Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased 52% year over year to $316 million, demonstrating strong business performance.
- The subscriber base grew to nearly 1.9 million, with over 155,000 net new users added in the quarter.
- Expansion of personalized offerings across specialties, with 4 out of 5 specialties now carrying at least 10 personalized solutions.
- Launch of GLP-1s in the weight management category, scaling to a run rate of $100 million in annual revenue within less than a year.
- Strong financial profile with $39 million of adjusted EBITDA and free cash flow of $47.6 million in the second quarter.
Negative Points
- Gross margins saw slight degradation, dropping to 81% due to the addition of GLP-1s and growth in the weight loss specialty.
- Marketing as a percentage of revenue remains high at 46%, despite improvements.
- Near-term gross margin erosion expected to continue due to the scaling of new offerings like GLP-1s.
- Dependence on third-party partnerships for supply chain and compounding capabilities, which may impact cost structure and margins.
- Potential challenges in maintaining the rapid growth and scaling of new specialties while ensuring high-quality personalized solutions.
Q & A Highlights
Q: Can you share projected GLP-1 revenue contribution for the second half of the year and how the acquisition of the outsourcing facility might impact your gross margins and unit economics longer term?
A: We are very excited about the core business's performance, excluding GLP-1s, which delivered over $300 million in revenue in Q2. While it's too early to provide specific guidance on GLP-1 contributions, we are pleased with the initial launch and confident in its momentum. The acquisition of the 503B facility will unlock new specialties and optimize the cost structure for compounded GLP-1s, improving gross margins over time.
Q: How should we think about the total marketing investment in the second half of the year, especially with the election and GLP-1s?
A: Marketing investment will focus on broadening the aperture of personalized solutions across core specialties and weight loss offerings. We anticipate a meaningful portion of the spend to address multi-condition capabilities and maintain flexibility due to the election year. The investment will adhere to a one-year payback period, leveraging economies of scale.
Q: How durable is the GLP-1 opportunity, especially if these drugs are taken off the shortage list?
A: We see thousands of patients daily struggling to access GLP-1s. Our portfolio, including personalized oral compounds, branded medications, and personalized GLP-1 doses, offers a robust range of options. The clinical necessity for personalized dosages will remain clear, ensuring a durable business line beyond the shortage.
Q: Can you provide additional color on the unit economics of GLP-1s and how you're able to offer them at lower price points?
A: Our scale allows us to negotiate favorable cost structures with third parties. While GLP-1s currently have a dilutive effect on gross margins, we expect to optimize unit economics through verticalization, process improvements, and logistics optimization. This will improve margins over time.
Q: Have you seen any signs of slackening consumer demand due to a weakening economy?
A: We have not observed any meaningful degradation in consumer demand. Our diverse consumer base and the emotionally resonant conditions we address ensure continued engagement. Our transparent and affordable pricing also helps maintain consumer interest during economic uncertainty.
Q: How many subscribers are taking multiple drugs across categories, and have GLP-1 users converted to other products?
A: We don't disclose specific specialty mixes, but personalized adoption is accelerating rapidly. In the weight category, many users have complex needs, leading to significant cross-category concerns. Our holistic approach addresses these needs, driving strong engagement and conversion.
Q: How do you expect the business mix to evolve in the weight management category, including GLP-1s and other drugs?
A: We expect a diverse product mix, similar to other specialties. The awareness of obesity as a treatable disease is driving significant interest. We see a range of customer needs, from those seeking aggressive treatments like GLP-1s to those preferring oral medications. Our product roadmap will continue to expand to meet these varied needs.
Q: Can you provide color on the cadence of GLP-1 sign-ups and retention rates?
A: The majority of GLP-1 users opt for multi-month subscriptions. While it's early days, initial feedback and check-ins suggest strong retention. We are confident in the long-term durability of the GLP-1 offering.
Q: Did the recent news from Lilly about increased capacity impact your internal expectations for this year and next?
A: There are no material changes to our guidance based on Lilly's announcement. Our current business and guidance already account for the existing GLP-1 offerings on our platform.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
