Q3 2024 Hims & Hers Health Inc Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Christa and I will be your conference operator today.

At the time, I would like to welcome everyone.

2, Hims and hers, third quarter, April, earnings, conference call, all lines that they have placed on you to prevent any background noise. And after the speaker's remarks, fill the question in answer session. If you'd like to ask a question during this time, simply press star, follow the number one, tell someone.

Speaker Change: and if you like the question, I think you. I turn the conference over to Bill Newby, head out to the surrelations, Bill, Yemi begin.

Bill Newby: Good afternoon everyone and welcome to the Henson Herself 3rd Quarter, 2024 earnings call. Today, after the market closed, we released this quarter shareholder letter, a copy of which you can find on our website at investors.him.com.

On the call as we today, Andrew Dudum, are co-founder and chief executive officer, Yemi Okupe, or Chief Financial Officer, and Dr. Patrick Carroll, or Chief Medical Officer.

Before I hand it over to Andrew, I need to remind you of legal safe harbor and cautionary declarations

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.

BCR most recently filed 10-K and 10-Q reports for discussion of risk factors as they relate to forward-looking statements.

In today's presentation, we will also have certain non-GAAP financial measures. We refer you to the reconciliation tables to 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.hens.com.

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

Speaker Change: And with that, I will turn the call over to Andrew.

Andrew: Thanks, Bill.

Andrew: Strong momentum from last quarter continued into the second half as we further expanded capabilities on our platform to help millions of consumers feel great through the power of better health.

Andrew: and many others. Thank you. Thank you.

Andrew: We made considerable progress across several dimensions that consumers value, including the speed with which they can access providers and personalized solutions to address their needs,

Andrew: The convenience and transparency provided by our world-class technology platform. And lastly, the breadth of personalized solutions that enables them to address concerns across our specialties in a more unique and customized way.

Andrew: Ongoing success in the delivery against our mission is translating into exceptional business results.

Andrew: Year-over-year revenue growth accelerated 25 points quarter-over-quarter to 77% as we surpassed $400 million in revenue in the quarter.

Andrew: A disciplined approach to investment enabled us to surpass $50 million in adjusted EBITDA, reflecting a 13% adjusted EBITDA margin.

Andrew: Our strategy of offering high-quality personalized solutions at mass market prices continues to resonate with consumers.

Andrew: We ended the third quarter with over 2 million subscribers and north of 50% of subscribers utilizing a personalized solution.

Andrew: We believe there are four primary factors driving rapid adoption of personalized solutions.

Andrew: The FIRST is a continuous expansion of personalized solutions within new specialties.

Andrew: During the third quarter, we launched access to personalized titration schedules and dosing for semaglutide within weight loss.

Andrew: The second is scaling the number of compelling multi-condition solutions available on our platform that draw in a broader set of users.

Andrew: This includes access to personalized treatments that address multiple concerns, both within and across specialties.

Andrew: The third is a wider selection of form factors, unlocking access to solutions that can now be utilized via chewable or topical solution and in the near future, gummy.

Andrew: And finally, as these solutions and our underlying capabilities expand, we're able to offer them at more accessible price points, strengthening a high-value proposition for our customers that we believe is unmatched.

Andrew: Each of these developments allows us to service a broader set of consumer needs, which we believe will ultimately support more consumers sticking with their treatments and achieving positive outcomes.

Andrew: All of our specialties have benefited from this innovation, and we're seeing it have significant impact on the HERS brand.

Andrew: I've always believed that the HERS brand has the potential to eventually match, if not surpass, the size of the HIMS brand. As we surpassed 400,000 HERS subscribers in the third quarter, across specialties such as dermatology, dental care, and dentistry.

Andrew: It is becoming increasingly clear that this area of our business is at an inflection point.

Andrew: In response to this accelerating trajectory, we are excited to announce the addition of Dr. Jessica Shepard, who recently joined us as Chief Medical Officer of HERS.

Andrew: A board-certified OB-GYN, Dr. Shepherd has served patients for nearly 20 years across health issues top of mind for women, including endometriosis, sexual health, menopausal health, fibroids, and narrowing health disparities for women.

Andrew: More recently, she has run a clinic that has offered personalized solutions across weight management, hormonal therapy, and dermatology.

Andrew: Our expanding platform continues to make significant strides in unlocking access to a level of care that has historically been available to only the most privileged segments of society.

Andrew: As our platform continues to scale, we are seeing an increased ability to reach some of the most vulnerable populations across America.

Andrew: We've seen an increase in individuals from less affluent communities joining and retaining on our platform, as we have made access to personalized solutions and high-quality care available at mass market prices.

Andrew: We ended the third quarter with over 400,000 subscribers on the platform from Zip Codes, where the average household income is below $50,000, with nearly 40,000 of those subscribers in weight loss.

Andrew: Similarly, we are seeing an increase in subscribers from older communities, where we often see mobility issues, financial constraints, and in the case of weight loss, lack of Medicare coverage, present barriers to treatment.

Andrew: Over 100,000 of our subscribers, as of quarter end, are over the age of 65, with nearly 7,000 of those accessing a weight loss solution.

Andrew: And finally, many individuals who spend their lives caring for others and keeping our country safe and healthy often face roadblocks when seeking access to medical care.

Andrew: This includes teachers that educate our communities, first responders that save lives, and military personnel and veterans that keep us safe.

Andrew: I'm incredibly proud of our Service Appreciation Initiative, which launched on September 18th and allowed us to offer U.S. military, veterans, teachers, nurses, and first responders access to personalized, compounded, GLP-1 weight loss solutions for as low as $99 per month.

Andrew: Underpinning our ability to bring this type of value to our consumers is scale. And more importantly, scale that is supported by a continuously advancing technology platform.

Andrew: Our platform is enabling us to democratize a high standard of care historically accessible by only a small population.

