Hims & Hers Health, Inc. (NYSE: HIMS) showcased a robust financial performance in the first quarter of 2024, with a significant increase in its subscriber base and revenue. The company added a record 172,000 subscribers, reaching over 1.7 million in total. Revenue surged by 46% year-over-year to $278 million, while adjusted EBITDA stood at $32 million.
Hims & Hers announced plans to enhance its product portfolio with new offerings in weight loss and dermatology, and to invest in affiliated pharmacies to improve market penetration and customer experience. The company's outlook for 2024 includes anticipated revenue between $1.2 billion and $1.23 billion and adjusted EBITDA of $120 million to $135 million.
Key Takeaways
- Record subscriber growth of 172,000 in Q1, reaching over 1.7 million.
- 46% year-over-year revenue increase to $278 million.
- Plans to expand product offerings in weight loss and dermatology.
- Investment in affiliated pharmacies to boost customer experience.
- Expected 2024 revenue of $1.2 billion to $1.23 billion with adjusted EBITDA of $120 million to $135 million.
- Strategy focused on high-quality personalized solutions at competitive prices.
Company Outlook
- Hims & Hers aims for North Star adjusted EBITDA margins of 20% or more by 2030.
- Free cash flow generated in Q1 amounted to $11.9 million.
- Approximately 2 million shares repurchased.
- Capital deployment prioritized in expanding personalized offerings and strengthening balance sheet.
Bearish Highlights
- The company expects elevated CapEx investments for the next three years.
- Investments will fluctuate based on growth and the need to invest in machinery and facility capabilities.
Bullish Highlights
- Gross margins expanded to over 82% in the first quarter.
- 35% of subscribers are now using personalized solutions, leading to stronger retention.
- The company has seen strength across different income levels with no concerns in consumer strength.
Misses
- No specific figures or guidance provided for the expected uptick in personalized products.
Q&A Highlights
- CEO Andrew Dudum stated no material impact from his previous comments on the business.
- The company is focused on five core specialties, each with potential to generate $100 million in revenue by next year.
- Plans to innovate and expand the product suite to achieve growth targets.
- GLP-1s expected to launch this year, emphasizing safety and clinical excellence.
- Marketing and pricing strategies will be adjusted to maintain affordability and attract multi-month subscriptions.
In summary, Hims & Hers Health, Inc. is poised to continue its growth trajectory with an emphasis on personalized health solutions and strategic investments aimed at enhancing customer experience and expanding its market reach. The company's strong financial results and ambitious plans for product expansion and market penetration underscore its commitment to long-term growth and profitability.
InvestingPro Insights
Hims & Hers Health, Inc. (NYSE: HIMS) has demonstrated a promising start in 2024, with a remarkable uptick in subscribers and revenue. InvestingPro data highlights several key financial metrics that provide a deeper understanding of the company's valuation and performance. The market cap stands at approximately $2.5 billion, reflecting investor confidence in the company's growth potential. Despite the impressive revenue growth of 65.49% over the last twelve months as of Q4 2023, the company's P/E ratio remains negative at -121.49, indicating that it is not currently profitable. However, the strong revenue growth coupled with a high gross profit margin of 81.99% suggests that Hims & Hers has been efficient in generating revenue relative to the cost of goods sold.
InvestingPro Tips offer additional insights into the company's financial health and future outlook. Hims & Hers holds more cash than debt on its balance sheet, which is a positive sign for financial stability. Analysts predict that the company will be profitable this year, which could be a turning point for the company's earnings trajectory. Additionally, the stock is in oversold territory according to the Relative Strength Index (RSI), which might indicate a potential buying opportunity for investors.
Investors interested in a deeper analysis can find more InvestingPro Tips for Hims & Hers, including discussions on the company's liquid assets, stock performance over various timeframes, and dividend policies. For those looking to take advantage of this insight, there are 11 additional InvestingPro Tips available at https://www.investing.com/pro/HIMS. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of data and expert analysis to inform your investment decisions.
Full transcript - Oaktree Acquisition Corp (HIMS) Q1 2024:
Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Hims & Hers First Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions] I would now like to turn today's call over to Bill Newby, Head of Investor Relations. Please go ahead.
Bill Newby: Good afternoon, everyone, and welcome to the Hims & Hers Health first quarter 2024 earnings call. Today, after the market closed, We released this quarter's 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 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. Please view our most recently filed 10-K and 10-Q reports for a discussion of risk factors as they relate to forward-looking statements. In today's presentation, we have certain non-GAAP financial measures. We refer you to the reconciliation 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.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.
