Hims & Hers Well being, Inc. (NYSE:HIMS) This fall 2022 Earnings Name Transcript February 27, 2023

Operator: Good afternoon women and gents, welcome to the Hims & Hers Well being Fourth Quarter 2022 Earnings Name. My identify is , and I will likely be your operator at this time. Right now, all members are in a listen-only mode and please be suggested that this name is being recorded. Right now, I will flip the decision over to Ms. Alice Lopatto, Vice President of Investor Relations. Please go forward Ms. Lopatto.

Alice Lopatto: Good afternoon everybody and welcome to the Hims & Hers Well being fourth quarter and full-year 2022 earnings name. On the decision with me at this time is Andrew Dudum, Co-Founder and Chief Govt Officer; in addition to Yemi Okupe, our Chief Monetary Officer. Earlier than I hand it over to Andrew, I must remind you of authorized protected harbor and cautionary declarations. Sure statements and projections of future outcomes made on this presentation represent forward-looking statements which might be based mostly on amongst different issues, our present market, opponents and regulatory expectations and are topic to dangers and uncertainties that might trigger precise outcomes to differ materially. We take no obligation to replace publicly any forward-looking assertion after this name, whether or not because of new data, future occasions, adjustments in assumptions or in any other case.

Please see our most lately filed 10-Ok and 10-Q stories for a dialogue of danger components as they relate to forward-looking statements. In at this time’s presentation, we’ve got sure non-GAAP monetary measures. We refer you to the reconciliation desk contained in at this time’s press launch accessible on our Investor Relations web site for reconciliations to essentially the most immediately comparable GAAP monetary measures and associated data. You may discover a hyperlink to the webcast and Investor Relations web site at traders.forhims.com. Please additionally be aware, we’ve got created a brand new investor presentation that we hope will function a helpful useful resource for each new and current traders. You’ll find this on our investor relations web site, below occasions and shows. After the decision, this webcast will likely be archived on the web site for 12 months.

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And with that, I will now flip the decision over to Andrew.

Andrew Dudum: Thanks, Alice. Welcome to everybody becoming a member of us. 2022 was a transformative 12 months for Hims & Hers and I am completely satisfied to be with you all at this time to overview our efficiency and share our views on the longer term. We’re happy to report an distinctive end to a document 12 months, headlined by annual income of 527 million, greater than 1 million subscribers and over 10 million cumulative medical visits since inception, and importantly, the transition to adjusted EBITDA profitability within the fourth quarter for the primary time in our firm’s historical past. That is an unbelievable second for us all that serves as a testomony to the power of our firm and method. We discover ourselves at an inflection level during which we’re reaping the advantages of our dimension and scale.

We imagine our model consciousness and buyer loyalty have by no means been stronger. Our product choices have by no means been extra expansive and personalised and our platform scale and insights are enabling scientific excellence and effectivity in contrast to something available in the market at this time. Even after this quarter of document breaking development, we have important aspirations for our firm’s future. In dedication to those aspirations, we set a particularly excessive bar for disciplined execution throughout all groups throughout the group. This method is pushed by the truth that our mission to assist the world really feel nice by means of the ability of higher well being is extra related and important for purchasers than ever earlier than. By delivering on this at each degree, we will proceed taking leaps in the direction of our aim of being a basic and beloved a part of each family within the nation.

This mission is deeply private as a result of we too are clients. That is the enduring energy of Hims & Hers. We’re experiencing a really distinctive second in historical past, a second the place clients count on hyper personalization, on-demand entry, and value transparency. A second the place know-how and AI are able to serving to ship each pace and accuracy in a posh evaluation. And lastly, a second the place belief is a driver of shopper buy habits, and the place genuine manufacturers are anticipated to achieve out and construct deep and enduring relationships with clients. As an organization and as a workforce, we’ve got by no means been extra assured in our means to seize this vitality and seize this historic second, with all the instruments and expertise required to guide on this new world.

We ended 2022 with the strongest quarter in our firm’s historical past, delivering not solely continued momentum, however accelerating development since going public over two years in the past. Income, which was predominantly pushed by recurring on-line subscriptions, grew 97% year-over-year reaching a document 167 million within the fourth quarter. Effectivity and a disciplined method towards investments have been essential to our technique and have enabled us to realize our first quarter of adjusted EBITDA profitability, which was roughly $4 million within the fourth quarter. The underlying power of our mannequin mixed with ongoing velocity throughout the enterprise provides us a novel alternative to function profitably on a go ahead foundation, whereas persevering with to scale our platform.

