Q4 2023 Hims & Hers Health Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Hims & Hers 4th Quarter and Full Year 2023 Earnings Conference Call. Please note that this call is being recorded. If you would like to ask a question, please press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, again, press star one.

Ladies and gentlemen, thank you for standing by at this time I would like to welcome everyone to the HIMSS and Hearst fourth quarter and full year 2023 earnings conference call.

Please note that this call is being recorded.

If you would like to ask a question. Please press star followed by the number one on your telephone keypad and if you'd like to withdraw your question again press Star one. Thank you I would now like to turn today's call over to Bill Newby Director of Investor Relations. Phil. Please go ahead, good afternoon, everyone and welcome to the anthem.

Operator: Thank you. I would now like to turn today's call over to Bill Newby, Director of Investor Relations. Bill, please go ahead.

Bill Newby: Good afternoon, everyone, and welcome to the Hims & Hers fourth quarter and full year 2023 earnings call. Today, after the market closed, we released our first ever shareholder letter, a copy of which you can find on our website at investors.hims.com. On the call with me today is Andrew Dudum, our Co-Founder and Chief Executive Officer, as well as Yemi Okupe, our Chief Financial Officer. Before I hand it over to Andrew, I need to remind you of the Eagle's Lake Harbor Incautionary Declaration.

<unk> fourth quarter and full year 2023 earnings call.

After the market closed we released our first ever shareholder letter a copy of which you can find on our website at investors <unk> com.

On the call with me today.

Our co founder and Chief Executive Officer as well.

Our Chief Financial Officer.

Before I hand over to Andrew I need to remind you of legal safe Harbor and cautionary declarations.

Bill Newby: Certain statements and projections 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 and uncertainties that could cause actual results to vary materially. We take no obligation to update publicly any forward-looking statement after this call, whether as a result of new information, future events, changes in assumptions, or otherwise. Please view the most recently filed 10-K and 10-Q reports for a discussion of risk factors as they relate to forward-looking statements.

Certain statements and projections of future results made in this presentation constitute forward looking statements that are based on among other things.

Our current market competitors.

Expectations.

And are subject to risks and uncertainties that could cause actual results to vary materially.

We take no obligation to update publicly any.

Forward looking statements after this call.

Whether as a result of new information future events change the assumptions.

Please see the most recently filed 10-K 10-Q reports for a discussion of risk factors as they relate to forward looking statements.

Bill Newby: In today's presentation, we will also use certain non-GAAP financial measures. We refer you to the Reconciliation Tables for the most directly comparable GAAP financial measures contained in today's press release and shareholder letter. You can find this information as well as a link to today's webcast at investors.hims.com. 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.

In today's presentation, we will also use certain non-GAAP financial measures. We refer you to the reconciliation tables to the most directly comparable GAAP financial measures.

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Sure.

You can find this information as well as a link.

Webcast in the investors Dot dot com after the call of this webcast will be archived on the website for 12 months and with that I will now turn the call over to Andrew.

Andrew Dudum: Thanks, Phil. 2023 was a transformative year for Hims and Hers, as we continue to deliver on our mission of helping the world feel great through the power of better health. Strong execution of our strategy resulted in financial success on both the top and bottom lines. Revenue increased 65% year-over-year to $872 million, and growth remains robust as a result of our ability to continue to draw and retain users to the Hims & Hers platform. Over 1.5 million subscribers were on the platform at the end of 2023, representing a year-over-year increase of 48%.

Thanks Bill.

2023 was a transformative year for him and her as we continue to deliver against our mission of helping the world feel great through the power of better health.

Strong execution of our strategy resulted in financial success on both the top and bottom line revenue increased 65% year over year to 872 million growth remains robust as a result of our ability to continue to draw and retain users to the HIMSS <unk> platform.

For $1 5 million subscribers were on the platform at the end of 2023, representing a year over year increase of 48%.

Andrew Dudum: We've always taken a disciplined approach to scaling our platform, and that is translating to meaningful success on our bottom line as well. I'm incredibly proud of our organization's ability to scale our platform efficiently and deliver our first quarter of positive net income on the one-year anniversary of our first quarter of positive adjusted EBITDA. Throughout 2023, we continue to excel at providing users with access. Access to providers and diagnosis in days, or in some instances, hours, as opposed to weeks or months in brick and mortar, and access to clinically appropriate generic treatments and solutions for singular issues that consumers are challenged with.

We've always taken a disciplined approach to scaling our platform and that is translating to meaningful success on our bottom line as well.

Incredibly proud of our organization's ability to scale, our platform efficiently and deliver our first quarter of positive net income on the one year anniversary of our first quarter of positive adjusted EBITDA.

Throughout 2023, we continue to excel at providing users with access.

Access to providers in diagnosis in days or in some instances hours as opposed to weeks or months in brick and mortar.

And access to clinically appropriate generic treatments and solutions for singular issues that consumers are challenged with with.

Andrew Dudum: We view our capabilities to deliver on access as a table and believe a sustainable leadership position requires more. My belief is that our success is the culmination of an intentional focus on core specialties as well as our ability to transform our platform across a few dimensions. Let me start by double-clicking into the significance of focus.

We view our capabilities to deliver on access as table Stakes and believe a sustainable leadership position requires more.

My belief is that our success is the culmination of an intentional focus on core specialties as well as our ability to transform our platform across a few dimensions.

Let me start by double clicking into the significance of focus today. Our efforts are focused on ensuring that customers have a delightful experience across five core specialties sexual health men's and women's dermatology mental health and weight loss, which were excited to launch in the fourth quarter.

Andrew Dudum: Today, our efforts are focused on ensuring that customers have a delightful experience across five core specialties: Sexual Health, Men's & Women's Dermatology, Mental Health, and Weight Loss, which we are excited to launch in the fourth quarter. These are some of the most emotionally resonant challenges across society today and impact over 100 million individuals in the U.S. alone.

These are some of the most emotionally resonate challenges across society today and impact over 100 million individuals in the U S alone.

Andrew Dudum: In 2023, we made meaningful strides evolving our platform across a few key dimensions, which has enabled us to capture a leading market share of customers seeking solutions within many of our specialties. First, we made a move beyond generics towards personalized solutions and treatments that uniquely address users' concerns via new form factors as well as multi-action capability. Second, is our ability to leverage AI capabilities across structured data to not only inform new effective and safe solutions that resonate with users, but also enable providers to leverage learnings from hundreds of thousands of interactions across our platform to more efficiently match users with the right treatment. Lastly, our operational excellence and scale enable us to offer all of this value to users at an attractive price.

In 2023, we made meaningful strides evolving our platform across a few key dimensions, which has enabled us to capture a leading market share of customers seeking solutions within many of our specialties.

First is the move beyond generics towards personalized solutions and Treehouse that uniquely address users' concern via new form factors as well as multi action capabilities.

Second is our ability to leverage AI capabilities across structured data to not only inform new effective and safe solution that resonate with users, but also enable providers to leverage learnings from hundreds of thousands of interactions across our platform to more efficiently match users with the right treatment.

Lastly, our operational excellence and scale enable us to offer all of this value to users at attractive price points.

Andrew Dudum: Nationally renowned experts combined with our data platform were foundational to our ability to roll out access to heart support, hard mints, and updated men's hair loss options in tenured specialties such as sexual health and men's dermatology. Personalized offerings, which have now been adopted by over 30% of subscribers on the platform as of year end, have allowed these specialties to continue to scale at a rapid rate through 2023. We are confident that substantial runway for growth remains, especially as we continue to evolve our. The shift toward personalized offerings has been even stronger in our newer specials, as new users are increasingly opting for these unique approaches to individualized care. HERS Dermatology subscribers are opting for a personalized solution more than 75% of the time, while subscribers to the new weight loss offering are essentially all opting for a personalized treatment.

Nationally renowned experts combined with our data platform for foundational to our ability to rollout access to heart support hardness and updated men's hair loss options in our tenured specialties, such as sexual health and medicine dermatology.

Personalized offerings, which have now been adopted by over 30% of subscribers on the platform as of year end have allowed the specialties to continue to scale at a rapid rate through 2023.

We are confident that substantial runway for growth remains, especially as we continue to evolve our offerings.

The shift toward personalized offerings has been even stronger in our newer specialties as new users are increasingly opting for these unique approaches to individualized care.

Hers dermatology subscribers are opting for a personalized solution more than 75% of the time, while subscribers to the new weight loss offering are essentially all opting for a personalized treatment.

Andrew Dudum: It is clear to us that personalized solutions drive increased longevity on the platform and help to facilitate the acquisition of new users. As we continue to see increasingly rapid adoption of personalized approaches across newer specialties, such as Hers Dermatology, Mental Health, and Weight Loss, we are confident that each of these specialties will have the ability to deliver more than $100 million of revenue in 2025. We are pleased to see the strong momentum of the past six years continue into 2024 with continued strength across each of our specialties and margin expansion from our disciplined approach to scale. These factors provide us with a line of sight to achieve our 2025 targets of $1.2 billion of revenue and $100 million of EBITDA one year early. We are also tracking toward our first year of positive net income in 2024.

It is clear to us that personalized solutions drive increased longevity on the platform and helped to facilitate the acquisition of new users.

As we continue to see increasingly rapid adoption of personalized approaches across newer specialties, such as hers dermatology mental health and weight loss. We are confident that each of these specialties has the ability to deliver more than $100 million of revenue in 2025.

We are pleased to see the strong momentum of the past six years continue into 2024 with continued strength across each of our specialties and margin expansion from our disciplined approach to scale.

These factors provide us with line of sight to achieve our 2025 targets of $1 2 billion of revenue and $100 million of EBITDA one year early.

We are also tracking towards our first year of positive net income in 2024.

Andrew Dudum: These are all important benchmarks, but we believe this is just the beginning. Our aspiration is to bring tens of millions of users on our platform, given the fact that over 100 million consumers are impacted by conditions and the specialties we serve. Our ability to achieve these ambitions will be governed by our ability to remove points of friction for users seeking treatment today, as well as to remove barriers for those who may be suffering but are not seeking treatment.

These are all important benchmarks, but we have every belief this is just the beginning or.

Our aspiration is to bring tens of millions of users on our platform given the fact that over 100 million consumers are impacted by conditions in the specialties we serve.

Our ability to achieve these ambitions will be governed by our ability to remove points of friction for users seeking treatment today as well as remove barriers for those who may be suffering but not seeking treatment.

Andrew Dudum: To date, we've excelled at removing barriers and friction points such as lack of awareness, accessibility, and affordability. In 2024, we expect personalization will be foundational to unlocking new opportunities for the treatment of users that may have alternative form factor needs or require unique dosages. We expect MedMatch by Hims & Hers to be a critical tool in giving both providers and consumers the confidence that a treatment will work for them. This is natural, in that MedMatch by Hims & Hers has the potential to evolve to address one of the questions most on the mind for consumers. Has this solution worked for people like me?

To date, we've excelled at removing barriers and friction points, such as lack of awareness accessibility and affordability in.

In 2024, we expect personalization will be foundational to unlocking new opportunities for the treatment of users that may have alternative form factor needs or require unique dosages, we expect med matched by him and her to be a critical tool and giving both providers and consumers the confidence that a treatment will work for them.

