Q4 2022 Hims & Hers Health Inc Earnings Call

Yeah.

Please standby were about to begin.

Good afternoon, ladies and gentlemen, welcome to be hands in hers health fourth quarter 2022 earnings call. My name is Bob and I will be your operator today at this time all participants are in a listen only mode and please be advised that this call is being recorded after the speakers' prepared remarks, there will be a question and answer session. If you would like to ask.

A question during this time simply press star one on your telephone keypad and he would like to withdraw your question simply press Star One again and at this time I'll turn the call over to MS. Alison Auto Vice President of Investor Relations. Please go ahead Mr bottle.

Good afternoon, everyone and welcome to the Haynes and her health fourth quarter and full year 2022 earnings call on the call with me today is Andrew <unk> co founder and Chief Executive Officer, as well as the email Cooper, our Chief Financial Officer before I hand, it over to Andrew I need to remind you of legal safe Harbor and cautionary declarations certain state.

And protections of future results made in this presentation constitute forward looking statements that are based on among other things our current market competitors and regulatory expectations and are subject to risks uncertainties that could cause actual results to vary materially we take no obligation to update publicly any forward looking statement. After this call.

As a result of new information future events changes in assumptions or otherwise. Please see our most recently filed 10-K and 10-Q report for a discussion of risk factors as they relate to forward looking statements in today's presentation, we have certain non-GAAP financial measures. We refer you to the reconciliation table contained in today's press release.

Available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information, you'll find a link to the webcast and Investor Relations website.

Oster dot for him Dot com.

Please also note we have created a new investor presentation that we hope will serve as a useful resource for both new and existing investors you can find this on our Investor relations website under events and presentations after.

After the call. This webcast will be archived on the website for 12 months.

And with that I'll now turn the call over to Andrew.

Thanks Alice.

Welcome to everyone joining us.

2022 was a transformative year for him and her and I'm happy to be with you all today to review our performance and share our perspectives on the future.

We are pleased to report an exceptional finish to a record year headlines by annual revenue of $527 million.

And then 1 million subscribers and over 10 million cumulative medical visits since inception, and importantly, the transition to adjusted EBITDA profitability in the fourth quarter for the first time in our company's history. This is an incredible moment first of all it serves as a testament to the strength of our company and approach.

We find ourselves at an inflection point in which we're reaping the benefits of our size and scale.

We believe our brand awareness and customer loyalty you have never been stronger.

Our product offerings have never been more expansive and personalized and our platform scale and insights are enabling clinical excellence and efficiency. Unlike anything in the market today.

Even after this quarter of record breaking growth, we have significant aspirations for our company's future.

Our commitment to these aspirations, we set an extremely high bar for disciplined execution across all teams within the organization.

This approach is driven by the fact that our mission to help the world feel great through the power of better health is more relevant and essential for customers than ever before.

But delivering on this at every level. We can continue taking leads towards our goal of being a fundamental and beloved part of every household in the country.

This mission is deeply personal.

Because we to our customers. This is the enduring power of him and her.

We're experiencing a truly unique moment in history, a moment, where customers expect hyper personalization on demand access and price transparency.

A moment, where technology and AI are capable of helping deliver both speed and accuracy in a complex analysis.

And lastly, a moment, where trust is a driver of consumer purchase behavior, and where authentic brands are expected to reach out and build deep and enduring relationships with customers.

As a company and as a team we have never been more confident in our ability to capture this energy and fees. This historic moment with all of the tools and experience required to lead in this new world.

We ended 2022 with the strongest quarter in our company's history, delivering not only continued momentum, but accelerating growth since going public over two years ago.

Revenue, which was predominantly driven by recurring online subscriptions grew 97% year over year, reaching a record 167 million in the fourth quarter.

Efficiency and a disciplined approach towards investments have been crucial to our strategy and have enabled us to achieve our first quarter of adjusted EBITDA profitability, which was approximately $4 million in the fourth quarter.

The underlying strength of our model combined with ongoing velocity across the business gives us a unique opportunity to operate profitably on a go forward basis, while continuing to scale our platform.

Our team's execution and focus alongside our exciting pipeline of innovation positions us well to deliver on a robust outlook for 2023.

Equally energizing those elements give us the confidence to speak to certain longer term financial targets by 2025, we expect to deliver annual revenue of at least $1 2 billion and generate at least $100 million of adjusted EBITDA.

These targets are based on the current strength and trajectory of the business.

Our success will continue to be fueled by our relentless focus on our customers.

Putting them at the center of everything we do.

This focus on consumer Centricity is powered by four key strategic pillars towards every investment priority and initiative ladders up.

First building a trusted brand known and respected in every household in the country.

Second developing a leading technology platform that can deliver world class recommendations efficiently through perpetual improvements with customer feedback.

Third delivering innovative products and personalized services and fourth ensuring clinical excellence with each and every patient.

You'll notice we've expanded our pillars now decoupling technology and innovation.

This is a natural evolution for us as we pursue market leadership and work to redefine our world class experiences in our industry look and feel.

These four pillars create a powerful flywheel that underpins our growth engine.

It starts with our trusted brand, which drives customer demand and scale the growth in our consumer base fuels the rate of customer insights feedback and learnings we can utilize.

This allows us to garner better personalized understandings and customer segment preferences.

These insights feed into our technology platform to better train refine and deliver great care.

In addition, this trove of customer insights helped shape, the innovation roadmap and ultimately the products and services delivered.

All of this done in partnership and collaboration with a leading clinical bodies specialists and pharmaceutical supply chain partners delivers an experience. Unlike anything available in the market cycling right back to the Florida vacation of our trusted brand.

We are incredibly proud of the company we have built in just six years.

