Q1 2021 Hims & Hers Health Inc Earnings Call

May 18, 2021

Okay.

Yeah.

Operator 2: Good afternoon, and thank you for joining us on today's conference call to discuss Hims & Hers Health, Inc. Q1 2021 financial results. Joining me on the call are Andrew Dudum, our Chief Executive Officer, and Spencer Lee, our Chief Financial Officer. On this call, we will be making forward-looking statements, including financial guidance and expectations for our Q2 and fiscal year 2021 growth, expansion into new categories, strategies, customer demand, and products. These statements reflect our best judgment based on factors currently known to us, and actual events or results may differ materially. Please refer to documents that we file with the SEC, including the Form 8-K filed with today's press release. Those documents contain risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements.

Operator: Good afternoon, and thank you for joining us on today's conference call to discuss Hims & Hers Health, Inc. Q1 2021 financial results. Joining me on the call are Andrew Dudum, our Chief Executive Officer, and Spencer Lee, our Chief Financial Officer. On this call, we will be making forward-looking statements, including financial guidance and expectations for our Q2 and fiscal year 2021 growth, expansion into new categories, strategies, customer demand, and products.

Good afternoon, and thank you for joining us on today's conference call to discuss HIMSS and hers Health, Inc. First quarter 2021 financial results.

Joining me on the call our entry due to our Chief Executive Officer, and Spencer and Lee, our Chief Financial Officer.

And this call, we will be making forward looking statements, including financial guidance and expectations for our second quarter and fiscal year 2021 growth expansion into new categories strategies customer demand and products. These statements reflect our best judgment based on factors currently known to us.

Operator: These statements reflect our best judgment based on factors currently known to us, and actual events or results may differ materially. Please refer to documents that we file with the SEC, including the Form 8-K filed with today's press release. Those documents contain risks and other factors that may cause our actual results to differ from those contained in our forward-looking statements.

And actual events or results may differ materially.

Please refer to documents that we file with the S E C, including the form 8-K filled with today's press release those documents contain risks and other factors that may cause our actual results to differ from those contained and our forward looking statements. These forward looking statements are being made as of today.

Operator 2: These forward-looking statements are being made as of today, and we will disclaim any obligation to update or revise these statements. If this call is reviewed after today, the information presented during this call may not be current or accurate. We will also discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. For historical periods, a reconciliation of GAAP and non-GAAP results is provided in the press release filed today with the SEC on an 8-K and also available on our website. With that, I'll now turn it over to Andrew Dudum.

Operator: These forward-looking statements are being made as of today, and we will disclaim any obligation to update or revise these statements. If this call is reviewed after today, the information presented during this call may not be current or accurate. We will also discuss non-GAAP financial measures which are not prepared in accordance with generally accepted accounting principles. For historical periods, a reconciliation of GAAP and non-GAAP results is provided in the press release filed today with the SEC on an 8-K and also available on our website. With that, I'll now turn it over to Andrew Dudum.

And we will disclaim any obligation to update or revise these statements. If this call is reviewed after today. The information presented during this call may not be current or accurate. We will also discuss non G. A a P financial measures, which are not prepared in accordance with generally accepted accounting principles.

For historical periods, a reconciliation of G. A a P and non G. A a P results is provided and the provided in the press release filed today with the a C. C. One and 8-K and also available on our website and with that I'll now turn and I'll now turn it over to introduce them.

Andrew Dudum: Welcome, and thank you all for joining our Q1 Earnings Call. Simply put, 2021 is off to an incredible start. Our mission is clear. To make the highest quality personalized healthcare accessible to everyone. We started this year helping more consumers across more conditions than ever before, and the results speak for themselves. Across the board, we exceeded our guidance with revenue coming in at over $52 million, representing 74% year-over-year growth, and adjusted EBITDA coming in at a loss of $8.6 million ahead of our guidance range. We also maintained our gross margin of 77%, which remains our highest in any historical quarter.

Welcome and thank you all for joining our first quarter earnings call simple.

Simply put 2021 is off to an incredible start.

Our mission is clear to make the highest quality personalized health care accessible to everyone. We.

We started this year, helping more consumers across more condition than ever before and the results speak for themselves.

So across the board, we exceeded our guidance with revenue coming in at over $52 million, representing 74% year over year growth and adjusted EBITDA coming in at a loss of $8 6 million ahead of our guidance range.

We also maintained our gross margin of 77%, which remains our highest and any historical quarter.

Andrew Dudum: This outperformance across the spectrum was driven by continued robust growth in our core Hims categories, as well as accelerated strength of our Hers brand, and across all of our emerging categories. These numbers underpin what I continue to believe is an exceptionally rare opportunity in the public markets. A business that combines a massive multi-generational vision, significant tailwinds, and present day core fundamentals of robust, diversified growth and efficiency. The truth is, we're doing things differently, and it's a real, durable, competitive advantage. We are meeting this younger generation, especially Millennials and Gen Z, where they are, building a brand and set of experiences that they love, and leveraging deep consumer expertise and insights to build lasting relationships with the most digitally native generation in the country, the future of the health system, the consumers that matter most. Key to it all, personalization.

This outperformance across the spectrum was driven by continued robust growth and our core hims categories as well as accelerated strength of our hers brands and across all of our emerging categories.

These numbers underpin what I continue to believe is an exceptionally rare opportunity and the public market a.

For a business that combines a massive multi generational vision significant tailwind and present day core fundamentals of robust diversified growth and efficiency.

Andrew Dudum: The truth is, we're doing things differently, and it's a real, durable, competitive advantage. We are meeting this younger generation, especially Millennials and Gen Z, where they are, building a brand and set of experiences that they love, and leveraging deep consumer expertise and insights to build lasting relationships with the most digitally native generation in the country, the future of the health system, the consumers that matter most. Key to it all, personalization.

The truth is we're doing things differently and it's a real durable competitive advantage.

We are meeting the hunger generation, especially millennials and Gen Z where they are.

Building, a brand and set of experiences that they love and leveraging deep consumer expertise and insights to build lasting relationships with the most digitally native generation and the country.

Future of the health system to consumers that matter most.

And key to it all and personalization.

Andrew Dudum: Hims and Hers helps consumers develop a healthcare plan of action that is tailored to the exact needs of each individual across a broad range of their conditions and preferences. We believe personalized medicine focused on the consumer is something that's really never been done before at anywhere near this level of reach. Our focus on personalized access is working. In the last year, people's understanding of telehealth has dramatically accelerated. While many have experienced the simplicity and ease of virtual care, there have been questions as to whether or not the post-COVID environment will drive a shift back to in-person. For our customers and our audiences, the answer appears clear. Last quarter, we added more new subscriptions than any quarter in the company's history, growing subscriptions nearly 80% year over year.

And her helps consumers develop a health care plan of action that is tailored to the exact needs of each individual across a broad range of their conditions and preferences.

We believe personalized medicine focused on the consumer is something that's really never been done before and anywhere near this level of for each.

And our focus on personalized access is working and.

And the last year People's understanding of Telehealth has dramatically accelerated and while many have experienced the simplicity and ease of virtual care there have been questions as to whether or not the post COVID-19 environment will drive a shift back to in person.

Andrew Dudum: While many have experienced the simplicity and ease of virtual care, there have been questions as to whether or not the post-COVID environment will drive a shift back to in-person. For our customers and our audiences, the answer appears clear. Last quarter, we added more new subscriptions than any quarter in the company's history, growing subscriptions nearly 80% year over year.

For our customers and our audiences and the answer appears clear.

Last quarter, we added more new subscriptions than any quarter in the company's history growing subscriptions nearly 80% year over year.

Andrew Dudum: For the generation who grew up with cell phones in their hands, the traditional healthcare approach is a way of the past, and we believe Hims and Hers Health is the future. Our personalized approach to building a unified and fully verticalized front door to healthcare has served us well in continuing to differentiate and build moats in the landscape. Offering a single destination for personally tailored digital health and wellness, we continue to gain economic advantages and deeper, more valuable customer relationships that are quickly driving real economics. This quarter, our gross profit grew 95% year over year. Despite the historic magnitude of investment in the last twelve months in this sector, our team's execution and our defensible approach continued to drive efficiency throughout the business.

For the generation, who grew up with cell phones and their hands.

Traditional health care approach is a way of the past and we believe him and her and the future.

Our personalized approach to building a unified and fully Verticalizing front door to health care has served us well and continuing to differentiate and build moats and the landscape.

Andrew Dudum: Offering a single destination for personally tailored digital health and wellness, we continue to gain economic advantages and deeper, more valuable customer relationships that are quickly driving real economics. This quarter, our gross profit grew 95% year over year. Despite the historic magnitude of investment in the last twelve months in this sector, our team's execution and our defensible approach continued to drive efficiency throughout the business.

Operating a single destination for personally tailored digital health and wellness, we continue to gain economic advantages and deeper more valuable customer relationships that are quickly driving real economics.

This quarter, our gross profit grew 95% year over year.

Despite the historic magnitude of investment and the last 12 months and this sector, our team's execution and our defensible approach continued to drive efficiency throughout the business.