Andrew Dudum: Thanks, Bill. Our first quarter results marked an outstanding beginning to the year. The momentum we built in 2023 is continuing. As we further advance our mission to help the world feel great through the power of better health. The underlying strength of our business is propelled by an unwavering dedication to delivering the highest quality personalized care possible across each of our five core specialties, men's and women's dermatology, mental health, sexual health and weight loss. Strong execution of our strategy is drawing more consumers to our platform than ever before, translating into robust financial performance. In the first quarter, subscribers grew by a record 172,000 quarter-over-quarter to over 1.7 million. Personalization continues to resonate with users. The number of subscribers opting for personalized subscription has nearly tripled over the course of the last year to north of 600,000 subscribers, representing just over 35% of subscribers on the platform. Our ability to efficiently acquire and retain users resulted in revenue increasing 46% year-over-year to $278 million, while also generating $32 million of adjusted EBITDA. We believe that our expanding portfolio of personalized solutions, combined with the ability of our brand to reach and resonate with consumers at multiple stages of their health and wellness journeys are driving forces behind our continued success. I'd like to start by providing additional insight into how we see each of these evolving across the year. Starting with our portfolio of personalized solutions. We leverage hundreds of thousands of interactions on our platform to facilitate an understanding of key consumer concerns and challenges that may prevent individuals from reaching optimal outcomes. Partnerships with leading medical institutions and experts within each of our specialties then enable us to provide access to tailored clinical solutions that are crafted with a focus on safety, efficacy at top concerns identified by our customers. This allows providers on our platform to meet their patients' clinical needs at an individual level, targeting things like side effects and adherence through personalized dosages, a variety of product form factors to drive adherence and the ability to address multiple health conditions with one solution. Our infrastructure and scale provides the ability to equip providers with the breadth of personalized treatment options at mass market prices. Continued expansion and refinement of our personalized portfolio will be a critical component behind our success in 2024 and beyond. In areas like weight loss and dermatology we'll aim to improve the customer experience with more user-friendly form factors and eventually a broader selection of multi-action offerings. Just as with Hard Mints and Heart Health, our upcoming offerings will be focused on various customer needs and use cases across demographics through tailored treatments. Our recent launch of Sex Rx + Climax Control is a great example of this type of innovation. A 2-in-1 offering designed to help men address multiple aspects of their sexual health without the need to take multiple pills. In the coming years, we expect the vast majority of our subscribers will be utilizing one or more of our personalized offerings. Our brand has historically played a critical role in our success. And early on in our company's lifecycle, we built trust and awareness with our customers by making conditions more approachable in driving awareness of these solutions. Traditionally, these efforts were targeted at consumers that are already being impacted by a condition within one of our specialties. Our aspiration is to make Hims & Hers synonymous with high-quality personalized, affordable solutions. And as part of that ambition, we've started to focus efforts on reaching consumers earlier in their journey with a narrative that resonates. In recent years, we have significantly increased our investments in channels that enable us to reach a broader set of consumers at different phases of their journey with a condition. This includes TV and other brand campaigns aimed at consumers during the most culturally relevant moments across society. These efforts are not aimed at immediate user acquisition. Rather, they are centered on raising awareness of our brand and platform capabilities early in an individual's journey with the condition, sometimes even before those journeys formally begin. A multi-specialty platform enables us to do this in an efficient manner as we're able to speak to consumers broadly about a platform of capabilities versus an individual condition. It is clear to us that these efforts are starting to compound. We are seeing users actively seek us out, either by visiting our website directly or through other cost-effective channels. We believe this is happening as users associate the Hims & Hers brand with the treatment of a breadth of conditions and are seeking treatment on our platform, either the result of recalling prior messaging that they saw or increasingly through word of mouth from friends and associates. The growth and efficiency gains we saw in the first quarter are a direct result of these improving dynamics. And solidify our conviction in our ability to achieve our long-term adjusted EBITDA margin target of 20% to 30%, while simultaneously maintaining an attractive growth profile. This is an incredibly exciting time for our business. In a very short period, I believe we have established Hims & Hers as the clear leader for accessing high-quality personalized care and the efficiency gains we are seeing throughout our model ensure we can continue to build upon that position for years to come. There are three underlying components of this model that allow us to bring this differentiated value proposition to market. First, our technology platform, which serves as the backbone of our innovation process and allows us to seamlessly integrate structured data and direct feedback from both consumers and providers offering invaluable insights into our user preferences and needs. This provides us with critical insights into customer behaviors, why users adopt certain solutions why they may switch to another? And why they adhere to particular products? Importantly, we also recognize the sensitivity of this data, and we take significant steps to prioritize customer trust and safety through our commitment to data privacy and security, compliance with ethical privacy laws, and transparency about how we use data. Second, our team of internal medical experts oversee this entire process. With expertise across each of our core specialties, these individuals help ensure that each offering aligns with the highest standards of clinical excellence. And finally, our affiliated pharmacies help ensure that every step of production from formulation to packaging upholds the integrity of our brand and meets the exacting standards of our customers. This enables us to offer access to a wide array of personalized solutions. Solutions that historically were only available to the wealthiest segments of society at truly accessible prices. Investments across these key pillars are fundamental to our ability to meet growing demand we're experiencing. And fuel future growth. In the near term, this means additional investments in our affiliated pharmacies. Enhancements in both breadth and capacity will position us to further accelerate market penetration while ensuring a best-in-class experience for our customers. Through the integration of robotics and specialized software, we aim to build the necessary infrastructure to bring our unique offering to tens of millions of individuals. These investments will allow us to continue deploying a strategy that focuses on offering a diverse range of solutions that our providers can use to effectively meet individual needs. As we expand these capabilities we are thrilled to announce that several new and exciting solutions will be launching on our platform in the coming weeks. I look forward to sharing more details as these solutions become available later this quarter. Before I close, I want to thank our teams for their outstanding levels of execution to start the year. We have created a platform that delivers a seamless and comprehensive customer experience by providing an expanding portfolio of personalized solutions at compelling prices. I take extreme pride in how we serve our customers, and I look forward to extending this experience to an ever-growing audience in 2024. Before passing to Yemi, I'd like to reiterate a clarification I shared yesterday. The last few days have been a disheartening reflection of just how divisive a time we live in, and my words have been misconstrued by some. I, in no way, condone nor support acts or threats of violence, antisemitism or intimidation and there's absolutely no justification for violence on our campuses. Every student deserves to feel safe without fear of harm or being targeted for who they are. I am deeply saddened that my support for peaceful protest has been interpreted by some as encouraging violence, intimidation or bigotry of any kind. I do believe deeply in the right for people to use their voices and peaceful protest to drive change. This right is critical to our democracy and must be protected. Our world today is more just because students throughout history have courageously taken to their campuses and use their voices to force change. Generations of Americans have engaged in nonviolent protests and these movements have led to some of the most important changes in our country's history. As a father whose children are both the descendants of Palestinian refugees who fled the Nakba in 1948 and the descendants of Holocaust survivors from Poland. As I've previously shared, I have a personal appreciation for the different perspectives people have, which I live with daily at my dinner table. I hope and pray for peace and for an end to violence everywhere. With that, I will pass it over to Yemi to walk through our financials in greater detail.
