Hims & Hers Earnings Was Way Better Than The Wall Street Thought, Here Is Why.
Story of a company performing so amazingly that its investors got upset for a 20% decline after it quadruples in a year.
Let me start straight with this: Playing the earnings game isn’t a way to make money in investing.
There are many reasons for this.
To start with, “quarter” is an artificial timeframe that we have created to assess business’ performance. It doesn’t exist in reality. The most natural result of this is that business cycles don’t actually coincide with quarters.
Business is an infinite game where winners are those who “survive.”
Survival requires adapting to changing conditions, agility to timely and effectively respond to threats and ability to constantly innovate to meet changing customer needs.
A business may sacrifice all year’s profits to invest for future growth, it can even sacrifice revenues of this year to, for instance, adopt a new infrastructure that will fuel growth in the future.
Thus a business is like an athlete that constantly runs on a track-field. Earnings are just pictures of moments from this endless run.
Thus, they tend to “OVERSTATE” both success and failure…
Imagine that you get 100 pictures showing the athlete running and 101st shows the moment he stumbled.
What would you think? Would you bet on his death?
If you just focus on the 101st picture, you will see a stumbling athlete. If you take it with the 100 pictures before that, you’ll think that he has been running non-stop for a hundred rounds and he’ll likely keep running after he gets some rest.
Exact opposite is true too.
If you concentrate on just one picture showing an athlete running, you will think that everything is okay. But if you look at the previous pictures that all show the same athlete either falling or resting on the side, you'll be less likely to believe that he’ll keep running in the future.
Earnings reports are such momentary pictures of businesses.
Yet, people tend to divorce them from the broader picture because emotions are too dominant. Once a business stumbles, people tend to think that it’s the moment that the long-term thesis breaks and they sell in fear. Conversely, if it’s an exceptionally good report, they tend to see it as the beginning of a new bright future.
Yet, if you looked at a hundred pictures of a good business, you would see 10 times the business stumbled and 10 times it was resting on the sidelines and 80 times it was running. For a bad business, you’ll see 20 times it started to sprint and 80 times it was either falling or waiting on the sidelines.
How many times do you think people thought the Amazon thesis was broken in the last 20 years?
This news by Associated Press is from 2022 when Amazon missed third quarter revenue expectation:
Do you know what happened after this news? Amazon stock declined 18%.
Not 2, not 5, not 10, it bled 18%. People were so sure that the Amazon thesis was broken. Stock price dipped in December.
What has happened since then? The stock has tripled.
If you think this was an exceptional moment, you are grossly wrong. People have been saying that the Amazon thesis is broken since the early 2000s. Yet, Amazon is now a $2.5 trillion company and I believe the thesis remains stronger than ever.
In the last 20 years, people could have regarded all these times where Amazon stumbled as a buying opportunity and made fortunes, yet most of them preferred selling their shares cheap.
I know that what I have written so far will come across 100% reasonable to all people, yet most of them will keep playing the earnings game and sell their shares cheap when a good company stumbles or pay a premium when a bad company surprises.
Why do we do that?
I think there are two reasons:
People don’t actually understand why investors are compensated.
They invest their livelihood in the stock market.
Despite all the complex financial research and analysis, I think even the analysts in big firms don’t understand why investors make money. If they did, they wouldn't play the earnings game.
Investors are compensated for bearing the risk.
When the stock price rises steadily, everybody wants to carry the risk because stability signals less risk to our brain. That’s a fact. But as they do that, the compensation for bearing the risk gets smaller and smaller while the risk increases as higher stock price creates higher expectations.
When a business stumbles, the exact opposite happens. The compensation for bearing risk skyrockets while downside itself gets limited because the new stock price should already reflect the possibility of future deterioration. It’s a dream place to be.
It’s actually best times to buy when the business stumbles and market prices in the future risk, limiting the downside and raising the compensation for bearing the risk.
Yet, many people can’t take themselves to buy at or hold through those dips.
Why? I think because most people invest their livelihood in the market.
They think of markets as a place to get rich by betting on companies and the more money you invest, the faster you’ll reach that point.
That’s a crucial mistake.
If you are investing your life savings or a disproportionately high portion of your net-worth, it’s really hard to keep yourself together when your holdings dip, let alone buying.
In such situations, the mindset you should have is “I’ll be largely rewarded if it’s just a stumble and I’ll lose some money if it’s broken, so be it.”
And note here, even if the thesis proves to be broken, this doesn’t mean you’ll lose all your money. It may go sideways, it may underperform a bit, it may go down a bit but a profitable business with no debt isn’t going to go bankrupt. Meaning, almost always you’ll get another chance to exit with a minimal loss at a point where it’s more obvious that the thesis is broken.
But… If you have invested your livelihood, it’ll be very hard to adopt that mindset.