Building blocks, we have put in place the strategic decisions, we have made throughout our journey.

And an ongoing focus on our four growth pillars are paying dividends.

Looking ahead, we are energized by the many opportunities available and initiatives planned across these pillars.

With our trusted brand, we expect to expand our awareness and develop deep relationships with individuals and whole households by continuing to show up in the most culturally relevant moments across society.

Most recently, we ran campaigns during the NFL playoffs and into high profile partnership with Kristen Bell <unk>.

Who teamed up with her to share her journey managing depression.

We have many new initiatives underway that will continue this work to better empower consumers and deepen these relationships as.

As our platform continues to scale, we will deploy our leading technology to leverage unique insights delivering access to world class care for our customers and best in class tools for our providers.

Our vision is a world where being treated through hems and hers is equivalent to accessing the collective mines of the top specialist across the nation to review each customer's needs and provide timely recommendations made possible through the power of machine learning.

So the power of scale from over 1 million subscribers and $10 million cumulative medical visits our platform currently generate insights that enable us to deliver access to innovative products and services that customers love.

Throughout 2023, we have a robust pipeline of new products, they'll bring advanced and personalized ways to treat consumers, which we feel will remove barriers for wide portion of potential patients yet to be treated.

We are pleased with the rollout of our first newly launched offering in 2023, Hardeman spy, hence which has seen strong interest in its first month on the platform.

Customers come to us to find solutions to their health and wellness needs ultimately has a path towards feeling great.

This is why clinical excellence is so important to us.

Today, we have a medical advisory team of specialists that ensure providers and our platforms are providing the highest quality of care in line with how we do everything at HIMSS hers.

Further augmented our clinical capabilities to bring on two C level hires our chief Medical Officer, and Chief Pharmacy Officer Andy.

And expanding our partnerships with medical groups across the nation to ensure patients that come to us have access to high quality care, whether that be through our platform for via a recommendation from us to an alternative option.

Standalone initiatives. We believe these advancements will continue to distinguish <unk> as a leader in the industry.

Together this flywheel propels us down a strategically laid path towards further growth and profitability.

All of this is made possible by a team that today is executing better than any team I've had the privilege of working with.

Our people are our greatest asset.

And this quarters performance and this coming year's ambitions are reflective of the talent and focus of each of our employees.

As I mentioned earlier, many of our employees, including myself our customers.

This is the reason our passion and commitment is so strong and why we are so energized about the future ahead.

We are excited to update you on our next phase of growth and with that I will now turn it over to Jeremy to walk through details of our financial performance and outlook.

Thanks, Andrew Hello, everyone and thank you for joining us today.

I'll start by providing additional color into our financial performance, including newly disclosed metrics and expand upon Andrew's comments regarding our 2023 items and longer term goals.

2022 was an incredible year for HIMSS in hers that saw the compounding effect of our investments materialized from record performance.

This culminated into a strong finish for the year.

In the fourth quarter, we continue to drive exceptional growth across our business, while also delivering our first quarter of adjusted EBITDA profitability.

Fourth quarter revenue grew 97% year over year to $167 2 million.

Revenue for 2022 was $526 9 million up 94% relative to 2021.

Throughout 2022, we saw strong momentum from our established offerings, such as men's sexual health and hair loss as well as several of our emerging offerings.

Strength in our online channel remained the primary driver of our growth throughout 2022.

In the fourth quarter online revenue increased 106% year over year to $161 2 million.

For the full year online revenue increased 94% year over year to $502 5 million.

Growth in our online channel was driven by two levers. The first is the footprint of our subscriber base, which is influenced by our efforts to attract new subscribers and retain them.

The second is our ability to increase subscriber engagement on the platform, which drives more revenue per subscriber.

Our platform has evolved over the years to offer users a broader set of solutions to a diverse set of health and wellness needs. We feel that we will increasingly have the ability to enable services to our users across multiple conditions elevating the importance of measuring the holistic relationship with our customers.

Starting this quarter, we are disclosing the number of subscribers on our platform and will provide this metric on a quarterly basis going forward.

A subscriber as an individual with one or more subscriptions on the <unk> platform.

Subscribers when combined with monthly online revenue generated per average subscriber is more reflective of our holistic engagement with each individual provides greater visibility into the underlying drivers of growth.

We will provide these metrics on a quarterly basis, and we are subscriptions going forward.

In the fourth quarter subscriber count grew 124000 quarter over quarter, representing an increase of 88% relative to the fourth quarter of 2021, we.

We feel this growth is the result of successful investment related to the development of our brand innovative products and the overall platform experience.

Monthly online revenue per average subscriber in the fourth quarter was $55 up 10% relative to the fourth quarter of last year.

The share of subscribers with a multi month subscription increased five points year over year in the fourth quarter to 73%.

Higher revenue generated per user is a strong signal that we are not only expanding the number of users on our platform, but we're also able to foster deeper relationships with our customers.

Wholesale revenue increased $1 million relative to the third quarter to $6 million, representing a modest decline from the same time period last year.

As we have previously communicated we expect revenue growth in our wholesale channel to moderate as we now have a presence in the majority of top retailers across the country.

The wholesale channel will remain an important piece of our strategy to generate more consumer awareness for our brand and we will look to continue to cultivate our relationships with strategic partners across the channel.

Gross margins remained stable quarter on quarter at 79%, representing a 600 basis point year over year increase for the fourth quarter.

Gross margins for 2022, or 78%, reflecting a 300 basis point increase from 2021.

Margin expansion was driven by continued efficiency gains in our operations increased fulfillment volume from our affiliated pharmacies higher adoption of longer duration subscriptions and a greater share of online channel revenue.

Moving down the P&L.