Yemi Okupe: Thanks, Andrew. I will start by providing an overview of our first quarter financial performance and then discuss our updated outlook for 2024. 2024 is off to an exceptional start. Our position as a leader for success in high-quality personalized care has never been more evident, and we are seeing cascading improvements throughout our business as more and more individuals find success on the Hims & Hers platform. We believe we are just scratching the surface of what our platform can do and the number of individuals we can help. Continued robust momentum in the first quarter serves as confirmation of that. Revenue grew 46% year-over-year to $278.2 million. This growth was driven by the ongoing expansion of our subscriber base. Subscribers grew 41% year-over-year to 1.7 million. The first quarter represented a record level of quarter-over-quarter subscriber additions on our platform as we added 172,000 net new subscribers. Our strategy of equipping providers with high-quality personalized solutions at mass market prices is a significant driving force behind our success. In just two years, the number of subscribers that have opted for a personalized subscription has increased over 6x to north of 600,000 subscribers. With this continued transition, we believe several benefits will emerge in the future. The first is improved retention. We are receiving signals across several specialties the retention for personalized products is higher alongside a stronger user preference for them relative to generic alternatives. This does not come as a surprise to us. as feedback from user interactions and behavior is one of the key ingredients and development of our offerings. We expect continued placement of personalized treatment options at increasingly mass market prices to compound this benefit. Secondarily, we see opportunities for improved efficiency. Benefits from economies of scale with our personalized offerings are expected, similar to what we have observed in other areas of our operation in the past. We are confident that these benefits will compound as we continue to extend our portfolio of personalized offerings over the course of 2024. Margins remain robust as we continue to leverage strong execution with the economies of scale. Gross margins expanded two points year-over-year in the first quarter to over 82%, relatively flat when compared with the prior quarter. Our team continues to leverage affiliated pharmacies in other areas of our network to drive efficiencies across key costs such as logistics, raw ingredients and customer support. We continue to experiment with the highest value ways to pass this value to our consumers, and we are excited to continue to enhance the value they receive in the future. As our platform scales, we continue to see G&A leverage. G&A improved 4 points year-over-year to 12% of revenue in the first quarter. Cost as a percentage of revenue associated with operations and support as well as technology and development were both relatively flat on a year-over-year basis. At the foundation of the Hims & Hers platform is a delightful end-to-end experience for our consumers across multiple specialties. We believe we can continue to drive robust growth with personalized solutions through firstly, drawing a broader audience of consumers impacted by a condition to seek treatment. Secondarily, attracting a greater share of users currently seeking treatment within the specialties Hims & Hers covers and lastly, increasingly longevity of users on the platform, a multi-specialty platform with unique personalized offerings and a compelling end-end experience has provided us with increased confidence to invest in reaching users early in their lifecycle journey. As Andrew mentioned, our aim over time is to make Hims & Hers with high-quality personalized solutions. In the first quarter, we saw a meaningful benefit from reaching a broader audience with a compelling experience and suite of offerings. Marketing as a percentage of revenue improved more than 400 basis points on both a sequential and year-over-year basis in the first quarter to 47%. The stronger retention, combined with increased acquisition of users through lower cost channels drove leverage. We are pleased to see this amount of leverage during a time of robust growth and record level additions of net new subscribers because it serves as a proof point of our ability to maintain strong growth while driving leverage. Our expectation is that we will continue to opportunistically utilize marketing as a discretionary lever to continue to reach consumers at various points in their journeys, ensure awareness for unique value propositions and capabilities in the platform as they emerge. -- and accelerate awareness for newer personalized offerings. As a result, we expect there to be some fluctuation in marketing levels on a quarter-to-quarter basis as we utilize the marketing as a discretionary lever to drive the aforementioned goals. However, we have high conviction in our ability to drive 1 to 3 points of leverage per annum and achieve our North Star adjusted EBITDA margins of 20% or more, no later than 2030. Strong execution and adherence to the principles behind our capital allocation framework are driving record profitability levels. Adjusted EBITDA in the first quarter was $32.3 million as adjusted EBITDA margins expanded over 3 points quarter-over-quarter to close to 12%. Net income was $11.1 million in the first quarter, up almost 10x from last quarter, elevating our conviction that 2024 will be our first year of GAAP profitability. Before providing additional insight into our outlook for the remainder of the year, I'd like to drill into how we allocated capital in the first quarter and are guiding principles for the remainder of the year. Free cash flow generation continues to remain strong. We generated $11.9 million of free cash flow in the first quarter as cash flow from operations exceeded investment in fixed assets within our affiliated pharmacies of $10.6 million. Over the course of the first quarter, we saw what we believe to be a meaningful disconnect in our market value relative to our intrinsic value. We believe this was the result of a natural shareholder rotation, driven primarily by members of our pre-IPO shareholder base as well as general market volatility. We repurchased approximately 2 million shares in the first quarter as a result of these dynamics. At the end of the first quarter, $20 million remain within our $50 million share repurchase program. As a result of these actions, cash and short-term investments decreased by approximately $17 million in the first quarter. As of the end of the first quarter, $204 million of cash and short-term investments remain on our balance sheet. Looking forward, our priority for capital deployment are as follows. Our highest priority remains around positioning our business for growth. We expect meaningful deployment of capital in our affiliated pharmacies over the course of the next three years. Consumer feedback has been resoundingly positive, and we expect future investment will enable us to continue expanding the breadth and capacity of personalized offerings across each of our five specialties. Our aspiration is to have tens of millions of subscribers on our platform, and we expect the majority will subscribe to a personalized solution. Additionally, our skill allows us to make positive ROI investments in our facilities that we expect will increase our ability to offer solutions to consumers at mass market prices. These investments can come in the form of automation as well as incremental operations in logistically advantageous locations. Our next priority is capitalizing on a moment, and we feel there are meaningful disconnects between our market value and intrinsic value with the repurchase of shares. Lastly, we will continue to take the opportunity to utilize our cash flow generation profile to further strengthen our balance sheet. We believe this will provide additional option value for opportunities in the future. We are grateful and confident that the strength of our balance sheet and cash flow generation profile will enable us to do each of these things in the coming years concurrently. With that backdrop, I'd like to detail our updated outlook for 2024. In the second quarter, we are anticipating revenue in the range of $292 million to $297 million, representing a year-over-year increase of 40% to 43%. We expect adjusted EBITDA to be between $30 million to $35 million, representing an adjusted EBITDA margin of 11% at the midpoint of both ranges. For the full year, we are anticipating revenue of between $1.2 billion to $1.23 billion, representing a year-over-year increase of 38% to 41%. Lastly, we expect 2024 adjusted EBITDA will be between $120 million and $135 million. These adjusted EBITDA and revenue ranges imply an adjusted EBITDA margin of 10% at the midpoint of both ranges. Strong momentum in the first quarter has strengthened our conviction that we will exceed not only our bottom line 2025 targets a year early, but our revenue targets as well. Our ability to concurrently drive record growth while achieving meaningful levels of marketing leverage, reinforce our conviction in reaching our goal of long-term adjusted EBITDA margins north of 20% by 2030. Our ability to drive these incredible 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 that 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.