The key in successful investing is emotional detachment enabling you to say “so be it” when you spot a favorable risk/reward situation. And you won’t achieve that detachment if your hopes are tied to the stock market.
If you are a retail investor, the best thing you can do to yourself is spending your time to become better in your profession, make more money and use investing as a way to preserve and possibly grow your capital over time, not a path to riches.
Once you do that, investing will automatically become a path to riches too.
So, with these explanations in mind, let’s look at how Hims & Hers performed lately and what we could expect from it going forward!
📊 Business Performance
Monster, monster quarter.
Sometimes, you have to stop, take a step back and appreciate the full picture.
As of March 2025, this is the full picture that Hims has drawn in the last five years:
They grew revenue every quarter since they became public and they have never missed their revenue expectation.
This is a monster performance. Last quarter wasn’t a deviation.
They posted their strongest results ever:
Revenue was $481M against the Wall Street estimate of $470M.
EPS was $0.11 against the Wall Street estimate of $0.10.
Though numbers themselves are already amazing, it gets even more impressive when you dive deeper and look at the key performance indicators of the business.
They added a massive 2.23 million subscribers last quarter. This is, by any means, insane. This is not a streaming platform or consumer SaaS, this is a telemedicine business that sells drugs to people through subscription plans.
When you say it as follows, you grasp the real level of its success: It managed to convince more than 2.2 million people to subscribe to buy drugs.
For the context, Amazon struggles to convince people subscribing for items they actually use regularly like facial cleansers.
This shows us that Hims has built a degree of confidence in its customers that is unmatched by any other tele-health services provider.
This is insane.
Just 2 years ago in December 2022, they added 100,000 subscribers in a quarter. Now, they added 200,000 subscribers in a quarter despite having a much larger subscriber base in place.
This is something most SaaS businesses fail to do yet a tele-health company has achieved this. This shows how well they actually execute.
What’s even better for me is that they are now converting these subscribers to personalized plans at a very rapid pace.
This is perhaps more bullish than the number of new subscribers added. Staggering 56% of all subscribers are currently on a personalized plan. These are higher value customers as personalization increases stickiness and raises exit barriers, growing the lifetime customer value.
As a result, they now have over 47% market share in tele-medicine, up from 33% in 2022.
This is one of the most impressive growth stories I have ever seen in the last 5 years.
If we could go back in time and this management presented us that they are planning to grow quarterly revenue from $25 million to over $480 million, become profitable and cash flow positive, reach over 2.2 million subscribers and expand their market share from 10% to 47%, you would say “stop shitting with me.”
Yet, they achieved that.
This is an amazing performance, that only deserves congratulation.
Couldn’t like it more.
📈 Guidance
It’s not enough to beat the earnings expectations nowadays, if you want to impress the market you should also beat their guidance expectations.
I am not going to start explaining how ridiculous this is and why I wouldn’t provide any guidance if I were managing any company. The notion that a business should be able to predict its future performance with high accuracy is already “not smart” in softest terms yet the market even takes actions on that.
I am just going to say that if you can’t see the conflict here, you shouldn’t be picking your own stocks and stick with index funds. It’s not just individuals who invest, business also requires investing for the future which sometimes requires sacrificing earnings today.
Amazon sacrificed earnings for 10 years and the stock traded sidelines in that time. And then it made 500x in the next 15 years. Just keep the meaninglessness of this game in your mind when you read this.
Yet, Hims played this game and literally destroyed the guidance expectations.
They guided for $2.4B revenue against expectation of $2.1 billion.
Guided EBITDA of $295M against expectation of $263 million.
And note this, this is excluding any GLP-1 revenue beyond Q1.
There is no question that this is a very strong and aggressive guidance no investor would turn up their nose.
Why did the stock sell-off then?
Short answer is sky high expectations and lack of confidence in their ability to execute. But I think the main answer is simpler: Impatience.
Let me explain.
💬 Commentary
It was indeed an amazing quarter for Hims and I have to emphasize that you should be impressed more by management’s ability to execute rather than the numbers.
They started to offer GLP-1 in just Q2 2024 and quickly scaled it to $225 million revenue in three quarters. This speed and excellence of execution is definitely something rare and should be appreciated.
Yet, as Howard Marks says, success comes with seeds of failure.
As Hims scaled GLP-1 offering and drove growth, investors became increasingly skeptical of its ability to drive growth because we knew that Hims wouldn’t be offering it if the shortage ended and it was bound to end at some point.
This is where it gets tricky.
GLP-1 contributed $225 million to 2024 revenue. If you deduct the GLP-1 revenue, the top line growth for 2024 would be 44% instead of the current 69%. This still would have been an amazing growth. Yet, it gets trickier when you look quarter by quarter.
