Hims & Hers: Explosive Growth, But Is It A Buy?
Hi Multis
Never a dull moment with Hims & Hers (HIMS). We saw that again last week, after Novo Nordisk ended the partnership with HIMS after less than two months. I wrote this article about it.
And while I'm at it, why not continue, right? For the article I wrote last week, I re-read the transcript of the Q1 2025 earnings call. Now that it's still fresh in my mind, I'll use that to look back shortly on the earnings.
After that, I'll give the first PMQS (Potential Multibaggers Quality Score) for Hims & Hers and look at its valuation to determine the QPI (Quality-Price Index).
Or, put simply, we will methodically assess the stock's attractiveness now.
But let's start with the Q1 earnings.
The Numbers
Revenue came in very strong, at $586.01 million, up 110.76% YoY. That's really impressive. Adjusted EBITDA was $91M, almost tripling. Adjusted EBITDA margins were up from 12% to 16% quarter-over-quarter.
The company had $109M in operating cash flow and $50M in free cash flow. I don't know too many companies growing revenue at 111% that have positive earnings, but Hims & Hers is one.
The total number of subscribers increased by 38% year-over-year to 2.4 million. I can't help but be excited that despite the revenue of $1.78 billion, Hims & Hers "only" has 2.4 million subscribers.
To illustrate Hims & Hers' rapid growth, over the last twelve months, it has achieved a revenue per subscriber of $61.83 per month, or $741.67 per year. However, in the last quarter, that was already $84 per month, or $ 1,008 on an annualized basis. This shows how deep the relationship between HIMS and its customers are. I'm not sure about you, but I'm not aware of many companies that generate more than $ 1,000 in revenue per year from me. For my health, though, I don’t have problems spending.
Especially now that Hims & Hers will expand to Europe with its ZAVA acquisition, this is very small compared to the company's eventual potential customer base.
Of the 2.4 million subscribers, 1.4 million had personalized solutions from HIMS. For dermatology, this was 80%. And the great thing? There was about 50% YoY growth in those subscribers.
For sexual health, the daily-offering uptake doubled and that means that about 40% of the sexual health specialty is daily now.
When people ask me what the moat of a company is, they cite the classic sources of competitive advantages.
A quick overview here.
Economies of scale: The company can produce goods or services at a lower cost per unit as the volume increases. It makes it hard for smaller competitors to match pricing. Think of Walmart's supply chain efficiency, for example.
Network effects: The value of the product or service increases as more people use it. Typical examples: the telephone network, Meta, Visa, etc.
Patents and intellectual property: Legal protections for technology, drugs or other things that prevent competitors from replicating your products. Think of all the great characters Disney owns, for example or Nvidia's chip design and CUDA platform, etc.
Switching costs: high effort, financial costs or retraining costs for customers to switch to a competitor’s product. Think of Salesforce's CRM, Microsoft's Windows OS or Adobe's Creative Cloud.
Regulatory advantages: exclusive licenses, permits, or government protections create barriers to entry. Think of utility companies, for example.
Cost advantages: This one is similar to economies of scale, but it has a distinct difference. Think of Copart, which owns the wrecking yards close to cities. That's cheaper, as the most expensive part is towing the car. Competitors can't have that cost advantage, as no new wreckage yards will be allowed so close to the cities.
Distribution: Think of Amazon's in-house, extremely big and efficient distribution network.
Brand loyalty is often regarded as the weakest source of a moat, but I believe this perception stems from a misapprehension. People often think too highly of brands from the past, such as Campbell's Soup, for example. However, brand recognition is no longer enough. Now you need raging fans to have this. Think of Apple aficionados, Tesla fans, Lululemon fitness women, etc.
Of course, a raving fan base alone is not enough. Peloton is a prime example: happy fans, terrible business. But it definitely helps.
So, why this overview of moat sources? I think that Hims & Hers has an emergins fanbase. Marketing plays an important role. The Hims & Hers marketing look and feel are recognizable and consistent.