This is natural in our med matched by HIMSS in Hurst has the potential to evolve to address one of the questions. Most top of mind for consumers has this solution worked for people like me.

Andrew Dudum: In the fourth quarter, we completed the transition of the vast majority of fulfillment to our affiliated pharmacies, which sets the stage to break down a substantial barrier for users suffering across our specialties today, cost. Over 85% of orders going through affiliated pharmacies provides us with a greater ability to realize the benefits of scale and ultimately pass value back to consumers in a way that is beneficial for our users and accretive to Hims & Hers. Since we founded Hims & Hers six years ago, our goal has been bold: to make the world feel great through the power of better health.

In the fourth quarter, we completed the transition of the vast majority of fulfillment to our affiliated pharmacies, which sets the stage to breakdown on substantial barrier for users suffering across our specialties today.

Cost over.

Over 85% of orders going through affiliated pharmacies provides us greater ability to realize the benefits of scale and ultimately pass value back to consumers in a way that is beneficial for our users and accretive to hands in hers.

Since we founded Hinson her six years ago. Our goal has been bold to make the world feel great to the power of better health <unk>.

Andrew Dudum: Developing the technology, operations, clinical excellence, and brand to achieve this goal of transforming health and wellness requires a long-term approach and an operational mindset. Through the unparalleled experience and expertise of our team, we have built a platform that offers personalized solutions through a holistic and seamless customer experience at compelling price points. Our approach can enable almost every household in the nation to find a level of personalized care that has historically only been available to the wealthiest subset of the population.

Developing the technology operations clinical excellence and brand to achieve this goal of transforming health and wellness requires a long term approach and an operational mindset through the.

The unparalleled experience and expertise of our team we have built a platform that offers personalized solutions through a holistic and seamless customer experience at compelling price points. Our approach can enable almost every household in the nation to find a level of personalized care that has historically only been available to the wealthiest subset of the population.

Yemi Okupe: We are proud of what we are delivering and the positive outcomes we're bringing to our customers. And we are energized by the opportunity we have to bring this incredible experience to an expanding group of consumers in 2024. With that, I will pass it over to Yemi to walk through our financials in greater detail. Thanks, Andrew.

We are proud of what we're delivering in a positive outcome as we are bringing to our customers and we are energized by the opportunity we have to bring this incredible experience to an expanding group of consumers in 2024 with that I'll pass over to <unk> to walk through our financials in greater detail.

Thanks, Andrew I.

Yemi Okupe: I will start by providing an overview of our fourth quarter financial performance and then expand on Andrew's comments related to our future outlook. We are incredibly proud of the progress made in 2023 in transforming the business into a leading provider of personalized solutions and excited by how that positions us for the future. Our strong results are the result of sound execution of our simple but powerful strategy, which is to provide users with access to attractive, high-quality, and personalized solutions that are affordable and backed by an experience that is delightful from beginning to end. Our fourth quarter results are a great example of the intersection of great strategy and strong execution. Revenue grew 47% year-over-year to $246.6 million, driven primarily by the ongoing expansion of its subscriber base.

I will start by providing an overview of our fourth quarter financial performance and then expand on Andrew's comments related to our future outlook.

We are incredibly proud of the progress made in 2023 and transforming the business into a leading provider of personalized solutions and are excited by how that positions us for the future.

Our strong results are the result of sound execution of our simple but powerful strategy.

Which is to provide users with access to attractive high quality and personalized solutions that are affordable and backed by an experience that is a life well from beginning to end.

Our fourth quarter results are a great example of the intersection of Great strategy and strong execution.

Revenue grew 47% year over year to $246 6 million driven primarily by the ongoing expansion of our subscriber base.

Yemi Okupe: We ended 2023 with over 1.5 million subscribers, up 48% from the end of 2022. Over the course of 2023, we will continue to evolve the suite of personalized offerings throughout the year across each of our specialties, including launches of hard mints and chewables in men's sexual health, hair blends in women's dermatology, our first multi-action offering for heart support, and finally, our weight management offering, which offers customized solutions designed around addressing the underlying causes of weight gain. Consumer demand for these offerings has been rapid, with over 35% of new subscribers pursuing personalized options in the fourth quarter.

We ended 2023 with over $1 5 million subscribers up 48% from the end of 2022.

Over the course of 2023, we continue to evolve our suite of personalized offerings throughout the year across each of our specialties, including launches apartments in chewables in men's sexual health care blends in women's dermatology, our first multi auction offering part support and finally, our weight management offering which offers customized solutions designed to run.

Addressing the underlying causes awaken.

Consumer demand for these offerings has been rapid with over 35% of new subscribers pursuing personalized options in the fourth quarter.

Yemi Okupe: Our belief is that this will continue to enable us to drive robust growth for the foreseeable future by, firstly, drawing a broader audience of consumers impacted by a condition to seek treatment, and secondly, enabling us to capture a greater share of users that are currently seeking treatment. And lastly, increasing the longevity of users on the platform. At the core of our strategy is ensuring that these solutions are placed at attractive price points, which we believe will continue to drive both stronger demand and retention. Our shift toward affiliated pharmacies allowed us to offset the margin impact of strategic pricing actions implemented in 2023. But even more exciting is that they provide a platform to unlock efficiencies that will enable us to provide a better consumer experience at even more attractive prices. We exited 2023 with over 85% of orders fulfilled via isolated pharmacies.

Our belief is that this will continue to enable us to drive robust growth for the foreseeable future for firstly trying a broader audience of consumers impacted by a condition to seek treatment secondly, enabling us to capture a greater share of users that are currently seeking treatment and lastly, increasing the longevity of users on the platform.

At the core of our strategy is ensuring that these solutions are placed at attractive price points, which we believe will continue to drive a stronger demand and retention.

Our shift toward affiliated pharmacies allowed us to offset the margin impact of strategic pricing actions implemented in 2023.

Even more exciting is that they provide a platform to unlock efficiencies that will enable us to provide a better consumer experience and even more attractive price points.

We exited 2023 with over 85% of orders fulfilled via escalated pharmacies.

Yemi Okupe: Our expectation is to maintain a share of orders going through third parties in the high single-digit to low double-digit levels for redundancy purposes. Investments made in affiliated pharmacies have provided the foundation for expanding capabilities as well as efficiency gains. Affiliated pharmacies allow us to drive efficiencies across key costs such as logistics, product costs, and even customer support. Gross margins expanded almost 4.3% every year in both the fourth quarter and across the full year to 83% and 82%, respectively, as we were able to identify and capture these officials.

Our expectation is to maintain its share of orders going through third parties in the high single digit to low double digit levels for redundancy purposes.

Investments made in affiliated pharmacies have provided the foundation for expanded capabilities as well as efficiency gains.

The weighted pharmacies allow us to drive efficiencies across key costs, such as logistics product costs and even customer support.

Gross margins expanded almost four points year over year in both the fourth quarter and across the full year to 83%, 82%, respectively. As we were able to identify and capture these efficiencies.

Yemi Okupe: Greater scale will continue to allow us to drive efficiency across our operation. As previously mentioned, we will actively pass a portion of these gains back to consumers over the next several years in ways that we believe are long-term accretive. This may be in the form of targeted price reductions and additional value-added services.

Greater scale will continue to allow us to drive efficiency across our operation as previously mentioned, we will actively pass a portion of these gains back to consumers over the next several years and ways that we believe are long term accretive.

This may be in the form of targeted price reductions and additional value added services.

Yemi Okupe: We believe that mass market pricing combined with the convenience of our end-to-end experience will enable us to cement a leadership position across each of our core specialties. Leveraging scale and actively capturing efficiencies is a core trait that extends beyond operations and is embedded in the DNA of Hims and Hers. Over the course of 2023, we gained leverage across the majority of cost areas, with marketing cost as a percentage of revenue improving 1 point, operations and support cost as a percentage of revenue improving 1 point, and G&A cost as a percentage of revenue improving 3 points. Disciplined growth and rigorous cost management are resulting in step-change improvements and profitability. Adjusted EBITDA increased 68% quarter over quarter in the fourth quarter to almost $21 million.

We believe that mass market pricing combined with the convenience of our end to end experience will enable us to submit a leadership position across each of our core specialties.

Leveraging scale and actively capture inefficiencies as a core trade that extends beyond operations and is embedded in the DNA of hands in hers.

Over the course of 2023, we gain leverage across the majority of cost areas with marketing costs as a percentage of revenue improving one point.

Operations and support cost as a percentage of revenue improving one point and G&A costs as a percentage of revenue improved three points.

Disciplined growth and rigorous cost management are resulting in step change improvements in profitability.

Adjusted EBITDA increased 68% quarter over quarter, and the fourth quarter to almost $21 million.

Yemi Okupe: This represents more than a 5x increase relative to the fourth quarter of last year, which was our first quarter of positive adjusted EBIT. On the one year anniversary of our first quarter of positive adjusted EBITDA, we're thrilled to have generated our first quarter of positive net income. In this fourth quarter, net income was $1.2 million.

This represents more than a five <unk> increase relative to the fourth quarter of last year, which was our first quarter of positive adjusted EBITDA.

On the one year anniversary of our first quarter of positive adjusted EBITDA, We're thrilled to have generated our first quarter positive net income.

In the fourth quarter net income was $1 2 million.

Yemi Okupe: Attainment of this important milestone is evidence of the strength of our strategy and capital allocation framework, as well as excellent execution across our organization. Our focus remains on continuing to address barriers that prevent consumers from seeking treatment for specialties that we serve, which we believe will result in greater market share. We will do so in a way that is disciplined and provides a path to generate positive recast. To better reflect this focus, we have started disclosing free cash flow generated in each period. In 2023, we generated over $73 million of operating cash flow, driving a free cash flow of $47 million.

The attainment of this important milestone is evidence of the strength of our strategy and capital allocation framework as well as excellent execution across our organization.

Our focus remains on continuing to address barriers that prevent consumers from seeking treatment for specialties that we serve which we believe will result in greater market share capture.

We will do so in a way that is disciplined and provides a path to generate positive free cash flow.

To better reflect this focus we have started disclosing free cash flow generated in each period.

In 2023, we generated over $73 million of operating cash flow driving free cash flow of $47 million.

Yemi Okupe: We ended the year with $221 million of cash and short-term investments on our balance sheet, up over $41 million from the end of 2022. We intend to leverage the strength of our balance sheet to continue to expand our portfolio of personalized solutions as well as to improve the efficiency of affiliated pharmacies as they continue to scale over the course of the next two to three years. This is reflected in higher capital expenditures in the fourth quarter, as well as for the full year of 2023.

We ended the year with $221 million of cash and short term investments on our balance sheet up over 41 million from the end of 2022.

We intend to leverage the strength of our balance sheet to continue to expand our portfolio of personalized solutions as well as to improve the efficiency of affiliated pharmacies as they continue to scale over the course of the next two to three years.

This is reflected in the higher capital expenditures in the fourth quarter as well as for the full year of 2023.

Yemi Okupe: Our expectation is that the evolution of personalized offerings will drive continued market share gains and growth in the near future. With that in mind, I'd like to detail our outlook for 2024. In the first quarter, we are anticipating revenue in the range of $267 million to $272 million, representing a year-over-year increase of 40 to 43 percent. We expect adjusted EBITDA to be between $22 million and $27 million, representing an adjusted EBITDA margin of 9% at the midpoint of both ranges. For the full year, we are anticipating revenue of between $1.17 and $1.2 billion, representing a year-over-year increase of $34 to $38 billion. It is our expectation that 2024 Jath Ebheda will be between 100 and 120 million.