Operator: [Operator Instructions] Your first question comes from Allen Lutz with Bank of America (NYSE:BAC). Please go ahead.
Allen Lutz: Good afternoon and thanks for taking the question. Andrew, you mentioned that consumers are seeking out Hims, and the way that you framed it made it seem like this is really the first time that you're seeing such significant efficiency gain. I guess, as we think about this in the context of the 2024 guidance, did this come to a surprise to you in the quarter? What do you think is driving this, and then why is it happening now? I guess as we think about the marketing as a percent of revenue, clearly there was a nice step down there. Just trying to think through, if what we saw in the first quarter is sustainable? Thanks.
Andrew Dudum: Thanks, Allen. Great question. Maybe I'll take the first part and let Yemi hit the second. I think what's been happening in the past quarter, is a continuation of the last couple of quarters, which is as we've expanded the suite and portfolio of personalized products across the categories, both historical core categories and some of the newer ones like weight loss and women's dermatology and others. That's just bringing a much more diverse set of customers to the company, right. We are getting better at segmenting, the types of people that live within each of these categories, and offering products that are maybe countering concerns they otherwise had, and otherwise were barriers for them adopting treatment. And so, I think as we continue to increase the breadth of choices, you're going to see a continuation of people coming to the platform. I think on top of that, which has added extra leverage, we continue to increase the accessibility of those personalized products, right. We're dropping prices strategically. These are very mass market attractive products and attractive prices that are often, compared to the traditional generic treatments priced essentially - side-to-side. And so, the combination of the personalization and the attractive price point. I think, is something that's just been growing. From a continuation standpoint, I think generally those trends are to be expected, Allen, because we continue to expand the portfolio. But I think there are also dynamics from a marketing leverage standpoint that Yemi can speak to with regard to when we push a little bit heavier, and when we pull back.
Yemi Okupe: Yes, thanks for the question, Allen. I think the way that we think around it is, there will be periods of time where marketing will fluctuate from time-to-time. We'll use it as a discretionary lever, to lean into a variety of different initiatives, whether it's a new category launch, or the launch of a new personalized product. But as we mentioned in the prepared remarks, over the course of like on an annual basis. We do see the ability to continue to gain leverage, just as a result of more and more consumers coming to the platform, loving the products, being on the platform for a longer period of time, as well as Andrew mentioned, more consumers coming to us organically. And so, that gives us the confidence that each year over the course of the coming years. We have the ability to get leverage and at the same time, concurrently maintain growth.
Allen Lutz: Very helpful. And then just a quick follow-up, on the personalized solutions. I think, Yemi, you mentioned 35% of subscribers, are now taking personalized solutions today. How should we think about the size of the retention improvement, from maybe where the company was a couple of years ago, versus what personalized solutions are doing currently? Is there any way to frame the improvement quantitatively? Thanks.
Yemi Okupe: Yes, I think we can give you some guiding principles around what we've been seeing across categories. I think various categories are at different stages in their lifecycle. Broadly, what we do see is that personalized solutions enable us to do a few things. One is just given that, there are not similar products, often cases in the market out there to them. We are seeing more and more consumers sign up for not only the personalized products, but also sign up for them at longer durations. And given the fact that many of these products do fundamentally go to the heart of consumer preferences and consumer needs, our belief is that these will be the catalyst that enable consumers to stay on the platform for years, or even decades. We're starting to see that show up across many specialties in the form of, much stronger retention that we've seen with the generic alternatives. Andrew, not sure if there's anything that you wanted to add there as well.
Andrew Dudum: Yes, the other thing, Allen, just maybe to give you some color on, how this plays out a lot of customers will cancel overwhelmingly, because the treatment itself is not perfectly personalized to them, right. Maybe the form factor is not a form factor that, they love using, right. Maybe it's a topical spray and it makes their hair sticky. And so, they prefer an oral solution, or maybe vice versa. Or there might be a side effect component, which is common among different treatments that the customer is trying to balance. And so, I think the way you can think about it is that, we like to dive deep into the data of understanding why customers are canceling, and try our best to address them directly with the next level of personalization launches. And so, very often they are directly attacking some of the side effect concerns that we see, or some of the form factor concerns we see, et cetera. And so probably can't speak to the magnitude, but definitely something that we've seen pretty consistently and would expect to continue.