Our workforce’s execution and focus alongside our thrilling pipeline of innovation positions us nicely to ship on a sturdy outlook for 2023. Equally energizing, these components give us the arrogance to talk to sure longer-term monetary targets. By 2025, we count on to ship annual income of at the very least 1.2 billion and generate at the very least 100 million of adjusted EBITDA. These targets are based mostly on the present power and trajectory of the enterprise. Our success will proceed to be fueled by a relentless deal with our clients placing them on the middle of the whole lot we do. This deal with shopper centricity is powered by 4 key strategic pillars to which each funding, precedence and initiative ladders up. First, constructing a trusted model. Identified and revered in each family within the nation.

Second, growing a number one know-how platform that may ship world-class suggestions effectively by means of perpetual enhancements with buyer suggestions. Third, delivering modern merchandise and personalised companies. And fourth, making certain scientific excellence with every affected person. You may discover we have expanded our pillars now decoupling know-how and innovation. It is a pure evolution for us as we pursue market management and work to redefine how world-class experiences in our business appear and feel. These 4 pillars create a robust flywheel that underpins our development engine. It begins with our trusted model, which drives buyer demand and scale. The expansion in our shopper base fuels the speed of buyer insights suggestions and learnings we will make the most of.

This permits us to garner higher personalised understandings and buyer section preferences. These insights feed into our know-how platform to raised practice, refine, and ship nice care. As well as, this of buyer insights helps form the innovation roadmap and in the end the services delivered. All of this, some in partnership and collaboration with the main scientific our bodies, specialist, and pharmaceutical provide chain companions delivers an expertise in contrast to something accessible available in the market, biking proper again to the fortification of our trusted model. We’re extremely pleased with the corporate we have in-built simply six years. The constructing blocks we’ve got put in place, the strategic choices we’ve got made all through our journey and an ongoing deal with our 4 development pillars are paying dividends.

Wanting forward, we’re energized by the various alternatives accessible and initiatives deliberate throughout these pillars. With our trusted model, we count on to develop our consciousness and develop deep relationships with people and complete households by persevering with to point out up in essentially the most culturally related moments throughout society. Most lately, we ran campaigns in the course of the NFL playoffs and named a excessive profile partnership with Kristen Bell, who teamed up with Hers to share her journey managing despair. We’ve many new initiatives underway that may proceed this work to raised empower customers and deepen these relationships. As our platform continues to scale, we’ll deploy our main know-how to leverage distinctive insights, delivering entry to world-class look after our clients and best-in-class instruments for our suppliers.

Our imaginative and prescient is a world the place being handled by means of Hims & Hers is equal to accessing the collective minds of the highest specialists throughout the nation to overview every buyer’s wants, and supply well timed suggestions made doable by means of the ability of machine studying. By the ability of scale from over one million subscribers and 10 million cumulative medical visits, our platform presently generates insights that allow us to ship entry to modern services that clients love. All through 2023, we’ve got a sturdy pipeline of recent merchandise that may convey superior and personalised methods to deal with customers, which we really feel will take away limitations for a large portion of potential sufferers but to be handled. We’re happy with the rollout of our first newly launched providing in 2023, Arduous Mints by Hims, which has seen robust curiosity in its first month on the platform.

Prospects come to us to search out options to their well being and wellness wants, in the end is a path in the direction of feeling nice. That is why scientific excellence is so essential to us. At the moment, we’ve got a medical advisory workforce of over 10 specialists that guarantee suppliers on our platforms are offering the best high quality of care in-line with how we do the whole lot at HIMSS and HERS. We’ve additional augmented our scientific capabilities to convey on two C-Degree hires. Our Chief Medical Officer and Chief Pharmacy Officer and increasing our partnerships with medical teams throughout the nation to make sure sufferers that come to us have entry to prime quality care, whether or not that be by means of our platform or through a suggestion from us to an alternate possibility. At standalone initiatives, we imagine these developments will proceed to differentiate Hims & Hers as a pacesetter within the business.

Collectively, this flywheel propels us down a strategically laid path in the direction of additional development and profitability. All of that is made doable by a workforce that at this time is executing higher than any workforce I’ve had the privilege of working with. Our persons are our best belongings. And this quarter’s efficiency and this coming 12 months’s ambitions are reflective of the expertise and focus of every of our workers. As I discussed earlier, lots of our workers, together with myself, are clients. That is the rationale our ardour and dedication is so robust and why we’re so energized in regards to the future forward. We’re excited to replace you on our subsequent part of development. And with that, I’ll now flip it over to Yemi to stroll by means of particulars of our monetary efficiency and outlook.