Marketing as a percentage of revenue in the fourth quarter was 51% and 50% when excluding stock based compensation, representing a 300 basis point improvement relative to the third quarter.

For the full year marketing as a percentage of revenue was 52% and 51% when excluding stock based compensation.

We're starting to see leverage on investments made in newer channels to develop our brands such as TV.

As a result of new product launches and operator, you can expect us to be opportunistic with our marketing investments from time to time.

That said, we expect that the payback period will remain less than one year as highlighted in our capital allocation framework.

Operations and support costs as a percentage of revenue in the fourth quarter came in at 13%, both including and excluding stock based compensation.

This represents a 150 basis point improvement relative to the third quarter.

Continue to see efficiency gains as a result of a greater share of fulfillment via our affiliated pharmacies benefits from economies of scale and leverage on overhead.

Technology and product development costs represented 5% of revenue in the fourth quarter and 4% when excluding the effects of stock based compensation.

Excluding stock based compensation. This represents a 60 basis point improvement relative to the third quarter.

We expect investment in this area to expand as we launched new capabilities on our platform and continue to evolve our product offerings in general and administrative costs for the fourth quarter was 16% of revenue representing a nine point improvement relative to the fourth quarter of 2021, and 160 basis point improvement relative to the third quarter of this year.

Excluding the impact of stock based compensation G&A costs were 11% of revenue in the fourth quarter, representing a seven point year over year improvement from 2021.

For the full year G&A costs were 18% of revenue, reflecting a 24 point year over year improvement relative to 2021.

When excluding stock based compensation G&A costs for the full year were 13% of revenue.

<unk> gains in this area are the result of disciplined head count growth and we anticipate further leverage in this area in the future.

Focus strategic investments, we have made throughout the years have enabled us to drive leverage across multiple areas of our platform at scale.

In the fourth quarter, we generated $3 9 million of adjusted EBITDA, marking our first quarter adjusted EBIT profitability.

Adjusted EBIT margins were 2% in the fourth quarter, representing an improvement of six points relative to the prior quarter and a 10 point improvement to the fourth quarter of 2021.

Adjusted EBITDA losses for 2022 were $15 8 million, representing an adjusted EBITDA margin of negative 3%.

2022 was another outstanding year for <unk>, we saw demonstrated success in the development of our brand across new channels brought in user awareness are showing up in some of the most culturally relevant areas.

As a result, we added a record number of subscribers and exited the year with over 1 million customers on the platform.

We signed new partnership agreements with medical groups, enabling us to expand the ways in which we serve our customer base and lastly, we achieved our first quarter of adjusted EBITDA profitability.

It is clear that we are at a critical moment in our company's history and I could not be more excited for the future.

We have an immense amount of flexibility as we enter 2023 with strong growth generating positive adjusted EBITDA and a robust balance sheet with approximately $180 million of cash and short term investments.

Turning now to our 2023 outlook.

In the first quarter, we are anticipating revenue in the range of $175 million to $180 million, representing a year over year increase of 73% to 78%.

On the bottom line, we expect adjusted EBITDA to be between 3% to $6 million, representing an adjusted EBITDA margin of between 2% to 3%.

For the full year, we are anticipating revenue of between $735 million to $755 million, representing a year over year growth rate of 39% to 43%.

On the bottom line is our expectation that 2023, adjusted EBITDA will be between 20% to $30 million.

These adjusted EBIT and revenue ranges resulted in an adjusted EBIT margin of between 3% to 4%.

Our full year outlook assumes that we are able to maintain long term retention rates above 85%.

We continue to achieve payback periods under one year on our marketing investments and we start to see traction with an expanding portfolio of personalized products that we expect to launch throughout 2023.

Several opportunities have emerged to extend the capabilities of our fulfillment centers that we expect to capture over the next two years as we take advantage of these opportunities we expect a temporary increase in capex.

Our expectation is that we will have between $10 million to $15 million of incremental capex over our current baseline during the next two years.

The first portion of these investments are expected in the second quarter.

I'll end by taking a moment to talk through some of our longer term aspirations are.

Our belief is that over time, our platform can generate adjusted EBIT margins of between 20%, 30%, while maintaining a healthy growth profile.

We are at a unique and exciting stage of the Companys lifecycle and the opportunity to make the world feel great through the power of health to the Max.

As a result, we will continue to strategically invest in new opportunities across our platform that we expect will result in a differentiated experience with better outcomes for our customers.

Embedded in our long term adjusted EBITDA margin target is an expectation that gross margins normalizing the mid seventies as the customer experience on our platform evolves.

To provide insight into how that trajectory toward the long term margin structure is expected to evolve I'll spend a moment talking through our range of expectations.

In 2025, we expect to generate at least $1 2 billion of annual revenue.

Our capital allocation framework has demonstrated an ability to drive leverage as our platform scales and we will continue to hearing to it.

As a reminder, the key tenants of the framework inquiry.

The payback period of less than a year on marketing and other investments investment in products and capabilities that foster durable long term growth channels, while enabling the ability to benefit from economies of scale.

Significant potential for a high return on investment over the long term.

We feel that strong growth combined with sound execution across our capital allocation framework will enable us to drive at least $100 million of annual adjusted EBITDA in 2025.

Our ability to achieve these targets is dependent on operating in a similar environment today and does not assume any significant or unforeseen external challenges.

It is clear to us that we are at an inflection point with.

The transition to profitability combined with our strong balance sheet provides us with the ability to capitalize on the tremendous runway, we see in front of us.

<unk> hundred 22 provides a solid foundation that gives us increased confidence to lean into the investments, we're making across each of our four strategic pillars.