Our expectation is that the evolution of personalized offerings will drive continued market share gains and growth in the near future.

With that backdrop I'd like to detail our outlook for 2024.

In the first quarter, we are anticipating revenue in the range of 267 to 272 million, representing a year over year increase of 40% to 43%.

We expect adjusted EBITDA to be between 22, and $27 million, representing an adjusted EBIT margin of 9% at the midpoint of both ranges.

For the full year, we are anticipating revenue of between 1.17 to $1 2 billion, representing a year over year increase of 34% to 38%.

It is our expectation that 2024, adjusted EBITDA will be between 101 hundred $20 million.

Yemi Okupe: These adjusted EBITDA and revenue ranges imply an adjusted EBITDA margin of 9% at the midpoint of both ranges. Our outlook for 2024 provides line of sight to achieve our 2025 floors of 1.2 billion of revenue and 100 million of adjusted EBITDA a year early. As mentioned previously, continued penetration of large addressable markets across our specialties remains our core focus. We continue to scale in a disciplined way that adheres to our rigorous capital allocation framework. With continued successful execution of these priorities, it is our expectation that 2024 will be our first full year of generating positive net income.

These adjusted EBITDA and revenue ranges imply an adjusted EBIT margin of 9% at the midpoint of both ranges.

Our outlook for 2024 provides line of sight to achieve our 2025 floors of $1 2 billion of revenue and $100 million of adjusted EBITDA a year early.

As mentioned previously continued penetration of large addressable markets across our specialties remains our core focus we.

We continue to scale in a disciplined way that adheres to our rigorous capital allocation framework.

With continued successful execution of these priorities. It is our expectation that 2024 will be our first full year of generating positive net income.

While 2023 was a phenomenal year in 2024 looks to be equally if not more exciting as Andrew has always mentioned the company has a long term orientation.

Yemi Okupe: While 2023 was a phenomenal year, and 2024 looks to be equally, if not more exciting, as Andrew has always mentioned, the company has a long-term orientation. In that spirit, I'll take a moment to provide additional color on our expectations for progress on the attainment of our long-term adjusted EBITDA margin goals of 20 to 30%. Our expectation is that we will achieve adjusted EBITDA margins of at least low to mid-teens by 2027 and be within our long-term margin range no later than 2030.

In that spirit I will take a moment to provide additional color on our expectations for progress on the attainment of our long term adjusted EBIT margin goals of 20% to 30%.

Our expectation is that we will achieve adjusted EBIT margins of at least low to mid teens by 2027 and be within our long term margin range no later than 2030.

The margin expansion will occur as we continue charting a path forward towards our ambition of bringing tens of millions of subscribers onto the platform.

While further leverage as expected across cost such as G&A and operations and support a substantial portion of leverage is expected to come from marketing.

Yemi Okupe: Margin expansion will occur as we continue charting a path forward toward our ambition of bringing tens of millions of subscribers onto the platform. While further leverage is expected across costs such as GINA and operations and support, a substantial portion of leverage is expected to come from marketing. Our expectation is that marketing as a percentage of revenue will be in the mid-30s to the low-40s by 2030.

Our expectation is that marketing as a percentage of revenue will be in the mid <unk> to low <unk> by 2030.

Several factors give us conviction in our ability to drive marketing leverage over time.

First a greater share of our spend is increasingly becoming more semi fixed in nature.

In 2022 and over the course of 2023, we meaningfully scale investment in broad based brand spend intended to drive awareness and consideration of our brand to users earlier in their lifecycle journey.

Yemi Okupe: Several factors give us conviction in our ability to drive marketing leverage over time. First, a greater share of our spend is increasingly becoming more semi-fixed in nature. In 2022, and over the course of 2023, we meaningfully scaled investment in broad-based brand spend, intended to drive awareness and consideration of our brand to users earlier in their lifecycle journey. As it starts to hit maturity in 2024, we are confident in our ability to get greater leverage on this. Second, our belief is that we can increase conversion and retention by offering consumers high-quality personalized solutions. We've already seen early signs of success that offering personalized solutions enables us to better convert users as well as increase their longevity on the platform. This is especially true when they are placed at attractive price points, as we saw in the second quarter of 2023.

As it starts to hit maturity in 2024, we are confident in our ability to get greater leverage on that spend.

Second our belief is that we can increase conversion and retention by offering consumers high quality personalized solutions.

We have already seen early signs of success that offering personalized solutions enables us to better convert users as well as increased their longevity on the platform.

This is especially true when they are placed at attractive price points as we saw in the second quarter of 2023.

As our personalized solutions continue to evolve to encompass multi condition treatments as well as new form factors and scale enables us to place them at more attractive price points, our expectations that we will see continued gains in both conversion and retention.

Lastly, our business is based on a recurring revenue model and the majority of marketing spend goes towards the acquisition of new users.

Yemi Okupe: As our personalized solutions continue to evolve to encompass multi-condition treatments as well as new form factors, and scale enables us to place them at more attractive price points, our expectations are that we will see continued gains in both conversion and retention. Lastly, our business is based on a recurring revenue model, and the majority of marketing spend goes towards the acquisition of new users. As our user base continues to mature and the average number of users on the platform increases, our expectation is that we will gain leverage. These dynamics are expected to drive between one to three points of marketing leverage per year, with leverage starting to show as early as 2024. 2023 was an exceptional year for Hims & Hers.

As our user base continues to mature and the average tenor of users on the platform increases our expectation is that we will gain leverage.

These dynamics are expected to drive between one to three points of marketing leverage per year with leverage starting to show as early as 2024.

2023 was an exceptional year for Hampden hers momentum looks to be stronger than ever as we head into 2024.

We have high conviction that our strategy of providing users with access to high quality personalized solutions that are affordable and backed by an experience that is a light oil from beginning to end will position us for continued success in the coming years.

Our ability to drive these strong results would not be possible without the dedication of hundreds of employees across his and hers.

I'd like to thank them as well as our customers and partners that support us in our mission of helping the world's book right through the power of better health.

Yemi Okupe: The momentum looks to be stronger than ever as we head into 2024. We have high conviction that our strategy of providing users with access to high-quality, personalized solutions that are affordable and backed by an experience that is delightful from beginning to end will position us for continued success in the coming years. Our ability to drive these strong results would not be possible without the dedication of hundreds of employees across Hims & Hers. I'd like to thank them, as well as our customers and partners who support us in our mission of helping the world feel great through the power of better health.

We appreciate the support of our shareholders and look forward to keeping you updated on our progress with that I will now turn it over to the operator for questions.

Thank you as a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw that question again press star one.

Also ask that you limit yourself to one question and one follow up and for any additional questions. Please re queue. Your first question comes from the line of Alan <unk> from Bank of America. Please go ahead.

Operator: We appreciate the support of our shareholders and look forward to keeping you updated on our progress. With that, I will now turn it over to the operator for questions. Thank you. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad.

Good afternoon, and thanks for taking the questions. Andrew you mentioned that hers derm mental health and weight loss can each deliver more than 100 million of revenue in 2025 I'm. Just curious what gives you line of sight into that and how much do you expect to be cross sales and then related to that what person.

Operator: If you would like to withdraw that question, again, press star one. We also ask that you limit yourself to one question and one follow-up, and for any additional questions, please call. Your first question comes from the line of Alan Lutz from Bank of America. Please go ahead. Good afternoon, and thanks for taking the questions.

Are your marketing budget is just getting patients to the HIMSS platform, which versus how much is specific to each indication that you are treating.

Andrew Dudum: Andrew, you mentioned that Hers, Derm, Mental Health, and Weight Loss can each deliver more than $100 million of revenue in 2025. I'm just curious, what gives you a line of sight into that, and how much do you expect to be cross sales? And then related to that, what percent of your marketing budget is just getting patients to the HIMS platform versus how much is specific to each indication that you're treating? Thanks.

Thanks, Alan Good question, maybe I'll take the first half of the army and.

And Jeff on the marketing side I.

I think for the emerging categories. This is really exciting right, we're seeing massive adoption of personalized offerings and cutting treatments in those categories. I think we mentioned first dermatology north of 70% of people are adopting those types of personalized treatment and with our newest category weight loss of nearly 100% of people are adopting.

Those personalized treatments are seeing a really great dynamic with regard to stickiness.

Engagement high retention with those customers, we think that that type of an operating where patients and providers can more nuance.

Andrew Dudum: Thanks, Alan, great question. Maybe I'll take the first half, and Yemi can jump on the marketing side. I think for emerging categories, this is really exciting, right? We're seeing massive adoption of personalized offerings and custom treatments in those categories. I think we mentioned, first, dermatology; north of 70% of people are adopting those types of personalized treatments. And with our newest category, weight loss, nearly 100% of people are adopting those personalized treatments.

Cater to an individual's need will result in a much stickier relationship long term and so I think given the size of those markets, which are absolutely enormous as we know and the very unique mass market pricing and personalized approach. It just gives us a tremendous amount of conviction that that is emerging categories will be meaningful.

Peter to growth in the long term, but even in the not too distant future in 2025.

A year. After this weight loss categories has gone live fleet to be able to contribute $100 million plus so really excited by both the tenured categories.

Andrew Dudum: So seeing a really great dynamic with regard to stickiness, high engagement, and high retention with those customers, we think that that type of offering where patients and providers can be more nuanced and cater to an individual's needs will result in a much stickier relationship long term. And so, given the size of those markets, which are absolutely enormous, as we know, and the very unique map to market pricing and personalized approach, it just gives us a tremendous amount of conviction that those emerging categories will be meaningful contributors to growth in the long term. But even in the not too distant future, in 2025, you know, just a year after this weight loss category is gone, believe those to be able to contribute 100 million plus. So really excited by both the 10 year categories, accelerating as a result of personalization, but also the new emerging categories, which are starting to show some very meaningful contributions to long-term growth. Hey Alan, thanks for the question.

Accelerating as a result of the personalization, but also the new emerging category.

Turning to show some very meaningful contributions to long term growth.

Hey, Alan Thanks for the question that the second part of your question.

<unk> had both targeted as well as broad broad ads.

So many of the investments we make in areas such as direct response in social.

Tend to be met and later funnel early.

Earlier on in the company's lifecycle, we still were able to draw consumers eyeballs, but that was traditionally through things like the retail partnerships that we've oftentimes scope is talking about.

As we mentioned in 2022 and 2023, but we're really starting to scale. Some of the broad based brand spend to make users aware of the.

Holistic set of conditions that we offered.

It's less around engaging with a user for specific condition and more introducing them to the overall him his and hers brands respectively.

Yemi Okupe: To hit the second part of your question, historically, we've had both targeted as well as broad, broad ads. So many of the investments that we make in areas such as direct response and social tend to be in the mid and later funnel. Earlier on in the company's life cycle, we still were able to draw consumers' eyeballs, but that was traditionally through things like the retail partnerships that we've often spoken about. As we mentioned, in 2022 and 2023, we really started to scale some of the broad-based brand spend to make users aware of the holistic set of conditions that we offer. So that's less around engaging with the user for a specific condition and more introducing them to the overall Hims & Hers brands, respectively.