Allen Lutz: Thank you.
Operator: Your next question comes from Maria Ripps with Canaccord. Please go ahead.
Maria Ripps: Great. Thanks so much for taking my questions and congrats on the strong quarter. First, I just wanted to ask about your pricing philosophy. It's been about a year since you sort of introduced lower prices. Can you maybe give us a little bit more color on your sort of near-term approach, to refining pricing from here? And are there any sort of specialties or maybe products, where you've seen particularly higher price elasticity?
Yemi Okupe: Yes, thanks for the question, Maria. I think just our fundamental approach is, as we continue to see benefits from scale. We're consistently running experiments with respect to how do we pass forward some of that value back to consumers, which we feel will increase the longevity on the platform. I think with respect to some of the price dynamics, we would lack many of those in the Q2 quarter. And so, we expect to see the benefit from that in the second quarter. But that said, I think that the way that we'll pass value to consumers, is not just in the form of price. You can expect additional features, or other creative solutions that we're experimenting. And so, I think over the course of the year, embedded in our guidance is the flexibility to do that, whether it's with respect to pricing, or incremental features that consumers get. Really with an eye towards addressing their needs, and keeping on the platform for longer.
Andrew Dudum: And I think maybe just to add, Maria, I think philosophically, we aim to build a platform where there are tens of millions of customers across Hims & Hers, and believe that the suite of categories and specialties we offer today, as well as the ones we'll continue to expand into, are categories that affect nearly every household in the country. And so, continuing to find leverage in the operational efficiency, or automation or throughout the business and give that back to customers is the core philosophy. In order to continue to make those price points accessible, in a way that you can truly target that multi tens of millions of customers.
Maria Ripps: Got it. That's very helpful. And then can you maybe give us a little bit more color on your targeted investments in affiliated pharmacies? You talked about sort of expanding automation capabilities through robotics and software. So any more color sort of on additional capabilities you're able to share? And then are you planning to add sort of more affiliated pharmacy locations at this point? And then lastly, how is this going to, how are we going to see this sort of flowing through your P&L? Is this largely CapEx or operating expenses?
Yemi Okupe: Yes, thanks for the question, Maria. I think that there's a few areas that we would like to invest. And I think that what's becoming overwhelmingly clear, is that the strategy of personalization is fundamentally working. And so, there are a few areas where we will fundamentally invest. One is just around the breadth of solutions that we offer across each of our specialties. And so, over the course of the next year, we'll invest to make sure that we can continue, to expand the number of different conditions and concerns for consumers that we address in the form of more SKUs. As part of that, much of the, kind of the first half of this year and into the early half of next year, we'll also expect to just ensure that there's deeper capacity to fundamentally meet those needs. The capacity and breadth of solutions will be growth dependent. We don't want to get too far ahead of our SKUs as we're investing. And so, we'll continue to watch those. With respect to where it will show up, you can expect it to primarily be capital expenditures. And then, starting from like the - really the back half of this year to early next year, our facilities run incredibly efficiently today,. But with greater skill, we're uniquely positioned to progressively increase the automation in those facilities. And so, we expect to start that process in the back half of the year. That again, which ultimate form CapEx, but we do expect many of those initiatives to be ROI positive and incrementally drive higher margins that we have the ability to, as Andrew mentioned before, philosophically pass through to consumers.
Maria Ripps: Got it. Thank you so much for the color.
Yemi Okupe: Thank you.
Operator: Your next question comes from Daniel Grosslight with Citi. Please go ahead.
Daniel Grosslight: Hi, guys, thanks for taking the question. I was hoping to get an update on the weight loss program. You know, really curious on the demographics of the folks that are coming to your platform. Have they tried GLP-1s? Are they a little bit wary of trying GLP-1s, and therefore would rather kind of go with you first? And then, as we think about GLP-1s and potentially bringing those to your platform, I would be great to get an update on your thinking there, and in particular around the compounded GLP-1s and your ability to do that, within your facilities? Thanks.
Andrew Dudum: Thanks, Dan. Great question. So, I think overwhelmingly really excited by what we've seen on weight loss. You're talking about over 100 million people suffering. I think the offering we have is excessively priced, affordable, safe, and has put it well on target to hit that $100 million in 2025, as we said. I think we will continue to expand that portfolio, and expect to launch GLP-1 soon, as we've talked about in the past. Regarding compounding, I think probably more to come in the future. So probably not too much to share on that today, but it is something we're watching really carefully and wrapping our heads around. And the clinical team and the pharmaceutical team are solidifying some perspectives on that, that we should be able to share shortly.
Daniel Grosslight: Got it. Thank you. And Andrew, you mentioned that you have - as one of your goals getting folks on more than one personalized product. I was hoping to get maybe some more details on how many folks right now are on more than one, and maybe any kind of either qualitative or quantitative benefit you can provide on those folks, people who have more than one versus just one versus no product, no personalized products?
Andrew Dudum: Yes, it's a great question. I think more and more, we're thinking more about the concept, because I think when you think of more than one, it's really this cross sell, right, this e-commerce concept. And I think as we watch customer behavior, what's becoming clear is personalized, versus non-personalized is really where we're focusing, because in a lot of situations, personalized often means cross category, right? So, when you think about our heart health category and our sexual health category, that's a single personalized treatment that is treating both sexual dysfunction as well as cardiovascular disease, right, in a single personalized pill. And so I think as a business, we're not really focused on, cross category conversion as much as personalized, human centric, treating an individual holistically. And I think as you start to see some of our categories overlap, for example, on the weight loss category, a lot of overlap with mental health and depressive eating. On the mental health category, same thing, overlap with obesity. These categories are not siloed. And so trying to think of a personalized solution that treats all underlying factors of the symptoms, or concerns that a patient is having, is really the predominant focus. And what we've seen overwhelmingly is if you do that really well, there are multiple reasons that a patient has to continue treatment. And some of those reasons might be more cosmetic, and some of those reasons might be more clinical and serious. But the combination, surely is increasing the stickiness and the retention, and the reasons people kind of remind themselves to pull it out of the cabinet, or off the shelf and build that habit.
