Hims & Hers Health, Inc.

Good afternoon and thank you for joining us today. Conference call to discuss HIMSS and HERS Health Incorporated third quarter 2021 financial results. Joining me on today's call are Andrew Dudum, our chief executive officer, and Spencer Lee, our chief financial officer. On this call, we will be making forward-looking statements, including the financial guidance and expectations for our fourth quarter 2021 and fiscal year 2021 and 2022 growth expansion into new categories, strategies, customer demand, and products. These statements reflect our best judgments based on the factors currently known to us as the actual events or results may differ materially. Please refer to the documents that we filed with the SEC, including the Form 8K filed with the day press release. Those documents contain risks and other factors that may cause our actual results, to differ from those contained in our forward-looking statements. These forward-looking statements are based and made as of today, and we will discuss these claims and any obligations to update or revise these statements. If this call is reviewed after today, the information proceeding during this call may not be current or accurate. We will also discuss the NANGAP financial measures, which are not prepared in accordance with the general accepted accounting principles. For the historical periods, the reconciliations with GAAP and non-GAAP results are provided in the press release filed today with the SEC on an 8K and also available on our website. And with that, I'll now turn it over to Andrew Dudum.

Welcome and thank you all for joining our Q3 earnings call. This quarter was yet again another quarter where our team's execution was outstanding. Our mission is to make the highest quality personalized healthcare accessible to everyone. This quarter, we delivered on that mission at a scale never achieved in the company's history. Across the board, we exceeded our guidance with revenue coming in at over 74 million, representing 79% year-over-year growth. Subscription members, the underlying driver of our subscription business, grew 95% year-over-year to over 500,000. This outperformance across the spectrum was driven by continued robust growth in our core HIMSS categories, where our entrenched brand and trusted products continued to deliver exceptional growth, as well as continued acceleration in our newest expansion categories, such as mental health, growing 1,000% year over year. Our fundamentals underpin what I continue to believe is an exceptionally rare opportunity in the public market, a beloved consumer brand that is built upon an enduring subscription membership business model. Approximately 94% of our GAAP revenue was recurring subscription revenue, made possible by robust 88% long-term revenue retention. Hims and Hers brings together the best of high-growth consumer Internet, coupled with the fundamental economics of enterprise SaaS. We believe what we are delivering is different from anything in the market, and our brand approach and execution continues to deliver real, durable, competitive advantages. While Spencer will spend more time reviewing the coordinator's remarks, I wanted to take the majority of the time today to share what I believe is the most exciting news of the day. Today we launched our mobile platform and plan to roll it out fully over the coming weeks and months to over 500,000 HIMS and HERS members. To me, this marks one of the most exciting launches in our company's history. As we continue to further advance our goal of fundamentally reshaping what it will mean to access and experience great modern healthcare. I believe that the launch of our mobile platform is significant, not just for our company, but for the industry as a whole. The HIMS and HERS mobile platform is a major step in visualizing the radically different vision we have for the future of health and wellness. Our members grew up expecting innovative, digitally native, and all-inclusive experiences like Spotify, Netflix, and Peloton. Those companies structurally changed the fundamental business model of their traditional industry in favor of everyday consumer experiences. We believe the healthcare industry is in need of that structural change as well, and we view today's launch as a major step towards him and her building that future. We imagine a world where the hardest part of accessing treatment options for a health challenge is pushing play on a guided and integrated program. A program led by inspiring and compassionate coaches, backed in partnership by leading medical institutions and specialists that brings together streamlined education, original content, community support, treatment, and oversight. We imagine a world where hundreds of programs are available at your fingertips, from helping track and improve your cholesterol to navigating the complexities of IVF with your partner. We imagine a world where the concept of scheduling an appointment, coordinating a visit, finding a specialist, or asking about even the smallest health concern is as simple as texting your concierge. who not only knows your name, but ensures someone is available to you 24-7 on call to assist you. We anticipate that our mobile platform will be the foundation on which we build and invest in this future, further bundling additional value for our members. It is hard to overstate the potential and full extent of how broadly we're thinking about this opportunity over the long term. In the near term, I'm confident what we built will be wildly additive to our existing offerings. In the long term, I believe we may have just introduced a new way entirely to think about the delivery of healthcare. We're excited to continue pushing the boundaries on behalf of everyday people, unconstrained by the existing entrenched systems of today, and focused solely on how to empower the masses with beautiful, affordable, and accessible care. For all of you visual learners, we've created a destination to see the core experiences within the mobile app. Let me walk you through a few of those core aspects. And for anybody interested, feel free to follow along more visually at the URL, app.4hims.com. To begin, let me introduce you to programs. Programs provide consumers with beautiful and fun original content journeys for a range of curated health challenges. Programs are led by energetic and compassionate coaches aiming to help each customer move along their journey of improved health. In partnership with leading medical experts and specialists, each program has been crafted to provide a world-class educational journey at the click of a button. Programs are a new world of access and community for people struggling to take the first step in resolving a health or wellness challenge. We believe programs have the potential to help millions of people take that first step. From helping reduce anxiety and resolve hormonal acne to sleeping better or navigating fertility challenges, we believe programs are an innovative new form factor that will help bring to the masses the best medical expertise. This is a new platform for us, which we will be building and creating on top of for years to come. Second, let me introduce you to Care. Hims and Hers members will now have full access to Care, a simple and unified hub for accessing your entire virtual care team. Within Care, customers will have access to support in a variety of ways, from scheduling consultations with licensed medical professionals on video, phone, or chat, to leveraging unlimited messaging access to the medical experts that are supporting their treatment plans. Within CARE, members will also find our new 24-7 concierge, where members will have around-the-clock access to highly trained coordinators helping navigate the ecosystem, coordinate with their virtual care teams, or simply help get the answers you need regarding your treatment plan. And lastly, introducing the member store. The member store is expected to bring together the entirety of the HIMS and HERS product portfolio into one simple and personalized space. Consumers will soon have one-click abilities to purchase at member pricing some of our most highly rated over-the-counter health and wellness offerings. From supplements to support sleep to products tackling hair loss, the member store allows for curated and personalized offerings bundled for easy access to up-level daily routines or enhance current plans. While still early, we believe that what we are building envisions a new future in healthcare. a single entry point into a beautiful healthcare world, simplifying the complexity of feeling great and being well. I'm so proud of the team for what they've dreamt up and have executed upon. Today, our business is stronger than it has ever been. We added more members to our platform in Q3 than any quarter in our company's history. Our products line the shelves at nearly 10,000 physical brick and mortar locations nationwide, including most recently a nationwide rollout in Walgreens. From the loyalists of J-Lo and the irreverent lovers of Miley Cyrus to the Sunday night fans of Rob Gronkowski, Kim's and hers is everywhere. An omnichannel strategy to build the first true consumer healthcare brand. Enhanced by this brand, our platform capabilities are only growing. And with this latest mobile platform, we feel confident in our abilities to lead in innovating, visualizing, and ultimately creating the future of healthcare. I've said this before, but I feel it's worth repeating. We are a company passionate about building this future. We pride ourselves on being visionary in our sector, sustaining consistent execution and delivering growth, and I feel this quarter is highly reflective of our ability to be the leader in this space. I'm proud of the results we shared with you today and of our team's dedication to our mission. At this point, I'll now turn the call over to Spencer for a more detailed review of our results, followed up by Q&A.

