A Larger Quarterly Loss Is Caused by Hims & Hers Switching to Branded Obesity Medications

The telehealth company’s move to branded weight-loss medications increased expenses, causing Hims & Hers Health (HIMS.N) to report a wider-than-expected second-quarter loss on Monday. As a result, its shares fell 6% in extended trading.

Although executives and investors claim the expansion has impacted gross profit margins, the company’s expanding GLP-1 weight-loss business and overseas expansion have raised memberships and monthly revenue per subscriber by 21% from a year ago.

According to LSEG-compiled data, Hims recorded a second-quarter net loss of 37 cents per share, while analysts projected a loss of 1 cent per share.

The company stated that restructuring costs of $4.6 million were incurred during the second quarter due to the switch to branded GLP-1 weight-loss medications, and it anticipates turning a profit in 2027.

Including a contribution from Eucalyptus, an Australian digital health business it agreed to buy in February, Hims increased its full-year revenue expectation from $2.8 billion to $3 billion to $3.1 billion to $3.3 billion.

Most analysts do not mention Eucalyptus revenue. When Eucalyptus was taken out of the picture, the company’s performance surpassed its initial projections, Chief Financial Officer Yemi Okupe told Reuters.Okupe stated, “The domestic business and the current international business were already ahead of our guidance range, even if you pull Eucalyptus (from the guidance).”

The business stated that as it expands its worldwide and weight-loss products, it anticipates gross margins to be below previous levels.

Can we lay the groundwork for future robust cash flows? Okupe said to Reuters. “The answer is unquestionably ‘yes’.

“Paul Cerro, chief investment officer at Cedar Grove Capital Management, the company that holds Hims shares, stated that although many foreign markets are not as successful as the US, they may eventually generate more income.

“It’s not a bad business. “It’s simply not as profitable,” Cerro remarked.

Hims expressed confidence in its ability to generate $6.5 billion in sales by 2030. Hims will probably revert to historical profit margins in five years, according to Raul Shah, chief investment officer of DocShah Financial.

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