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Yemi Okupe: Thanks, Andrew. Howdy everybody and thanks for becoming a member of us . I will begin by offering further shade into our monetary efficiency, together with newly disclosed metrics and develop upon Andrew’s feedback concerning our 2023 steering and longer-term objectives. 2022 was an unbelievable 12 months for Hims & Hers that noticed the impact of our investments materialized in document efficiency. This culminated into a powerful end for the 12 months. Within the fourth quarter, we proceed to drive distinctive development throughout our enterprise, whereas additionally delivering our first quarter of adjusted EBITDA profitability. Fourth quarter income grew 97% year-over-year to 167.2 million. Income for 2022 was 526.9 million, up 94% relative to 2021. All through 2022, we noticed robust momentum from our established choices corresponding to males’s sexual well being and hair loss, in addition to a number of of our rising choices.

Power in our on-line channel remained the first driver of our development all through 2022. Within the fourth quarter, on-line income elevated 106% year-over-year to 161.2 million. For the full-year, on-line income elevated 94% year-over-year to 502.5 million. Development in our on-line channel is pushed by two levers. The primary is the footprint of our subscriber base, which is influenced by our efforts to draw new subscribers and retain them. The second is our means to extend subscriber engagement on the platform, which drives extra income per subscriber. Our platform has developed over time to supply customers a broader set of options to a various set of well being and wellness wants. We really feel that we’ll more and more have the flexibility to allow companies to our customers throughout a number of situations, elevating the significance of measuring the holistic relationship with our clients.

Beginning this quarter, we’re disclosing the variety of subscribers on our platform and can present this metric on a quarterly foundation going ahead. A subscriber is a person with a number of subscriptions on the Hims & Hers platform. Subscribers when mixed with month-to-month on-line income generated per common subscriber is extra reflective of our holistic engagement with every particular person who gives higher visibility into the underlying drivers of development. We’ll present these metrics on a quarterly foundation in lieu of subscriptions going ahead. Within the fourth quarter, subscriber rely grew 124,000 quarter-over-quarter, representing a rise of 88%, relative to the fourth quarter of 2021. We really feel this development is the results of profitable funding associated to the event of our model, modern merchandise, and the general platform expertise.

Month-to-month on-line income per common subscriber within the fourth quarter was $55, up 10% relative to the fourth quarter of final 12 months. The share of subscribers with a multi-month subscription elevated 5 factors year-over-year within the fourth quarter to 73%. Increased income generated per person is a powerful sign that we’re not solely increasing the variety of customers on our platform, however that we’re additionally capable of foster deeper relationships with our clients. Wholesale income elevated $1 million, relative to the third quarter to six million, representing a modest decline from the identical time interval final 12 months. As we’ve got beforehand communicated, we count on income development in our wholesale channel to reasonable as we now have a presence within the majority of high retailers throughout the nation.

The wholesale channel will stay an essential piece in our technique to generate extra shopper consciousness for our model and we’ll look to proceed to domesticate {our relationships} with strategic companions throughout this channel. Gross margins remained steady quarter-on-quarter at 79%, representing a 600 foundation level year-over-year improve for the fourth quarter. Gross margins for 2022 have been 78%, reflecting a 300 foundation level improve from 2021. Margin enlargement was pushed by continued effectivity good points in our operations, elevated achievement quantity from affiliated pharmacies, larger adoption of longer period subscriptions, a higher share of on-line channel income. Transferring down the P&L, advertising as a proportion of income within the fourth quarter was 51% and 50% when excluding stock-based compensation, representing a 300 foundation level enchancment relative to the third quarter.

For the full-year, advertising as a proportion of income was 52% and 51% when excluding inventory based mostly compensation. We’re beginning to see leverage on investments made in newer channels to develop our manufacturers corresponding to TV. On account of new product launches and you’ll count on us to be opportunistic with our advertising investments from time-to-time. That stated, we count on that the payback interval will stay lower than one 12 months as highlighted in our capital allocation framework. Operations and help prices as a proportion of income within the fourth quarter got here in at 13%, each together with and excluding inventory based mostly compensation. This represents a 150 foundation level enchancment relative to the third quarter. We proceed to see effectivity good points because of a higher share of achievement through our affiliated pharmacies, advantages from economies of scale, and leverage on overhead.

Know-how and product improvement prices represented 5% of income within the fourth quarter and 4% when excluding the results of inventory based mostly compensation. Excluding inventory based mostly compensation, this represents a 60 foundation level enchancment relative to the third quarter. We count on funding on this space to develop as we launch new capabilities on our platform and proceed to evolve our product choices. Normal and administrative prices for the fourth quarter was 16% of income, representing a 9 level enchancment relative to the fourth quarter of 2021 and a 160 foundation level enchancment relative to the third quarter of this 12 months. Excluding the affect of inventory based mostly compensation, G&A prices have been 11% of income within the fourth quarter, representing a 7 level year-over-year enchancment from 2021.

