Table of Contents

• 1. Hims (HIMS) — Earnings Review

  • a. Demand

  • b. Profits & Margins

  • c. Balance Sheet

  • d. Guidance & Valuation

  • e. Call & Release

  • f. Take

• 2. Palantir (PLTR) – Earnings Review

  • Palantir 101 — Understanding this Complex Business …

  • AIP 101:

  • a. Demand

  • b. Profits & Margins

  • c. Balance Sheet

  • d. Guidance & Valuation

  • e. Call & Release

  • f. Take

1. Hims (HIMS) — Earnings Review

Hims is an online healthcare marketplace that conveniently connects patients and providers. Its specialties include sexual health, dermatology, mental health and weight loss.

a. Demand

• Beat revenue estimates by 4.9%. Its 66.4% 2-year revenue compounded annual growth rate (CAGR) compares to 66.7% Q/Q and 65.7% 2 quarters ago.

• Paid subscribers slightly, slightly missed estimates. You could call it a rounding error.

• Average Order Value (AOV) beat estimates by 16%.

b. Profits & Margins

• Its 79.2% gross margin beat 79.0% estimates by 20 basis points (bps; 1 basis point = 0.01%). GPM fell Y/Y due to investments in its newer weight loss business as expected.

• Beat $9M GAAP EBIT estimates by $19M.

• Beat $0.05 GAAP EPS estimates by $0.27. This includes a $52 million tax benefit. Excluding this help, it beat $0.05 GAAP EPS estimates by $0.05. Still very good, but that must be considered. I saw several major outlets forgo this needed context.

• Beat EBITDA estimates by 31% and beat guidance by 36%.

c. Balance Sheet

• $255 million in cash & equivalents; $49 million in inventory vs. $22 million at the start of 2024.

• No debt.

• Diluted share count +12% Y/Y; basic share count +3% Y/Y.

d. Guidance & Valuation

• Q4 revenue guidance crushed estimates by 11%.

• Q4 EBITDA guidance beat estimates by 30%.

• Reiterated its path to 20%+ EBITDA margins by 2030. Looks like they’re going to comfortably beat that schedule.

• CapEx is going to pick up a bit to support capacity expansion and facility automation.

Hims trades for 32x forward earnings and more likely closer to 27x-28x following this report. EPS is expected to grow by 156% Y/Y this year and by 41% Y/Y next year.

e. Call & Release

The Company Foundation:

For several quarters, the theme of Hims investor materials has been the power of “personalization.” From the company’s beginning, it set out to create a “proprietary” electronic medical record (EMR) that enabled it to unleash its growing database and innovate with faster velocity. This core can ingest, organize and leverage all structured data to build customer data profiles, personalize touch-points and ensure higher quality care. Whether it’s adding vitamins into prescriptions that a consumer is deficient in, combining prescriptions into single pills, customizing dosing and titration schedules or selecting substitute drugs based on side-effect profiles, data and personalization help a lot. This becomes more true and more precise with scale.

The modern, data-fueled EMR offers more benefits to its ecosystem. Per Hims, the foundation “reduces administrative burden” by automating customer appointment summaries and helping with paperwork. Furthermore, this approach has enabled Hims to debut two additional products to augment the personalization value that it provides:

First, MedMatch is essentially the firm’s automated insight hunter and gatherer. It utilizes GenAI and machine learning algorithms to uncover valuable pieces of information to nudge best provider practices. Whether it’s understanding polypharmacy or other drug interaction issues, comorbidity concerns or something else, the added context makes them more informed and better at their jobs. This tool has been available for about a year, but is only now expanding to weight loss.

The newest tool to support its care personalization aim is called Clever Routing. One of the main value propositions that Hims provides is compelling drug pricing and easier, more convenient access. One of the ways that it can position itself to provide more savings and unique value over time is by making sure its own operations are as efficient and profitable as possible. That’s really where this tool comes into play. Clever Routing pulls from data profiles to route customer journeys based on specific needs. If a patient requires more expensive, real-time access to a provider, it will guide them accordingly. If a patient needs a response to an administrative message sometime in the next week, perhaps a cheaper customer service interaction will be sufficient. Clever Routing knows.