2000, 22020, we saw a greater portion of the spend come towards that that's one of the things that also gives us confidence in the ability to get leverage really this year and into 2025 is that that spend tends to be more semi fixed nature.

As you start to implement and integrate into channels.

Youre not necessarily scaling.

Rapid of a pace once you reach a certain level of maturity.

Great and then another one for you Jimmy as we think about the margin profile that you reported for Q and we think about the margin trajectory into 2024.

Yes, I am curious on the gross margin line. It seems like the percentage of scripts going through affiliated pharmacies is going to stay relatively consistent I think that changed versus the last quarter. So can you talk a little bit about your decision to not get to a 100% going through the affiliated pharmacies.

Yemi Okupe: And so in 2022 and 2023, we saw a greater portion of spend come towards that. That's one of the things that also gives us confidence in the ability to get leverage really this year and into 2025, because that spend tends to be more semi-fixed in nature. As you start to, you know, implement, integrate into channels, you're not necessarily scaling at such a rapid pace once you reach a certain level of maturity. Great, and then another one for you, Yemi.

Yes.

We always want to maintain flexibility and have redundancy purposes set up and so in the near to midterm.

We view maintaining those relationships very much as a strategic as we look to the affiliated pharmacies and I've mentioned over time, we view gross margins going to.

More of a mid to high seven news.

It is probably likely going to take us a few years to get there just because in the affiliated pharmacy is there are opportunities both in terms of process. They can drive higher margins as well as as we look to the scale that we have now that unlocks the ability to leverage our balance sheet to drive greater efficiency and as well we will look to pass those back to consumers, but we are.

Yemi Okupe: As we think about the margin profile that you reported in 4Q and we think about the margin trajectory into 2024, I'm curious on the gross margin line. It seems like the percentage of Scripps going through affiliated pharmacies is gonna stay relatively consistent. But I think that changed versus the last quarter. So can you talk a little bit about your decision to not get to 100% by going through the affiliated pharmacies? Thanks. Yeah, I think we really always want to maintain flexibility and have redundancy purposes set up. And so, you know, in the near to midterm, we view maintaining those relationships very much as a strategic. As we look to the affiliated pharmacies, you know, as mentioned, over time, we view gross margins going to more of the mid to high 70s.

To do that in a very thoughtful way run dedicated experiments.

To just ensure that as we are giving that value back to consumers. It will result in long term value not only for consumers, but also for <unk>.

Great. Thank you.

Your next question comes from the line of Daniel Gross Lake Light from Citigroup. Please go ahead.

Hey, guys. Thanks for taking my question and congrats on the strong results here.

To stick with the marketing question and Jamie I. Appreciate all the details that you have given so far but I'm curious what are your competitors, mostly on the mental health side, <unk> mentioned that theyre seeing a decline in their marketing efficiency.

And you obviously are going to start to see more leverage coming out in 'twenty four and beyond so I'm curious if you're seeing similar degradation.

Yemi Okupe: It is probably going to take us a few years to get there, just because in the affiliated pharmacies, there are opportunities, both in terms of process, they can drive higher margins, as well as, you know, as we look to the scale that we have now, that unlocks the ability to leverage our balance sheet to drive greater efficiencies as well. We'll look to pass those back to consumers, but we're going to do that in a very thoughtful way, run dedicated experiments to just ensure that as we are giving that value back to consumers, it will result in long-term value, not only for the consumers but also for Hims & Hers. Great, thank you.

In marketing efficiency away from the broad brand building, which it seems like it is going to be a majority of your investment in 'twenty four and beyond and then I guess with that I mean, you mentioned that as a greater proportion of your.

User base becomes as recurring.

Use there you're naturally going to get additional.

Patiency from your marketing line item. So I'm curious if there's any stats you can provide around retention rates churn rates.

What percent of your user base now is on the platform or X amount of months or years, it would be very helpful.

Yes, so I'll take the first part of the question. Thanks for the question Dan.

Yemi Okupe: Your next question comes from the line of Daniel Groslick, Light from City Group, please go ahead. Hey guys, thanks for taking the question and congrats on the strong results here. I want to stick with the marketing question, and Yemi, I appreciate all the details that you've given so far, but I'm curious, you know, one of your competitors, mostly on the mental health side, mentioned that they're seeing a decline in their marketing efficiency, and you obviously are going to start to see more leverage coming out in 24 and beyond, so I'm curious if you're seeing a similar degradation in marketing efficiency, away from the broad brand building, which it seems like is going to be a majority of your investment in 24 and beyond, and then I guess with that, Yemi, you mentioned that as a greater proportion of your user base becomes this recurring user, you're naturally going to get additional efficiency from your marketing line item, so I'm curious if there's any stats you can provide around retention rates, churn rates, what percent of your user base now is on the platform for X amount of months or years would be very helpful. Yeah, so to take the first part of the question, thanks for the question, Dan. You know, really our focal point is around still continuing to maintain the payback period of less than a year, which we have been able to do. CACs do, you know, tend to fluctuate across quarters. We've really not seen anything out of the norm.

Really our focal point is around still continuing to maintain a payback period of less than a year, which we have been able to do.

Tax do tend to fluctuate across quarters, we've really not seen anything out of the norm and there's a few reasons behind that and some of it is this unique to the way that our platform has positioned.

The first is what we oftentimes diversify across a broad set of channels as.

As long as we're constantly experimenting with new messages narratives to consumers and really the channels interconnect with one another and so as we started to invest in things like broad based campaigns, we're seeing that show up in terms of efficiency and some of our other marketing channels.

The second is really just the combination of having a diversified set of products across the ecosystem that we can message to your users were able to rotate capital across our specialties.

It really enables the ability to.

Drive greater efficiency across the entire ecosystem and lastly, what we're seeing is really the differentiated offering resonates with.

Our user base and as we are bringing both personalized solutions for those products.

Those are driving a greater and greater set of users. So we're actually seeing even in many instances where either drawing news of the platform, which resulted in <unk>, which has resulted in greater share capture across the ecosystem.

Take the second part of your question just around how were thinking around the overall marketing leverage ecosystem. The vast majority of our spend actually goes towards the acquisition of new customers and so as a result, as we continue to build a larger and larger base of existing users that are tenured on the platform.

Yemi Okupe: And there are a few reasons behind that, and some of it is just unique to the way that our platform is positioned. The first is that we oftentimes diversify across a broad set of channels, as well as constantly experiment with new messages, and new narratives to consumers. And really, the channels interconnect with one another.

And that inherently results and more leverage and so what we are seeing is that particularly with personalized products and some of the pricing changes that we made last year. The platform is getting even more stickier than it historically was and so as a result of that that gives us the conviction to start the call. The fact that we'll even received leverages early this year and you're not sure. If there's anything you wanted to.

Yemi Okupe: And so as we started to invest in things like broad-based campaigns, we're seeing that show up in terms of efficiency in some of our other marketing channels. The second is really just, you know, the combination of having a diversified set of products across the ecosystem that we can message to users. We're able to rotate capital across our specialties. It really enables the ability to.

Add to that as well.

Yes.

On the mental health side, one thing to point out I think there continues to be a lot of investment in that category, specifically on the clinical excellence side with med match, and our AI capability can be able to better predict how a patient is going to respond with different medications and obviously the trial and error that comes with mental health treatment.

Yemi Okupe: Jailendra Singh, Hims & Hers, Take the second part of your question, you know, just around how we're thinking around the overall marketing leverage, you know, ecosystem. The vast majority of our spend actually goes towards the acquisition of new customers. And so as a result, as we continue to build a larger and larger base of existing users that are tenured on the platform, that inherently results in more leverage. And so what we are seeing is that, particularly with personalized products and some of the pricing changes that we made last year, the platform is getting even stickier than it historically was. And so as a result of that, that gives us the conviction to, you know, start to call the fact that we'll even receive leverage early this year. And Andrew, I'm not sure if there's anything you wanted to add to that as well.

Quite brutal so I think over time, we're going to see a stickier relationship with those customers I think increased confidence in the brand increased trust in the brand.

So that category continues to be one of our iPhone specialties like we shared in the past growing triple digits.

And I think as we continue to lean into the clinical efficacy.

And then the potential personalized treatment options.

There is an opportunity for us to continue to lean in and continues to take fairly meaningful market share.

Yeah makes sense and then as a follow up you mentioned some investments you're making you've made in the <unk> and your affiliated pharmacies and that accounted for a majority of the big increase in the purchase of PPE.

Andrew Dudum: Yeah, thanks, Daniel. On the mental health side, you know, one thing to point out: I think there continues to be a lot of investment in that category, specifically on the clinical excellence side with MedMatch and our AI capabilities to be able to better predict how a patient is going to respond to different medications. And obviously, the trial and error that comes with mental health treatment is quite brutal.

Beginning this quarter, how should we think about.

Capex and investments needed in your website and App for 2024 and beyond is kind of an $8 5 million of the right run rate per quarter on PP&E, two and a half on website, how should we be thinking about that.

Yeah, Great question, Dan I think I think it's going to probably vary across quarter to quarter. So it's not necessarily going to be just like a neat neat investment I think that there is two key areas are two ways. We think around that one is it's expanding capabilities and capacity and so as we start to look to have a broader evolution of personalized offerings on the platform.

Andrew Dudum: So, I think over time, you know, we're going to see a stickier relationship with those customers, I think, increased confidence in the brand, increased trust in the brand, and so that category continues to be one of our highest-growing specialties, as we shared in the past, growing triple digits. And I think as we continue to lean into the clinical efficacy side and expand the potential personalized treatment options, there's an opportunity for us to continue to lean in and continue to take fairly meaningful market share. Yeah, it makes sense. And then as a follow-up, Yemi, you mentioned some investments you're making you made in the 4Q and your affiliated pharmacies and that accounted for the majority of the big increase in the purchase of PPE, PP&E this quarter. How should we think about CAPEX and investments needed in your website and app for 2024 and beyond, kind of an eight and a half million, the right run rate per quarter on PP&E Two and a half on on the website.

That is the one area of investment.

Another big area of investment.

Likely more likely to show up in late <unk> early issue is really around with a different level of scale profile that we currently have relative to most other players in the market that affords us the ability to start to leverage the balance sheet to automate processes within the affiliated pharmacies and so as a result that effectively makes the overall ecosystem Morgan session.

Paid back pretty quickly, but then also enables us to pass value back to consumers without or with very limited margin that margin degradation.

Got it thank you.

Your next question comes from the line of John Kim from TD Cowen. Please go ahead.

Alright. Thank you for taking my question just curious in your guidance how much of new product launches is baked in there and in euro opinion, what could drive potential upside and downside to guidance. Thank you.

Yemi Okupe: How should we be thinking about that? Yeah, great question, Dan. I think it's going to probably vary from quarter to quarter, so it's not necessarily going to be just like a neat investment. I think that there are two areas or two ways that we think about it. One is just expanding capabilities and capacity. So as we start to look to have a broader evolution of personalized offerings on the platform, that is one area of investment. The other big area of investment that's more likely to show up in late H1, early H2 is really around the different level and scale profile that we currently have relative to most other players in the market. That affords us the ability to start to leverage the balance sheet to automate processes within the affiliated pharmacies. And so as a result, that effectively makes the overall ecosystem more efficient, pays back pretty quickly, but then also enables us to pass value back to consumers without or with very limited margin degradation. Your next question comes from the line of Jonna Kim from TD Cowen. Please go ahead.