Andrew Dudum: Most excitingly, in this last quarter, adoption of new product lines were some of the fastest-growing categories in our business, with revenue from Hers Dermatology, part of an estimated $44 billion market, more than doubling quarter over quarter. As the US healthcare system continues to move towards digital experiences like ours, we will be uniquely positioned to continue capitalizing on expansion, serving more customers in more conditions. Our team's ability to meet this younger generation where they are and deliver a brand and consumer experience that wows our customers will continue to prove a strong competitive advantage in our vertical by vertical expansion strategy. As we progress in our goal to be one of the most transformative digital health companies of the next generation, we continue to remind ourselves that the future is just around the corner.

And most excitingly in this last quarter adoption of new product lines, where some of the fastest growing categories and our business with revenue from hers dermatology part of an estimated 44 billion dollar market more than doubling quarter over quarter.

And the U S health care system continues to move towards digital experiences like ours will be uniquely positioned to continue capitalizing on expansion, serving more customers and more condition.

Andrew Dudum: more customers in more conditions. Our team's ability to meet this younger generation where they are and deliver a brand and consumer experience that wows our customers will continue to prove a strong competitive advantage in our vertical by vertical expansion strategy. As we progress in our goal to be one of the most transformative digital health companies of the next generation, we continue to remind ourselves that the future is just around the corner.

Our team's ability to meet this younger generation, where they are and deliver our brand and consumer experience and how is our customers will continue to prove a strong competitive advantage and our vertical by vertical expansion strategy.

As we progress and our goal to be one of the most transformative digital health companies of the next generation, we continue to remind ourselves that the future is just around the corner.

Andrew Dudum: We are leaders who are constantly anticipating what's next, and it has served us well. As such, we have invested a tremendous amount of time in Q1 prioritizing initiatives we believe will deepen our capabilities and entrench our competitive moat in the years to come. The two largest areas of investment have been in our future mobile platform and insurance. Let me tell you a little bit about both. Today, we have hundreds of thousands of subscriptions on the platform, with almost all platform engagement taking place via mobile devices. What comes next for Hims & Hers is a completely rethought mobile offering, native to iOS and Android, that will act as the future front door to all of our healthcare needs. This platform will showcase the breadth of what our customers are getting as part of the end-to-end Hims & Hers experience.

We are leaders who are constantly anticipating what's next and it has served us well.

As such we've invested a tremendous amount of time Q1 prioritizing initiatives, we believe will deepen our capabilities and entrench our competitive moats in the years to come.

And the two largest areas of investment have been and our future mobile platform and insurance, let me tell you a little bit about both.

Andrew Dudum: Today, we have hundreds of thousands of subscriptions on the platform, with almost all platform engagement taking place via mobile devices. What comes next for Hims & Hers is a completely rethought mobile offering, native to iOS and Android, that will act as the future front door to all of our healthcare needs. This platform will showcase the breadth of what our customers are getting as part of the end-to-end Hims & Hers experience.

Today, we have hundreds of thousands of subscriptions on our platform with almost all platform engagement, taking place via mobile devices.

What comes next for him his and hers is a completely rethought mobile offering native to iOS and Android They'll act and the future front door to all of our health care needs.

This platform will showcase the breadth of what our customers are getting as part of the end to end terms and hers experience and here again personalized consumer health will be at the center.

Andrew Dudum: Here again, personalized consumer health will be at the center, stretching across primary care to content, guided programs, community, and commerce. While still early in our development and design phase, what's clear is what we are building looks like nothing ever offered in healthcare. A single entry point into a beautiful healthcare world, simplifying the complexity of feeling great and being well. In parallel, our team has also begun the work to unlock the power of insurance reimbursement as part of the Hims and Hers platform. This is a key component to affordability for certain types of care and patient populations, which is core to our mission of expanding access for everyone. A first step in this initiative was opening our affiliated pharmacy, building the last verticalized component to our supply chain.

Stretching across primary care to content guided programs community and commerce, while still early and our development and design day. What's clear is what we are building looks like nothing ever offered and health care.

A single entry point into a beautiful health care world simplifying the complexity of feeling great and being well.

In parallel our team has also begun to work to unlock the power of insurance reimbursement and as part of the HIMSS and hers platform.

This is a key component to affordability for certain types of care and patient populations, which is core to our mission of expanding access for everyone.

The first step and this initiative was opening our affiliated pharmacy building the last vertical wise component to our supply chain for.

Andrew Dudum: From lab testing to behavioral health and more, we see exciting opportunities to facilitate more affordable access and comprehensive care for our customers via insurance. While early in development, we believe these capabilities will serve our customers well in the years to come. We are a company passionate about building the future of healthcare. We pride ourselves on being visionary in our sector, sustaining consistent execution, and delivering growth, and I feel this quarter is highly reflective of our ability to be the leader in this space. We are at the forefront of transforming an industry that we all so desperately rely upon. I'm proud of the results we have shared with you today and our team's dedication to our mission. At this point, I will now turn the call over to Spencer for a more detailed review of our results, followed up by Q&A.

From lab testing to behavioral health and more we see exciting opportunities to facilitate more affordable access and comprehensive care for our customers via insurance.

While early in development, we believe these capabilities will serve our customers well in the years to come.

We are a company passionate about building the future of health care, we pride ourselves on being visionary and our sector sustaining consistent execution and delivering growth and I feel this quarter is highly reflective of our ability to be the leader in this space.

Andrew Dudum: We pride ourselves on being visionary in our sector, sustaining consistent execution, and delivering growth, and I feel this quarter is highly reflective of our ability to be the leader in this space. We are at the forefront of transforming an industry that we all so desperately rely upon. I'm proud of the results we have shared with you today and our team's dedication to our mission. At this point, I will now turn the call over to Spencer for a more detailed review of our results, followed up by Q&A.

We were at the forefront of transforming an industry that we also desperately rely upon.

I'm proud of the results, we will share with you today and our team's dedication to our mission.

At this point I will now turn the call over to Spencer for a more detailed review of our results followed by Q&A.

Andrew Dudum: As a result of an imminently arriving firstborn son, I've pre-recorded this message and look forward to following up with many of you in the coming days.

As a result of and imminently, arriving firstborn son, I've prerecorded this message and look forward to following up with many of you in the coming days.

Spencer Lee: Thank you, Andrew. I'm pleased to report our incredibly strong performance in Q1. I'll walk through the details behind our performance and then provide our guidance for Q2 and our revised upwards revenue guidance for the full year. First, let's jump into the Q1 results. In Q1, we generated revenues of $52.3 million, which increased 74% year over year and exceeded the high end of our Q1 revenue guidance of $50 million. Growth was driven by strong performance across the entire business from all categories. We delivered on growth in new customer acquisition, continued improvements in customer retention, and continued expansion of average order values. In Q1, we generated 687,000 net orders, which grew 26% year over year. Growth in net orders was primarily driven by growth in subscriptions.

Thank you Andrew and.

Pleased to report our incredibly strong performance and each one I'll walk through the details behind our performance and then provide our guidance for Q2 and our revised upwards revenue guidance for the full year first let's jump into the Q1 results and Q1, we generated revenues of $52 $3 million, which increased 74% year over year and.

Exceeded the high end of our Q1 revenue guidance of $50 million growth was driven by strong performance across the entire business from all categories. We delivered on growth and new customer acquisition and continued improvements and customer retention and continued expansion of average order values in Q1, we generated 687000 net.

Spencer Lee: Growth was driven by strong performance across the entire business from all categories. We delivered on growth in new customer acquisition, continued improvements in customer retention, and continued expansion of average order values. In Q1, we generated 687,000 net orders, which grew 26% year over year. Growth in net orders was primarily driven by growth in subscriptions.

Orders, which grew 26% year over year growth and net orders was primarily driven by growth and subscriptions and we ended the quarter with 391000 subscriptions on the platform, which increased 79% year over year versus 218000, and subscriptions and the year ago quarter.

Spencer Lee: We ended the quarter with 391,000 subscriptions on the platform, which increased 79% year over year versus 218,000 subscriptions in the year ago quarter. Subscription growth was driven by both strong new subscriber acquisition and improving retention of existing subscribers. Average order value or AOV in Q1 was $74, which increased 42% year over year. AOV has increased for the past 9 consecutive quarters as we continue to drive an increased mix of subscriptions towards higher priced product bundles and multi-month subscriptions. Our revenue performance in Q1 highlights multiple areas of strength in our business. Our large and growing addressable markets, strong consumer demand driven by our uniquely positioned brand and clear cash pay value proposition, and our ability to drive growth by increasing subscriber lifetime values.

Subscription growth was driven by both strong new subscriber acquisition and improving retention of existing subscribers.

Average order value or a O V and Q1 was $74, which increased 42% year over year.

Spencer Lee: AOV has increased for the past 9 consecutive quarters as we continue to drive an increased mix of subscriptions towards higher priced product bundles and multi-month subscriptions. Our revenue performance in Q1 highlights multiple areas of strength in our business. Our large and growing addressable markets, strong consumer demand driven by our uniquely positioned brand and clear cash pay value proposition, and our ability to drive growth by increasing subscriber lifetime values.

He has increased for the past nine consecutive quarters as we continue to drive an increased mix and subscriptions towards higher price product bundles and multi month subscriptions.

Our revenue performance in Q1 highlights multiple areas of strength and our business are large and growing addressable markets strong consumer demand driven by our uniquely position brand and clear cash pay value proposition and our ability to drive growth by increasing and subscriber lifetime values and Q1, we saw the continued rotation.