Andrew: Consumers on our platform have the ability to message providers and generally address concerns within hours, as opposed to days or weeks.

Andrew: Access follow-up care on-demand, which is especially beneficial in high-touch areas like mental health and weight loss. And seamlessly access providers from the comfort of their own home, outside of traditional working hours, minimizing disruption to income from time lost commuting or sitting in a waiting room.

Andrew: We believe this has translated into remarkable success by drawing new customers to the platform and providing the kind of personalized support we believe is critical for patient adherence and positive outcomes.

Speaker Change: I'd like to pass it over to our Chief Medical Officer, Dr. Patrick Carroll, to briefly talk through some of the dynamics we're seeing in some of our higher touch specialties.

Speaker Change: Thanks, Andrew. Over the course of 40 years of running my own medical practice and overseeing health care institutions, I have heard again and again that one of the deepest desires for medical providers was to spend more time with patients and offer them a deeper level of care.

Andrew: There are several hurdles that impact disability for medical providers.

Andrew: which unfortunately only increased for many in recent years.

Andrew: These include, first, the time medical providers lose across their day as a result of navigating numerous administrative tasks with inefficient tools.

Andrew: and the need to operate on a non-intuitive technological platforms that are not designed for patients or providers.

Andrew: Kim's and hers ability to remove these hurdles

Andrew: Through thoughtful business practices and innovative technology centered on providing exceptional care to patients has unlocked an ability for medical providers to offer a deeper level of care to patients.

Andrew: This has been particularly transformational in traditionally higher touch areas such as weight loss.

Andrew: We believe GLP-1s have the ability to have a tremendous impact on society.

Andrew: However, several barriers prevent them from unlocking their full potential.

Andrew: Studies have shown that intolerable side effects like gastrointestinal issues and substantial muscle loss

Andrew: Less than desired frequency of engagement with providers and lack of access to affordable solutions result in less than 70% of patients continuing the medication after four weeks of treatment.

Andrew: That number falls further to 42% by 12 weeks.

Andrew: Across the HIMSS and HERS platform, we have seen strong retention rates for compounded GLP-1 solutions.

Andrew: At four weeks, 85% of GLP-1 patients are engaging with the platform, including through continuation of care, completing a check-in, or proactive engagement with the provider.

Andrew: By 12 weeks, we observed 70% of patients continuing with their subscription.

Andrew: We believe there are four primary drivers of these great results.

Andrew: First, our platform enables consistent provider communication.

Andrew: By 4 weeks, patients have typically had at least 3 engagements with the provider on the platform. And by 12 weeks, they've had an average of 5 engagements.

Andrew: Once a patient reaches the end of their titration schedule, providers still engage with patients on average of at least once a month.

Andrew: This level of service would be incredibly challenging to offer at scale to the average consumer in the typical brick and mortar setting.

Andrew: Thank you for watching. See you next time.

Speaker Change: Second, technology on our platform removes administrative overhead on providers and equips them with products and tools to better address individual patient needs.

Andrew: Providers on the HIMSS and HERS platform have access to tools with a proprietary EMR that automate notes on patients, programmatically flag certain risk and leverage structured data to help them highlight important concerns and dynamics for providers.

Andrew: Additionally, capabilities such as MedMatch by HIMS and HERS, a proprietary AI technology, support providers in identifying ways to balance weight loss results with the side effect management, including medication and titration schedule adjustments.

Andrew: Third, a wide breadth of personalized doses options means that providers on our platform can serve a broader set of patients.

Andrew: Standard doses will work for many patients.

Andrew: However, given the diversity of obesity challenges across the American population and the concerns many have with common side effects.

Andrew: like nausea, vomiting, diarrhea, and muscle loss or sarcopenia, we expect there are millions of individuals who stand to benefit from personalized dosages.

Andrew: Finally, based on customer-reported data from more than 10,000 subscribers on a personalized weight loss program who have reached their 28-day check-in,

Andrew: and several thousand of those.

Andrew: who have reached the 56-day check-in. These patients are seeing results and are indicating they are excited to continue accomplishing their goals.

Andrew: We have seen customers lose on average of 4.1% of their initial body weight in their first four weeks, while customers who have reached the eight-week mark have lost 5.5% of their initial body weight.

Andrew: We believe the clinical benefits of the care and personalized solutions available through our platform are clear, as we are seeing more consumers continue with their medication schedules and report positive outcomes.

Andrew: While both our mental health and weight loss specialties are in their early innings, I am excited by the foundation that we are laying with capabilities that we expect will expand over time.

Speaker Change: Thanks for those insights, Dr. Carroll. As we enter the final months of 2024, I'm so excited by the momentum we are seeing and how all of the pieces we've built over the last seven years are coming together.

Andrew: Our brand continues to connect with customers and is increasingly becoming known as a leader in high-quality personalized solutions.

Andrew: Each of our strategic pillars, a trusted brand, leading technology platform, innovative product and services, and clinical excellence are coalescing in a way that is enabling us to bring increased value to our subscribers at a rapid pace.

Andrew: We see the benefit in this with respect to how our weight loss specialty has rapidly scaled over the course of the last year.

Andrew: While the regulatory landscape continues to evolve, the data we are seeing on our platform suggests widespread difficulty accessing name-brand GLP-1 solutions.

Andrew: And a resolution of the GLP-1 shortage would not be possible without the potential disruption of care to hundreds of thousands of Americans.

Andrew: In the last two months, a total of over 80,000 reports have come through our platform from consumers that have been unable to obtain name-brand GLP-1 treatments.

Andrew: And we're seeing the number of consumers voicing their frustration increase, not decrease, in recent weeks. In fact, on a single day last week, we saw nearly 2,000 indications from individuals that have been unable to obtain name-brand GLP-1s.

Andrew: Consumers are doing their part to ensure their voices are heard, and we are actively communicating with federal and state legislative and regulatory bodies to share the experience of our customers and the dynamics that we're seeing across our platform.

