Growth is expected to accelerate from the next quarter on the back of GLP-1 offerings.
Hims & Hers Health (HIMS, 0.69%) shares fell immediately after the company reported strong second-quarter results and raised its guidance. Still, the company's shares have been performing well this year, up more than 80%.
Let's take a look at the telemedicine company's latest financial results to determine whether this recent share price drop still makes sense to buy.
A surge in revenue
Hims & Hers continued to show strong growth, with sales increasing 53% to $315.6 million, well above the company's guidance of $292 million to $297 million. Net orders increased 20% to 2.53 million and average order value (AOV) increased 27% to $121 million.
Excluding new GLP-1 weight-loss products launched in the middle of the second quarter, sales of existing products increased 46% to more than $300 million. Even before the introduction of GLP-1 products, the weight-loss category was experiencing strong demand: In just seven months, the category had gained more than 100,000 subscribers and reached $100 million in revenue.
To meet this growing demand, the company is acquiring a 503B outsourcing facility. The new facility will increase the company's compounding capabilities and enable it to enter new specialties that require sterile compounded drugs, such as hormone therapy, while also continuing to invest in robotics and specialized software over the coming years.
Subscriber numbers grew 43% year over year to 1.86 million, with 155,000 net new subscribers. Personalized subscriptions grew 164% to 785,000. These customers tend to stay with the service longer, and therefore have a higher lifetime value.
Hims & Hers also saw a strong marketing impact in the quarter, with marketing contributing 46% of sales compared to 52% in the same period last year, but the company plans to ramp up marketing in the second half of the year.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 270% year over year from $10.6 million to $39.3 million. Net income swung from a loss of $7.2 million (-$0.03 per share) to a profit of $13.3 million ($0.06 per share). Operating cash flow surged 219% to $53.6 million from $16.8 million a year ago, while free cash flow increased 377% to $47.6 million.
Hims & Hers also raised its full-year outlook for the year. The company now expects full-year revenue of $1.37 billion to $1.4 billion, up from its previous outlook of $1.2 billion to $1.23 billion. Its initial outlook was for full-year revenue of $1.17 billion to $1.2 billion.
The company also raised its adjusted EBITDA outlook to a range of $140 million to $155 million, up from $120 million to $135 million previously. The company had initially expected adjusted EBITDA to be between $100 million and $120 million in 2024.
Hims & Her expects third-quarter revenue to be between $375 million and $380 million, which represents growth of 65% to 68%. The company expects adjusted EBITDA to be between $35 million and $40 million.
Image source: Getty Images.
Is it too late to buy stocks?
Hims & Hers has experienced incredible growth, and with strong third quarter revenue guidance, that growth is set to accelerate with the recent launch of its personalized GLP-1 solutions. This is a huge opportunity, and one the company is only just beginning to scratch the surface.
The stock has performed well so far this year, but it's still very cheaply valued at 20.5 times analysts' projected earnings for 2025. That's a bargain for a company with revenue growth of over 50% and gross margins above 80%.
HIMS PE Ratio (1-Year Ahead) data from YCharts.
One drawback for Hims & Hers is its lack of a competitive advantage, but the increased use of personalized compounded formulations is creating an advantage and helping to change that. Offering a personalized compounded GLP-1 weight loss solution at a discount was a bold move, but it appears to be paying off. Note, however, that the personalized GLP-1 offering is made under a Food and Drug Administration compounding exemption, so challenging Hims & Hers on the basis of this exemption is risky. On the other hand, the company says the clinical need for personalized drug compounding is well established.
Despite the potential risks, I would buy the stock given its valuation and the opportunities ahead.
