and will provide scientific and brand marketing advisory services under the first of his agreements.
Why It Matters?
The quarter shows Hims buying growth at the expense of profitability. Revenue is still rising quickly, driven by higher spending per subscriber and a surge outside the U.S., but a 17-point drop in gross margin, by our calculation, turned a profit into a loss. The narrower guidance range lowers the midpoint to about $3.14 billion from $3.2 billion by our calculation, and the fourth-quarter guide implies a meaningful slowdown against Wall Street’s expectations. The Huberman agreements add up to a sizable marketing commitment to a board member at the same time the company is under pressure to control costs, which investors may scrutinize.
What’s Next?
Investors will focus on whether gross margin stabilizes in the fourth quarter and whether Hims can hit the low end of its revenue guidance. The pace of international growth and subscriber additions will show whether the higher spending is paying off. Watch also for detail on the lowered adjusted EBITDA outlook and on how much of the cost increase is temporary. The fourth-quarter report will be the next test of whether the company can return to profitability.
Affected Tickers and Coins: HIMS
Source: The Wall Street Journal