Andrew: Our belief is that the principles that have unlocked success in other specialties provide a path for weight loss to continue to succeed when the shortage is ultimately resolved.

Andrew: Having a breadth of solutions that continues to expand enables us to fulfill different consumer requirements and needs while building a specialty that can be increasingly durable.

Andrew: We launched access to a holistic weight loss program last November for as low as $79 per month, including access to personalized oral-based solutions aimed at addressing the underlying drivers behind an individual's weight gain.

Andrew: Our customers using personalized oral medications as part of the Holistic Program have reported weight loss results that are on average at least 70% of the numbers being self-reported by customers utilizing compounded GLP-1s on the platform.

Andrew: The addition of GLP-1s further expanded our weight loss offering and unlocked access to these potentially life-changing solutions for a broader portion of the American population.

Andrew: Next, we plan to bring Lyra Glutide, the first generic GLP-1 in the market, to the platform in 2025.

Andrew: We have already confirmed a core supplier for this edition, and over the next few months, expect to finish completing test and batch validation, as well as confirming certificates of authenticity.

Andrew: Our technology platform enables us to support consumers in identifying their options and help providers match their patients with the most appropriate solution for an individual's personal clinical need.

Andrew: Consumer's ability to maintain frequent communication with providers as they progress through their treatment with products like GLP-1s can help them effectively balance side effect concerns with weight loss goals.

Andrew: We are continuing to actively invest in our 503A facilities, which we expect will enable us to continue offering personalized weight loss solutions on the platform over the long term.

Andrew: The ability to bring significant value to consumers by democratizing access to high-quality, personalized solutions at affordable prices has enabled us to quickly achieve scale.

Andrew: Continued execution on this front provides me with confidence that we can fulfill our ambitious aspiration of having every household in the U.S. using HIMSS and HERSS for their personalized health and wellness needs.

Speaker Change: With that, I will pass it over to Yemi to walk through our financials and outlook for the remainder of the year in greater detail.

Yemi Okupe: Thanks, Andrew. I will start by providing an overview of our third quarter financial performance and then discuss our updated outlook for 2024.

Yemi Okupe: To date, 2024 has shaped up to be a transformational year with exceptional momentum across several areas of our business.

Yemi Okupe: We are excited to see what was already a strong trajectory accelerate in the third quarter.

Yemi Okupe: It is becoming increasingly clear that there is tremendous consumer demand for the value that our platform brings, as well as for high-quality personalized solutions at accessible prices.

Yemi Okupe: In the third quarter, revenue increased 77% year-over-year to $401.6 million, with ongoing strength coming out of our online channel.

Yemi Okupe: Online revenue was $392.6 million, up 79% from the third quarter of last year.

Yemi Okupe: Expansion of our online subscriber base continues to remain the primary driver of growth across the platform.

Yemi Okupe: Our subscriber base grew at a record-level pace, with over 180,000 net subscribers added in the third quarter.

Andrew: We ended the quarter with over 2 million subscribers, representing a 44% increase from the third quarter of last year.

Andrew: While our GLP-1 offering is resulting in incremental users coming to the platform, the majority of our subscriber growth is coming from our non-GLP-1 related offerings.

Yemi Okupe: Our subscriber base, excluding GLP ones, grew approximately 40% year-over-year. Our continued success at growing our subscriber base can largely be attributed to continued innovation across our portfolio of personalized solutions.

Yemi Okupe: We are pleased to achieve our goal of bringing the value of personalized solutions and care to over 1 million consumers by year-end, a quarter early.

Yemi Okupe: We are seeing the value to customers of personalized solutions reflected on the platform in two primary ways.

Yemi Okupe: The first is through an ability to draw a broader audience of users who may have historically struggled to find treatments that meet their clinical needs.

Yemi Okupe: Personalized solutions enable us to reach a broader set of consumer phenotypes that come with different clinical requirements, concerns, and goals.

Yemi Okupe: For example, through innovative form factors and dosages, we are able to provide access to differentiated solutions and messaging to the individual that has suffered from hair loss for years, relative to the individual earlier on in their journey and more interested in preventative measures.

Yemi Okupe: North of 65% of new subscribers benefited from a personalized solution in the third quarter, and we believe this number can continue to grow with continued innovation to meet customers' clinical needs.

Yemi Okupe: The second way we are seeing personalization demonstrate value is through higher retention, which we believe reflects increasing consumer satisfaction.

Yemi Okupe: User feedback around factors that prevent them from adopting or adhering to a treatment is a core part of the design process for personalized solutions.

Yemi Okupe: With greater customization for individual clinical needs at affordable prices, we are seeing retention drift higher across many of our specialties.

Yemi Okupe: For example, in some subspecialties of women's dermatology, we are seeing annual retention increase by more than 20 points year-over-year, as the mix of those utilizing a personalized solution increased 40 points year-over-year to approximately 70% of the specialty.

Yemi Okupe: We believe that with continued innovation and personalization for individual clinical needs, these benefits will continue to compound across specialties in the future.

Andrew: Thank you very much.

Andrew: A continued shift to more premium personalized offerings has been one contributor towards this dynamic, which is offset headwinds from a migration toward longer duration commitments that carry a lower average monthly price.

Andrew: The success of our weight loss specialty has been another key driver in the increase in monthly online revenue per average subscriber through two mechanisms.

Andrew: Firstly, our weight loss solutions carry a higher monthly average price relative to other product offerings.

Andrew: Historically, our offerings have ranged from $35 to $55 per month, depending on specialty and duration.

Andrew: Our Oral Weight Management offering starts at $79 per month, and our GLP-1 offering generally starts at $199 per month.

Andrew: Secondarily, many of our existing subscribers to other specialties are adopting weight loss solutions, and subscribers that come to the platform initially for weight loss are subsequently adopting solutions across other specialties.