I'd like to thank our customers partners and employees, helping us deliver these outstanding results and we look forward to continuing to update you on our progress with that I'll now turn it over to the operator to open the call to questions.

Thank you ladies and gentlemen at this time any question simply press Star one and just to remind you find your question has already been addressed you can remove yourself from the queue by pressing star one again, we will take our first question. This afternoon from Michael Cherny of Bank of America.

Yes, hi, good afternoon. This is clarke on for Mike.

To start from US just wanted to walk a little bit through the building blocks to get to your fiscal 'twenty five topline targets.

Much of that revenue do you sort of expect to come from existing products and how much do you expect will come from new products.

Hi, Dan This is Jimmy thanks. Thanks, so much for the question. There is a few different levers that we expect to pull on over the coming years. The first is we've seen an immense amount of growth coming from some of the existing categories that we're in on the <unk> platform and so really with the rollout of personalized products. We do expect that many of the verticals on haynesville.

To scale. We also remain excited by the opportunities that we continue to see on the <unk> platform as well and so we would expect that over the coming years to scale. Then lastly, as we mentioned.

On prior calls we do expect to have disciplined category expansion to the tune of expanding the capabilities of one or two categories.

And so really the ability to achieve.

The longer range targets that we set forth assume that we're able to continue to pull on each of those levers over the coming years.

Got it thanks, and then just shifting gears to fiscal 'twenty three guidance. How are you guys thinking about macro if at all in your guidance is there anything that we should be kind of thinking about there.

Yes.

We are cognizant of dynamic macroeconomic environment, what we've seen thus far throughout 2020 and in other periods.

Economic.

Uncertainty is it really the recurring nature of the platform.

Has afforded us some protection. Additionally in many of the conditions that we're in we've seen that they've been largely resistance macroeconomic headwinds and some of that is there is the result of just the stickiness of our solutions is also diverse consumer set and so we would say that our view is balanced we are continuing to project a strong quarter on quarter growth as well as year on year growth in 2023.

They're not necessarily some of the record level of performance that we saw in some quarters in 2022.

Got it thank you.

Thank you. We'll go next now to Daniel gross light at Citi.

Hi, guys. Thanks for taking my question and congrats on the quarter.

Your longer term guidance assumes around 400 basis points of gross margin degradation and I know you mentioned in your prepared remarks that some of that has to do with the customer experience, but I was wondering if you can put a little bit more of a finer point on that gross margin degradation from around so the 9% to 75% and the cadence of that from <unk>.

Three two to 'twenty five.

Thanks, Dan for the question.

I think theres a.

Our strong desire internally.

Really to be constantly reevaluating, the customer experience and find ways for us to improve materially.

So I think there is this.

Engine of personalization and innovation.

On the product side on a roadmap, where we're trying to create a level of care that is very different from what is traditionally available in generic markets.

And then I think there's also just a.

A general experience improvement that we constantly want to be investing in and so I think thats that.

Speaks to a couple of the points and yummy can probably speak to the timing of that.

Yes, I think with respect to the timing I think the factors as Andrew mentioned.

That would drive that would be.

So from time to time in exchange for making the popcorn sticky.

We will continue to reevaluate some of the pricing options in exchange for longer durations.

Additionally, we do expect over time more and more of the <unk>.

Ecosystem to be driven by value added services as well as the personalized products and so really the combination of making those experiences better it's not as if we're going to see gross margins to great overnight.

But over time as we start to continue to optimize the customer experience.

We're likely to see that start to normalize in the mid seventy's and embedded in our assumption in the 2000% to 30% range factors that in.

Okay makes sense and then our marketing expenses those can be a bit lumpy based on new marketing campaigns. You mentioned you had that new partnership with Kristen Bell curious.

Youre launching any other large marketing campaigns and how should we think about that line item in 2023 should we see some lumpiness there or are you going to begin more leverage out of your marketing spend in 'twenty three.

I think.

I think we want to leave the flexibility they're open for opportunistic investment I think we've said this in our last call.

There's definitely an opportunity in market right now where we're seeing.

A fairly unique ability to take disproportionate share as others. In this space are retrenching, and I think playing a little bit more conservative and I think the underlying strength of the model and the recurring nature of the business and the strength of the unit economics are improving gives us that energy and confidence to continue to lean in and so I.

We want to maintain that flexibility that Kristen Bell work.

Has proven to be really valuable and we think there are other partners that likely makes sense in a similar vein.

But with that said I think we definitely expect as we continue to shift more and more dollars into brand building initiatives and away from performance based channels, there to be pretty meaningful leverage on that line item.

Yes.

Thanks for the color.

Yes, Thanks, Jeff.

Thank you the next now to Jack Wallace with Guggenheim.

Hey, Thanks for taking my questions and congrats on another great quarter and are close to a fantastic 2022.

And then ask another set of questions around the 25 targets.

In terms of the growth contribution.

In terms of new verticals are there any one or two that.

To be outsized contributors, just think of sort of thinking of some hot categories.

Some of your competitors recently entered the Teamsters.

Growth.

There and then second is on the gross margin side should.

Should we read into that is there being any more of a human capital costs associated with say more time between patients and care providers.

Thanks, Jack I can probably take the beginning part of that on.

On the category side, we're seeing very robust growth both from the early tenured categories traditionally on the on the men's health side of the house as well as a lot of the new categories on the <unk> side. So I think at this point still maintain.

A number of categories with.

Triple digit mid triple digit growth rates and so a lot of the focus continues to be on better understanding those customers better segmenting them and then delivering a roadmap this year of proprietary and innovative products such as at a level of personalization to those customers in a way that.

It makes that relationship even stickier and have increased outcomes and really an experience they can't get anywhere else.

Theres a balanced effort here of <unk>.