Daniel Grosslight: Got it. Thank you.
Andrew Dudum: Thank you.
Operator: Your next question comes from Jack Wallace with Guggenheim Securities. Please go ahead.
Jack Wallace: Hi, thanks for taking my questions, and congrats on a great start to the year. Andrew, I just wanted to give you an opportunity to, and thank you for addressing your comments from last week, and over the weekend. Just wanted to give you an opportunity to just give us some idea, for how the public response reaction to your comments had any observable impact, to the business and thinking more specifically around attention, or excuse me, attrition and retention, new customer acquisition, as well as employee attention - attrition, and inbound resumes? Thank you.
Andrew Dudum: Thanks, Jack. Yes, great question. So, no material impact that we expect in the business. The guidance that we shared today reflects all of the latest thinking. And so, we don't expect that to be a big concern at all going forward.
Jack Wallace: Great. Thank you. And then I just wanted to get a little more color on the CapEx investments, Yemi. Should we think of the first quarter's CapEx number being a fair kind of jumping off point into the second half of the year, and I appreciate your response to the prior question? And then second, in terms of the therapeutic category, it sounds like maybe weight loss is getting some additional attention, with the expanded capabilities there. But any other categories existing that might be getting some extra attention as well as preparation for new categories? Thank you.
Yemi Okupe: Yes, I can start with the first part of the question, maybe I'll throw it over to Andrew for the second half. I think what we really see, Jack, is, as mentioned, kind of in the prior question, we'll look to calibrate the capital expenditures relative to the growth that we are seeing. I think historically, if you were relying two years ago, capital expenditures were fairly minimal in the low $1 million to $2 million range. Over the course of the next three years, like we do expect just more intensity in the CapEx. We don't expect to return to those levels for the next three years, but it will fluctuate as we start to invest in machinery, or expanding capabilities in the facilities. So it's hard to give an exact like quarter-to-quarter number, but we do expect it to be elevated, similar to what we've seen kind of in the latter part of last year to last quarter.
Andrew Dudum: Yes, I think a lot of these capabilities are centered around both pharmaceutical complexities. So you can imagine form factor variation. We got a number of form factors on the breadth of specialties and portfolio today, but there's quite a few more that we can be bringing to market. There's complexity in specific ingredient compounding. So, there's actually necessary processes, for more complex ingredients that are more challenging to put together into these form factors. And then obviously, there are categories that we are excited by that we've talked about in the past. Hormonal balance, menopause, testosterone, pain management, insomnia, right. These are categories we've always talked about and believe and believe there's a lot of people struggling and an opportunity to deliver hyper-personalized treatments at very affordable prices. And so, a lot of that CapEx investment is not only going towards some of the near-term categories, but building the foundation for what's going to be necessary a couple of years from now.
Jack Wallace: Great. Thank you so much.
Andrew Dudum: Thank you.
Operator: Your next question comes from Jonna Kim with TD (TSX:TD) Cowen. Please go ahead.
Jonna Kim: Thanks for taking my question. Just wanted to get a better understanding of sort of what changed in terms of the full year guidance in the first quarter, versus how you guided in the fourth quarter. And just curious, which areas deliver offside versus your original expectations? And also what changed in terms of your second half expectations? Any color will be helpful there. And just another question is, have you seen any change in consumer behavior, by different income cohorts across your categories? Thank you so much.
Yemi Okupe: Maybe I can start with the first part of the question on the guide, and then - can turn it over to Andrew for broader clarity around what we're seeing with the consumer. I think really, Jonna, what we did see in the first quarter is just record level momentum, both in terms of the magnitude of consumers that were coming on to the platform. Relative to what we were expecting as well as the frequency, which was they're opting for personalized products. As we mentioned, those typically do carry higher retention levels. And so, really what's embedded in our guidance, is just the strong momentum that we've seen. And we're seeing that across pretty much all of our specialties. Given the fact that we've innovated the suite of products, whether it's sexual health, dermatology, or the new weight category, we're seeing continued strength across each of our specialties. And we expect to continue to innovate with a very attractive pipeline on each of those specialties. And so really, that's what's embedded in the guide is a very strong pipeline of things to come. The strong uptick in consumer acquisition in the first quarter, and then just the adoption of personalized products.
Andrew Dudum: Yes. And then regarding consumer confidence, I think we continue to see strength across the demographics of income levels. I think probably, because of a couple of things and this has happened historically, when consumer confidence has dropped and others have struggled in traditional consumer channels and our business has remained resilient. I think you're talking about categories and products that are incredibly emotionally resonant, and core to the well-being of the consumer, right? They're products that when the customer wakes up in the morning, and look in the mirror are highly impactful to how that day goes, and how they show up in the world. And so, I think very, very sticky in that way. On top of that, I think the strategic pricing initiatives from the last year have continued to make those even further affordable, such that we have not seen any types of concerns in consumer strength whatsoever.
Jonna Kim: Got it. Thank you so much.
Operator: Your next question comes from Aaron Kessler with Seaport Global. Please go ahead.