Access & Adherence:

Let's stick with driving greater access and “democratizing” prescriptions for a moment. Hims allows providers to greatly expand their patient networks with modest incremental effort. And again, it gives them impactful data tools to use for their own care quality. This makes it doable for providers to interact with Hims patients a lot more than a traditional primary care physician relationship would allow. For context, patients routinely have text-level access to these providers. This is especially valuable for disciplines like mental health, where consistent interaction is needed. Weight loss is another area where this has a profound impact. Per Blue Health Intelligence, just 42% of GLP-1 patients are still taking the weight loss injectables after 12 weeks. On Hims, it’s 70%.

More on Personalization Traction & Impact:

For the first time, 50%+ of Hims subscribers are now on personalized subscriptions while 65% of all new subscribers went with personalized plans too. These customers boast higher retention and higher lifetime value for Hims, making it clear why this shift is being pursued. And while success here is great, leadership will readily tell you that it’s “very early.” Much more to do across new specialties and combining medications for prescriptions across multiple specialties.

Weight Loss:

The regulatory environment for GLP-1 drugs remains volatile and fluid. As a reminder, when drugs are on shortage lists, the FDA relaxes rules on compounding substitutes to sell to the public. Popular generic compounds (Dulaglutide, Liraglutide and Semaglutide) are all on that shortage list, which is good for companies like Hims. There is growing concern that supply chains are recovering (especially for Semaglutide) and that shortage designations will be short-lived. That could create new risk for this firm’s ability to sell GLP-1s. Notably, it doesn’t see these shortages being resolved in the near term. It called out 80,000 customers reporting inability to secure access recently and doesn’t see that list shrinking at all. It’s actually growing. Leadership also hinted at thinking it will be allowed to sell GLP-1s following shortage list removal, thanks specifically to the personalization approach it has taken:

There are many rich companies lobbying to get the FDA to clamp down on Hims and others selling copy-cat versions of their branded GLP-1s. Technically, these companies are supposed to have exclusivity windows before generics can compete. This protects their R&D dollars so that biotech discovery isn’t quite as risky. We’ll see how this shakes out.

Regardless of what happens, Hims is still delivering 40% Y/Y subscriber growth excluding weight loss, so it’s not like growth relies solely on this channel.

More weight loss news:

• The oral weight loss business crossed a $100 million revenue run rate.

• Liraglutide will be added to the Hims platform next year.

• It expects to gain better access to other branded medications like Wegovy and Ozempic over time.

More Retention Notes:

Weight loss is becoming a strong cross-selling tool for existing subscribers. 20,000 weight loss subscriptions during the quarter were from existing subscribers. 20% of total subscribers here are multi-product users. It now has 300,000 total multi-product subscribers, representing about 15% of its base.

• Monthly retention remains over 95% and its marketing payback period remains under 1 year. That would not be possible if churn rate was soaring.

• In sexual health, 50% of its new customers are using a daily solution, which tripled Y/Y. Daily Hims users offer higher retention.

• In dermatology, 80% of all subscriptions are personalized. Again, personalization means higher retention.

Vertical Integration:

HIMS purchased Medisource for its first owned compounding facility. To the company, this represents a single step in its path to vertical integration. It thinks this will yield better margins, more flexibility to pass on savings onto customers and faster innovation.

The Medisource facility is a 503A pharmacy, meaning for custom medications. 503B pharmacies enable large-scale production of medications, and are more efficient and profitable than 503A. As Hims scales and orders per product rise, it will shift to 503B manufacturing to pocket more margin over the long haul.

Growth Segmentation Highlights:

• Hims crossed 400,000 female subscribers during the quarter, rising to roughly 20% of total for the very first time.

• Strong growth in lower income and older age cohorts.

f. Take

This was an elite quarter in every sense of the imagination. I have been pretty skeptical of this business model and how it will fend off the slowly growing threat from Amazon and others. Personalization is a great way to insulate them, but I still question if that will be enough over time. I think mega-caps interrupting this compounding party is likely. But for now? Results look fantastic. This team is firing on all cylinders and executing at a level that very few other organizations are matching. There’s no denying that and bulls should be thrilled. There is nothing negative in these numbers to pick at. Congratulations to shareholders.

2. Palantir (PLTR) – Earnings Review

Palantir 101 — Understanding this Complex Business:

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