Spencer Lee: In Q1, we saw the continued rotation in our subscription base into multi-month subscriptions and higher AOV net orders. As this rotation took place throughout 2020, we saw strong sequential growth in AOVs last year offset relatively flat net orders as the mix of multi-month net orders increased throughout the year. However, as we enter our second full year of this rotation, in Q1, we saw strong year-over-year growth across all dimensions. In net orders, up 26%, in AOV, up 42%, in subscriptions, up 79%, and ultimately in revenue, up 74%, all contributing to and positively driving growth. In Q1, we generated a 77% gross margin, up 800 basis points versus 69% in the year ago quarter. The combination of strong revenue growth and expanding gross margins compounded to generate even faster gross profit growth, up 95% year over year.

And our subscription base into multi months subscriptions and higher EBITDA would be net orders and just for.

For patient took place throughout 2020, we saw strong sequential growth and <unk> last year offset relatively flat net orders as the mix of multi month net orders increased throughout the year.

However, as we enter our second full year of this rotation in Q1, we saw strong year over year growth across all dimensions, and net orders up 26%.

Spencer Lee: In net orders, up 26%, in AOV, up 42%, in subscriptions, up 79%, and ultimately in revenue, up 74%, all contributing to and positively driving growth. In Q1, we generated a 77% gross margin, up 800 basis points versus 69% in the year ago quarter. The combination of strong revenue growth and expanding gross margins compounded to generate even faster gross profit growth, up 95% year over year.

It'll be up 42% and subscriptions up 79% and ultimately in revenue up 74%, all contributing to and positively driving growth.

In Q1, we generated a 77% gross margin up 800 basis points versus 69% and the year ago quarter.

Combination of strong revenue growth and expanding gross margins compounded to generate even faster gross profit growth up 95% year over year.

Spencer Lee: Our focus over the last two years on expanding unit economics and increasing subscriber lifetime values has not only driven rapid revenue growth, but also year-over-year gross margin expansion at the same time. We've been able to meaningfully expand margins and accelerate gross profit generation because the fundamental quality of our revenue is improving. As we improved and expanded our product offerings, we were able to reach and target higher value customers. We've been able to validate higher value customers through their uptake of higher AOV and higher margin product bundles and multi-month subscriptions. Not only are newer subscribers spending more with us than previous subscribers, but they also have higher retention, which means they are generating more revenue during their lifetimes.

Our focus over the last two years on expanding unit economics, and increasing subscriber lifetime values has not only driven rapid revenue growth, but also year over year gross margin expansion at the same time, we've been able to meaningfully expand margins and accelerate gross profit generation because the fundamental quality of our revenue is <unk>.

Moving as.

As we improved and expanded our product offerings, we were able to reach and target higher value customers, we've been able to validate higher value customers through their uptake of higher ANV and higher margin product bundles and multi month subscriptions not only our newer subscribers spending more with us and previous subscribers, but they also have <unk>.

Higher retention, which means they are generating more revenue during their lifetimes, all of which generates increased cost leverage from our product cost provider costs and shipping costs, thus leading to a combination of strong revenue growth and expanding gross margins.

Spencer Lee: All of which generates increased cost leverage from our product costs, provider costs, and shipping costs, thus leading to a combination of strong revenue growth and expanding gross margins. Our Q1 adjusted EBITDA loss of $8.6 million increased versus a $4.6 million loss in the year ago quarter and outperformed our Q1 adjusted EBITDA loss guidance of $9.5 to 11.5 million. We were able to outperform our adjusted EBITDA guidance while also exceeding our revenue guidance because we drove numerous operational efficiencies in the quarter. First, we successfully drove increased customer conversion rates through on-site and customer experience optimizations. Second, we increased retention rates through improved customer experience and lifecycle management. Finally, AOVs continued to expand as we drove increased uptake of higher priced product bundles and multi-month subscriptions.

Our Q1, adjusted EBITDA loss of $8 $6 million increase versus a $4 $6 million loss and the year ago quarter and outperformed our Q1 adjusted EBITDA loss guidance of nine five to $11 $5 million.

Spencer Lee: We were able to outperform our adjusted EBITDA guidance while also exceeding our revenue guidance because we drove numerous operational efficiencies in the quarter. First, we successfully drove increased customer conversion rates through on-site and customer experience optimizations. Second, we increased retention rates through improved customer experience and lifecycle management. Finally, AOVs continued to expand as we drove increased uptake of higher priced product bundles and multi-month subscriptions.

We were able to outperform our adjusted EBITDA guidance, while also exceeding our revenue guidance, because and drove numerous operational efficiencies in the quarter for.

And we successfully drove increased customer conversion rates through onsite and customer experience optimizations.

We increased retention rates through improved customer experience and lifecycle management and finally <unk> continued to expand as we drove increased uptake of higher price product bundles and multi month subscriptions. The combined efforts across the organization drove strong outperformance on both the top and bottom line.

Spencer Lee: The combined efforts across the organization drove strong outperformance on both the top and bottom line. Before I move on to discuss financial guidance, I wanted to touch briefly on the recent pronouncements by the SEC on warrant accounting related to SPACs. In April, the SEC issued a statement on the various accounting considerations for SPAC warrants with respect to liability versus equity classification. Up until that point, almost all SPACs had classified their warrants as equity, including Oaktree Acquisition Corp. Consistent with the SEC's guidance, for Q1, we booked a $33 million liability on our balance sheet related to warrants that were issued by Oaktree Acquisition Corp prior to the merger with Hims. We also booked a $2.7 million expense in Q1 in other expenses related to the mark-to-market liability accounting for all of our liability classified warrants.

Before I move on to discuss financial guidance I wanted to touch briefly on the recent pronouncements by the SEC on warrant accounting related to stocks and.

In April the SEC issued a statement on the various accounting considerations for stock warrants with respect to liabilities versus equity classification.

Spencer Lee: Up until that point, almost all SPACs had classified their warrants as equity, including Oaktree Acquisition Corp. Consistent with the SEC's guidance, for Q1, we booked a $33 million liability on our balance sheet related to warrants that were issued by Oaktree Acquisition Corp prior to the merger with Hims. We also booked a $2.7 million expense in Q1 in other expenses related to the mark-to-market liability accounting for all of our liability classified warrants.

Up until that point, almost all spacs and classified their warrants and equity, including Oaktree acquisition Corp.

Consistent with the FCC's guidance for Q1, we booked a $33 million liability on our balance sheet related to warrants that were issued by Oaktree acquisition Corp. Prior to the merger with him and.

We also book of $2 7 million dollar expense and Q1 and other expenses related to the mark to market liability accounting for all of our liability classified warrants.

Spencer Lee: Going forward, we will continue to mark to market outstanding warrants and will reflect any changes as other expense or other income in the period. Additionally, we decided to restate Oaktree Acquisition Corp's historical financial statements to classify the warrants as liabilities. This included amending and restating the 10-K filed by Hims and Hers in March to correct Oaktree's historical financial statements. The amended 10-K was recently filed with the SEC. Now moving on to financial guidance. For Q2 2021, we are guiding the revenues of $55 to 57 million and an adjusted EBITDA loss of $10 to 12 million. For the full year 2021, we are raising our revenue guidance to a range of $221 to 227 million, an increase of $24 million at the midpoint versus our previous guidance.

Going forward, we will continue to mark to market outstanding warrants and we'll reflect any changes as other expense or other income and the period.

Additionally, we decided to restate Oaktree acquisition Corp's historical financial statements to classify the warrants as liabilities. This included amending and restating. The 10-K filed by his and hers and March to correct Oaktree historical financial statements. The amended 10-K was recently filed with the SEC.

Spencer Lee: The amended 10-K was recently filed with the SEC. Now moving on to financial guidance. For Q2 2021, we are guiding the revenues of $55 to 57 million and an adjusted EBITDA loss of $10 to 12 million. For the full year 2021, we are raising our revenue guidance to a range of $221 to 227 million, an increase of $24 million at the midpoint versus our previous guidance.

Now moving on to financial guidance for Q2, 2020. One we are guiding to revenues of $55 million to $57 million and and adjusted EBITDA loss of $10 million to $12 million for.

For the full year 2020, one we are raising our revenue guidance to a range of $221 million to $227 million and increase of $24 million at the midpoint versus our previous guidance. We are maintaining our guidance for adjusted EBITDA losses of $35 million to $45 million for the year.

Spencer Lee: We are maintaining our guidance for adjusted EBITDA losses of $35 to 45 million for the year. To provide some additional color on how we are thinking about revenue for the rest of the year, our current internal financial forecast has Q4 revenues roughly in line with Q3. With Q1 revenues this year at $52 million and the midpoint of our Q2 guidance at $56 million, if you take the midpoint of our full year guidance at $224 million, that implies $58 million per quarter in Q3 and Q4 at the midpoint. As we discussed on our last call, and similar to the guidance we provided for Q1, as a young and newly public company, we intend to provide guidance that we are confident in our ability to achieve based on the current data points we see in the business.

To provide some additional color on how we're thinking about revenue for the rest of the year. Our current internal financial forecast has Q4 revenues roughly in line with Q3, So with Q1 revenues this year at $52 million and the midpoint of our Q2 guidance at 56 million. If you take the midpoint of our full year guidance at $224 million.

And that implies $58 million per quarter, and Q3 and Q4 at the midpoint and.