Yes, maybe I can start and then we'll hand it over to Andrew as well I think.

Inherently like what we are assuming is that the personalization offerings that we have across all of our specialties.

Actively continues to evolve and so we've seen a very rapid adoption.

Cross that over the years as we've rolled out new products now with 30% of the overall subscriber base seeking to adopt a personalized product.

The things that could drive further upside on is that if that adoption hoppers happens faster than we anticipate.

Or there are products with what we saw last year. When you rollout hard meant that users are drawn to and a faster way than we anticipated.

That could result in meaningful meaningful upside. The loss is we are very much in the early days of weight management that platform will and offering will continue to evolve. We're seeing early signs of traction historically, we've said that it takes 12 to 18 months too.

We really see a meaningful contribution from categories.

Yemi Okupe: Hi, thank you for taking my question. Just curious about your guidance, how much of new product launches is baked in there? And, in your opinion, what could drive potential upside and downside to guidance? Thank you. Maybe I can start and then we'll hand it over to Andrew as well.

But there is the potential for for that to be brought forward and Andrew are not representing that you wanted to Tulsa.

I'll also add to that.

Yeah, the only thing I'd add theres really a focus I think this year on depth right to focus on the core specialties that we outlined we believe those are exceptionally large when you look at the total Tam and the penetration rate.

Yemi Okupe: I think inherently, what we are assuming is that the personalization offerings that we have across all of our specialties effectively continue to evolve. And so we've seen a very rapid adoption of that across that over the years as we've rolled out new products. Now with 30% of the overall subscriber base seeking to adopt a personalized product, the things that could drive further upside if that adoption happens faster than we anticipate, or there are products we saw last year when we rolled out enhancements that users are drawn to in a faster way than we anticipated, that could result in meaningful upside. The last point is that we are very much in the early days of weight management, and that platform will, and offering will continue to evolve. We're seeing early signs of traction.

They are massive right you talked about 100 million people plus with 1% to 3% penetration rates. So there's still so many barriers for why people are not getting treated whether or not that's access or price or stigma or education or a lack of personalized choice. So I think we're continuing to go deeper in the core specialties.

And I think you'll see us offer a wider range of segmentation and portfolio across offerings and capabilities and product selection as well as technology capabilities in order to strengthen the confidence from a consumer's perspective that not only can you get great access to health and wellness and generic but you can actually get.

Yemi Okupe: Historically, we've said that it takes 12 to 18 months to really see meaningful contribution from categories, but there is the potential for that to be brought forward. And Andrew, I'm not sure if there's anything that you wanted to also add to that. Yeah, the only thing I'd add is there's really a focus this year on depth, right, to focus on the core specialties that we outlined. We believe those numbers are exceptionally large.

Clinically the best care for the core specialty specialties that we focus on.

Got it and just one more question in terms of the retention rate did you see any improvement compared to other quarters and what are you baking in in terms of retention rates for the next year. Thank you so much.

Yes, So I think we're very excited by the adoption of personalized products as we look into 2024, our belief is that.

Andrew Dudum: When you look at the total TAMs and the penetration rates, you know, they're massive, right? You're talking about 100 million people plus with 1%, 2%, 3% penetration rates. So there are still so many barriers to why people are not getting treated, whether or not that's access, price, stigma, education, or a lack of personalized choice.

As a greater share of users shift to those products.

Retention on the platform will be stickier than historically has across many of the more tenured specialties, we have seen some success with.

Some of the personalized offerings. The second is we're lapping the price effects will start to lap some of the pricing effects.

Andrew Dudum: So I think we're continuing to go deeper in the core specialties. And I think you'll see us offer a wider range of segmentation and portfolio across offerings and capabilities and product selection as well as technological capabilities in order to strengthen the confidence from a consumer's perspective that not only can you get great access to health and wellness at Hims & Hers, but you can actually get clinically the best care for the core specialties that we focus on. And just one more question.

From Q2 of last year and really what we've seen in the early signals is as we've put.

Many of the personalized offerings and longer duration subscriptions at more attractive price points, what drove the ability to breakeven last year. It was primarily around new users switching.

A different composition mix.

We're excited by in 2024 is that we do see the potential for even higher retention.

For those users that came on as well as the existing users that are on the on the on the platform just because the products are very uniquely differentiated and they're also at a very cost effective price points, which is a combination of those things gives us confidence.

Yemi Okupe: In terms of retention rates, did you see any improvement compared to other quarters? And what are your thoughts in terms of retention rates for the next year? Thank you so much.

Yemi Okupe: Yes, I think we're very excited by the adoption of personalized products as we look into 2024. Our belief is that as a greater share of users shift to those products, retention on the platform will be higher than it has been historically. Across many of the more tenured specialties, we have seen some success with some of the personalized offerings. The second is that we're lapping the price effects, or we'll start to lap some of the price effects from Q2 of last year. And really, what we've seen in the early signals is that as we've put many of the personalized offerings and longer-duration subscriptions at more attractive price points. What drove the ability to break even last year was primarily around new users switching and a different composition mix.

That retention will.

Continue to improve throughout 2024 as a result of that that's some of that is reflected in to the stronger guide.

Alright, thank you.

Your next question comes from the line of Jack Wallace from Guggenheim Securities. Please go ahead.

Thank you and thanks for taking my questions.

Wanted to ask the contribution question, a little differently with regards to the emerging categories.

Is there any way you can help give us a baseline for how those categories did in 'twenty three.

Because if I'm doing.

Doing the math here it looks like there's a pretty significant step up.

In those categories.

It seems to be a meaningful driver for the guidance.

Can you just help us unpack the kind of the relative contributions.

As we're thinking about the outlook. Thank you.

Yes, Jeff Great question.

Yemi Okupe: What we're excited about in 2024 is that we do see the potential for even higher retention for those users that come on as well as the existing users that are on the platform just because the products are very uniquely differentiated and they're also at very cost-effective price points. The combination of those things gives us confidence that retention will continue to improve throughout 2024. As a result of that, some of that is reflected in the Stronger Guide. All right, thank you.

Let me go into a bit of detail, but I think.

Instinctively correct right I think we're seeing the emerging categories first dermatology weight loss.

<unk> signed that momentum and I think the.

Early indications of high adoption rate of personalized products really reflects essentially the engagement and stickiness profiles.

Of those customers right you have some of our more tenured businesses the aggregate of the business around 30% adopting of this personalized product on the new emerging categories, you have 70, plus percent and hurt dermatology and nearly 100% and waste management. So I think it's reflective of the type of customer that stickiness of that relationship.

Yemi Okupe: Your next question comes from the line of Jack Wallace from Guggenheim Securities. Please go ahead. Thank you, and thanks for taking my questions. I wanted to ask the contribution question a little differently, with regard to the emerging categories. Is there any way you can help give us a baseline for how those categories did in 23? Because if I'm just doing the math here, it looks like there's a pretty significant step up in those categories, and it seems to be a meaningful driver for the guidance. Can you just help us unpack the kind of relative contributions? as we're thinking about the outlaw.

When you look at the composition of growth more and more of that competition is moving toward a lot of the new emerging categories, which we think are very large tan with that said I think we've also seen acceleration in the in the more tenured category as Dave adopted the wider blended portfolio with the new personalized operator, so there's that.

Yemi Okupe: Yeah, Jack, great, great question. I'll let you me go into a bit of detail, but I think instinctively correct, right? I think we're seeing the emerging categories for dermatology, and weight loss show exceptional signs of momentum. And I think the early indications of high adoption rates of personalized products really reflect essentially the engagement and stickiness profiles of those customers, right? You have some of our more tenured businesses; the aggregate of the business, around 30% is adopting those personalized products. On the new immersion categories, you have 70 plus percent in herb dermatology and nearly 100% in waste management.

We have ramp up happening with regarding with regard to Debbie.

The emerging categories, and I think it's giving us.

In combination with the more tenured success.

A lot of confidence to be able to at that high end of the range pull forward into 2025 guide of $1 2 million a $100 million EBITDA a year early so I think really exciting from everything that we're seeing already in the very beginning of the year.

Yes, I mean just to provide.

Additional color there Jack I think we 2023 saw success across both.

Tinder specialties as Andrew mentioned as well as some of the more emerging ones and.

And so really as we started to roll out new personalized products within some of the tendered specialties. We saw rapid adoption many of those many of those products across the portfolio and so that continues to drive success across the tendered offerings I think one of the beauties of overall model is that given the fact that you haven't now over $1 5 million.

Andrew Dudum: So I think it's reflective of the type of customer, the stickiness of that relationship. I think when you look at the composition of growth, you know, more and more of that composition is moving towards a lot of the new emerging categories, which we think are very large TAMs. With that said, I think we've also seen acceleration in the more tenured categories as they've adopted the wider blend of the portfolio with the new personalized offerings. So there's definitely a ramp-up happening with regard to the emerging categories, and I think it's giving us, in combination with the more tenured success, a lot of confidence to be able to, at the high end of the range, you know, pull forward the 2025 guide of So I think it's really exciting from everything that we're seeing already at the very beginning of the year.

Subscribers on the platform.

Across many different specialties were able to take efficiencies and learnings that we've already historically gotten and that we also continue to get with that scale and rapidly deploy them across some of the.

Newer and more emerging offerings and so as a result, what we are seeing is that oftentimes. Many of these are able to scale it even faster pace than some of our more tenured category. Historically have just because we're able to take the learnings across things like marketing segmentation messaging personalization and so forth and embed that into how we <unk>.

Right and wrong.

Got it.

Yemi Okupe: Yeah, I think just to provide some additional color there, Jack. I think we, you know, in 2023 saw success across both the tenured specialties, as Andrew mentioned, as well as some of the more emerging ones. And so really, as we started to roll out new personalized products within some of the tenured specialties, we saw rapid adoption, you know, of many of those many products across the portfolio. And so that continues to drive success across tenured offerings.

Thank you that's helpful. And then one thing maybe I didn't hear you say explicitly but im guessing as part of the outlook is that there is going to be the potential for some cross selling with inside your base model jockeys are updating our outlook.

In response to the strong fourth quarter results and the guide just wondering if there's any change in the growth algorithm between subscriber growth and.

Revenue per subscriber going forward. Thank you.

Yes at this time, our focus still remains on extending the subscriber base I think as Andrew mentioned in his prepared remarks as well is I think one of the questions previously.

Yemi Okupe: I think one of the beauties of the overall model is that, you know, given the fact that we now have over 1.5 million subscribers on the platform across many different specialties, we're able to take efficiencies and learnings that we've already historically gotten, and that we also continue to get, you know, with that scale, and rapidly deploy them across some of the newer and more emerging offerings. And so as a result, what we are seeing is that oftentimes, many of these are able to scale at an even faster pace than some of our more tenured categories historically have, just because we're able to take the learnings across things like marketing, segmentation, messaging, personalization, and so forth, and embed that into how we operate and run the newer categories. Thank you; that's helpful.