Aaron Kessler: Great. Thanks, guys. Congrats on the quarter. A couple of questions. One, maybe just you can update us on the women's kind of performance or the Hers' performance in the quarter, I think you noted a pretty strong growth last quarter. And then just on the mental health side, maybe an update there. I think our recent survey was showing pretty high rates of depression, particularly among younger adults. Just curious kind of what you're seeing there as well? Thank you.
Yemi Okupe: Thanks, Aaron, and great to have you. On the Hers side of the business, continuing to see it be one of the fastest growing, if not the fastest growing parts of the business. And this is comprised of Hers dermatology, Hers hair, the Hers weight loss category as well as the mental health business. All of those are growing very robustly, and I think really pulling the company ahead in a dramatic way. When we look at some of the penetration rates that the business has in those categories. It's quite small. You're talking 1%, 2% penetration rates in very, very massive markets. And so, we suspect that the brand and the investments in the brand that we've been making in the last year or two, are really just starting to unlock the awareness levels necessary to start taking massive share. But we believe strongly that from what we can tell, we've got strong product market fit in those three or four categories. The breadth of portfolio of offerings is expanding very rapidly. Many products in the last quarter and many to come in the next couple, in a way that gives us confidence that, that growth rate will be able to be sustained for quite some time.
Aaron Kessler: Great. Thank you.
Yemi Okupe: Thank you.
Operator: Your next question comes from Glen Santangelo with Jefferies. Please go ahead.
Glen Santangelo: So yes, thanks for taking my question. Hi guys, I just wanted to sort of unpack some of the numbers here, maybe a couple of financial questions, if I could. I mean the subscriber growth of 41% in the quarter was almost equivalent with the sort of the revenue growth - drove. But when I sort of peel back that, the layers a little bit, it looks like the monthly sales per average subscriber were flat. But yet your average order value was up 21%, which may be suggest that you're continuing to have some success booking multi-month subscriptions. I was wondering if you could just give us a little bit more a little bit more meat on both those two numbers, because I think what some are trying to assess as well, as we get the churn question a lot. And so, I'm just trying to make sure I understand, how all these metrics sort of play off one another?
Yemi Okupe: Yes, sure. Thanks for the question, Glen. I think we stated in the past that the primary growth lever that we're focused on as a company, is around subscriber growth. And so, a lot of the strategic initiatives, whether it's around personalization, or some of the pricing elements we've talked to historically in the past. Those are geared towards both making it attractive, to the consumers to come to the platform as well as keeping consumers on the platform for multiple years, if not even decades. And so, largely our performance this quarter was primarily driven off of the subscriber growth, as you mentioned. We expect that to continue to be the case. And with respect to the monthly average revenue per subscriber/AOV, really, our focus is, as you mentioned, continuing to make sure that the multi-month bundles are attractive. And we see continued success there. With respect to some of the movement that you see in AOV, it is driven primarily by that, as well as some of the product mix - dynamics as well with the way we're coming online.
Glen Santangelo: And Yemi, maybe just one more quick question on the guidance. If I sort of look at the adjusted EBITDA margin you put up in 1Q and what you're sort of implying for 2Q, it seems to suggest a reasonable step down in the back half of the year to be consistent with your sort of full year guidance. I was wondering, is that some level of conservatism you're building in? Or are there some - you've talked on this call about some planned investments that may ultimately be made. So, I'm just trying to make some sense of why we should expect the margin in the back half of the year to go down?
Yemi Okupe: Yes, I think it's a great question. I think Q1 was definitely a phenomenal quarter for us, and we are very excited by the remainder of the year to come. Really what we are doing is we're leaving ourselves flexibility. As we've mentioned, we do continue to look for ways to pass value back to consumers. Whether that's the case of leaning back into marketing as we start to have new categories come online - sorry, new products come online. We will look to opportunistically have the flexibility to invest there. And then as we mentioned before, over the course of several quarters, we do run experiments, identifying what are the most accretive ways to pass value back to consumers. We're very close to finalizing some of those experiments and excited by those. And so, do you want to leave ourselves flexibility in the guide to have the capability to roll out some of those.
Glen Santangelo: Okay. Thank you.
Operator: Your next question comes from Jailendra Singh with Truist Securities. Please go ahead.
Jailendra Singh: Thank you, and thanks for taking my questions, and congrats on a strong quarter. First couple of clarification questions on the subscribers using personalized solution 1Q at 35%. What was this figure among the new members you added in 1Q, in terms of using a personalized solution? And second part of the question is, like what is your outlook reflecting in terms of this figure by end of the year?
Yemi Okupe: Yes. I think maybe I can start with some of the more granular details. And then you can hand it over to Andrew to add some of the broader questions. We didn't explicitly guide to basically a new number specifically. What we do see is that the adoption for new subscribers of personalized products. Tends to be higher just, because I think many of those users for the first time when they come to the platform are identifying the attractiveness of personalized solutions. Is also what we do see is that in many of the newer categories, the adoption rate is quite strong just, because the vast majority of the user base is disproportionately oriented towards new users. And so, we do expect that number to basically creep up each quarter alongside it. We're excited by the potential that, that means for retention. And then Andrew, not for business….
Andrew Dudum: Yes. And Jailendra, maybe just - I mean, at a high level, I think we expect the vast majority of the business in the coming years to be on being treated with a personalized offering. The underlying relationship these customers have with the platform, the stickiness, the degree of choice and customization that they're provided the flexibility tools that they have are just meaningfully more powerful than a traditional generic treatment. So, we expect the vast majority of the business in the coming years to move towards those types of treatments.
Jailendra Singh: Okay. And then my quick follow-up, just trying to better understand your comment around pricing adjustments, flexibility in - has there been any change in your thought process given what you've learned about the consumer behavior competitive environment so far in the year in terms of getting more, or less aggressive with those changes in the year? And what kind of data points will you be watching or focused on, which will drive your decision to make these adjustments?