Improving the customer experiences for those core categories that have really rapid scale and are continuing to grow pretty robustly. While also looking and getting excited about what else to platform can conserve and unlock and I think to your point.

There's quite a lot I think in some of the materials were released today theres categories.

Women's health across digestion menopause men's health testosterone prostate health.

General health, such as pain management for <unk> fertility cardiovascular diabetes. These are all categories that over time I believe we will be in and have a very strong presence in but I think we're just being.

Balanced in making sure that we are continuously improving the core experience of the segments that are growing today and in the reasons people are coming to us today and as <unk> said you can expect us to act as we have in the past switches.

To continue to rollout meaningfully new categories on a one to two times per year basis, while innovating within those categories on a much more rapid timeline.

And then I hit the second part of your question Jack We actually continue to see our cost structure get more and more efficient over time.

So really what we would look to do is look for again as Andrew mentioned, new ways to improve the overall customer experience whether that comes in the form of more personalized products new services evolving our overall offering.

That's what we expect to.

To drive more of the movement in gross margin that we expected as opposed to our evolving cost structure, we're actually getting to see more and more efficiency, which is showing up in the form of higher hydrocarbon.

Got you that's really helpful and then.

Just a quick follow up on the Capex are.

Are there.

Certain maybe robotic processes that you're looking at or I'm, just trying to get an idea for what the.

Mansion or.

The opportunities are that youre looking at that.

You're going to be an incremental to the budget. The next couple of years.

Yes, we've got a high level, it's today a few things it's too.

Augment the given the pipeline of products that we have that are centered on creating a unique experience with personal for customers.

Some of the investment is going towards that as well as towards just increasing the overall efficiency of our affiliated fulfillment centers as it relates to a combination of <unk> that are driving the incremental investment.

Got it thanks, again, and congrats on another great quarter and great year.

Thanks, Jeff.

Thank you and the next now to Glenn Santana <unk> at Jefferies.

Hi, Thanks for taking my question.

Andrew just wanted to follow up on some of the comments you were just making regarding the competitive landscape as you obviously noticed right Amazon sorted not sitting still people looking at sort of category expansion enrollment and I'm just kind of wondering how you view the competitive landscape. These days because I think what investors are trying to.

Stand is that path to those sort of long term margin targets right. It seems like Youre clearly getting the SG&A leverage this year right. When people are kind of looking more into marketing expense and sort of thinking about customer acquisition costs vis vis that competitive landscape and what may be happening with CAC.

Overtime.

Yes, Thanks for that question I think.

As a high level, we've found the market right now to be really advantageous for us right and I think <unk> seen that in Q4 and the quarter before where we are taking opportunities to lean in and be aggressive and I think take very meaningful market share.

From the competitors that are very well funded competitors.

And really strong paybacks rate within our capital allocation framework always maintaining a sub one year payback period.

But doing in a way that's investing in the long term asset of the business, which is that trusted brand.

I think that.

The competitors continue to move as you expect they would write I genuinely believe that the industry. We're in this kind of mix between consumer business and healthcare will likely generate one of the largest industries in the country if not the world eventually and I think some of the largest and most valuable businesses in the world.

<unk> will likely end up in this industry and so I think it's probably unexpected to believe that we will be the only one.

But I think we are very clearly.

<unk> that path as the leader and taking that forward.

As long as we continue to focus on those four pillars that I was talking about.

Prior and investing in that trusted brand continuing to innovate on the leading technology delivering truly innovative products and services and then reinforcing that whole thing with clinical excellence. Those four pillars I think really are the bread and butter of what's what's working.

And what's delivering a holistic start to finish experience that is really unlike anything in market and so that's where we're focused but I think we're seeing really great dynamics and market that allow our team to be aggressive and to take share in a time, where it's a little bit a little bit more turbulent for for the rest of the industry.

I appreciate that commentary if I could just ask one quick follow up I'm trying to get maybe a little bit of a better understanding as to which therapy areas might be driving the growth and I think you sort of called out in your prepared remarks men's sexual health because we're getting some questions around the average order value up $13 year over year to 18%.

And we're trying to figure out is that a mix issue is at a price and some of that price in some of that multi month subscription. So can you give us any color about where the strength is coming from and maybe what's driving that.

As much as it is.

Yes, I think maybe I can provide a little color on the first half.

From a growth standpoint, we're seeing strong growth.

I think.

Quite equally between the original kind of older tenured businesses and.

In men's health, which is usually things like dermatology and sexual health as well as a lot of the newer businesses that finance off more on the her side of the business.

Yes.

We've got a few businesses now still maintaining mid triple digit growth across both <unk> and <unk>.

So there's really no single point here that's driving this this is really accumulation.

Of multiple businesses scaling and I think this is really the defensible nature of this business, which is you are layering very.

Current customers, who are coming to us with very different needs and we're servicing those patients with very different treatment plant at <unk>.

And relationships and so that defense ability I think is one of the core aspects of the business, but it really is a combination coming from the traditional and older tenured businesses in hands as well as a lot of the newer innovation that you guys have seen from us in the last 12 months to 18 months.

And then Glenn just to touch upon your question.

What's driving an AAV, particularly.

Generally not in the habit of directly optimizing for <unk>.

Just given the fact that the.

The revenue model as primaries, primarily subscription based our strategy really centers around driving longer more durable lasting relationships with customers.

So as a result that focus has resulted in a few things. One is as mentioned we continue to see strong multi mic adoption. We also see users opening.

Themselves and be more receptive to it.

Engage with us across a broader set of conditions.

Our strategy is going to continue to be around focusing on building those relationships and so that's about to draw new subscribers is also retained the Christians subscribers on the platform.

As well as expand the revenue that we generate per subscriber.