The overall terms across the specialties that we serve are massive and so while we are impressed with having over $1 5 million subscribers on our platform. The reality is there is a 100 million users across the country that are suffering from these specialties in some form or fashion.

So the ability to break down barriers and capture those is something that we view, we're very much in the early innings of <unk> subscriber growth will be the focus that said you are starting to see us innovate with.

Personalized offerings and things like that match, where we're starting to roll out things like multi condition treatments. We're also starting to think through.

Sure.

What are potential offerings that.

A user can simply get treated for multiple things and as we start to do that.

Yemi Okupe: And then, you know, one thing maybe I didn't hear you say explicitly, but I'm guessing it's part of the outline, is that there's gonna be the potential for some cross-selling inside your base. And as us model jockeys are updating our outlook in response to strong fourth-quarter results in the guide, just wondering if there's maybe any change in the growth algorithm between subscriber growth and your revenue per subscriber going forward Yeah, at this time, our focus still remains on expanding the subscriber base. I think, as Andrew mentioned in his prepared remarks, as well as I think in one of the questions previously, the overall TAMs across the specialties that we serve are massive. And so while we're impressed with having over 1.5 million subscribers on the platform, the reality is that there are 100 million users across the country that are suffering from these specialties in some form or fashion. And so the ability to break down barriers and capture those is something that we view we're very much in the early innings of.

I think that there will be a pretty sizeable unlock but the primary focus today remains on ensuring that across each of our specialty as consumers have an amazing experience and subscriber growth as the primary metric.

And Jack maybe just add one thing there I think I think in some way as the company's capabilities of the pharmacy continue to improve.

Having said, we're launching dual action capability triple action capabilities, we're treating.

For example on weight loss the many of the underlying conditions are positive and weight gain.

The platform I think is moving a little bit away from the simplistic concept that maybe cross sell.

And more tour.

More holistic care in that single offerings. So we might be treating you for Manitex will help but we're also treating you for cardiovascular risk profile.

That is a personalized offerings dual oxy capabilities by not fall as cleanly into a simple cross category cross sell but very much is a much deeper relationship with the customer in a way that is.

Andrew Dudum: And so subscriber growth will be the focus. That said, you are starting to see us innovate with personalized offerings and things like MedMatch, where we're starting to roll out things like multi-condition treatments. We're also starting to think through what are potential offerings that a user can simply get treated for multiple things. And as we start to do that, I think that there will be a pretty sizable unlock.

Offering multiple categories multiple conditions and ultimately we believe is a much stickier relationship.

Got it makes sense. Thank you.

Your next question comes from the line of Glenn SMT Angelo from Jefferies. Please go ahead.

Yemi Okupe: But the primary focus today remains on ensuring that across each of the specialties, consumers have an amazing experience, and subscriber growth is the primary metric. I think, in some ways, you know, as the company's capabilities at the pharmacy continue to improve, and as Yemi said, we're launching dual action capabilities, triple action capabilities, treating, you know, for example, weight loss, many of the underlying conditions or causes of weight gain. The platform, I think, is moving a little bit away from the simplistic concept of maybe cross-selling and more towards, you know, more holistic care in that So we might be treating you for men's sexual health, but we're also treating you for your cardiovascular risk profile. And that is a personalized offering with dual action capabilities might not fall as cleanly into a simple cross category cross sell, but it is very much a much deeper relationship with the customer in a way that offers multiple categories, multiple conditions, and ultimately, we believe, a much stickier relationship. It makes sense, Thank you.

Yes. Thanks for taking my question I actually I have one for each you Andrew I wanted to start with you and talked about weight loss is a little bit it sounds like some of the initially exuberant surround the potential to eventually sell DLP ones that sort of died down but it sounds like you're getting a lot of traction here and I'm kind of curious could you could you give us a little.

More in terms of the products that you're offering here and sounds like you're doing some personalized treatments and I'm kind of curious as to how you're doing that and how you are pricing for that product because it sounds like it's been.

A nice upside surprise for you.

Yeah. Thanks.

We're really excited by the launch we partnered and brought Dr. Craig <unk> into the into the <unk>.

Company, a couple of quarters back and since then have been really refining what we believe is a great clinical offering that goes under the hood of traditional weight management and more of what you find at a very high end obesity specialists, alright, somebody who is used to understanding the underlying causes of your weight gain that can be.

Yemi Okupe: Your next question comes from the line of Glenn Santiangelo from Jeffries. Please go ahead. Yeah, thanks for taking my question. I actually have one for each of you.

Andrew Dudum: Andrew, I want to start with you and talk about weight loss a little bit. It sounds like some of the initial exuberance around the potential to eventually sell GLP-1s has sort of died down. But it sounds like you're getting a lot of traction here. And I'm kind of curious, could you give us a little bit more in terms of the products that you're offering here? And sounds like you're doing some personalized treatments. And I'm kind of curious as to how you're doing that and how you're pricing for that product, because it sounds like it's been a nice upside surprise for you. Yeah, thanks, Glenn.

Things like insulin resistant metabolic disorder.

Heating habit depressive binge dynamic.

Treating those things directly which we have great confidence.

Meaningful clinical efficacy.

And helping people not only shed the weight, but also something thats sustainable and something that you can stay on repeatedly for a long period of time.

That offering I think it's something we're excited by in addition to you because it's also a mass market offering pricing that in the range of $70 per month, which is a simple cash price that has the holistic care of the platform.

Andrew Dudum: You know, we're really excited about the launch. We partnered and brought Dr. Craig Fremack into the company a couple of quarters ago, and since then, we have been really refining what we believe is a great clinical offering that goes under the hood of traditional weight management and more of what you'd find at a very high-end obesity specialist, right? Somebody who is used to understanding the underlying causes of your weight gain.

The specialist asset constant interaction and adjustments to your treatment as well as the personalized compounded treatment delivered to your door. So.

So we think it's incredibly valuable we think the holistic offering including the mobile application and the content is really compelling and has a lot of efficacy.

Andrew Dudum: This could be things like insulin resistance, metabolic disorders, eating habits, depressive binge dynamics, and treating those things directly, which we have great confidence will have meaningful clinical efficacy in helping people not only shed the weight but also something that's sustainable and something that you can, you know, stay on repeatedly for a long period of time. That offering, I think, is something we're excited about in addition because it's also a mass market offering, right? We're pricing that in the range of $70 per month, which is a simple cash price that includes the holistic care of the platform, the obesity specialist access, constant interaction and adjustment to your treatment, as well as personalized compounded treatments delivered to your door. So we think it's incredibly valuable. We think the holistic offering, including the mobile application and the content, is really compelling and has a lot of efficacy. And that's not to say that we're not still excited by the GLP-1s.

And it's not to say that we're not still excited by the <unk>, we very much expect us to be on the platform and would expect in the coming years for those to contribute very meaningful growth to the business.

I think very energizing to see the efficacy of those but we're also pretty excited by that the model that we brought to market as a first iteration and plan to continue to expand the portfolio and expand the offering and believe ultimately this category is going to be a.

Passive contributor to growth and I think we.

We are very encouraged by the response, thus far that that allows us to say that.

With the amount of people struggling it very clearly.

A really big opportunity to help a lot of people.

That's super helpful. Thanks for that detail.

I just wanted to ask you about the monthly on running Rev per subscriber.

Down a little bit sequentially, but if you look at the average order value that was up pretty meaningfully year over year and also pick up sequentially. So I'm wondering if you could just sort of reconcile those two data points, maybe give us a sense for is there any.

Andrew Dudum: We very much expect them to be on the platform and would expect in the coming years for them to contribute very meaningful growth to the business. It's, I think, very energizing to see the efficacy of those. But we are also pretty excited by the model that we brought to market as a first iteration and plan to continue to expand the portfolio and expand the offering and believe, ultimately, this category is going to be a massive contributor to growth. And I think we are very encouraged by the response thus far that allows us to say that. But with the amount of people struggling, it's very clearly a really big opportunity to help a lot of people. That's super helpful; thanks for that detail.

King changing with respect to mix or subscription duration or price or anything that would that would reconcile those two data points. Thanks.

Yeah, I think it's a great question, Glenn So I think it's a combination of the factors that you had.

Lines I think that we see.

Really our customers tend to go to longer duration subscriptions.

Those tend to have a higher average order baskets, but also come with an exchange for a longer term commitment generally lower.

Yemi Okupe: Hey, Yemi, I just wanted to ask about the monthly on-ramp per subscriber. You know, it ticked down a little bit sequentially, but if you look at the average order value, you know, that was up pretty meaningfully year over year and also ticked up sequentially. So I'm wondering if you could just sort of reconcile those two data points maybe and give us a sense of whether there is anything changing with respect to mix or subscription duration or price or anything that would reconcile those two data points? Thanks.

Monthly monthly rate and so you sign up for more at once but you get a lower monthly rates. We are seeing as a result of some of the pricing changes that we made in Q2.

Greater share of users opting for.

Subscriptions that are longer duration in nature and then there is you know just from quarter to quarter. There is.

Adjustments that happened in the overall product mix, but we would say is it's looking a lot of amendments that were seeing are.

Tend to be within the course of abnormal and so it's been relatively stable over the last last couple of quarters.

Yemi Okupe: Yeah, I think it's a great question, Glenn. So I think it's a combination of the factors that you had outlined. I think that we see, you know, really as customers tend to go to longer-duration subscriptions, those tend to have higher average order baskets but also come with an exchange for a longer-term commitment, generally a lower monthly rate. And so you sign up for more at once, but you get a lower monthly rate.

Thank you.

Your next question comes from the line of Joanne dressing from true as to Q3.

Please go ahead thank.

Thank you and thanks for taking my questions and congrats on a strong quarter and guide.

First question around balance sheet and cash flow a trend just wondering if you're willing to share your 2024 hour free cashflow expectations and related to that just wanted to get your thoughts on the capital deployment 220 million cash and short term investments on our balance sheet. How do you think of the blind guys you've talked about internal investments just curious if you have any plans to.

Yemi Okupe: So we are seeing, as a result of some of the pricing changes that we made in Q2, a greater share of users opting for subscriptions that are longer-duration in nature. And then there's, you know, just, you know, from quarter to quarter, there are, you know, adjustments that happen in the overall product mix. But, you know, we would say it's just like, you know, a lot of the movements that we're seeing are, you know, tend to be within the course of normal. And so it's been relatively stable over the last couple quarters. Thank you. Your next question comes from the line of Jailendra Singh from Truist Security. Please go ahead.

I'll get back in the mix on M&A and if there are certain capabilities that coupon to focus when it comes to M&A.

Thanks for the question so under it so I think that we have.

We do like the Optionality of the cash provides on the balance sheet.

That said I think the reality is like we are seeing the operating cash flow. We're generating has all but free cash flow that we're generating accelerated pretty meaningfully with north of $70 million of operating cash flow.

Deliver delivered last year I think in terms of how we think around the priorities as.

Yemi Okupe: Thank you and thanks for taking my questions and congratulations on a strong Quadrant Guide. My first question is around balance sheet and cash flow strength. Just wondering if you're willing to share your 2024 free cash flow expectations and, related to that, just wanted to get your thoughts on capital deployment, 220 million in cash and short-term investments on your balance sheet. How do you think of deploying cash? You talked about internal investments. I was just curious if you have any plans to get back in the mix on M&A and if there are certain capabilities or areas you plan to focus on when it comes to M&A. Thanks for the question, Jailendra.