Marketing is a crucial element in building brand loyalty. Apple and Steve Jobs demonstrated this extensively. While it seems simple (just make the marketing good) it's extremely difficult to know exactly how to reach and touch your public so they become devoted evangelists for your product or service. It's still early for Hims & Hers, but I think it may have this rare quality.
The company also knows that marketing is important. That's why it spends so much on marketing. In Q1, that was 39% of total revenue. That sounds a lot (and it is), but it's down from 47% in Q1 2024. That's impressive, considering revenue is up 111%. It's called operating leverage.
General and administrative costs as a percentage of revenue also fell, from 12% in Q1 2024 to 8% now. Again, the same thing: operating leverage.
Very interesting: the company gave a long-range target (for 2030). Management sees $6.5 billion or more in revenue and $1.3 billion or more in EBITDA.
While I'm not always a big fan of such long-range guesses (because that's what they are), HIMS can show a track record.
In its Q4 2022 earnings call, the company presented its goals for 2025: $1.2 billion in revenue and $100 million in adjusted EBITDA. In 2024, the company already reported revenue of $1.5B, 25% above the target. For the adjusted EBITDA, the beat was even bigger: $177M, 77% than the target. And both a year earlier. Very impressive.
In Q1 2025 alone, adjusted EBITDA was $91M, almost reaching the $100M target in a single quarter.
Guidance
For Q2, Hims and Hers projects revenue between $530 and 550 million. That would be up 68% to 74% YoY. But it would also mean that revenue is down QoQ. The reason is that the sexual health volatility and especially the end of the semaglutide shortage, which means more people will need the branded versions.
For adjusted EBITDA, management guided for a margin of about 13%, which means $65 million to $75 million.
For the full year, revenue is expected to grow 56% to 63%. That means $2.3 billion to $2.4 billion. Adjusted EBITDA for the full year is expected to be between $295M and $335M.
More Insight
Not surprisingly, management said they would be continue to walk the path of deepening personalization, with hundreds or potentially thousands of tailored treatments with better lab diagnostics. Don't forget they bought Trybe Labs, an at-home lab testing facility based in New Jersey.
Hims & Hers will also use subscriber data and use the data of wearable devices to get more personal healthcare.
The company is convinced that faster feedback loops lead to better care and higher subscriber retention.
Hims & Hers MedMatch platform, launched two years ago, is an AI-powered tool for better clinical decisions. It uses the anonymized data from the Hims & Hers platform. Think of historical clinical visits, demographics, treatment types and patient outcomes, just to name a few. That means doctors will be able to prescribe the best personalized treatment plan.
The company will also implement more AI-driven coaches. Those will be used for therapeutic purposes and nutrition guidance, for example. The goal is to increase the success rate of patients and strengthen the connection with Hims & Hers' platform.
I am very enthusiastic about these initiatives. People want more personalized solutions. That's why Unscaled Scalability is such an important element in my Potential Multibaggers selection process.
In the meantime, Hims & Hers has already launched what it announced on the Q1 2025 earnings: support for low testosterone. These were supposed to launch before the end of 2025 but were already made available. Approximately 50 million Americans could benefit from support for one of the two.
The company also said it had big plans for its acquired peptide production facility. You should look for peptides for pain management, recovery, longevity, etc. But it will be 2026 before we can see any results.
And talking about longevity. Bryan Johnson has proven that there is a big market for longevity. After all, who wouldn't want to live a longer, healthier life?
Hims & Hers feels the moment and it will be ready to focus on longevity products soon. It's also looking at sleep improvement and preventive care (curing before it goes wrong). I'm excited about all of these.
The company will also focus on expanding its international presence. Convenient personalized healthcare is not just attractive for Americans, tests in the UK showed.
Potential Multibaggers Quality Score
It's always exciting to give the first Potential Multibaggers Quality Score to a company. It provides an excellent snapshot of how attractive the stock is currently.