For the full-year, G&A prices have been 18% of income, reflecting a 24 level year-over-year enchancment relative to 2021. When excluding inventory based mostly compensation, G&A prices for the full-year have been 13% of income. Effectivity good points on this space have been the results of disciplined headcount development and we anticipate additional leverage on this space sooner or later. Focus strategic investments we’ve got made all through the years have enabled us to drive leverage throughout a number of areas as our platform has scaled. Within the fourth quarter, we generated $3.9 million of adjusted EBITDA marking our first quarter of adjusted EBITDA profitability. Adjusted EBITDA margins have been 2% within the fourth quarter, representing an enchancment 6 factors relative to the prior quarter and a 10-point enchancment to the fourth quarter of 2021.

Adjusted EBITDA losses for 2022 have been 15.8 million, representing an adjusted EBITDA margin of unfavourable 3%. 2022 was one other excellent 12 months for Hims & Hers. We noticed demonstrated success within the improvement of our model throughout new channels, introduced in person consciousness for displaying up in a number of the most culturally related areas. Because of this, we added a document variety of subscribers and exited the 12 months with over 1 million clients on the platform. We signed new partnership agreements with medical teams enabling us to develop the methods during which we serve our buyer base and lastly achieved our first quarter of adjusted EBITDA profitability. It’s clear that we’re at a important second in our firm’s historical past and I can’t be extra excited for the longer term.

We’ve an immense quantity of flexibility as we enter 2023 with robust development, producing constructive adjusted EBITDA, and a sturdy steadiness sheet with roughly $180 million of money and short-term investments. Turning now to our 2023 outlook. Within the first quarter, we’re anticipating income within the vary of 175 million to 180 million, representing a year-over-year improve of 73% to 78%. On the underside line, we count on adjusted EBITDA to be between 3 million to six million, representing an adjusted EBITDA margin of between 2% to three%. For the full-year, we’re anticipating income of between 735 million to 755 million, representing a year-over-year development price of 39% to 43%. And on the underside line, with our expectation the 2023 adjusted EBITDA will likely be between 20 million to 30 million.

These adjusted EBITDA and income ranges resulted in an adjusted EBITDA margin of between 3% to 4%. Our full-year outlook assumes that we’re capable of preserve long-term retention charges above 85%. We proceed to realize payback durations below one 12 months in our advertising investments and we begin to see traction with an expanded portfolio of personalised merchandise that we’d count on to launch all through 2023. A number of alternatives have emerged to increase the capabilities of our achievement facilities that we count on to seize over the following two years. As we reap the benefits of these alternatives, we count on a brief improve to CapEx. Our expectation is that we’ll have between 10 million to fifteen million of incremental CapEx over our present baseline in the course of the subsequent two years.

The primary portion of those investments are anticipated within the second quarter. I will finish by taking a second to speak by means of a few of our longer-term aspirations. Our perception is that over time, our platform can generate adjusted EBITDA margins of between 20% to 30%, whereas sustaining a wholesome development profile. We’re at a novel and thrilling days of the corporate’s lifecycle and the chance to make the world really feel nice by means of the ability of well being . Because of this, will proceed to strategically spend money on new alternatives throughout our platform that we count on will lead to a differentiated expertise with higher outcomes for our clients. Embedded in our long-term adjusted EBITDA margin goal is an expectation that gross margin is normalized within the mid-70s because the buyer expertise on our platform evolves.

To supply perception into how the trajectory towards the long-term margin construction is anticipated to evolve, I will spend a second speaking by means of our mid-range expectations. In 2025, we count on to generate at the very least 1.2 billion of annual income. Our capital allocation framework has demonstrated a capability to drive leverage because the platform scales and we’ll proceed to . As a reminder, the important thing of the framework embody a payback interval of lower than a 12 months on advertising and different investments, funding in merchandise and capabilities that foster sturdy long-term development channels, whereas enabling the flexibility to learn from economies of scale, and a big potential for a excessive return on funding over the long-term. We really feel that robust development mixed with sound execution throughout our capital allocation framework will allow us to drive at the very least 100 million of annual adjusted EBITDA in 2025.

Our means to realize these targets depends on working in an identical atmosphere at this time and doesn’t assume any important or unexpected exterior challenges. It’s clear to us that we’re at an inflection level. The transition to profitability mixed with our robust steadiness sheet gives us with the flexibility to capitalize on the great runway we see in entrance of us. 2022 gives a stable basis that offers us elevated confidence to lean into the investments we’re making throughout every of our 4 strategic pillars. I would wish to thank our clients, companions, and workers serving to us ship these excellent outcomes and we sit up for persevering with to replace you on our progress. With that, I will now flip it over to the operator to open the decision to questions.

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