As mentioned, we do see.

A meaningful opportunity to introduce new capabilities.

And to be affiliated pharmacies, both in the form of <unk>.

Capacity as well as a broader set of personalized offerings across the ecosystem.

And then what we also.

Do you see is there is the opportunity for M&A were going to hold a high bar for that I think that the types of the types of profiles and build that we would look to potentially consider would be similar to what we've done in the past, where it's extending a new capability or or expanding in new opportunity somewhat of what apostrophe provided but that probably would be the order.

Yemi Okupe: So I think that we do like the optionality that cash provides on the balance sheet. That said, I think the reality is that we are seeing the operating cash flow that we're generating, as well as the free cash flow that we're generating, accelerate pretty meaningfully, with north of $70 million of operating cash flow delivered last year. I think in terms of how we think around the priorities, you know, as mentioned, we do see a meaningful opportunity to introduce new capabilities into the affiliated pharmacies, both in the form of additional capacity as well as a broader set of personalized offerings across the ecosystem. And then what we also, you know, do is there is an opportunity for M&A. We're going to set a high bar for that.

Where we would leverage the balance sheet for capabilities blocked capacity personalize offerings, followed by some of the automation efforts that we talked around to increase the overall efficiency across the pharmacies.

And then lastly, I think that we will be opportunistic with M&A, but it is going to be primarily centered around.

The expansion of new capabilities as opposed to.

The acquisition of revenue.

That's that's helpful. And then my follow up is related to your comments around remaining flexible at all incremental pricing adjustments in future.

Can you help us with some of the key trends and metrics you will focus on with respect to your decision to do these adjustments in future also trying to better understand your assumptions around the competitive environment as part of your 24 guide.

Yemi Okupe: I think that the types of profiles of bills that we would look to potentially consider would be somewhat of what we've done in the past, where it's extending a new capability or expanding a new opportunity, somewhat of what Apostrophe provided. But that probably would be the order in which we would leverage the balance sheet for capabilities, flash capacity, personalized offerings, followed by some of the automation efforts that we talked about to increase overall efficiency across the pharmacies. And then lastly, I think that we will be opportunistic with M&A, but it's going to be primarily centered around the expansion of new capabilities as opposed to, you know, the acquisition of revenue. That's helpful.

Yes, I think it's a great question. So I think I mentioned in our shareholder letter we did provide some visibility into some of the competitive dynamics that we are that we are seeing and we're quite pleased by.

Many of the actions that we took in 2023 that enabled us to.

Effectively draw new users into the ecosystem, which resulted in greater market share capture.

As we look to make pricing decisions like we see.

Consider several factors, but ultimately at the end of the day like what we are looking for is does it yield a higher net present value across the category and that comes in the form of a higher LTV on each individual user where retention more than likely goes up to offset the pricing degradation or we're able to draw a different.

Yemi Okupe: And then my follow-up is related to your comments around remaining flexible around incremental pricing adjustments in the future. Can you help us with some of the key trends or metrics you will focus on with respect to your decision to do these adjustments in the future? I'm also trying to better understand your assumptions around the comparative environment as part of your 24 guide. Yeah, I think it's a great question.

User mix or more users into the ecosystem and so the changes that we saw in the second the second quarter of last year really were a reflection of.

A couple of quarters of test into to get that right and so we're continuously experiment in now to identify like what is the right mix to pass through some of that value to consumers, but it generally is expected to be those actions NPV accretive to any given specialty that we have.

Yemi Okupe: So I think in our shareholder letter, we did provide some visibility into some of the competitive dynamics that we are seeing. And we're quite pleased by many of the actions that we took in 2023 that enabled us to effectively draw new users into the ecosystem, which resulted in greater market share. As we look to make pricing decisions, we consider several factors. But ultimately, at the end of the day, what we are looking for is, does it yield a higher net present value across the category? And that comes in the form of a higher LTV on each individual user, where retention more than likely goes up to offset the pricing degradation, or we're able to draw a different user mix or more users into the ecosystem. And so the changes that we saw in the second quarter of last year really were a reflection of a couple quarters of testing to get that right.

Great. Thanks, a lot.

Your next question comes from the line of George Hill from Deutsche Bank. Please go ahead.

Hey, good evening, guys and thanks for taking the question I kind of wanted to piggyback on <unk> line of questions. There, which is as we think about the pricing action that you guys are looking to take and are taking.

I guess I mean is there any way to talk about like what should we think of as the benchmark. So I guess I'm just trying to I'm trying to get more color on how you guys evaluate the pricing actions. So we can evaluate.

The market dynamics, the same way that you guys do I don't know if its comparable prices at retail pharmacies as the cash prices is it like what's happening with underlying generic drug cost I guess.

Yemi Okupe: And so we're continuously experimenting now to identify what is the right mix to pass through some of that value to consumers, but it generally is expected to be those actions NPV created for any given specialty that we have. Great, thanks a lot. Your next question comes from the line of George Hill from Deutsche Bank. Please go ahead.

Any more information that you can give us around like kind of the inputs in the pricing decisions.

Yes, so I think it's less around I think it's less around what's happening with the external environment and I think it's really more around running experimentation.

Yemi Okupe: Hey, good evening, guys, and thanks for taking the question. I kind of wanted to piggyback on Jailendra's line of questions there, which is, as we think about the pricing action that you guys are looking to take and are taking, I guess, I mean, is there any way to talk about, like, what should we think of as the benchmark? So I guess I'm just trying to get more color on how you guys evaluate the pricing action so we can evaluate kind of the market dynamics the same way that you guys do. I don't know if it's comparable prices at retail pharmacies, is it cash prices, is it what's happening with underlying generic drug costs.

Across the ecosystem I think now the beauty of the model is having $1 5 million subscribers on the platform.

That gives us the ability to run several experiments at any given point in time from that we're able to determine.

Yes.

With the changes are those resulting in the types of behavioral patterns that we did see and then we're also able to estimate with our data science teams is that likely to be long term accretive and how much and so I think it's really more of experimentation.

<unk>.

Of opportunities across our platform and then really leaning into that versus trying.

Yemi Okupe: I guess just, I would just love any more information that you could give us around, like, kind of the inputs in the pricing decision. Yes, I think it's less around what's happening with the external environment. And I think it's really more around running experimentation across, you know, the ecosystem. I think now the beauty of the model is having 1.5 million subscribers on the platform. That gives us the ability to run several experiments at any given point in time. From that, we're able to determine the types of behavioral patterns that we did see, and then we're also able to, with our data science teams, estimate how likely that is to be long-term or creative and how much. And so I think it's really more of an experimentation of opportunities across our platform and then really leaning into that versus, you know, trying to compare to external factors because the offering that we are increasingly bringing to No, I think that's right.

Trying to compare to external.

Doctors, because we offer them that we are increasingly bringing to market is so different and Andrew not sure. If there's anything you wanted to it also.

Well.

No I think I think that's right.

I think George there's really not a lot of focus with regard to.

Maybe specific drug pricing or cost to generics or cost per cafe, because as Henry said holistic offering that patients are getting access to provider unlimited visits constant iteration and treatment to deliver the treatment content.

Whole thing.

It is really comparable to specific drug treatment I think in addition to the experimentation and optimization is kind of a longevity lifetime value analysis, what Jimmy was speaking to I think there's also just the very first principle perspective around understanding that in the core specialties. We operate in there are 100.

Plus people suffering.

So when you don't want to go after a mass market opportunity right, where we.

We don't aim to bring 500000, new subs on our platform, we aim to bring five or 10 million new steps onto the platform.

Andrew Dudum: I mean, I think, George, there's really not a lot of focus with regard to, you know, maybe specific drug pricing or cost of generics or cost of cash pay because, as Yemi said, the holistic offering that patients are getting from access to providers, unlimited visits, constant iteration, and treatment to deliver the treatment content, you know, that whole thing is, it's really incomparable to specific drug treatment. I think in addition to the experimentation and optimization of kind of a longevity, lifetime value analysis, which Yemi was speaking about, I think there's also just a very first principle perspective around understanding that in the core specialties we operate in, there are 100 million plus people suffering. And so when you want to go after a mass market opportunity, right, where we don't aim to bring 500,000 new subscribers on the platform; we aim to bring 5 or 10 million new subscribers on the platform.

And understanding that as you can leverage your scale and efficiency and bring that back into a customer's pocket you are unlocking different.

Graphics and stagnant.

And I think as we expand the portfolio of operating Youll see.

<unk>.

Expanding both on the high end for <unk>.

More of the premium experience as well as more on the mass market experience to get people that flexibility and welcome them into the tent.

No that's super helpful and if I could just have a quick follow up.

Just curious do you guys know what percentage of.

These are users.

Pay for the subscription with either an HSA Carter and FSA card.

I don't think we have that that direct visibility.

At this time I think the vast majority of our users as we stated previously do you have insurance and so but I don't think we have the direct split out of how many are using.

HSA FSA card.

Okay.

Andrew Dudum: There's just an understanding that as you can leverage your scale and efficiency and bring that back into a customer's pocket, you are unlocking different demographics and segments. And I think as we expand the portfolio of offerings, you'll see the expansion both on the high end for more of the freemium experience, as well as more on the mass market experience to give people that flexibility and welcome them. Now, that's super helpful.

Thank you very much thanks, guys.

Your next question comes from the line of Karen <unk> from Piper Sandler. Please go ahead.

Hey, good afternoon, guys. Thanks for taking the question and congrats on a really good quarter I wanted to touch on.

On the gross margin again, and kind of what you're embedding into expectations here for 2024. So you have taken some pricing actions that you are also seeing some scale benefits and other things that are off study. So is it fair to assume that gross margin should maybe there'll be expanding.

Yemi Okupe: I could just have a quick follow-up, Yemi. Do you guys know what percentage of your users pay for the subscription with either an HSA card or an FSA card? I don't think we have that direct visibility, you know, at this time. I think the vast majority of our users, as we have stated previously, do have insurance, and so, but I don't think we have the direct split of how many are using an HSA or FSA card. Thank you very much. Your next question comes from the line of Corinne Wolfmeyer from Piper Sandler. Please go ahead.

24, and then start contract in and moving down towards that 75% long term that youre talking about or how should we be thinking about that.

Factory there thanks.

Yes, so I think the path to seven into kind of the mid to or the mid seventy's that we've guided to.

Definitely going to be probably more more of a multiyear journey like that's not going to happen over the course of a couple of quarters.

We do see some pretty amazing opportunities in front of US you also continue to drive efficiency, whether that's in the form of just.

Yemi Okupe: Hey, good afternoon, guys. Thanks for the question, and congrats on a really good quarter. I want to touch a bit on the growth margin again and kind of what you're embedding into expectations here for 2024. So you have taken some pricing actions, but you're also seeing some scale benefits and other things that are offsetting. So is it fair to assume that gross margin should maybe still be expanding in 2024 and then start contracting and moving down toward that 75% long term that you're talking about? Or how should we be thinking about the trajectory there?

Volume negotiated rates that we have across our supply chain ecosystem or continued process improvements like looking to get more and more efficient around those as well as just the ability to automate from scale.