Andrew: In the third quarter, 20,000 subscribers that acquired a weight loss solution were pre-existing customers and 20% of weight loss subscribers had a multi-specialty relationship with Hems & Hers.

Andrew: Increased multi-specialty adoption from our subscribers has been largely organic.

Andrew: In the third quarter, nearly 300,000 subscribers were treated for two or more conditions on the platform, inclusive of subscribers on a single treatment with multi-condition capabilities.

Andrew: As we continue to broaden the variety of solutions across specialties, and elevate the number of multi-condition personalized treatments, we expect the number of multi-condition subscribers to continue to increase.

Andrew: In 2025, we expect to elevate the consumer experience for our multi-specialty subscribers through technological advancements on our platform. We believe this carries immense potential to drive higher retention as users receive multiple benefits.

Andrew: Effective execution of our Capital Allocation Framework has enabled us to maintain a robust margin profile while simultaneously accelerating revenue growth.

Andrew: In the third quarter, adjusted EBITDA was $51.1 million, increasing four times relative to last year.

Andrew: Adjusted EBITDA margin expanded more than seven points year-over-year to nearly 13% as efficiency gains in operating expenses offset an expected degradation in gross margin associated with new product launches.

Andrew: Gross margin declined two points quarter over quarter and was 79% in the third quarter.

Andrew: Scaling of the weight loss specialty was the primary driver of this margin degradation.

Andrew: As we highlighted last quarter, lower margins are a common dynamic we often see early in an offering's lifecycle.

Andrew: As the offering continues to scale, and we are able to unlock efficiencies from automation and verticalization, we expect to offset a portion of these gross margin headwinds in the future.

Andrew: Management of our operating cost structure enabled us to offset pressure from gross margin headwinds.

Andrew: G&A Cost as a Percentage of Revenue improved 5 points year-over-year and 2 points quarter-over-quarter to 11%.

Andrew: GINA expenses may fluctuate from quarter to quarter, but in the midterm, we see continued opportunity for leverage.

Andrew: Operations and support costs as a percentage of revenue improved two points year over year and one point quarter over quarter to 12%.

Andrew: We expect continued efficiency gains in these areas over the mid- to long-term as we benefit from scale efficiencies and further leverage technologies like clever routing to improve the performance of our customer support and care teams.

Andrew: Marketing as a percentage of revenue improved six points year-over-year to 45 percent, marking a new record in our history as a public company for the second quarter in a row.

Andrew: The growing emphasis on personalized solutions, along with the maturation of newer customer groups introduced to favorable pricing models, is enhancing our retention rates.

Andrew: Additionally, we are seeing continued success in acquiring customers through more cost-effective channels as awareness of the Hems and Hers brands grows.

Andrew: As we expand in categories where consumers feel more comfortable discussing their experiences, these factors are driving both growth and customer loyalty.

Speaker Change: Net income was $75.6 million in the third quarter and included a $60.8 million tax benefit related to the release of a tax valuation allowance, partially offset by current period tax expense.

Andrew: Recall I highlighted this possibility last quarter due to our improving certainty around long-term profitability resulting in the increased likelihood and utilization of our deferred tax assets.

Andrew: Our income before taxes was $23.6 million for the third quarter, which excludes the total income tax effects, which were impacted by the Valuation Allowance Release.

Andrew: Excellent execution across the business continues to result in improving cash flow dynamics, putting us in a great position to strategically invest in growth, return capital to shareholders, and further strengthen our balance sheet.

Andrew: Solid free cash flow of $79.4 million in the third quarter enabled us to make strategic investments and increase cash and short-term investments on our balance sheet by nearly $27 million quarter over quarter to $254 million.

Andrew: In the third quarter, we saw what we believed to be a meaningful disconnect between the market value and intrinsic value of our stock.

Andrew: At the end of the quarter, there is $70 million remaining on our $100 million share repurchase authorization.

Andrew: Before going into our outlook for the remainder of the year, I'd like to reiterate our capital allocation priorities and give additional insight into how we intend to utilize our balance sheet.

Andrew: Given the momentum we are seeing across the business, we continue to believe our model is positioned to help tens of millions of individuals.

Andrew: As such, our first priority remains in ensuring that our platform has the necessary capabilities in place to meet the growing needs of our subscribers.

Andrew: While CapEx investment has been moderate through the last two quarters, we expect more significant investment during the fourth quarter as we further evolve our capabilities.

Andrew: These investments will primarily go toward two areas of focus.

Andrew: First, increasing our capacity to provide more individuals with access to a personalized solution uniquely designed to address their clinical needs.

Andrew: We expect these investments will position us to continue expanding the variety of form factors, multi-condition treatments, and dosage options available to our customers.

Andrew: Second, increasing the level of automation at each of our affiliated facilities. We expect these investments to drive greater efficiency and allow us to unlock more value for consumers, strengthening our competitive position while allowing an increasingly wider portion of the population to access the solutions available on our platform.

Andrew: We will continue to explore opportunities to expedite the evolution of our platform through strategic M&A transactions.

Andrew: While we set an extremely high bar in this regard, the MetaSource acquisition is a great example of our willingness to deploy our balance sheet towards high-value assets that we feel will accelerate our corporate strategy.

Andrew: With that backdrop, I'd like to provide the final update for our 2024 outlook.

Andrew: In the fourth quarter, we are anticipating revenue in the range of $465 to $470 million, representing a year-over-year increase of 89 to 91 percent.

Andrew: We expect adjusted EBITDA to be between $50 to $55 million, representing an adjusted EBITDA margin of 11% at the midpoint of both ranges.

Andrew: For the full year, we are anticipating revenue of between $1.46 to $1.465 billion, representing a year-over-year increase of 67 to 68 percent.

