I think by and large the HIMS long investment community has a blind spot and missing significant red flag: the deceleration of the growth for the Core (excluding GLP1) business and in particular the Legacy (excluding all weight-loss) business.
For FY25 the company has effectively guided for Core to grow by 49% over 2024, yet in Q1, using public disclosures, we can estimate core slowed even further to 28% growth.
It's worse for Legacy (excluding all weight loss). They effectively guided for 43% growth in FY25, but Q1 (again, with public disclosures), we can estimate Legacy growth slowed down to 15%.
Consequently, HIMS' growth prospects are too dependent on GLP1 growth and *any* news (e.g., Cigna) that puts GLP1 revenue at risk *will* (rightfully so) move the stock price.
Thanks for the read and perspective. I appreciate it. Valid points.
Management did address this on the call. They noted that core growth was around 30% (as you noted) despite a major shift in marketing focus to be spend on the GLP-1 opportunity for Q4 and Q1.
“As we transition our subscriber base toward more premium daily products, we expect some volatility in sexual health growth as we recalibrate our approach to messaging and invest in consumer education around the benefits our offerings provide. Over the mid-to-long term horizon, we believe this transition will drive durable growth within our sexual health specialty as a result of increased retention and acquisition efficiency. Despite a significant shift in marketing spend towards weight loss and dynamics from the previously mentioned transition, year-over-year revenue growth outside of our GLP-1 offering remained robust at nearly 30% year-over-year. That's an important proof point.”
Now that the ability to sell compounded GLP1 commercially is done, I believe the company will re-focus marketing spend on driving core growth once again.
In addition, they highlighted the transition of focus for ED from ‘as needed’ to daily use was resulting in slower growth in the short term.
These acknowledgments plus the pipeline of 1-2 new offerings a year (specifically testosterone this year) give me confidence in the companies growth prospects over the long term.
…and fortunately they have some GLP-1 partnerships to continue offering that product in some form.
Again - I appreciate the perspective and your valid points. I do acknowledge it but feel sufficiently confident it is a short term dynamic rather than a long term downtrend. Only time will tell though, it is the number one thing on my radar though and I will be watching it closely.
It is also the number one thing on my radar. I'm not concerned about margins (they will go up in Q2 because the GLP1 % of revenue share will be lower), and Net New Subscribers will "bounce back" in Q3, because Q1 and Q2 will see elevated churn from all the GLP1 commercial subscribers coming off the platform.
I just don't see how they'll come close to meeting their 49% and 43% (effective) growth guidance for Core and "Legacy". I'm not concerned about them missing their FY25 total guidance, because however short they fall in Legacy/Core growth, they'll easily make it up in weight-loss sales. Their "at least 725M" guidance for weight-loss will be closer to 1 Billion than it will be to 725M.
By my math, they banked 35M of customer acquisition dollars (why their marketing ratio was so low-39%) that they'll be able to deploy the rest of the year in the Legacy/Business.
Still, so long as incremental revenue growth is this dependent on GLP1 sales (as it will be this whole year, IMO), we will continue to trade as a "GLP1 company" (again, deservedly so).
Great article. Thanks for sharing.
I think by and large the HIMS long investment community has a blind spot and missing significant red flag: the deceleration of the growth for the Core (excluding GLP1) business and in particular the Legacy (excluding all weight-loss) business.
For FY25 the company has effectively guided for Core to grow by 49% over 2024, yet in Q1, using public disclosures, we can estimate core slowed even further to 28% growth.
It's worse for Legacy (excluding all weight loss). They effectively guided for 43% growth in FY25, but Q1 (again, with public disclosures), we can estimate Legacy growth slowed down to 15%.
Consequently, HIMS' growth prospects are too dependent on GLP1 growth and *any* news (e.g., Cigna) that puts GLP1 revenue at risk *will* (rightfully so) move the stock price.
Thanks for the read and perspective. I appreciate it. Valid points.
Management did address this on the call. They noted that core growth was around 30% (as you noted) despite a major shift in marketing focus to be spend on the GLP-1 opportunity for Q4 and Q1.
“As we transition our subscriber base toward more premium daily products, we expect some volatility in sexual health growth as we recalibrate our approach to messaging and invest in consumer education around the benefits our offerings provide. Over the mid-to-long term horizon, we believe this transition will drive durable growth within our sexual health specialty as a result of increased retention and acquisition efficiency. Despite a significant shift in marketing spend towards weight loss and dynamics from the previously mentioned transition, year-over-year revenue growth outside of our GLP-1 offering remained robust at nearly 30% year-over-year. That's an important proof point.”
Now that the ability to sell compounded GLP1 commercially is done, I believe the company will re-focus marketing spend on driving core growth once again.
In addition, they highlighted the transition of focus for ED from ‘as needed’ to daily use was resulting in slower growth in the short term.
These acknowledgments plus the pipeline of 1-2 new offerings a year (specifically testosterone this year) give me confidence in the companies growth prospects over the long term.
…and fortunately they have some GLP-1 partnerships to continue offering that product in some form.
Again - I appreciate the perspective and your valid points. I do acknowledge it but feel sufficiently confident it is a short term dynamic rather than a long term downtrend. Only time will tell though, it is the number one thing on my radar though and I will be watching it closely.
Thanks for the response.
It is also the number one thing on my radar. I'm not concerned about margins (they will go up in Q2 because the GLP1 % of revenue share will be lower), and Net New Subscribers will "bounce back" in Q3, because Q1 and Q2 will see elevated churn from all the GLP1 commercial subscribers coming off the platform.
I just don't see how they'll come close to meeting their 49% and 43% (effective) growth guidance for Core and "Legacy". I'm not concerned about them missing their FY25 total guidance, because however short they fall in Legacy/Core growth, they'll easily make it up in weight-loss sales. Their "at least 725M" guidance for weight-loss will be closer to 1 Billion than it will be to 725M.
By my math, they banked 35M of customer acquisition dollars (why their marketing ratio was so low-39%) that they'll be able to deploy the rest of the year in the Legacy/Business.
Still, so long as incremental revenue growth is this dependent on GLP1 sales (as it will be this whole year, IMO), we will continue to trade as a "GLP1 company" (again, deservedly so).