And we discussed on our last call and similar to the guidance. We provided for Q1 as a young and newly public company, we and we intend to provide guidance that we are confident and our ability to achieve based on the current data points, we see and the business as new data points become available we will continue to update investors and the coming quarters.

Spencer Lee: As new data points become available, we'll continue to update investors in the coming quarters. Finally, I just want to note, in Q1, we incurred stock-based compensation expenses of $34 million, largely driven by the merger transaction in January. This was near the midpoint of the guidance we provided on our previous call. In Q2, we expect stock-based compensation to return to a more normalized level of between $9 and 11 million. We are exceptionally pleased with the results we were able to deliver in Q1. Our Q1 performance really highlights the core strengths of our business. Our large markets where we treat conditions that consumers really personally care about, a brand that can uniquely harness this deep consumer demand, our offerings and clear value proposition that resonate with consumers, which drive our ability to grow AOV's, net orders, subscriptions, and gross margins all simultaneously.

And finally I just want to note in Q1, we incurred stock based compensation expenses of $34 million largely driven by the merger transaction in January this was near the midpoint of the guidance. We provided on our previous call. In Q2, we expect stock based compensation to return to a more normalized level of between nine.

And $11 million.

Spencer Lee: We are exceptionally pleased with the results we were able to deliver in Q1. Our Q1 performance really highlights the core strengths of our business. Our large markets where we treat conditions that consumers really personally care about, a brand that can uniquely harness this deep consumer demand, our offerings and clear value proposition that resonate with consumers, which drive our ability to grow AOV's, net orders, subscriptions, and gross margins all simultaneously.

We're exceptionally pleased with the results we were able to deliver in Q1, our Q1 performance really highlights the core strength of our business and our large markets for retreat conditions that consumers really personal and care about our bra.

And that can uniquely harnessed this deep consumer demand, our offerings and clear value proposition that resonate with consumers, which drive our ability to grow <unk> net orders and subscriptions and gross margins all simultaneously.

Spencer Lee: We continue to see strong investment opportunities ahead, which give us the confidence to increase our full-year revenue guidance at both ends of the range, now representing year-over-year growth rates of 49% to 53% for 2021, substantially ahead of the 30% guidance we provided in our public investor presentation last summer. We continue to be disciplined and return driven with our capital deployment. We continue to be prudent and focused on driving growth at high rates of return, and I look forward to updating you on our performance in H2 of this year. I want to thank our team for their incredible execution last quarter, all while managing the difficult transition into a public company. It's really special to watch the dedication and tremendous talent of our people that allow our company to deliver these types of results.

We continue to see strong investment opportunities ahead, which give us the confidence to increase our full year revenue guidance at both ends of the range now representing year over year growth rates of 49% for 53% for 2020. One substantially ahead of the 30 per cent guidance, we provided in our public investor presentation last.

Number.

We continue to be disciplined and returns you're getting with our capital deployment, we continue to be prudent and focused on driving growth at high rates of return and I look forward to updating you on our performance and the second half of this year.

Spencer Lee: We continue to be prudent and focused on driving growth at high rates of return, and I look forward to updating you on our performance in H2 of this year. I want to thank our team for their incredible execution last quarter, all while managing the difficult transition into a public company. It's really special to watch the dedication and tremendous talent of our people that allow our company to deliver these types of results.

And to thank our team for their incredible execution last quarter, all while managing the difficult transition into a public company, it's really special to wash the dedication and tremendous talent of our people that allow our company to deliver these types of results I'm proud to share. These results on your behalf.

Spencer Lee: I'm proud to share these results on your behalf. With that, we can open the call to questions. Operator?

With that we can open the call to questions operator.

Operator 2: At this time, I'd like to remind you if you would like to ask a question, please press star then the number one on your telephone keypad. Again, to ask a question, it is star then the number one. We'll pause for just a moment to compile the Q&A roster. Your first question is from the line of Daniel Grosslight with Citi.

Operator: At this time, I'd like to remind you if you would like to ask a question, please press star then the number one on your telephone keypad. Again, to ask a question, it is star then the number one. We'll pause for just a moment to compile the Q&A roster. Your first question is from the line of Daniel Grosslight with Citi.

At this time I'd like to remind you if you would like to ask a question. Please press Star then the number one on your telephone keypad again to ask a question. It is star then the number one and we'll pause for just a moment to compile the Q&A roster.

Your first question is from the line of Daniel growth slight with Citi.

Daniel Grosslight: Hey, Spencer. Congrats on the quarter, and congrats to Andrew on his expanding family. Can you drill in a little deeper into the revenue beat this quarter, and your revenue guide up? You know, what's really exceeding your expectations? Is it subscriptions, AOV? Help us think through those components, and really on the top line this year. And on that $24 million guidance revision up on top line, why aren't you assuming any incremental EBITDA comes through?

Hey, Spencer congrats on the quarter and congrats to Andrew on his our expanding family.

Can you drill and a little deeper into the revenue beat this quarter and your revenue guide up and what.

Whats really exceeding your expectations and it subscriptions a O V.

I think through those components.

And I'm really on the top line this year and and on that 24 million.

Guidance revision up on top line why arent, you assuming any incremental EBITDA.

<unk> true.

Spencer Lee: Hey, Daniel. Yeah, sure thing. You know, first, in terms of understanding our growth forecast and the beat for Q1, you know, I think it's, yeah, obviously it's important to understand the execution in Q1. In Q1, we worked really hard on a number of initiatives that fundamentally increased our conversion rates and retention rates, while also continuing to expand AOVs and sustaining our high gross margins. Our business now is just fundamentally a better business today, which gives us the confidence to increase our full year guidance by $24 million at the midpoint.

Hey, Daniel Yeah sure thing.

So first in terms of understanding our growth forecast and the beat for Q1.

I think it's yeah, obviously, it's important to understand the execution and Q1. So in Q1, we worked really hard on a number of initiatives that fundamentally increased our conversion rates and retention rates, while also continuing to expand <unk> and sustaining our high gross margins are.

Business now is just fundamentally a better business today, which gives us the confidence to increase our full year guidance by $24 million.

At the midpoint.

Spencer Lee: You know, now on top of this just fundamentally better business that we have today, we've taken the metrics that we currently see in Q2, and if you run rate those forward, you know, that gives us a high level of confidence in our ability to achieve the Q2 guidance we've provided of $55 to 57 million, which is nearly 60% year-over-year growth on the high end of that range. Now, there are obviously a number of new initiatives and business levers we're still working on today. Similar to the guidance we provided in Q1, you know, we'll continue to update investors as we execute on these new initiatives, but we won't bake them into the guidance.

Now on top of this just fundamentally better business that we have today.

We've taken the metrics that we currently see and Q2 and if you run rate those forward that gives us a high level of confidence and our ability to achieve for Q2 guidance we provided for.

$55 million to $67 million, and which is nearly 60% year over year growth.

On the high end of that range now there are obviously, a number of new initiatives and business levers, we're still working on today and.

Similar to the guidance, we provided in Q1 and it will continue to update investors as we execute on these new initiatives, but we wont baked in into the guidance.

Spencer Lee: you know, we've got a high level of confidence in our ability to hit the guidance that we've provided on the backdrop of this work that we did in Q1 that just fundamentally built a better foundation for the overall business. Now, you know, with respect to our EBITDA guidance, in light of the raise on the revenue side, you know, overall, we're seeing really great opportunities to invest in growth. For context, in Q1, if you take our marketing expenses and exclude stock-based comp, our marketing expenses in Q1 increased by about $6 million versus Q4, but revenues increased by $11 million. Again, we're guiding to an additional $24 million in revenue at the midpoint of our guidance.

And so we've got a high level of confidence and our ability to hit the guidance that we've provided.

Off the backdrop of this work that we did in Q1 that just fundamentally built a better foundation for the overall business.

And and now with respect to our EBITDA guidance in light of the.

Raise on the revenue side, you know overall, we're seeing really great.

And opportunities to invest in growth for.

For context in Q1.

If you take our marketing expenses and excluding stock based comp.

Our marketing expenses in Q1 increased by about $6 million versus Q4, but revenues increased by 11 million and.

And again, we're guiding to an additional $24 million and revenue at the midpoint of our guidance. So we're really happy with the performance and efficiency.

Spencer Lee: You know, we're really happy with the performance and efficiency we're driving through our marketing channels. With respect to the EBITDA guidance itself, I mean, frankly, we want to preserve our ability to be aggressive when we see really great growth investment opportunities versus having to come back, you know, next quarter or the quarter after to have to explain anything. Honestly, that's the underlying thinking in keeping our full year EBITDA guidance the same, is just to preserve that flexibility to invest when we see opportunities.

Driving through our marketing channels and with respect to the EBITDA guidance itself.

I mean frankly, we.

And I want to preserve our ability to be aggressive when we see really great growth investment opportunities versus having to come back next quarter or the quarter after to have to explain anything and honestly, that's the underlying thinking and keeping our full year EBITDA guidance. The same is just to preserve that.

Flexibility to invest when we see opportunities.

Got it okay, and maybe that's a good segue to my follow up can you can you talk about the rates Youre seeing out of your debt direct response marketing channels and and and unit economics. This quarter can you give an update on an LTV to CAC.