Okay. Thank you very much.

Thank you.

We will go next now to Jonathan Young with credit Suisse.

Hi, Thanks for taking my question and congrats on a strong quarter here.

Just going through your 2025 targets as you think about balancing growth versus profitability going to your comments about some retrenchment by some of your competitors. How do you think about possibly accelerating the revenue growth.

Maybe pulling back on the EBITDA side may be launching more categories to 23 or 224 gasoline from how youre thinking about that if the opportunity represents itself presents itself to you.

In an accident guarantee.

Yes, I would say that we continue to be very much focused on.

Optimizing and.

Acquiring more of a Tam that's in front of us that said I think as we've been able to demonstrate throughout our history, we really have the ability to do both but given the uniqueness of the model given that we are oftentimes are able to benefit from economies of scale unlock new efficiencies across the business as we scale.

What you do see is that we get leverage across certain areas.

And as well as our variable expenses and so I think that that's what gives us the conviction to put forth not just a revenue target or not just an EBIT target, it's a little bit more mid to long term in nature, but really to be able to do both just because we do have the conviction that.

The model affords us the ability to see expansion across across both areas. So we can continue to expect us to lean in to identifying.

Identifying and investing in categories, where it makes sense.

That though we also are confident in the ability to continue to drive more and more EBITDA onto the platform as well.

Great and then just going to the customer experience investments that youre doing.

When you think about those investments is it really to drive kind of the topline growth or is it to improve retention or maybe it's a combination of both just how you think about where the benefits of that will come from thanks.

Yes, it's a great question I think we really look at it through the lens of better treating.

Patients on the platform right and providing products and services that increase adherence that deliver.

Outcomes that have more efficacy.

And that deliver experiences that patients frankly love and that they as a result.

You don't really stick to and share with their friends and family and.

We have as a meaningful part of their lives and so I think a lot of that ends up long term as.

Driving aggregate LTV cohort improvements, but really.

Improved activation and improved retention rates over time.

But a lot of it I think is looking at it through the lens of.

How do we improve customer outcomes what are the reasons patients are struggling currently how do we how do we make that simple for simpler what are the dynamics that patients don't like and what are their preferences and how can we improve those what are the clinical options, we have to drive better outcomes or reduced side effect profile I think those are a lot of the question.

They were asking on the customer support side.

Ultimately just just result in a much happier customer a much longer tenured customer in.

Long term a much more valuable customer.

Great. Thank you.

Okay.

Yes.

Thank you the next now to Jillian receipt at curious securities.

Hi, This is Joe.

On slide you Linda Thanks for taking my questions.

We're no longer providing sort of segue. So most of them and some chairs just wanted to know like what is the percentage of our multi month orders continuing to trend upwards each quarter above.

36% in the.

Shanghai one curve.

Single digits percent monthly.

Yes, so I think.

Disclose in our in our materials.

The ratio of subscribers that have multi month relationship with us.

Relative to those that are more on a month to month.

Currently we have north of 70% of our users.

On the multi month.

On a part of a multimodal model.

And then to your.

Second question, Andrew do you want to take on.

Sorry, I didn't get the first part of that.

For the second part of that I'm, sorry, do you mind repeating it.

Weather.

First on the mid single digits percentage monthly.

Yes, we havent reported on the monthly side, but.

To see really strong long term retention rates in the north of 85%, which is what we do.

And reiterated this quarter.

Alright.

Just quickly what are your thoughts on oil realizations, a proposal last week, which was on.

Required patient thoughtful person thus horrible.

Proposal portfolio medal close one of our wholesalers.

Wondering what's on a pro forma basis.

Talbot gross Carlo prescriptions.

Yes, that's a great question. We currently do not offer any type of controlled substances on the platform. They are not permitted in.

In any capacity and so there is no part of the business today that would be affected by the by the administration's proposals that came out last week.

Alright, thank you.

Thank you.

Yes.

And we'll go next now to Jonna Kim at Cowen.

Thank you for taking my question and congratulations on a nice quarter I just wanted to maybe get more thoughts on the retention rate you were talking about how does it retains world differ by single lens multiline.

I'm Keith strategy that you have in place to drive higher retention of cost discipline.

Thank you very much.

Yes, so we generally see.

For multi month the retention rates are higher for many of these conditions. They are chronic in nature, but for some of them. You know for instance, using hair loss as an example, it does take time to see.

The results show up and so they are committing to multi month, we generally see that those users are stickier.

Many of the initiatives that we had around retention of religious centered around evolving the customer experience, making it easier to switching to for instance to.

A different cadence or your treatment also just having on the platform the <unk>.

<unk> experience, we're able to solicit help.

A timely response and as mentioned in the prepared remarks, we're continuously looking for ways to evolve that customer experience.

Two.

Further increase the overall stickiness on our platform.

Got it thank you.

Thank you we'll go next to George Hill at Deutsche Bank.

Good evening, guys and thanks for taking my question I guess.

And Andrew I'd start off with how would you guys characterize your visibility to the long term guide and I guess do you think of it as at one end of the spectrum is conservative. The other end of the spectrum is aspirational and kind of I would be interested in your comments on the thoughts of.

Just in general putting it out there.

Given the uncertainty in the environment that we're in.

Yes, thanks for asking the question.

I would characterize it is reflective of what we think is reasonable for the business to achieve given the current trajectory of what we see today.

So I think we intentionally put out there that we think this is.

Sure.

Our revenue number of at least $1 2 billion and an adjusted EBITDA number of at least $100 million. So we do think that the business can achieve this we think that hopefully the business can surpass it.

But it's fairly representative of the growth we see under the Hood today and I think also representative of the really robust innovation pipeline that we have in the works, but for for this year and next year on the proprietary product side across categories and new categories that.

