Shares Trim Losses After Earnings

Hims & Hers Health (NYSE: HIMS) shares declined about 3% before trimming losses Tuesday as investors digested the telehealth company’s latest quarterly results.

The company swung to a loss of $0.37 per share in the second quarter, compared with earnings of $0.17 per share during the same period a year earlier.

Gross margin also came under pressure, falling to 64% from 76% a year ago.

The weaker profitability was partly attributable to an $81 million one-time cost recorded during the quarter.

One-Time Costs Weigh on Results

The $81 million charge included expenses associated with Hims & Hers’ acquisition of Australian digital health company Eucalyptus.

The company also incurred restructuring costs following its decision earlier this year to change its strategy surrounding weight-loss treatments.

Legal reserves related to recent litigation with the Federal Trade Commission also contributed to the one-time expenses.

As a result, the headline earnings figure does not fully reflect the underlying operating performance investors are assessing, although the decline in gross margin remains an important issue for the business.

Weight-Loss Strategy Faces Regulatory Pressure

Hims & Hers has been recovering from a significant stock drawdown earlier this year as regulatory and legal concerns surrounding compounded GLP-1 weight-loss medications pressured investor sentiment.

The company has responded by shifting away from copycat weight-loss medications and moving toward partnerships with pharmaceutical manufacturers.

That transition is important because the weight-loss market has become one of the company’s most significant growth opportunities, while regulatory scrutiny has increased around compounded versions of popular GLP-1 drugs.

FTC Lawsuit Adds Another Challenge

Hims & Hers also faces a separate legal challenge from the Federal Trade Commission.

On July 29, the FTC filed a lawsuit alleging that Hims & Hers shared private health information with advertisers including Meta and Snap and made subscription cancellations difficult.

Hims & Hers has rejected the allegations and said it intends to defend itself.

“We are confident in our position and intend to defend it vigorously,” CFO Yemi Okupe said during the company’s earnings call.

The litigation adds another layer of uncertainty for investors already evaluating the company’s changing weight-loss strategy and declining margins.

What Investors Should Watch

The latest results leave Hims & Hers at an important point in its transition.

The $81 million one-time charge explains part of the sharp deterioration in reported earnings, but the decline in gross margin from 76% to 64% highlights a broader profitability issue that investors will continue to monitor.

At the same time, the company’s decision to work more closely with pharmaceutical manufacturers could reduce some of the regulatory uncertainty surrounding its previous weight-loss strategy.

However, the FTC lawsuit remains an overhang, particularly as the company attempts to rebuild investor confidence.

With shares still down more than 4% year to date, the market’s focus will likely remain on whether Hims & Hers can stabilize margins, successfully execute its new weight-loss strategy and manage its legal and regulatory challenges.