Daniel Grosslight: Got it. Okay. Maybe that's a good segue to my follow-up. Can you talk about the rates you're seeing out of your direct response marketing channels and unit economics this quarter? Can you give an update on LTV to CAC? Have you had to shift your customer acquisition strategy at all, particularly in some of the more competitive and faster growing segments?

And have you had to shift your customer acquisition strategy at all particularly and some of the more competitive and faster growing segments.

Spencer Lee: Sure. You know, with respect to ad rates, in our largest channels in Q1, we actually saw ad rates overall in the quarter decline slightly, versus Q4. Although over the course of the quarter, in March, we actually saw rates come back to Q4 levels, if not even slightly higher. I think with respect to sort of the marketing side of the equation, you know, what was really special about our execution in Q1 was the fact that we were able to increase our marketing expenses, if you exclude stock-based comp, by about 30% quarter-over-quarter. New subscriber CACs actually decreased. To repeat, CACs in Q1 were lower than what they were in Q4, despite really increasing our marketing budget on a quarter-over-quarter basis.

Sure.

No.

With respect to add rates.

And our largest channels in Q1, we actually saw AD rates overall in the quarter declined slightly versus Q4, although over the over the course of the quarter in March we actually saw rates come back to Q4 levels if not even.

Slightly higher.

And so I think with respect to sort of the marketing side of the equation and what was really special about our execution. In Q1 was the fact that we were able to increase our marketing expenses. If you exclude stock based comp by about 30% quarter over quarter, but new.

And subscriber tax actually decreased so to repeat tax in Q1 were lower than what they were in Q4, despite really increasing our marketing.

Marketing budget on a quarter over quarter basis.

Spencer Lee: Now it's really difficult to materially scale marketing without CACs increasing, right? When you grow traffic, you know, at the margins, you're generally driving incrementally lower intent traffic. What you have to do is fundamentally improve the platform to better capture that demand and increase conversion rates just to keep CACs flat, you know, let alone have them decline. That's exactly what we did in Q1. You know, we materially improved multiple facets of the platform that increased conversion while we also scaled marketing, which means we were able to drive more new subscribers at lower CACs. As a result, in Q1, we were able to drive the most new subscribers in the company's history.

It's really difficult to materially scale marketing without tax increasing right when you grow traffic at the <unk>.

Margins are generally driving incrementally lower and tank traffic and so will you have to do is fundamentally improve the platform to better capture that demand and increase conversion rates just to keep tax flat, let alone have them decline and.

That's exactly what we did in Q1, we materially improved multiple facets of the platform that increased conversion and while we also scaled marketing, which means we were able to drive more new subscribers at lower tax and as a result in Q1, and we were able to drive the most new subscribers.

In the company's history.

Spencer Lee: Again, it's these types of fundamental improvements on the platform that's giving us the confidence to increase, you know, our full year guidance by $24 million at the midpoint. The other side of the equation on the LTV side, you know, we also did a bunch of work on the retention side, and we saw retention continue to improve and LTVs continue to expand. You know, that unit economic equation for us continues to get better, you know, is allowing us to continue to invest aggressively in growth, where again, we were able to deliver a quarter where we increased marketing by $6 million, again, excluding stock-based comp in Q1, but we're able to grow revenues by $11 million in the same quarter.

And again, it's these types of fundamental improvements on the platform, that's giving us the confidence to increase our full year guidance by $24 million at the midpoint.

The other side of the equation on the LTV side. We also did a bunch of work on the retention side and we saw retention.

Continuing to improve and Ltvs continue to expand so.

And that unit economic equation for us continues to get better and is allowing us to continue to invest.

Aggressively in growth, where again, we were able to deliver a quarter, where we increased marketing by $6 million again, excluding stock based comp and Q1, but we're able to grow revenues by $11 million in the same quarter.

Daniel Grosslight: Got it. Thank you.

Got it thank you.

Yeah.

Operator 2: Your next question is from the line of Sean Wieland with Piper Sandler.

Operator: Your next question is from the line of Sean Wieland with Piper Sandler.

Your next question is from the line of.

Sean Wieland with Piper Sandler.

Sean Wieland: Thanks so much. Let me add my congrats to Andrew on the birth of his baby. Has he had it yet?

Thanks, So much and let me add my congrats to Andrew on the birth of his baby has he had it yet.

Spencer Lee: Yes. He had the kid over, I think, over this weekend. You know, big congratulations to the entire Dudum family.

Yes.

He had indicated over I think over this weekend, so a big congratulations to the entire Dude and family.

Sean Wieland: A boy or a girl?

Ah boy or girl.

Spencer Lee: A little boy.

A little boy.

Sean Wieland: A little boy. Well, congratulations, Andrew. I hope you're not listening. My question, you mentioned in your prepared remarks new subscribers, you're seeing a higher value customer with higher retention, which doesn't really align with my thinking when you're talking about subscriber CAC decreasing. It's impressive, that dynamic going on. I'd like to better understand that a little bit.

A little blip, well, congratulations Andrew and I hope you're not listening.

So my question you mentioned in your prepared remarks, a new.

Scriber as youre, seeing and a higher value customer with higher retention, which.

Doesn't really align with my thinking when you when you were talking about subscriber CAC decreasing so it's it's impressive that dynamic going on and I'd like to better understand that a little bit.

Spencer Lee: Yeah. You know, on the LTV side, right, you know, what I can say is that, you know, versus last year, AOVs are up materially. You know, gross margins are up, retention is up, so, you know, LTV is up. You know, I think it's just been our intense focus on the customer experience side of, you know, producing a really, you know, the most easy, convenient, flexible platform for customers to get the treatment that they need, providing an array of treatment options, where, you know, any customer can find the exact right treatment plan best suited for them to treat the condition that they're seeking.

Yeah, so on the on the LTV side right.

What I can say is that versus last year.

<unk> are up.

Materially your gross margins are up retention is up so LTV is up.

And I think it's just been our intense focus on the customer experience side of producing a really the most easy convenient and flexible platform for customers to get the treatment that they need.

Providing an array of treatment options.

For any customer can find the exact right treatment plan and best suited for them to treat the condition and that there that theyre seeking and so all of this work and even on the conversion side right just building a continuously more engaging platform that allows.

Spencer Lee: all of this work, and even on the conversion side, right, just building a continuously more engaging platform that allows more customers to convert into a subscription plan despite continuing to grow the amount of traffic that we're bringing to the platform. You know, it's really that intense focus of execution, you know, is where we've been focused, you know, over the last you know last quarter, certainly, and all of last year. You know, we've been successful in expanding LTVs through that execution. You know, on the CAC side of the equation, I mean, it kind of comes from the same place, right?

More customers to convert into a subscription plan despite continuing to grow the amount of traffic and that we're bringing to the platform is really that intense focus.

Execution is where we've been focused and over the last Oh.

Last quarter, certainly and all of last year.

And so we've been successful and expanding ltvs and through that execution.

On the tax side of the equation I mean, it kind of comes from the same place right, where you know as we continue to invest and the platform make it more engaging and make it more relevant and make the experience better what we're seeing is that we're able to convert more of that traffic that's getting to the platform and with the higher <unk>.

Spencer Lee: Where, you know, as we continue to invest in the platform, you know, make it more engaging, make it more relevant, make the experience better, what we're seeing is that we're able to convert more of that traffic that's getting to the platform, you know, and with the higher conversion rate, that will bring down CAC over time. It's that really focused execution, you know, really through the lens of just customer experience, that's allowed us to increase the numerator and decrease the denominator at the same time.

<unk> rate that will reduce debt will bring down and tax over time. So it's not really focused execution really through the lens of just customer experience.

<unk> us to increase the numerator and decrease the denominator at the same time.

Okay. So there hasn't been any shift and channels that youre pursuing or or really a definitive change and our marketing strategy.

Sean Wieland: Okay, there hasn't been any shift in channels that you're pursuing or really a definitive change in a marketing strategy?

Spencer Lee: No, I mean, it's been relatively consistent in terms of where we're deploying capital.

I mean, it's been relatively consistent in terms of where we're deploying capital.

Sean Wieland: Okay. Just one more question. Just the cadence of the guidance that you gave on revenue throughout the rest of the year. I guess what are the inputs into that that are driving the big step up, I'm sorry, into Q2, and then kind of flat sequentially on the back half?

Okay.

And then just one more question just the cadence of the guidance you gave on revenue throughout the rest of the year I guess what are the what are the inputs into that that are driving the big step up into Q3, and then that.

Im sorry into Q2.

And then kind of flat sequentially and the back half.

Spencer Lee: Yeah. I think what we're seeing right now in terms of the core revenue drivers, on the AOV side, we expect AOVs to sequentially increase through to the end of the year, but at not as steep a rate, if that makes sense. We expect AOVs to exit this year, you know, kind of in the mid-seventies, you know, call it in the $75, $76, $77 dollar range, $74 in Q1. The offset on that on the growth side obviously is continued growth in net orders. We expect net orders to continue to grow here, sequentially, you know, over the next couple quarters, with right now Q4 maybe being roughly in line, with Q3 from a net order perspective.

Yeah. So I think what we're seeing right now in terms of the core revenue drivers on the <unk> side, we expect <unk> to sequentially increase.

Through to the end of the year, but at a.

Not not as.

And I steep of rate and if that makes sense. So we expect <unk> to exit this year kind of in the mid seventies and you call. It in the 70 570 $677 range.

Yes.

74 in Q1.