Andrew: Lastly, we expect 2024 adjusted EBITDA will be between $173 and $178 million.

Andrew: These adjusted EBIT and revenue ranges imply an adjusted EBIT margin of 12% at the midpoint of both ranges.

Andrew: Embedded in our outlook is an expectation for more substantial investment in marketing in the fourth quarter relative to prior quarters.

Andrew: Current momentum of the business provides us with confidence to continue to drive 1-3 points of marketing leverage per annum and achieve our goal of adjusted EBITDA margins of at least 20% no later than 2030.

Andrew: Continue to gross margin degradation is expected in the fourth quarter as our weight loss specialty continues to gain traction.

Andrew: Capital investment will start to re-accelerate as we invest in capabilities that we expect will enable us to fulfill an increasing portion of demand for GLP-1 solutions through our affiliated pharmacies and bring new solutions to the platform in 2025, such as Liraglutide.

Andrew: We believe these investments will enable us to bring the benefit of our platform to tens of millions of users across weight loss and our other specialties.

Andrew: Our business has always centered on our subscription platform, but now more than ever, the majority of our revenue is derived from recurring subscription revenue. The focus of our strategy is centered around acquiring, retaining, and expanding our relationships with our subscribers.

Andrew: As a result, we will no longer report on orders and average order value after our 2024 10-K filing.

Andrew: Our trajectory in 2024 has been nothing short of phenomenal due to excellent execution across the organization.

Andrew: The business trajectory, as well as the current investments in capabilities and talent, are setting a robust foundation for 2025.

Andrew: More and more consumers are coming to the platform as we continue to expand technological capabilities in our breadth of solutions.

Andrew: We are drawing world-class providers onto the platform as a result of our technology's ability to help them focus on treating patients versus handling administrative burdens.

Andrew: Exiting in the year with over 1 million subscribers on the platform benefiting from personalized solutions and many more consumers benefiting from the potential our platform can bring is a clear signal that our strategy is resonating across America.

Andrew: Our ability to drive these incredible results would not be possible without the ongoing commitment and dedication from every team member at Hims and Hers.

Andrew: I'd like to thank them, as well as all of our customers, partners, and shareholders for supporting us in our mission of helping the world feel great through the power of better health. With that, I will now turn it over to the operator for questions.

Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.

Speaker Change: And if you'd like to withdraw that question, again, press star 1.

Speaker Change: We ask that you limit yourself to one question and one follow-up. Your first question comes from the line of Alan Lutz with Bank of America. Please go ahead.

Alan Lutz: Good afternoon. Thanks for taking the questions. I didn't think that I caught it on the prepared remarks, but are you providing what the GLP-1 contribution was in the quarter? Either members or revenue would be fine.

Alan Lutz: This is an uncorrected transcript. Transcribers' names are listed in the official Wayne State-appointed journal of the State of Washington. Readers should consult with a professional financial advisor prior to installing this

Alan Lutz: Thanks for the question, Alan. This is Yemi. We provided the year-over-year growth rate of the subscriber base, excluding GLP-1s, so that number was north of 40% year-over-year.

Alan Lutz: Thank you for tuning in.

Speaker Change: Okay, got it. And then Andrew, you mentioned a belief that we can continue to succeed when the shortage is ultimately resolved.

Alan Lutz: You mentioned a lot of different opportunities.

Alan: in the shareholder letter. But can you kind of describe to us what do you think the GLP-1 business looks like a year from now? You mentioned different factors. You mentioned world business growing. You mentioned Lyric Blue Tide. How should we think about the way that you're thinking about the GLP-1 business maybe this time next year? Thanks.

Speaker Change: I think like all of our specialty, we're looking at a diverse breadth of portfolio within the product assortment.

Alan: And so when you look at the weight loss business, you know, the oral business, which we launched

Alan: the fastest business to 100 million run rate that we had on the platform.

Alan: That business is delivering 70% of the weight loss of GLP-1 medicines for $70 per month. You then have medications like Liraglutide, which are generic medications now coming to the platform in 2025.

Alan: You have, when it comes to on-patent, off-brand medications like Simaglutide, the ability to hyper-personalize for the millions of patients that need to mitigate those side effects of muscle loss and nausea and vomiting. So we think the composition of all of those different avenues will enable quite a durable business across weight.

Alan: And that really, I think, is regardless of whether or not that shortage dynamic happens.

Alan: you know, in a couple of months or next year or years from now. You know, I think the precedent specifically on the GLP-1 side for personalization and compounding through the 503A has existed for many, many years.

Alan: And I think the regulators, the legislators, the drug companies, the health care system really respect the clinical need of that personalization when it's necessary for a patient. And given you're talking about north of 100 million people suffering from obesity in this country, and the very, very high side effect rate with these medications.

Alan: We fully expect that there's millions of patients that will need that level of personalization that our platform over the long haul is really well equipped to deliver on.

Speaker Change: Great. Thanks, Andrew.

Speaker Change: Your next question comes from the line of Maria Ripps with Canaccord. Please go ahead.

Maria Ripps: Great, congrats on the strong quarter and thanks for taking my questions.

Maria Ripps: And then secondly, more broadly, how are you thinking about the average duration of the GOP1 patients on the platform?

Maria Ripps: Thank you.

Maria Ripps: Thank you. Thank you.

Speaker Change: Yeah, Maria, let me take the first question, Pat's not on the call.

Speaker Change: When it comes to the GLP-1 study in the white paper we put out last week,

Speaker Change: You know, the numbers were really quite astounding.