Given that Hims started to offer GLP-1’s in the Q2, we can assume that GLP-1 contribution to revenue was lowest in Q2. Assuming 1/5 of the contribution occurred in Q2 and 2/5 occurred in Q3 and Q4 each, we can estimate that GLP-1 contribution to Q4 revenue was at least $90 million, potentially higher.
If you say it was $100 million and deduct it from the Q4 revenue, you would think that Q/Q revenue would have actually declined if it wasn’t for GLP-1.
This channel won’t be available after Q1 2025. Yet, the management predicts that $725 million of the expected revenue will come from the weight-loss segment.
Well, if you start with the assumption that revenue would have declined in Q4 without GLP-1, you would have a hard time to believe that $725 million will come from the weight-loss segment next year. If you deduct $600 million of it from the top end of the revenue guide, you will think that the revenue will grow only 14% and you will reach the conclusion that this company is a toast.
Well, I don’t blame them. Most finance professionals have had nothing to do with entrepreneurship or business in their lives and they overestimate their ability to understand developments looking just at numbers. They don’t understand business.
Let me explain to you what probably happened:
Yes, most of the growth in Q4 was probably driven by GLP-1, but it was only because the company made it so. GLP-1 has way higher price label than any other Hims products and it also has the highest life-time customer value. Plus, the company also knew that they wouldn’t be able to sell it forever. So, they probably directed almost all their marketing efforts to GLP-1 after Q2, neglecting others and trying to print as much cash as possible.
If it wasn’t for putting all marketing dollars in GLP-1, we probably wouldn’t have seen nearly 30% quarter over quarter growth from Q2 to Q3. Instead of $402 million in Q3, we would have gotten something around $330 million in Q3 and $350 million Q4. Total revenue for the year would have been $1,274 million and the annual growth rate would have been 46%.
This would have still been an amazing growth rate and the company would still have guided for around $1.8 billion revenue for this year.
I would have been very happy and glad with this scenario as there was no GLP-1 scenario when I first opened this position in Q1 2023.
Finance geniuses thinking that revenue would have declined sequentially in the absence of GLP-1 can’t comprehend this. They are so far away from business and entrepreneurship that they can’t even reason that those marketing dollars would have been reallocated if there wasn’t GLP-1.
How genius is this:
They take out the GLP-1 from Q4 revenue.
Compare it to Q3 revenue while they keep the GLP-1 contribution in Q3.
They say that the revenue would have declined sequentially.
Well, let’s go and play this game from the ground, reallocating the marketing dollars.
Plus, if you assumed just $200 million oral weight-loss pill revenue for 2025 (the management indicated that oral treatment already passed $100 million ARR), you would again get a $2 billion target for this year and growth rate would have been 56%.
Overall, even without GLP-1, the company would have been on a solid growth path which would have accelerated further with oral-treatment contribution. It's a great quarter and a great year and it would have been the same way even without GLP-1, if you deduct it the right way.
🏁Conclusion
Going forward, the management has raised the bar and it needs to execute at the elite level. However, remember that we are compensated in investing for assuming such risks. This is why the team is alway part of the thesis, always.
Hims’ management has proved its mastery over and over again by delivering a performance that no would have believed 5 years ago. Yet, they delivered.
You can’t control the execution or the risk you assume there, you do it through your purchase price. Not overpaying is the best defense you have.
Our buy price in Hims remains below $20 and I decidedly refused everybody asking for whether it’s time to buy as stock did small dips in its way to $70 levels. I remain at this point. We did a remarkable job and Hims remains as a great investment for us because we have made more than double our money due to our low purchase price. If I purchased it at $35, there wouldn’t have been anything remarkable.
Yet, interestingly, shorts are celebrating despite the fact that they haven’t made any money in their shorts as the stock remains well above their short level. For context, until two weeks ago, Hims had never seen $40.
This is what the annual chart looks like: Up more than %200 in a year.
Let’s celebrate it, note that everybody but “everybody” who bought this stock before the last month made a really good money on it.
And always keep this in mind: Don’t overpay.
Even though I like the company very much, I refused to buy lately because the stock was ahead of itself.
Remember, even the best companies are bad investments at expensive prices. This is true for Hims, this is true for Apple, Amazon, Nvidia and anything you could think of.
If you do your job to limit the risk by picking a good company and not overpaying, the upside will take off.
Other than that, calm down, stay invested.
“If you do your job to limit the risk by picking a good company and not overpaying, the upside will take off.” Great line.
I haven’t completed my $HIMS DD yet but right now I’m leaning that HIMS is worth the risk at current prices. I think it’s still misunderstood by the market, because the market doesn’t understand that $HIMS is selling convenience. And If there’s anything I learned from Doordash it’s that Americans will pay a lot for convenience. Hopeful to post my DD soon!
Futur potential bet!