Offset on that on the growth side, obviously is continued growth and net orders. So we expect net orders to continue to grow here sequentially over the next couple of quarters with right now Q4, maybe being roughly in line with Q3 from a from a net order perspective.

Spencer Lee: Largely driven by, you know, I think we've got, you know, sort of two relevant years of historical data in terms of, you know, Q3 and Q4 and what that seasonal dynamic might look like. You know, out of an abundance of caution based on sort of the most recent data point we had last year, you know, we're driving our internal forecast right now as having Q4, you know, roughly in line with Q3.

Largely driven by.

I think we've got a.

And sort of two relevant years of historical data in terms of.

Q3, and Q4, and what that seasonal dynamic might look like and.

And out of an abundance of caution and based on sort of the most recent data point, we had last year, we're driving our internal forecast right now.

And as a having Q4 roughly in line with Q3.

Sean Wieland: Got it. Thanks so much.

Got it thanks, so much.

Your next question is from Milan, <unk> Singh with credit Suisse.

Operator 2: Your next question is from the line of Jailendra Singh with Credit Suisse.

Operator: Your next question is from the line of Jailendra Singh with Credit Suisse.

Jailendra Singh: Thanks, and congrats, Andrew, on the new addition to your family. Spencer, I was wondering if you look at your 2021 revenue guidance of $221 to 227 million, when you're almost at the $233 million the company had for 2022 when you did the de-SPAC process. I know you're talking about various initiatives, and you have been putting in place. Just trying to understand if you had to highlight some one or two key drivers you have seen over the past six months or initiatives you have put in place that you are trending well ahead of your expectations you had at the de-SPAC process.

Thanks, and congrats Andrea on the New addition for your family.

And so I was just wondering if you look at your 2021 revenue guidance of 221, two and $27 million when you're almost at the $233 million. The company had for 2022. When you did that deal back process I know you're talking about day desk initiatives and you have been putting in place just trying to understand.

If you had to highlight from one or two key drivers you have seen over the past six months or initiatives you put in place that you are trending well ahead of your expectations you had of the dis back losses.

Jailendra Singh: Keeping that in mind, all the momentum you had in 2021, when we think about the business longer term, what would you say that in terms of these initiatives having long-term implications on the business for more sustainable growth rate going forward?

And keeping that in mind, all the momentum you had in 2020, one when we think about the business longer term.

What would you say that in terms of Dyskinesia day was the having long term implications on the business for all.

And more sustainable growth rate going forward.

Spencer Lee: Sure. I mean, that's a really good point, Jailendra. You know, last summer when we had provided investors a forecast for 2021 and 2022, we had provided a forecast for 2022 of $233 million in revenue. At the high end of our current guidance, we're already guiding to $227 million in revenue. We're pretty close to the guidance we provided in 2022 just last summer. Effectively, you know, we've packed two years of execution into 12 months, right? We've really accelerated things.

Sure.

So I mean, that's a that's a really good point till Indra So last summer when when we.

Investors are forecast for 2021 and 2022.

<unk> provided a forecast for 2000 $20 million to $233 million and revenue and at the high end of our current guidance, we're already guiding to $227 million and revenue so pretty close to for the guidance. We provided in 2022, just last summer and so effectively we track.

Two years of execution.

And to 12 months right. So we've really accelerated things.

Spencer Lee: You know, that execution I characterize in 2021 as, you know, not a continuation of the continued focus and execution that you've seen out of the business over the last couple years, right? You know, the intense focus around just building an amazing customer experience, you know, a super engaging customer experience that people love, and you know, that people are seeking in terms of how they want to consume healthcare, particularly for this new generation of technology first, you know, mobile first consumers. I think you've really seen that come through in the metrics in Q1 with, you know, improved retention rates, you know, improved conversion rates, and just us continuing to deliver higher margin, you know, higher LTV customers.

And that execution I'd characterize in.

In 2021, as you know not a continuation of the continued focus and execution that you've seen out of the business over the last couple of years right.

Hence focus around just building and.

And amazing customer experience.

Super engaging customer experience.

And that people love.

And that people are seeking in terms of how they want to consume our health care, particularly for this new generation of technology first mobile first consumers.

And I think you've really seen that come through and the metrics in Q1 with improved retention rates improved conversion.

Conversion rates and just us continuing to deliver higher margin higher higher LTV customers.

Spencer Lee: I think, you know, that work, right, is very foundational, right? This is building a business whose, you know, fundamental economics, whose, you know, fundamental performance has improved over time. As we launch new products and expand into new categories, you know, all of those new products and categories are being launched against and built on top of this, you know, just fundamentally, foundationally better business. I think the second side of it is our continued launch of new products, right? You know, as Andrew mentioned, we're seeing really strong performance on the Hers side, with, you know, the largest category more than doubling on a quarter-over-quarter basis in Q1.

And I think that works right is very foundational right. This is.

Building, a business, whose fundamental economics, whose fundamental performance has improved over time. So you know as we launch new products and expand into new categories. All of those new products and categories are being launched against and build on top of.

This just fundamentally foundational lead better business I think the second side of it is our continued launch of new products right as Andrew mentioned.

We're seeing really strong performance on the her side.

With the largest category.

More than doubling on a quarter over quarter basis in Q1.

Spencer Lee: You know, behavioral health continues to perform really well, and we are seeing great positive early signs in that business, and are optimistic about its performance. You know, even all of these newer categories, the strength that we're seeing there, has given us, you know, the additional confidence of taking up our guidance for the remainder of this year. On a longer term basis, right, I think all of this is just a continuation of the same trend, right? We've got really exciting new categories that are growing quickly, which should continue to be accretive to growth in the long term.

Behavioral health continues to perform really well and we are seeing great positive early signs and that business and are optimistic about its performance and even all of these these newer categories. The strength that we're seeing there has given us the additional confidence.

And of taking up our guidance.

For the for for the remainder of this year and on a longer term basis right. I think all of this is just a continuation of the same trend right. We've got really exciting new categories that are growing quickly, which should continue to be accretive to growth in the long term and you've got this really solid foundation.

Spencer Lee: We've got this really solid foundation, and this platform of a business that, you know, continues to be better at capturing demand, converting demand, and retaining customers. Going forward, as we continue to launch into new products and categories, you know, all of this combined, you know, we think is a fantastic foundation to continue to drive growth into the foreseeable future.

And this platform of our <unk>.

Business that continues to be better at capturing demand converting demand and.

And retaining customers and going forward as we continue to launch into new products and categories. All of this combined we think is a fantastic Foundation.

And to continue to drive growth into the foreseeable future.

So just to make sure I.

Jailendra Singh: Just to make sure I understand. You are not saying that there was anything in 2021 we would say that will not repeat next year, because some of the people, some investors, think that there could be some COVID-related tailwinds in your business. That's probably not the case here, and all the initiatives and benefit you are seeing in 2021 will likely repeat again in the future periods, right?

Kind of mature and our sense that you are not saying that there was anything in 2021, and we would say that cannot be will not repeat next year because some of the people. Some investors think that there could be some COVID-19 related scalable engineered business, that's probably not the case here and all the initiatives and benefit you're seeing and 2021 can really well.

Likely repeat again in the future.

Right.

Spencer Lee: Yeah, I would say, you know, the guidance that we're providing for 2021 is being driven by, you know, the execution and the metrics, you know, we're seeing in the company. You know, with respect to COVID, right? I think, you know, if you look at our performance historically, you know, over the last several years, you know, we were delivering consistent sequential growth before COVID. We were delivering consistent sequential growth through COVID. Now, you know, we're providing guidance of consistent sequential growth after COVID. We're not seeing anything in the business that suggests any kind of secular slowdown, you know, driven in the business this year as a result of COVID. I think our guidance, you know, really supports this view.

Yeah, I would say the guidance that we're providing for 2021 is being driven by the.

Execution, and then and the metrics we're seeing in the company.

With respect to COVID-19 right.

I think.

If you look at our performance historically over the last several years, we were delivering consistent sequential growth before COVID-19, we were delivering.

And sequential growth through COVID-19, and now, we're providing guidance and consistent sequential growth after COVID-19 and where.

And not seeing anything and the business that suggest any kind of secular.

Slowdown and.

And driven.

In the business this year as a result of COVID-19 and I think our guidance really supports this view.

Spencer Lee: You know, if you think about our go-to-market strategy, I mean, from day one, right, our audience has been this digitally native, mobile first, younger demographic. Now, this audience wasn't switching from brick-and-mortar to telemedicine because of the pandemic, because they were kind of never at brick-and-mortar to begin with. So unlike other companies that may have benefited from some kind of switching behavior, our audience didn't really get any bigger because of COVID. 80% of our customers were already telling us that they were purchasing the medication for the first time from us. So our opportunity has always been around, you know, our ability to harness the enormous demand from this digitally native audience, and provide an amazing experience to them.

And if you think about our go to market strategy I mean from day, one right. Our audience has been this digitally native mobile first a younger demographic now this audience wasn't switching from brick and mortar to net to telemedicine and because of the pandemic.

They were kind of never at brick and mortar to begin with so unlike other companies that may have benefited from some kind of switching behavior.

And our audience didn't really get and bigger because of COVID-19 eight.

And 80% of our customers were already telling us that they were purchasing the medication for the first time from us.