That we think are going to unlock.

A lot of new customer segments, and also drive engagement and retention is pretty pretty powerfully.

And so maybe that's a little bit of color to it.

Provided around if there's anything you'd like to add.

Yes, nothing further from me.

Okay and then.

If I could happen with a follow up on the on the new <unk> product that you guys launched.

I know that you talked about the gross margin erosion over the next couple of years as we look at the 2025.

If we compare the mint product to what I would call it the standard generic.

<unk> product is that product gross margin accretive or dilutive and I guess can you talk about do you see a lot of opportunities in other product categories to use formulation as a way to kind of drive price and maybe gross margin expansion.

I'll take the first part of that question and I'm going to hand, it over to Andrew to take the second part I think overtime. We do expect that we have the ability to achieve similar gross margins on the personalized products that we do.

For more of the generic genetic based products. The gross margin dynamics that we talked about we're really just around having line of sight into the flexibility to offer consumers more and more capabilities onto the platform.

And so I think as we look at around how things are likely to evolve.

Really just having that flexibility is where where we see the.

Some of the gross margin dynamics that we referenced earlier come from.

Yeah and to your question George about formulation opportunities.

I think the answer is absolutely.

I think what's key to that.

The large.

Strategic purchase of apostrophe and that compounding infrastructure pharmacy, a couple of years ago. We have always believed that personalized medicine will deliver much better outcomes for patients.

And that can be in way of form factor preference it can be in the way of optimizing side effects by.

Improving different dose dynamics.

Or it could be in the way of optimizing clinical outcomes through different formulation combinations.

Where it makes sense and so I think giving the providers on our platform and the patients on our platform.

Increased capabilities too.

Optimized personalized solutions for them and that means formulation and form factor and a lot of situations across the businesses, we're in and across the future businesses, we're going to launch into as a huge opportunity and again I think this just really reinforces.

A lot of the investments, we've been making across the stack to improve the customer experience in such a way where patients really can come to us and know that not only are they going to get the best clinical care, but theyre also going to get products and services that are truly proprietary and unique to our platform and unavailable.

There are places in market.

Okay. That's helpful. Maybe just a really quick follow up just can you comment on uptake of the Mint has that has it been kind of I know, it's early but kind of met expectation surpassed expectations.

I think we have very high expectations and I think they're meeting that there's been a really strong strong adoption and strong engagement just in the last few weeks since getting those out so has given the team a lot of energy and excitement to keep pushing forward.

Okay. Thank you.

Okay.

Thank you. We'll go next now to Corrine Wolf minor at Piper Sandler.

Hey, good afternoon, congrats on a great quarter and thanks for taking the questions. So first I would like to kind of I guess to piggyback on that last question.

Some of the newer products that you've been launching.

Thank you Andrea and conditioners are you viewing these as more so market expansive and being able to tap into a broader customer base or are you seeing existing customers start tacking on these other products that you're launching and to their current orders any any high it would be helpful. Thank you.

Yes, that's a great question I think it's a mix of both we see similarly in the retail channel switch.

Can you to invest in for the most strategic partners being on shelves and having OTC product breadth for customers allows them to have.

An introductory relationship with <unk> and I think as we invest in brand building initiatives and an omnichannel presence and the ability to touch and and have deep relationships with these patients.

Those products and a lot of ways are sometimes less intimidating and more accessible and first start products.

So I think that's definitely part of it and then I think it's probably equally weighted that patients that are coming to us and are getting personalized prescription pharmaceutical products to the platform and getting treated with specific issues.

Often asked for and desire complementary products that that work with that regiment.

So having a prescription made topical spray, let's say for a woman who is experiencing hair loss postpartum.

<unk> also going to ask us what is the right shampoo or is there a condition that can also boost volume and boosted thickening and helping to grow and so the ability to.

Have that assortment that proprietary assortment and the breadth of products I think ultimately does drive increased bundled value in <unk>.

Average order size in a way that it is incrementally pretty meaningful to the business.

That's really helpful. Thank you and then if I could just push you a little bit more on this 20% to 30% EBITDA margin guide that you put out for the longer term can you just talk about how far down. The road is that I mean, you gave us 2025 targets.

It seems like we're not quite there all that those are at least $100 million EBITDA, but just how are we going to get to that 20% to 30% and how far down. The road do you think that really is thank you.

Yes sure. Thanks for the question.

I think we have direct line of sight to continue to get leverage on many of the line items that we've seen leverage on already so we do expect to continue to be very disciplined in the way that we grow our G&A footprint. So you can expect us over the coming years to get leverage leverage on that side, we see a lot of things that are very exciting on our variable cost will primarily show up in opera.

<unk> and support and so.

Over the coming years will continue to get leverage there.

We would also expect to see is right now we're currently.

Investing and acquiring.

More and more customers onto the platform also investing across a breadth of categories, but what we do see over time is that the base of the <unk>.

<unk> customers that we have is also rapidly growing.

As a result that also drives a ton of leverage and efficiency across the business and so over time, what we would expect as we start to get leverage on the marketing line as well.

Realistically, we're probably looking at at least probably a five year plus horizon I'd say five to 10 years.

It's really probably a hefty.

That type of concept, but really it's going to be a tradeoff between how we make the investments versus how we continue to see R.

Our base evolve evolve and mature.

Very helpful. Thank you.

And we'll go next now to Ivan defined set of Tigress financial.

Alright, Thank you for taking my questions and congratulations on another huge year.

I have two questions in your projections going into 25 does at $1 2 billion include any possible M&A or that would be if you were to make an acquisition fee and additional to that.

Thanks, Adam for the question.

