Hims' sales soar. Its adjusted profit target goes backward.
Acquisitions, a costlier sales mix and a new receivables-financing deal complicate the health platform’s growth story.
Hims & Hers is selling much more without keeping a similar share of the increase. Quarterly revenue rose 49%, but the online health platform lowered its full-year adjusted profit forecast as its business mix changed and it spent ahead of new launches.
Research by Ticker Byline shows that $291 million of additional sales produced only $67 million of additional gross profit in the year-over-year comparison. That is about 23 cents of extra gross profit for each extra sales dollar, before marketing and overhead.
A bigger business with a different mix
Revenue reached $890.4 million in the September quarter. Gross profit, the amount left after direct costs, grew much more slowly, by about 15%.
Overseas operations supplied roughly 61% of the revenue increase. Acquisitions were important to that expansion, including Eucalyptus, which joined the group in June and supplied about 15% of the latest quarter's total sales.
The U.S. business also grew faster. Domestic revenue rose 21%, compared with 16% in the second quarter, delivering on management's earlier expectation of a second-half acceleration.
The growth mix is more expensive to serve. Hims says shorter shipment cycles in weight loss bring higher fulfillment costs, while recent acquisitions and new offerings also weigh on gross margin. Management said it timed marketing spending ahead of planned fourth-quarter expansions.
The quarter met the plan, but the annual target fell
Third-quarter adjusted EBITDA of $82.4 million was inside August's $75 million to $95 million forecast. It also rose from $78.4 million a year earlier.
The annual outlook moved down. Hims now expects $257 million to $277 million, compared with $275 million to $325 million in August. The midpoint falls 11%, to $267 million from $300 million.
Adjusted EBITDA removes interest, taxes, depreciation, amortization, stock compensation and selected other items. Hims now also excludes foreign-exchange gains and losses; that change added back a $4.1 million currency loss in the latest quarter.
A financing deal changes the cash picture
Hims' quarterly filing reveals another part of its growth funding: it sold $434.5 million of receivables, amounts owed to the company, to JPMorgan Chase. It received $433.3 million after a discount, bringing in cash before collecting those balances itself.
Those proceeds sit inside operating cash flow, which totaled $65.4 million for the quarter, down from $148.7 million a year earlier. The receivables-purchase facility is uncommitted, meaning the bank is not required to keep buying receivables.
Free cash flow after capital spending was $26 million, compared with $79.4 million. Faster collections through the new arrangement therefore accompany a lower reported cash result.
The next stage depends on turning the larger customer and product base into more profit after delivery and marketing costs. The Hims & Hers company profile follows the acquisitions, revised outlook and cash financing behind that expansion.