And so our opportunity has always been around our ability to harness the enormous demand from these digitally native audience and provide an amazing experience to them and I think our Q1 results and our guidance suggests that this opportunity continues to be massive for us.

Spencer Lee: I think our Q1 results and our guidance suggest that, you know, this opportunity continues to be massive for us.

Great and a quick follow up on you talked about.

Jailendra Singh: Great. A quick follow-up on, you talked about kind of favorable retention rate. Just wondering if you can provide some more color, like where was your monthly churn rate trend in the quarter? How did it compare to the churn rate trend at mid-single digits you talked about in Q4? And what were the key drivers there? And what are you assuming in your outlook with respect to the churn rate trends for rest of 2021?

Kind of.

Favorable.

And our retention rate I'm just wondering if you can provide some more color like read a book your monthly churn rate trend in the quarter, how did it compare compared to the churn rates and I think mid single digit you talked about and fourth quarter and what are the key drivers there and what are you assuming and your outlook with respect for the churn rate trends for the rest of 2021.

Spencer Lee: Yep. So monthly churn in Q1 decreased versus Q4. I'd characterize the monthly churn rate in Q1 as still in the mid-single digits. You know, we expect churn to continue to decrease over time as an increasing percent of our subscriptions are repeat customers versus new subscribers, and that's continued to play out over the last several quarters. You know, with respect to the guidance that we provided for the year, and like I previously mentioned, we're essentially run rating the churn rate that we're seeing currently through to the rest of the year. We're not really baking in or taking any credit of any further optimization on the retention side.

Yep.

So monthly churn in Q1 decreased versus Q4, and I would characterize the monthly churn rate in Q1 and still in the mid single digits.

We expect churn to continue to decrease over time as an increasing percentage of our subscriptions are repeat customers versus new subscribers and that's continued to play out over the last several quarters.

With respect to the guidance that we provided for the year.

And you know like I previously mentioned were essentially run rating.

Churn rate that we're seeing currently through to the rest of the year. So we're not really baking in and they're taking any credit of any further optimization on the retention side.

Jailendra Singh: Okay. Thank you.

Okay. Thank you.

Your next question is from the line of.

Operator 2: Your next question is from the line of Ivan Feinseth with Tigress Financial.

Operator: Your next question is from the line of Ivan Feinseth with Tigress Financial.

I mean.

Ivan <unk> with Tigress financial.

Ivan Feinseth: Thank you for taking my question. Spencer, congratulations on another quarter of great results and great progress, and also congratulations to Andrew on the birth of his son. On the year, on the growth you're seeing, you know, in some of the new product categories besides Hers skincare, what would you say emerging categories, where are you seeing some of the growth drivers?

Thank you for taking my question.

Spencer congratulations on another quarter of great results and great progress and also congratulations to Andrew and the birth for Sun.

Because on the year on the growth Youre seeing in and.

Some of the new product categories. Besides.

Hers skincare.

And emerging categories, where you're seeing some of the growth drivers.

Yes, so for the quarter.

Spencer Lee: Yeah. You know, for the quarter, we saw really strong sequential growth, really across the board, right? This wasn't any, you know, one category or one product line. It spanned from our core Hims categories, which, you know, produced exceptionally strong sequential growth, in the Hers brand, you know, as Andrew mentioned, within behavioral health, and really sort of all of our products across the board. We saw really strong performance in Q1. You know, I'd say combination of several things, right? The optimization work that we've done and that we did, in terms of improving conversion rates, improving retention rates, expanding LTVs, that foundational work wasn't unique to any one product or any one category.

And we saw really strong sequential growth really across the board right. So.

This wasn't any one category or one product line.

Spanned from our core and categories, which.

Produced exceptionally strong sequential growth.

In the the hers brands.

Andrew mentioned.

And within behavioral health and really sort of all of our products across the board. We saw really strong performance in Q1, and I'd say a combination of several things right.

And the optimization work that we've done and that we did in terms of improving conversion rates improving retention rates expanding ltvs.

That foundational work wasn't unique to any one product or any one category again, it was kind of foundational to the platform, which improved the business overall.

Spencer Lee: Again, it was kind of foundational to the platform, which improved the business overall. You know, some of the marketing efficiency that we saw, where we were able to, as a result of increasing conversion rates and our ability to lean into marketing more aggressively, at higher LTVs and, you know, generating $11 million of sequential revenue growth, while only sequentially spending roughly $6 million more on the marketing side. Again, that level of execution was benefited all categories and all products.

And some of the marketing efficiency that we saw and where we were able to as a result of increasing conversion rates and our ability to lean into marketing more.

More aggressively.

Higher ltvs and generating $11 million of sequential revenue growth, while only sequentially spending roughly $6 million more on the marketing side again that level of execution.

Was benefited all categories and all products.

Ivan Feinseth: It looks like in Andrew's prepared remarks that your gross margin or your gross profit increased more than on a percentage basis than your revenue, which means your margin expanded, right?

And then it looks like and so in Europe and.

Interest prepared remarks that your gross margin for you.

Gross profit increased more than on a percentage basis.

And then your revenue, which means your margin expanded right.

Spencer Lee: That's right. On a year-over-year basis, you know, our gross margins expanded by roughly 800 basis points, which to your point, compounded to actually have gross profit grow by almost 100% last quarter.

That's right and so on a year over year basis.

Our gross margins expanded by roughly 800 basis points, which to your point compounded to actually have a gross profit grow by almost 100% last quarter.

Ivan Feinseth: What were the drivers of the increasing margin? Are you sourcing better as your volumes increase? Or what's leading to that?

And what were the drivers of the increasing margin argue source and better as your volumes increase or what.

And what's leading to that.

Spencer Lee: Yeah. We're getting more operating leverage out of the business, you know, as we continue to scale, and just the core fundamentals of our revenue has just been. We're driving higher quality revenue this year than we were last year, where, you know, with the uptake of higher-priced bundles, you know, more extensive treatment plans, and multi-month subscriptions, you know, all that uptake has combined to produce, you know, additional operating leverage across our product costs, shipping costs, and provider costs. You know, we're seeing, you know, margins expand as a result.

Yeah, and so I think we're just.

Able to a number of things get where we're getting more operating leverage out of the business as we continue to scale and.

And just the core fundamentals of our revenue has just been.

Driving higher quality revenue this year than we were last year.

Where with the uptake of higher priced bundles.

More extensive treatment plans and multi month subscriptions and all that uptake is combined to produce and.

Additional operating leverage across our product costs shipping costs and provider costs.

And we're seeing.

Margins expanded as a result.

And then and it don't you normally are seeing right.

Ivan Feinseth: You normally are seeing, right, you get a customer that buys one product, they tend to buy more. As you add customers, so shouldn't you have some expected growth in H2 because of as you penetrate, as you add customers and penetrate your existing customers?

Net of customer that buys one product they tend to buy more and then.

As you add customers. So shouldn't you have some expected growth from the second half for the year because of as you penetrate.

And customers and penetrate your existing customers.

Yes, so I think that's exactly right and we're seeing that.

Spencer Lee: Yes. You know, I think that's exactly right. We're seeing, you know, that type of behavior, you know, within the base. I think, you know, with the guidance that we've provided, and I think, you know, what I mentioned earlier was, you know, we're obviously working on a number of, you know, initiatives today, that we expect to continue to improve conversion rates, improve retention, expand LTVs, you know, drive cross-selling. We haven't baked any of that into the forward guidance.

At that.

And that that type of behavior.

Within the base I.

I think with the guidance that we provided.

And I think.

What I mentioned earlier was.

And we're obviously working on a number of you know.

Initiatives today.

That we expect to continue to improve conversion rates improve retention and expand Ltvs drive cross selling but we havent baked any of that into the forward guidance.

Spencer Lee: You know, based on the work that we've been able to do in Q1 and sort of this fundamentally better business that we've got today, you know, we've put out guidance that, you know, I think we are confident in our ability to hit. As we continue to execute and, you know, the data changes, our you know, our ability to forecast more accurately, we'll provide, you know, updates to guidance in H2 of that, of the year, you know, as we continue to execute.

And so based on the work that we've been.

<unk> been able to do and Q1 and sort of this fundamentally better business that we've got today and we've put out we've put out guidance that you know I think we are confident in our ability to hit.

And as we continue to execute and the data.

Changes are.

Our ability to forecast and are accurately we will provide updates to guidance and the second half of the year as we continued to execute.

Okay, Thanks, again and congratulations again.

Ivan Feinseth: Okay. Thanks again, and, congratulations again.

Spencer Lee: Thanks.

Thanks.

Operator 2: Your next question is from the line of Sandy Draper with Truist Securities.

Operator: Your next question is from the line of Sandy Draper with Truist Securities.

Your next question is from the line of Sandy Draper with true Securities.

Mitchell: Hi, this is Mitchell in for Sandy. Thanks for taking the question. Just, one housekeeping one. Can you please walk us through what the fully diluted share count is and how to get there? Thanks.

[Analyst] (Truist Securities): Hi, this is Mitchell in for Sandy. Thanks for taking the question. Just, one housekeeping one. Can you please walk us through what the fully diluted share count is and how to get there? Thanks.

Hi, This is mitchell on for Sandy. Thanks for taking the question just one housekeeping one can you. Please walk us through what the fully diluted share count is and how to get there. Thanks.