We will continue to evolve evolve that over.

In the course of several quarters as last years, but as mentioned we are actively looking for ways to give back to consumers, but that does take time to identify what are those what are the most optimal opportunities we're going to take our time to do that and for the past seven years is not going to happen over the course of.

One or two quarters or even a year, it's likely to be a multi multiyear journey.

Yemi Okupe: Yeah, so I think the path to, you know, seven, you know, kind of the mid to the mid 70s that we've guided to is definitely going to be more of a multi-year journey, like that's not going to happen over the course of like a couple quarters. We do see some pretty amazing opportunities in front of us to also continue to drive efficiency, whether that's in the form of just volume negotiated rates that we have across our supply chain ecosystem or continued process improvements, like looking to get more and more efficient around those, as well as just the ability to automate from scale. You know, we'll, you know, continue to evolve and improve that over the course of several quarters, you know, slash years.

Got it very helpful. And then is there any color you can provide on that.

Wholesale revenue this quarter I know, it's a small piece of the business, but it did grow pretty notably.

To call out there and then as we look forward and model forward is Q4 kind of the proper run rate to build off of.

Or should it be a little bit weaker going forward.

Yes.

Yeah. So I think the wholesale channel is one that remains more strategic in nature for us I think it's a relatively.

Small percentage of the business, but we do still be a very much a strategic from a springing eyeballs.

Two to the platform as we started to have found other mechanisms mainly in the form of <unk>.

Yemi Okupe: But then, as mentioned, we're actively looking for ways to give back to consumers. But that does take time to identify what those are, what are the most optimal opportunities, and we're going to take our time to do that. And so the path to the 70s is not going to happen over the course of, you know, one or two quarters or even a year; it's likely to be a multi-multi-year journey.

Brand spend while still important and the impact of that is.

Not necessarily to the same degree that it historically was and so I think that the guidance. We can provide is that we're not necessarily actively looking to expand that channel proactively that said there are periods where.

Yemi Okupe: Very helpful. And then, is there any color you can provide on the wholesale revenue this quarter? I know it's a small piece of the business, but it did grow pretty significantly. So anything to call out there?

A new merchant or a new supplier might want to be.

One of our offerings and so some of what we saw in Q4 was a result of that but that is not an active channel that we're seeking to rapidly expand.

Yemi Okupe: And then as we look forward and model forward, what is the proper run rate to build off of, or should it be a little bit weaker going forward? Yes, I think the wholesale channel is one that remains more strategic in nature for us. I think it's a relatively small percentage of the business, but we do still view it very much as strategic for just bringing eyeballs to the platform. But as we have started to find other mechanisms, namely in the form of brand spend, while still important, the impact of that is not necessarily to the same degree that it historically was.

Okay helpful. Thank you.

Your next question comes from the line of Ivan <unk> from Tigress Financial Partners. Please go ahead alright.

Alright, Thanks for taking my questions and congratulations on another great quarter and year in the great outlook.

As you start to work with.

Patients that are using <unk> as people start to reduce significantly reduce their food and caloric intake, it's going to create nutritional uneven protein deficiencies. How do you feel what do you feel your opportunity is to introduce products to help them manage that and how would you foresee let's say the adviser.

Yemi Okupe: And so I think that the guidance that we can provide is that we're not necessarily actively looking to expand that channel. That said, there are periods where a new merchant or a new supplier might want to boost one of our offerings. And so some of what we saw in Q4 was the result of that. But that is not an active channel that we're seeking to rapidly expand. Very helpful, thank you. Your next question comes from the line of Ivan Feinseth from Tigress Financial Partners. Please go ahead.

The doctor with a provider of cross selling.

Commending products like these.

Thanks, Kevin.

I think it's a great question.

We holistically believes that we can bring to market for each of these categories.

The true necessity of what is needed for success.

And I think each of the category likely has a different set.

Out of components for that I think in obesity management piece to your point, there's a pretty wide range there as often.

Andrew Dudum: Alright, thanks for taking my questions and congratulations on another great quarter and year and the great. As you start to work with patients that are using GLT, Significantly reduced food and calories will help them. www.mooji.org are the providers. Thanks, Ivan. I think it's, I think it's a great question. We, you know, I think we holistically believe that we can bring to market for each of these categories the true necessities of what is needed for success, and I think each of the categories likely has a different set of components for that. I think in obesity management, to your point, there's a pretty wide range. And there's often, you know, pharmaceutical intervention that helps make it easier. There's, you know, a very clear caloric and nutritional necessity. There's a basic movement necessity.

Pharmaceutical intervention that help make it easier, there's very clear caloric and nutritional necessity baked it in movement, either water intake or mental health sleep.

Protein supplementation.

Think about a business like weight watchers thats been around for a very long time at north of 3 million subscribers.

For decades, right I think that.

That business approach it with a couple of the components I think.

We have the privilege.

As a consumer oriented brand and really building these offerings ourselves holistically.

To be able to go to market with a wide range. So I could absolutely imagine, hence it hurts having supplementation offerings.

Andrew Dudum: There's water intake. There's mental health and sleep. There's protein supplementation.

Adding food replacement offering.

As part of the core obesity offering that we launched there is fairly holistic recipe nutritional information and guidance.

Andrew Dudum: You know, you think about a business like Weight Watchers that's been around for a very long time, and it has north of 3 million subscribers for decades, right? I think that business approaches it with a couple of components. I think we have the privilege as a consumer-oriented brand and really building these offerings ourselves holistically to be able to go to market with a wide range. So I could absolutely imagine Hims & Hers having supplementation offerings, having food replacement offerings.

So I think this category is one where you really need all hands on deck and theres, often five or six components to what makes that puzzle really coming together and be successful and so I think youll see us as we continue to scale that.

To evolve the offering and expand the operating to fill a lot of those different needs.

And then one more question and congratulations on the great year over year subscriber growth do you have any kind of data you could share as far as how you see.

Andrew Dudum: As part of the core obesity offering that we launched, there's fairly holistic recipe and nutritional information and guidance. So I think this category is one where you really need all hands on deck, and there's often five or six components to what makes that puzzle really come together and be successful. And so I think you'll see us as we continue to scale this to evolve the offering and expand the offering to fill a lot of those gaps. One more question.

Once the subscriber joins how they ramp up their purchases.

But what the percentage year over year change is how much the subscriber when they go from one to products and <unk> products et cetera.

Yes, it's great question, we haven't we haven't disclosed anything specific on that I think the best guidance I can probably give you.

Probably point to the personalization adoption.

Andrew Dudum: Congratulations on the great year-over-year subscriber growth. Do you have any kind of data you could share as far as how once a subscriber joins, how they ramp up their purchases, what the percentage year-over-year... Please see the complete disclaimer at https://sites.google.com. Yes, great question.

Gone essentially zero to north of 30% of subscribers on the platform.

You know being treated with the personalized offering and in the newer categories like dermatology in weight loss between 70, and 100% personal lines I would say that those personalized solutions for the most part.

Yemi Okupe: We haven't, we haven't disclosed anything specific about that. I think the best guidance I could probably give you is that you're probably pointing to the personalization adoption. You know, we've gone essentially zero to, you know, north of 30% of subscribers on the platform are being treated with a personalized offering, and in the newer categories like dermatology and weight loss, you know, between 70 and 100% personalized. I would say that those personalized solutions, for the most part, often include expanded value. They might include multi-dual action or triple action, supplements that counter some type of side effect or concern of the patient, or multiple dosages or custom dosages.

Often include expanded value.

They might include multi multi dual action or triple action or supplement that counter some type of side effects are concerned of the patient or multiple dosages are accustomed dosages and so I think the the rapid adoption of personalized treatment.

Yes.

Really exciting indicator for us.

The commitment to the platform and the Recommitment of this platform for patients that are.

In many situations upselling and adopting the new offerings that are coming onto the platform at very very mass market affordable prices.

Thanks.

Looking forward to a big 2024 for you.

Andrew Dudum: And so I think the rapid adoption of personalized treatments is, you know, a really exciting indicator for us of the commitment to the platform and the recommitment of the platform for patients that are, in many situations, upselling and adopting the new offerings that are coming onto the platform at very, very mass market affordable prices. Thanks and looking forward to a big 2024. Thanks, Ivan. Your next question comes from the line of Michael from Cherny Leerink Partners. Please go ahead, uh... afternoon evening, A lot of money. Jailendra Singh, Hims & Hers: Why is that?

Thanks, Kevin.

Your next question comes from the line of Michael from Cherny Leerink Partners. Please go ahead.

Afternoon evening, guys and thank you for the question a lot of mine have been addressed but I guess I just want to harp, a little bit more on the gross margin side.

It's great that you have the operating leverage to drive towards the long term margins as you outlined your army, but why is that level will go into mid to high seventies kind of right number in terms of the way you see pricing and tie back towards customer benefits just trying to understand how that fits into the broader scaling effect and as you settle on that number.

<unk>.

Whether you're on the pathway there or before you get there.

Landing in that number is the right level and is there potential variability to be upside or downside beyond that.

Yemi Okupe: Wildland, Yeah, thanks, Michael. I think it's a great, great question. So the teams, you know, do spend a lot of time running scenarios on what we call our North Star, which is effectively, you know, across a variety of different improvements to our model, as well as giving back to consumers. Where do we think that optimal equilibrium lands?

Yeah. Thanks, Thanks, Michael I think it's a great great question. So the teams do spend a lot of a lot of time running scenarios on like what we call as our North Star, which.

Which is effectively across a variety of different improvements to our model as well as give backs to consumers.

Where do we think that optimal equilibrium lamps, and so what we do see as Andrew mentioned, given the fact that we're not looking to add another 500000 million subscribers. We're looking to eventually bring on tens of millions of subscribers onto the platform.

Yemi Okupe: And so what we do see is that, as Andrew mentioned, given the fact that we're not looking to, you know, add another 500,000 or million subscribers; we're looking to eventually bring on 10s of millions of subscribers onto the platform, placing our offerings and having a segmented offering that's at different price points for different users is something that is fundamentally important to us. And so as we've started to run different scenarios, we think that we can offer that holistic suite both at the premium end, the mid end, and the mass market end at a margin profile that lands in the mid-70s. As mentioned previously, that will take some time. I think you'll see periods where margins, similar to last year, may actually expand as we unlock efficiencies in advance of that. But over time, we see the pathway to get to tens of millions of subscribers. Having a mass market offering as well is a critical element in that.

<unk> seen our offerings and are having a segmented offering with different price points for different users.

Nothing that is fundamentally important to us and so as we've started to run different scenarios. We view that we can offer that holistic suite, both the premium and the mid and mass market and.

At a margin profile.

Lands' end and the mid seventies.

You mentioned previously that will take some time I think youll see periods, where margins similar to like last year may actually expand as we unlock efficiencies in advance of that.

But over time, Mike we view the pathway to get to tens of millions of subscribers.

Having a mass market offering as well as they can.

Recall, a critical element to that.

Cool that's it from me.

Thanks, so much.

Operator: We have no further questions in our queue at this time, and with that, that does conclude today's conference call. Thank you for your participation. And you may now disconnect.

And we have no further questions in our queue at this time and it.

That does conclude today's conference call. Thank you for your participation.

And you may now disconnect.

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Sure.

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Sure.