Speaker Change: As you mentioned, you know, 70% of patients on the Hems and Hers platform that are getting this type of personalized treatment are adhering and retaining on the treatment relative to just around 40% in the traditional brick and mortar system that has been reported. You know, that's a 30 point delta in clinical adherence. And when you look at the public data on GLP-1 adherence over the course of a year,

Speaker Change: The data is also staggeringly low. You're talking about 10% to 15% of people actually being retained. You know, the reasons for these are relatively straightforward but very material. You have nearly every single person who tries these medications experiencing side effects. You've got very widespread nausea, vomiting, muscle loss is a great concern, gastrointestinal issues, and for many patients, you know, they can't bear those side effects. And so I think what's really powerful about the IMSNURSE platform is you've got the combination of factors. You've got the provider communication. As we've mentioned, providers are talking to these patients and engaging with them every single month.

Speaker Change: Allowing a really robust set of communication to titrate, adjust dosing, adjust treatment regimen.

Speaker Change: in order to optimize for the patient's needs and for the side effects.

Speaker Change: You've got technology underpinning this.

Maria Ripps: where MedMatch is able to start helping providers set the right prescription treatment from day zero. So that could be a slower titration schedule in any dose that is optimized for the patient's preferences. And then obviously under the hood, the capabilities on the platform allows for a really wide range of personalized dosages.

Maria Ripps: This has continued to expand in Q3, and I think you'll continue to see us expand that like we have in other specialties, but more and more of the nuance of understanding these patients, letting the technology and the provider and then the high touch.

Maria Ripps: Yemi Okupe, Alice Lopatto, Bill Newby

Yemi Okupe: And then, Maria, this is Yemi. To take the second part of your question, the factors that, you know, Andrew mentioned,

Maria Ripps: really are driving stronger retention across the platform.

Maria Ripps: What we are seeing is that the brand, the transparency, and really having providers act as a partner in the care with consumers is also providing consumers with greater comfort up front too.

Maria Ripps: commit to, you know, longer durations on the platform. And so I think that across the GLP-1 solutions, we are seeing consumers adopt on the higher end of the of the duration spectrum that currently sits at a roughly like around five months right now for the typical consumer.

Speaker Change: Thank you both and good luck with the rest of the year.

Speaker Change: Your next question comes from the line of Daniel Grossleit with Citi. Please go ahead.

Daniel Grossleit: Thank you very much.

Daniel Grossleit: Hey guys, thanks for taking the question and congrats on the strong quarter

Daniel Grossleit: You noted in your shareholder letter that you introduced the personalized dosing and titration for GLP-1s, and you mentioned, I think, on the call, that around

Speaker Change: 10,000...

Speaker Change: And then, on that, is it your understanding that these more personalized...

Maria Ripps: titrated GLP-1 dosages will be able to continue to compound that once the shortages abate. Is it enough to kind of get around that personalization carve-out?

Speaker Change: Thanks, Daniel. Regarding the 10,000, I think that was specific to a study that we put out on the

Speaker Change: on patient outcomes for GLP-1, but I don't think it was the exact number of patients specifically on personalized doses in aggregate.

Speaker Change: I think more and more, given the nature of our business, as you know, for many years across specialties, patients are coming to us for personalization. That's the type of person that comes to us.

Speaker Change: And so I think our platform will continue to invest in catering to those needs.

Speaker Change: We believe that dosing specifically for this type of a treatment to mitigate side effects is very much right down the center of what that compound exemption is built for. I think also there's widespread clinical awareness of this level of personalization and the benefits of it.

Maria Ripps: When you go back to some of those white papers in the public data around side-effects and clinical outcomes and adherence like we were talking about with Maria, these people are really struggling and we see it overwhelmingly on the platform and most just stop. They stop taking the medicine for many of these reasons.

Maria Ripps: And so the ability to really customize that level of care, we think, is very well-respected precedent, very much within the bounds of the compounding exemption, and we also believe it's very well-respected across all the parties in the industry.

Speaker Change: Yep, makes sense.

Speaker Change: And then on the acquisition of the 503B compounding pharmacy that you recently closed, what investments do you need to make to get that operational and up and running on GLP-1s? And Yemi, was that a bulk of the CapEx that you were talking about increasing in the fourth quarter?

Speaker Change: Yeah, thanks for the question, Dan. So I think that when we, you know, look at the, you know, the acquisition of MetaSource, I think as it stands today, it does have the capability to, you know, produce the GLP-1s.

Speaker Change: Really, the investments that we are looking to make over the course of the next couple quarters is expanding capacity.

Speaker Change: as well as just the overall efficiency through, you know, leveraging the playbook of automation. We know that we will have scale with GLP-1s on our platform. And so deploying, you know, that knowledge and the playbook that we've utilized across other specialties in the past.

Maria Ripps: something that we expect to do in the coming quarters to drive more and more efficiency on that front.

Speaker Change: Thank you.

Maria Ripps: We've received clear signal that consumers overwhelmingly are resonating with personalization given the fact that it produces unique advantages to address their clinical needs. And so I think as we mentioned in the prepared remarks, we now have over a million subscribers that are benefiting from personalized solutions, more than half of the subscriber base.

Maria Ripps: So, as a result, we're going to look to also, in addition to verticalizing the GLP-1 operation, start to widen the aperture both from capacity personalized options that we can have, but also the breadth of personalized options that we can have in the coming quarters. And so I would say that the CapEx really is a mix across those elements.

Speaker Change: Got it. Thank you.

Speaker Change: Your next question comes from the line of Eric Percher with Nefron Research. Please go ahead.

Eric Percher: Thank you. Yemi, I'd like to follow on that line and just ask, I heard 503A investment for the long term, 503B in the near term. How do you think about the ability to flex on those two as the regulatory environment changes?

Speaker Change: And is there any major difference in efficiency if you need to move toward 503A?

Yemi Okupe: Yeah, thanks for the question, Eric. You know, I think that really we're going to need to be able to, you know, walk and chew gum, you know, at the same time. So we have a very talented team across the board. We also have the strength of our balance sheet with

Speaker Change: north of $250 million in a growing free cash flow portfolio.

Speaker Change: that will enable us to invest in these things concurrently. So we would expect to continue to invest in the capabilities.