Spencer Lee: Yeah. In Q1, because the merger transaction closed in January, you know, on a weighted average basis across the quarter, you know, sort of weighted average share count is, you know, a little understated relative to kind of, you know, what the expected future share count will be. You know, with respect to calculating GAAP EPS, you know, our total fully diluted shares outstanding in Q2, again, to calculate EPS on the income statement, you know, should come in at, you know, in and around call it, you know, 192-ish million total shares, you know, for this quarter.

Yeah, So in Q1 because.

The merger transaction.

Closed in.

In January.

And a weighted average basis across the quarter.

And sort of weighted average share count is low.

<unk> understated relative to kind of.

And what the expected future share count will be.

With respect to calculate and GAAP EPS, our total fully diluted shares outstanding and Q2 again to calculate EPS on the income statement.

<unk> come in.

And in and around call it 192 ish million.

Total shares.

For this quarter.

Mitchell: Got it. Thank you. Just one more question. Do you think we could get some more color around the average order value? Like is more of the growth attributed to multi-month order growth, or is it a more expensive product mix, or is it just both? Thanks.

[Analyst] (Truist Securities): Got it. Thank you. Just one more question. Do you think we could get some more color around the average order value? Like is more of the growth attributed to multi-month order growth, or is it a more expensive product mix, or is it just both? Thanks.

Got it and thank you and then just one more question do you think we could get some more color around the average order value.

More of the growth attributed to multi month order growth or is it a more expensive product mix or is it just both thanks.

Spencer Lee: Yeah. We've discussed this in the past, and I think in the past I've mentioned that in terms of our AOV expansion, you know, roughly half of that expansion has been a result of customers opting into more expansive, higher priced product bundles. The other half of the expansion is related to customers opting into multi-month subscriptions. You know, the growth of AOVs in Q1, you know, I'd say, you know, roughly had a similar dynamic where again, roughly half can be attributable to higher price bundles, and the other half to multi-month subscriptions.

Yes. So we've discussed this in the past and I think in the past I've mentioned that in terms of our <unk> expansion and roughly half of that expansion.

Has been a result of customers opting into more expansive a higher price product bundles and the other half of the expansion is related to customers opting into multi month subscriptions.

And the growth of video views in Q1 I'd say.

Roughly sort of had a similar dynamic where again.

Roughly half can be attributable to higher price bundles and the other half to multi month subscriptions.

Mitchell: Great. Thank you.

[Analyst] (Truist Securities): Great. Thank you.

Great. Thank you.

Operator 2: Your next question is from the line of David Larsen with BTIG.

Operator: Your next question is from the line of David Larsen with BTIG.

Your next question is from the line of.

David Larsen with BTG.

Hi, congratulations on a good quarter.

David Larsen: Hi. Congratulations on a good quarter. Can you talk a little bit more about the advertising rates? I would have thought with the presidential elections going on last year, the ad rates would have improved fairly significantly this quarter, but it seems like they may have improved just slightly. I think I heard you also mention that those ad rates are actually coming back up towards the end of calendar Q1. How are they trending now relative to expectations? Just any more color around that would be helpful. Have you disclosed what portion of your ad spend is going into television versus online resources like Facebook or other online resources? Thank you so much.

Can you talk a little bit more about the advertising rates I would've thought with the presidential elections going on last year, the AD rates would've improved fairly significantly.

This quarter.

And that can be a improve just slightly and.

And then and then I think I heard you also mentioned that those AD rates are actually coming back up towards.

And towards the end of calendar <unk>, how are they trending now relative to expectations just any more color around that would be helpful. And then have you disclosed what portion of your AD spend is going into TV versus online resources like Facebook or other online resources and thank you so much.

<unk>.

Spencer Lee: Sure. Yeah. Last Q4, in the October-November timeframe, we did see ad rates run up fairly substantially, you know, as a result of the presidential election, and, you know, a return of advertisers, you know, aggressively into the holiday season. As we rolled into Q1, we did see rates come down fairly substantially, starting in January, and then kind of at a trough, you know, in maybe the late January timeframe, we saw rates start to incrementally increase throughout February and March, whereby late March, ad rates had returned to levels that we saw, you know, kind of at their peak in Q4. In April and May, you know, we're continuing to see ad rates stay fairly robust.

Sure Yeah. So.

Last Q4 in the October and November timeframe, we did see AD rates run up.

Fairly substantially as a result of the presidential election, and a return of advertisers aggressively into.

And do the holiday season.

And.

As we rolled into Q1, we did see rates come down fairly substantially starting in January.

And then kind of at a trough.

And maybe the the late January timeframe, we saw rates start to incrementally increase throughout February and March.

Whereby a late March.

Rates have returned to levels that.

And that we saw kind of at their peak in Q4.

In April and May we're continuing to see and rates stay fairly robust.

Spencer Lee: You know, I think, you know, with, you know, advertisers now coming out of COVID, looking to drive demand, I think we're just seeing, you know, people bid fairly aggressively across the board, you know, on multiple marketing channels.

I think with.

Advertisers now coming out of COVID-19 looking to drive demand I think we're just seeing people bid fairly aggressively across the board.

And on multiple marketing channels.

Spencer Lee: I'd say, you know, even despite that dynamic, right, in March and what we're seeing here early in Q2, is that we've been able to continue to drive growth and acquire new subscribers at a very, you know, call it attractive rate because of the fundamental work that we've done in Q1 and, you know, throughout last year of continuing to work on the user experience, you know, engagement on our site and conversion on our site, where again, in Q1, our TAC decreased, you know, versus Q4.

And I'd say, even despite that dynamic right in March and and what we're seeing here early in Q2.

We've been able to continue to drive growth and acquire new subscribers at a very nice call at attractive rate.

Of the fundamental work that we've done in Q1 and throughout last year of continuing to work on the user experience and engagement on our site and conversion on our site where again in Q1.

Our tax decrease.

Versus Q4.

Spencer Lee: You know, with respect to our marketing mix, yeah, we actually have a very diversified marketing budget across a number of channels, including, you know, digital direct response and more branded channels like TV, radio, streaming TV, out-of-home, direct mail, and so on. In terms of our marketing mix, there is no one channel that makes up the majority of our budget. Frankly, the largest channel, you know, depending on the month or quarter, you know, might make up only, you know, 20% to 30% of the overall spend in the current quarter. You know, our strategy has always been and continues to be to have a very diversified, you know, marketing channel mix within our budget.

And with respect to our marketing mix.

Yeah, we actually have a very diversified.

Marketing budget across a number of channels, including digital direct response and more branded channels like TV and radio streaming TV out of home direct mail and <unk>.

So on.

There.

In terms of our marketing mix.

There is no one channel that makes up the majority of our budget and frankly, the largest channel depending on the month or quarter.

Make up only 20% to 30%.

Of the overall spend in the current quarter. So our strategy has always been and continues to be.

Have a very diversified.

Getting channel mix within our budget.

David Larsen: Okay, great. That's very helpful. Thanks so much. It sounds to me like the customer acquisition cost improvement is due mainly to the quality of the user experience and the platform itself. It's not like there were any changes that happened at the start of the year, like when somebody signs up for the first time, they're registered as a year-long subscriber, whereas previously, they were treated as like a one-time purchase subscriber. It's nothing like that. It's more simply the overall user experience. Is that correct?

Okay, Great. That's very helpful. Thanks, so much and it sounds to me like the customer acquisition cost improvement is due mainly to the quality of the user experience and the platform itself.

If there were any changes that happened at the start of the year like when somebody signs up for the first time the registered as a yearlong subscriber, whereas previously they were treated as like a onetime purchase subscriber.

And it's nothing like that its more simply the overall user experience is that correct.

Spencer Lee: That's exactly right. I mean, we just laser-focused on making that user experience as, you know, seamless and easy and convenient as possible, and unlocked, you know, a performance improvement, that allowed, you know, conversion rates to increase, and it allowed CAC to come down.

That's exactly right I mean, we just laser focused on making that user experience is seamless and easy and convenient as possible and.

Unlocked.

Yes.

Our performance improvement.

That allowed conversion rates to increase and it allowed cash to come down.

David Larsen: Okay. Thanks very much. Congrats on a good quarter.

Okay. Thanks, very much congrats on a good quarter.

And there are no further questions at this time I'd like to turn it back over to the company for closing remarks.

Operator 2: There are no further questions at this time. I'd like to turn it back over to the company for closing remarks.

Operator: There are no further questions at this time. I'd like to turn it back over to the company for closing remarks.

Spencer Lee: Yeah. I wanna just thank the entire team again for helping and to execute such an amazing quarter, and allowing us to put forth such strong guidance for the rest of the year. Finally, just want to send congratulations again to the entire Dudum family, and yeah, look forward to providing additional updates here in H2 of the year.

Yes, I wanted to just thank the entire team again for helping it and to execute such an amazing quarter and.

Allowing us.

For such strong guidance for the rest of the year and finally, just want to send and congratulations again to the entire deal and family.

And look forward to providing additional updates here and the second half of the year.

Operator 2: That does conclude today's conference. Thank you for participating. You may now disconnect.

And that does conclude today's conference. Thank you for participating you may now disconnect.

Operator: That does conclude today's conference. Thank you for participating. You may now disconnect.

Q1 2021 Hims & Hers Health Inc Earnings Call

Request a DemoDemo

HIMS

Hims & Hers Health

Earnings