Yemi Okupe: Yes, if we can go a bit into just like what is the philosophical approach behind some of the changes that we make. And so, I think that as a management team, as a company, I think we're less focused on what's happening quarter-to-quarter. As Andrew mentioned, we've seen the consumer remain very resilient just given the types of conditions are oftentimes serving. They tend to be more resilient in nature. And so really, when we think around whether it's pricing, or other mechanisms that we use to pass value back to consumers, what will drive the decision to do those will be primarily just around the data that we receive in experiments in identifying which categories, which areas and which types of vehicles results in the highest ROI. And so, that will be more of the governing factor versus any given concern, or opportunity in a quarter.
Jailendra Singh: Great. Thanks a lot
Operator: Your next question comes from Korinne Wolfmeyer with Piper Sandler. Please go ahead.
Korinne Wolfmeyer: Hi, good afternoon, guys. Congrats on the quarter and thanks for the question. To touch on the churn question kind of in a different way. I mean I think what we're all selling is it hasn't been quantified very clearly, of like what's changed with retention and churn levels. So I guess, is there any way you can give us better color on like how many of your multi-month subscribers, are ending up doing reorders after their first initial order and how many are falling off? And then, any other detail you can give us there? Thank you.
Yemi Okupe: Yes. I think what I'd point to, Korinne, I think it's a great question. I think there are a few data points. One is just like the previous guidance that we've given around long-term retention levels more of 85%. I think this whole pull-through. And if anything, I think the hope for us would be that, in fact, that gets stronger, we did see across Q1 really is just a record level of addition of net new subscribers. And that's a function of efficiency on acquisition, but also just some of the benefits and longevity. As we continue to pass value back to consumers in the form of pricing experiments, or other value-added ads to consumers. We do expect the retention to improve in the coming quarters, but it's very difficult to give exact quantification numbers around that.
Korinne Wolfmeyer: Got it. Thank you. Really appreciate it. And then I think you guys kind of hinted towards some new product launches. And I think, Andrew, you said, potentially GLP-1s soon. When you laid out the guidance, how much of the improvement in the guidance is coming from new product launches? And is anything getting pulled forward sooner than anticipated? And then any detail you can give us on timing of GLP-1s? And is that a, this year thing or maybe a next year thing? Any color there would be great? Thank you.
Andrew Dudum: Yes. On the GLP-1 side, definitely this year, so I would expect them soon as we talked about. But regard yes to the other side, I'd let Yemi tackle.
Yemi Okupe: Yes. And with respect to the question around guidance, Korinne, I think that really that's less of a function of a specific categorical launch, or product launch and it relates to what it's more of a function of as we expect continued strong demand from consumers that was similar to what we saw in the first quarter. And we do expect a continued uptick in personalized products. We're very excited by the portfolio to come. But historically, with our guidance philosophy, we generally roll forward what we have certainty and visibility into. And so, reflected in the guidance is what we can see based upon today, and some of the impacts that we have around the products that have already launched, or imminently coming.
Korinne Wolfmeyer: Great. Thank you.
Operator: Your next question comes from George Hill with Deutsche Bank (ETR:DBKGn). Please go ahead.
George Hill: Good afternoon, guys, and thanks for taking the questions. I have kind of one big picture one and one small picture one, Andrew and Yemi. I guess the small picture one is, do you guys have an opinion kind of at what price point GLP-1s inflect for you from a subscription and volume perspective? And I ask that as somebody from the drug supply chain side, we see pretty significant price competition in that space and discounting in that space. So prices are coming down pretty significantly. And then my follow-up question to that is Yemi to your comments, when you talked about wanting to grow a business that has tens of millions of subscribers, kind of which disease states and product categories do you think are most important for getting to that goal? Thank you.
Andrew Dudum: Thanks George. On the GLP-1 side, I'm not sure, we probably have a perspective to share on that at this point, but I agree very interesting question and definitely dynamic, right, changing pretty near time. So I think, we'll be able to share more on that shortly. Yes, Yemi, I'll let you take the second half?
Yemi Okupe: Yes. And with respect to the categories, I think George, I think the benefit of our platform is that it's both comprehensive, but at the same time, we're very focused on the five core specialties that we operate in. Within each of these specialties, there's tens of millions, if not hundreds of millions of subscribers for us to go after. And so, I think that we are confident in each of the specialties. They have the ability, as we mentioned in the past, to be at least $100 million or more of revenue by next year. Even that said, I think across many of these were just scratching the surface through continued innovation on the personalization side as well as continuing to broaden the product suite at different price points. We do feel very confident in our ability, to have each of these multi-hundred million dollar businesses.
George Hill: Okay. I don't know if there's time for a quick follow-up, but I would ask one more about GLP-1s where brand seems to be very important in that category and name brand, is very important in that category, where name brand is kind of less impolite, your name brand, Hims & Hers is important in your kind of total assets. Is that something that you view as kind of different, or like something you can cover? Or I don't know if you can talk about how you address the marketing aspect of that category, and how it's different from what you guys have done historically?
Andrew Dudum: Yes. I probably can't give too much there, but I do think that when you're talking about GLP-1 and specifically even to Dan's question earlier around compounded GLP-1s, the safety profile and the clinical excellence around those I think it's critical, right? And I think there's a wide range of offerings in market with a wide range probably of clinical best practices -- and I think when we bring things to market, as we've kind of said in the past. We don't necessarily believe we ever need to, or should be the first to market, but we should be the best in market. And I think that's the way we'd approach this category and its launch of being able to ensure customers that the offering, and the products are the highest quality, the highest testing and have a degree of safety and clinical excellence that is really unmatched and may know that.
George Hill: Great. Thank you.
Operator: There are no further questions at this time. This will conclude today's conference call. Thank you all for your participation. You may now disconnect.
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