Speaker Change: and both the 503A as well as the 503B with respect to the efficiency across the two

Speaker Change: different operations.

Speaker Change: 503Bs are generally more efficient than 503As.

Maria Ripps: Given the fact that we have 503As for numerous years, we do believe that we can drive a substantial amount of efficiency. The reality is that both operations will be significantly more efficient than utilizing a third party. So we see substantial opportunity for efficiency and greater economics within that subspecialty in the coming quarters.

Speaker Change: And the lyriglutide, is that identification of API versus a manufacturer of a generic injectable, and does that then have to go into an NDA submission?

Speaker Change: Hey Eric, great question. Similar across all of the medications that we offer on the platform, there's a pretty extensive

Maria Ripps: and the entire set of protocols that the supply chain goes through and many of the times this is

Maria Ripps: DMS numbers with the FDA, batch authentication, certificates of authentication that we open source to all of the patients.

Maria Ripps: We do in-house and third-party independent testing of these APIs and treatments, both what is absolutely clinically necessary from a safety standpoint with the FDA, but also kind of the above and beyond that our team goes through just to get comfortable.

Maria Ripps: So when it comes to lyric glutide, it will be the exact same process that we've utilized across the stack. And, you know, we're really excited about that medication in particular, just because I think patients are really looking for value when it comes to obesity treatments. And, you know, that medication is known, it's increasingly available, the affordability profile will be something that we think is achievable for many. And similar to our oral medications, where you're seeing, you know, 70% of the weight loss for $70 per month, you know, that type of value offered is really something we're pretty excited to bring to market. But same protocols and same safety standards when it comes to bringing that to customers and how we think about it.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Ryan McDonald with Needham. Please go ahead.

Ryan McDonald: perform really well despite sort of the now availability of GLP-1s on your platform.

Ryan McDonald: Can you just talk about how you're sort of able to sort of effectively route patients or customers?

Ryan McDonald: to the oral option versus some of the GLP-1s and what's really the top of the funnel driving demand? Is it customers coming in, you know, looking for GLP-1s and sort of being made aware and educated on the oral option? Just any color there would be helpful.

Speaker Change: Thanks, Ryan. It was a great question.

Speaker Change: You know, in many ways, I think we see ourselves as a platform, you know, looking a little bit like Switzerland, where we offer a wide range of treatments and services.

Speaker Change: and try to help patients identify what is right for them.

Maria Ripps: That could be related to clinical needs, it could be related to personal preferences.

Maria Ripps: something they've heard of, or something they're excited by. So there's really no, so to speak, Trojan horse where we're leveraging one medication to bring people in. The oral treatment option, as we've shared, is an incredibly robust business within the obesity business. As we shared last quarter, it's the fastest specialty we have ever launched on the platform, just the oral medication alone. And what that's doing is something really special. It's doing something that also is...

Maria Ripps: very rarely accessible to the mass market, which is a hyper-personalization approach.

Maria Ripps: to understand the underlying factors driving your weight gain. So this could be insulin resistance, metabolic disorder, binge eating, depressive dynamics and symptoms. And our SVP of Weight Management, Dr. Craig Primack, has been a specialist in this for 20 years. And we've brought a lot of expertise that is available only to the one or two percent.

Maria Ripps: to the masses at scale for a price point that's very, very achievable.

Maria Ripps: This is a treatment that is, as I was saying, delivering 70% of the weight loss of an injectable weekly gold standard GLP-1.

Maria Ripps: for only $70 per month.

Maria Ripps: So, incredible value, which I think just naturally is attracting consumers. I think there's also a lot of comfort in the fact that these treatments in the oral business have been around for decades.

Maria Ripps: The known side effects and safety profiles are very widely studied, and the fact that there's different formats, oral medication, chews, versus an injectable is also I think appealing to people. So we expect that oral business to be a large composition of the weight business regardless of GLP-1s and Lyric Glutide and everything to come.

Speaker Change: Appreciate all the code there, Andrew. Maybe as a follow up, you mentioned obviously a number of options of how the way business is going to continue to evolve in the future. One obviously being as supply becomes available, offering, you know, the branded options. As we think about the incremental investments you're making, is there any sort of contemplation in the near term about sort of building up the infrastructure for sort of getting reimbursed and taking insurance? Or would you expect even as you start to offer the branded options, continuing on the cash base side? Thanks.

Speaker Change: Yeah, great question Ryan. I think right now the simplicity of the cash-based diet has been relatively straightforward for patients.

Speaker Change: As most know, the actual coverage for the brand name medications when it comes to obesity is very, very low.

Maria Ripps: Almost nobody without extremely high-end plans are getting coverage, and you see more and more coverage drop in quarter over quarter, even in the last couple of weeks.

Maria Ripps: So the simplicity, I think, of the cash pay market is probably our approach. We will continue to try to bring more branded options to the platform because, again, choice is king, and consumers do love that choice.

Maria Ripps: But with that said, I think we're excited by some of the treatments like Liragutide and the oral treatments and the personalized

Maria Ripps: Samago Ties, and GLP-1s that offer really effective treatment at something that is more accessible to the mass market. And as we shared in the prepared remarks,

Maria Ripps: You know, we're now treating hundreds of thousands of Americans that are, you know, in zip codes and economic brackets that really, you know, really, really struggle with care. And so I think it's increasingly becoming, you know, a really spirited, altruistic part of the business that we're really excited by.

Speaker Change: Your next question comes from the line of Erin Kessler with Seaport Research. Please go ahead.

Erin Kessler: Thanks, guys. A couple of questions. In terms of these sub-verticals with kind of...

Erin Kessler: Dr. Shepard, joining as CMO of HRS, can you help us think through the potential kind of for new sub-verticals within the HRS category and just within some of the maybe the traditional categories you've been in, including

Maria Ripps: sexual health, kind of hair dermatology, just provide us an update on May's performance of some of those within the quarter as well. Thank you.

