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.

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).

With the growth engine of GLP-1s being cut at the knees, all eyes are on management’s ability to

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).

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.

But what’s interesting to note, which I will go ahead and label a quarterly anomaly, is two-fold.

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).

But the reason we label this as an anomaly is that Semaglutide was taken off the shortage list mid-quarter, which meant that any of the advertising assets that HIMS had in place to run needed to be scrapped.

Without a reallocation of those marketing dollars, which was confirmed by Yemi (below), marketing expenses as a % of revenue looked amazing (39.5% vs 46% Q/Q and 46.9% Y/Y).

So it wasn’t some magic wand that their marketing team waved that led to an ~800 bps decline in marketing spend Y/Y, but rather that they just didn’t reallocate those dollars fast enough to the core product offerings → which makes sense.

This also checks out as to why the net new subscribers added were the lowest over the last 5 quarters → commercial compounded GLP-1 coming offline (can’t help net new patients or even many existing) so the value proposition comes down and without core marketing online as heavily as it once was, less eyeballs to keep the funnel going.

This all makes sense as to why they believe that Q2 revenue will be down as they try to right the ship, but it is also disingenuous for Yemi to claim they worked some god-level magic to make that happen. The fact of the matter is that they just didn’t spend the money because they were doing so well with compounded Semaglutide, they didn’t need to.

That maneuver also led to an artificial jump in Gross Profit / Marketing Expense for the quarter after sequential declines since the original launch of Semaglutide.

So, while as a bear, we love to see these figures getting blown out or decreased, we need to caveat that these are probably one-offs and we’ll see a course correction in the coming quarters to a more normalized level.

The biggest bear thesis outside of the shortage ending was an IP infringement suit against HIMS brought on by NVO. The argument for this happening was just which led to the stock to drop from a peak of ~$72/share in February to $22/share in mid-April, a 69% decrease.

We covered this greatly with expert calls, if you’d like to see them here. However, this fear was taken out back and shot once NVO announced that they would be selling their cash-pay offering via HIMS site, which sent the stock into the stratosphere that day.

A number of things from this announcement.

To point #1, if you’re willing to get into bed with the person that’s been “stealing” from you, that means that a) you’re desperate (which NVO is) and b) you believe that you’re better off with them than without them for whatever reason.

NVO getting into bed with HIMS means that they more or less sanctioned the personalization that HIMS was doing for compounded GLP-1s, though we will never know the extent of this “situationship” between the two.

Andrew reiterated that providers have autonomy to do whatever they think is best and are not swayed by either management decisions or affiliated medical groups (i.e., NVO).

This is GOOD because that’s the way it should be. Providers should have the autonomy to do what they think is best without outside parties pushing them to do one thing over the other (see Cerebral and DONE).

To point #2, it’s not really much of a partnership. Rallying >25% (up to 40% at one point) on the day had more to do with the derisking of a lawsuit vs the upside of the “partnership.” That same day, NVO announced they’re also partnering with Ro (who now has both LLY and NVO on their platform) and LifeMD.

Not much of an exclusivity that bulls were hoping for.

To make matters worse, the price is much higher than if you just went directly to NVO’s website. If you were to visit them, you’ll notice that the price is $499/mo vs the $599/mo if you partnered with HIMS.

Meaning that the spread ($100) is most likely the take for HIMS, and then since they’re really only facilitating the transaction, margins on something like that could be 85 - 90%.

But here’s the kicker, you have to believe that they’ll be able to get sell-through with this new offering.

Prior to Semaglutide coming off, HIMS was offering compounded Semaglutide for $249/mo for 6 months (~$1,500 upfront). Factoring in about 60% margins, and you’re looking at ~$150/mo on that offering (the annual subscription of $165/mo for 12 months and a 50% margin would imply $82.5/mo in margin).

With the NVO partnership, you’re looking at $599/mo with a 6-month requirement! That’s ~$3,600 upfront to get that (3x the price they were just used to paying). Factor in the 85% margins on the $600 they’d be getting ($100 * 6 months), and you’re left with $85/mo on that offering.

To make matters worse, bulls were praising the generic Liraglutide coming to market as well, but the problem with that is that not only is it less efficacious, but it’s still expensive.

The offering right now on their website is $299/mo for 12 months at the cheapest level. Intuitively speaking, you just went from trying to convince someone to buy your compounded Semaglutide at $2,000/yr (cheapest option) to potentially needing to pay $3,600/yr for an inferior drug (Generic Liraglutide) to now $7,200/annually for the branded option of Wegovy where you don’t even make as much money on.

Call us skeptical, but convincing someone to 1.5x the price they were just paying to stab themselves every day for less weight loss, or cough up 3.5x what you were just paying to get the branded version, seems very farfetched.

Going into a slowdown along with other telehealth companies being able to offer the same thing, we’re not optimistic that convincing subscribers will come to fruition, which then puts added pressure to get the other weight loss offering in rocket mode (orals) as well as the core business.

While we are biased on the short side, we like to think we have a level head on what’s going on, absent retail mania.

We shared research in January that the shortage was about to be over and even highlighted the dramatic over-indexing to GLP-1s just days before the top. The work we provide on HIMS, we believe, is bar none.

Short interest going into the print was ~30%, and the price action we’re seeing intraday says more about covering than bulls buying. Looking to Palantir’s (PLTR) stock today, which for some reason the retail cult likes to compare it to, had stellar earnings but is down 13% right now. Note that the short interest on that stock is very low so selling in that name is on the premise that institutions are ditching the stock.

Even looking at Novo Nordisk (NVO), the stock is down today despite that they are the ones to benefit the most from the HIMS partnership. Goes to show how ludicrous the name is today from being -8% in pre-market to +15% at the time of writing.

Historically speaking, getting out relatively unscathed is best done the day after earnings when liquidity is the highest. Frankly, we see no reason to buy this stock with reiterated guidance and a boost to EBITDA earnings into a possible macro slowdown.

We’ll see how the rest of the week plays out for price action, but we do hold long-dated, OTM calls as our short position, which we disclosed in our Q1’25 letter.

As always, we appreciate your support of our work. If you have any questions, please make sure to message or comment below. If you think others would benefit from the research/commentary we release, we would greatly appreciate your sharing.

Until next time,

Paul Cerro | Cedar Grove Capital

Personal Twitter: @paulcerro

Fund Twitter: @cedargrovecm