This is really representative of the organic trajectory of the business. So does not take into consideration any upper opportunities on the M&A side that might pop up in the next couple of years.

And then not given specifics, but lets say what would be let's say some of the other areas that you would like to expand into.

From a category standpoint.

I think on the Investor presentation that we released that's up on the the Investor website right now.

We outline a couple of perspective market that the team is really energized by on the men's health side. This is things like prostate health testosterone.

Women's health side, Youre talking about things like menopause digestion.

On mental health, there is quite a bit.

To unlock and customers struggling with insomnia, PTSD and then a more general health.

Pain management fertility concerns for men and women.

Weight and metabolic health cardiovascular diabetes.

I know thats, a lot, but I think that the honest answer is those are all categories. The team is.

Looking at and spending a lot of time in and and for US. It's really not a question of if we're going to launch in any of these categories. It's really just a question of when and how right I think we have a desire to.

Bring to market products and services that truly are innovative and truly personalized and so that means.

Not necessarily rushing out the door with with.

A new medicine once it's been approved it means actually thinking about how.

How we deliver that to patients in a way that's improving their outcomes and their preferences and ultimately the relationship we have with them and so.

Those are a lot of categories, but I think it's just a matter of time between.

And launching them and it's just a question of how we bring them into market in a way that we feel is very much representative of the Henderson <unk> approach.

Okay and then my other question is like since bringing on Christian barrel as a spokesperson what kind of impact have you seen or how do you measure that and then.

Some other types of.

People are.

Or like types of areas in similar roles that you would look to expand into.

Yes, it's a good question I think Kristen is a unique example in that.

So authentically.

And Craig <unk> speaks to her her her struggles over the years with depression, and anxiety and I think that authenticity is really powerful for men and women to here, especially for categories that are in a lot of ways full of shame and highly stigmatized and.

And despite the fact that huge portions of the country suffer from them very.

Very few.

Some of those people actually go and get treated and so we've seen really strong results on the brand building side for Christian a lot of people are seeing that message and it's resonating with them and coming and being encouraged to evaluate solutions for them.

And so.

For me I really think of our biggest competitor as somebody who is just reluctant to take that first step right. The majority of people that come to US are first time buyers right. They are really seeking information and they're trying to learn about options available theyre not theyre not coming from a different a different competitor or a different.

Health system, it's somebody who's currently outside of the system, who is now opting in with him his and hers and so I think celebrities and athletes and people of high influence have this ability to be that nudge that encourages people to take the first step and normalize the realities of whatever they might be struggling.

And then.

Learn and hopefully take care of it and ultimately feel better so.

I think we're.

Open to more partnerships like Christian we're looking at a lot of different options across categories that have those dynamics. So I definitely think it's something you could you could expect from us in the years to come.

Thank you congratulations again wishing you a big 23.

Thanks, Kevin.

Okay.

And we would expect to enjoy some SPD securities.

Hey, guys. Congrats on another strong quarter and thank you for taking my question.

In your prepared remarks, you had some comments on sort of the that's it.

As assistant I can't say that word, but you know what I mean.

And customer segment. So can you give us an update on the profile of your sort of typical customer in terms of age gender geography et cetera.

And has that profile of the typical customer changed at all over the past few years you've expanded.

Expanding into more categories. Thank you.

Thanks, George Good question.

I think.

There is there is a really unique part of this brand that attracts a very wide spectrum of customers and so I think in those remarks, what I was talking about the customer specificity.

Is it tough word.

Is the ability to identify within the wide spectrum of patients that are coming to us.

Specific needs within those patient groups, and how treatments and content and therapies can be improved and personalized for that specific patient. So I'll give you an example.

<unk>.

Yes.

The women's mental health business per Se right you have.

Women that are struggling with anxiety, who are in their late teens and early twenties.

Women struggling with anxiety and depression postpartum.

Women's struggling with anxiety depression.

We're approaching Paramount a pause and through menopause.

The actual care.

Appropriate for each of those women that each of those stages is likely very different.

And so being able to better segment and understand the specific needs of those patients specific treatments digital therapeutics content et cetera that could be helpful.

And even underlying conditions that might be completely different that we can help address like that's a really big part of it and so the brand right now is attracting a very wide spectrum of men and women. There is there truly is no HIMSS <unk> customer.

No single age there is no single demographic. It is it is incredibly vast and broad.

Across all swaths of people and I think thats actually one of the most powerful parts of the businesses the brands resonate across many many generations and so.

That's continuing to grow and I think as we as we launch more categories and get better at customer segmentation and better at brand building I think youll see that expand even further.

In a place where.

Eventually an entire family and the entire household could.

Could be a customer of him his and hers and likely the grandparents and great grandparents and.

So I think thats kind of the ambition and the trends that we've seen so far.

That's super Super helpful. Thank you.

And then as a follow up.

Just tack on another gross margin question.

Can you update us on sort of what percentage of your prescription volume today is done through the in house fulfillment centers and.

And how much juice is there a lot just squeeze.

<unk> benefits from that going forward.

Yes, it's great question I think we disclosed in the latest presentation that north of 55% of the business is being fulfilled through the <unk>.

The affiliated pharmacies.

And so there's still quite a bit left to go which is great and there are quite a bit of opportunities to streamline the margin profile and the efficiency of that remaining percentages. So.

Improving quite a bit but still quite a lot of opportunity on the horizon for us to drive efficiency.

Alright, thank you.

Thank you.

Thank you and ladies and gentlemen that will conclude our question and answer session today as well as bring us to the end of today's conference call again, we'd like to thank you. All so much for joining the HIMSS <unk> health fourth quarter 2022 earnings conference call and wish you all a great remainder of your day.

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Yes.

Okay.