Maria Ripps: Executive Executive, Andrew Dudum, Yemi Okupe, Alice Lopatto, Bill Newby

Speaker Change: Yeah, thanks, Aaron.

Maria Ripps: So, on the new side of the house, we're really excited by Dr. Shepard joining, you know, the Hertz business, as we mentioned.

Maria Ripps: is the fastest part of the aggregate business growing, right? It's an incredible business and it's diversified quite dramatically across mental health, dermatology, as you shared, metabolic health, obesity. So an incredible amount of diversity taking place that's actually driving that. I think the combination of

Maria Ripps: moves that we've made, such as bringing Dr. Shepard onto the team, as well as the 503b metasource in California, which allows for sterile injectables, you know, kind of leads towards categories that we've spoken about in the past that Dr. Shepard is an expert on. And these are categories such as paramenopause, menopause, hormonal therapy, and all of the related impacts that that might have for women as they age.

Maria Ripps: on the men's side of the business, we expect that business to be something that is rolling out in the next couple of years and something that our customers really have been wanting for some time. So that's maybe a little bit of color on the new vertical to come.

Maria Ripps: With regard to the core, as Yemi shared, there was 40-plus percent year-over-year growth in our subscribers, excluding the GLP-1 business.

Maria Ripps: So, the core is growing very robustly, you're seeing mass market adoption of the personalization options across all of these categories, with I think it's 65-70% of new customers now opting for personalization, which is really bringing a level of clinical excellence.

Maria Ripps: adherence, stickiness, retention, and customer demand to kind of all-time highs across the core, which we think has been an exciting contributor, which is even more exciting when you add in, obviously, the scale of the obesity opportunity. So it's a combination of those factors that are driving all of this growth.

Maria Ripps: and many more. Thank you. Thank you.

Speaker Change: All right. Thank you.

Speaker Change: Our next question comes from a line of John Akim with TD Cowen. Please go ahead.

John Akim: Thank you.

Speaker Change: Yeah, Jenna, thanks so much for the question. I think, you know, what we constantly do as we unlock efficiency gains is we look for the best vehicles to pass that through to consumers.

Speaker Change: But, you know, as we see the technological capabilities across the platform expand, and we also have numerous specialties, we're very excited by some of the additional creative opportunities that we can do beyond price to pass value back to consumers.

Speaker Change: and many more. Thank you. Thank you.

Speaker Change: And just one follow, you mentioned GLP1 users are also using other offerings that you have. What is the strategy to further grow this sort of cross-selling of your platform? Thank you so much.

Speaker Change: Yeah, to date it's largely been organic. Like what we do see is that as we have a wide breadth of specialties across the platform, users are organically opting into multiple treatments.

Speaker Change: As we look to 2025, I think that subscriber growth will largely be the continued focus in aggregate.

Speaker Change: But what we can do is make it easier for users to opt and select into multiple bundles through moving friction points that we're aware of today. And so we would expect that number over time to go up, but largely in the next quarter or two will be mainly organic.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Jalindra Singh with Truist Securities, please go ahead.

Jalindra Singh: Thank you and congrats on a strong quarter. I want to go back to GLP 1 related contribution, the quarter

Jalindra Singh: It seems like GLP-1 subscriber count was around 47,000 to 48,000 in the quarter. Is there any additional color you can provide us to frame the revenue contribution in the quarter? You said 12 million in 2Q, just trying to understand the growth there. Basically the AOV was up pretty strong sequentially and trying to understand how much is driven by GLP-1 contribution versus like other tailwinds in the quarter.

Jalindra Singh: Thank you.

John Akim: , , , , , , , , , , , , , ,

Speaker Change: Yeah, I think I can kind of take that and a few questions. So I think that we largely see the subscriber growth coming from the core. That said, we do see accelerating GLP-1 growth.

Speaker Change: Some of that was a result of the fact that we started to roll out GLP-1s across a broader number of states.

Speaker Change: Additionally, as consumers become more aware of the capabilities that we offer and we expand those capabilities, we do see GLP-1 adoption accelerating and increasing on the platform. I think just kind of doing the math on the subscriber count and looking at the rough average approximation of the monthly average revenue per subscriber can get you within the ballpark of what the GLP-1 contribution looks like.

Speaker Change: Okay.

Speaker Change: And then going back to the comment earlier made about, you know, only 13% of GLP-1 cancelled their treatment in the first month. Of the remaining 87%, are you seeing customers renewing for the same duration? Are you seeing them opting for higher duration subscription? Are you seeing like people getting comfortable signing for 3, 6, 12 months, trying to understand the mix of the duration and the subscription here?

Speaker Change: Thank you for watching. I'm Andrew Dudum. I'll see you next time.

Speaker Change: Yeah, I think what we do see is that, you know, really, I think that the hurdle, you know, like most of our other specialties, you know, the cancellations come early, early on in the lifecycle of a given user.

Speaker Change: As a user, particularly for medication like GLP-1s, starts to cross, you know, the 12-week

Speaker Change: or three-month milestone, you generally do see that the overall platform becomes sticky and we would expect that. With respect to the duration of wait, what we mentioned in a question earlier is that we're seeing a duration kind of in the ballpark of five months.

Speaker Change: And that really is just a testament to consumers are enjoying the transparency that our platform is bringing. They're enjoying having providers act as partners and walk them through how to get effective.

Speaker Change: Care, how to manage side effects, you know, that Andrew mentioned earlier, such as muscle loss or nausea. Providers walking consumers, you know, through that is really resulting in strong and sound results. And as a result, we're seeing very strong performance on the typical durations that consumers are signing up for.

Speaker Change: Great. Thanks a lot.

Speaker Change: And that's all the time we had for questions today. And ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Speaker Change: [music]