Thank you, Andrew. I'm pleased to report another incredibly strong financial quarter for Q3. I'll walk through the details behind our performance for the quarter then discussed our revised upwards guidance for Q4. First, let's discuss our Q3 results. In addition to continuing to drive strong growth in both the HIMSS and HERS brands, we also began integrating the company's first two acquisitions, Apostrophe and Honest Health, with both companies on track with integration and go-to-market expectations. Q3 was a quarter with many moving parts, And with this additional complexity, on our last earnings call, we not only provided guidance for revenue and adjusted EBITDA for Q3, but we also discussed several other metrics, including gross margin, marketing expense, and AOV. I'm pleased to report that we met or exceeded our guidance across every metric we provided on our previous call. In Q3, we generated revenue of $74.2 million, up 79% year over year. which exceeded the high end of our revenue guidance of $71 million. Q3 included approximately $5 million from Apostrophe, which was at the high end of the guidance we provided. Our strong growth this quarter continues to demonstrate the deep underserved demand of a new generation of experience-driven and brand-savvy healthcare consumers. Our ability to identify these audiences and deeply connect with them through our brands, and drive engagement and conversion through our unique digital experiences resulted in Q3 subscriptions growing 95% year over year to approximately 551,000. We generated nearly 1 million net orders in the quarter, 968,000 to be precise, which accelerated to 66% growth year over year. Year-over-year growth in net orders has accelerated for the last four consecutive quarters which we believe further demonstrates the deep consumer demand that exists in the market and our unique ability to capture it. Q3 gross margin was 74% and in line with the guidance we provided last quarter. As we indicated on our previous earnings call, the quarter per quarter decrease in gross margin was primarily driven by lower margin revenue from Apostrophe and Honest Health. As we continue to integrate our teams and capabilities, we see opportunities for margin expansion for both acquisitions over the medium term. Q3 marketing expenses were $38 million, right in line with the guidance we provided last quarter. Q3 marketing expenses included the marketing budgets we inherited from Apostrophe and Honest Health and the upfront investments we made for our celebrity partnerships with Miley Cyrus and Rob Gronkowski. We are exceptionally pleased with continued performance and scalability of our marketing. What we've been able to accomplish this year with our marketing efforts, I think has been really special and quite unique. Like many, we've seen ad rates increase throughout the year. Yet, in the face of these rate increases, we have kept our acquisition cost per new subscriber effectively flat the entire year. From Q1 to Q3, the variance between our highest CAT quarter and lowest CAT quarter has been less than 3%. Another way of saying this is that CACs have essentially been flat all year. Keeping CACs flat in an environment of increasing rates would be impressive by itself. However, we've done this while also scaling subscriptions and exceeding our revenue targets. Often when ad rates increase, companies are forced to make the tough choice between maintaining CACs by spending less and having growth decline or increasing marketing spend at ever increasing marginal tax in order to hit growth targets. This is why I think our execution has been so special and unique. Not only have we been able to hold our tax flat this year, we've done so while also growing revenue 79% year over year and subscriptions 95% year over year in Q3. Throughout the year, we've discussed the underlying drivers of our efficient marketing performance. but I want to take a moment to really emphasize them. First, we have a diversified marketing model where we are not dependent on any single marketing channel to drive growth. Since the start of the company, we have tested and learned how to scale and drive growth from a broad range of marketing channels, including digital and offline channels. In Q3, no single marketing channel accounted for more than 25% of total marketing expenses. This expertise and diversification allow us to continuously allocate our budget to the highest performing channels to drive efficiency and growth. Second, our data and analytics capabilities allow us to deeply understand our core audiences, develop assets and campaigns that drive high engagement, and allow us to very effectively identify, target, and convert high intent and high value consumers. These capabilities have allowed us to exceed our targets for revenue and growth throughout the year, including in Q3, despite price fluctuations across channels. Adjusted EBITDA loss in Q3 was $9.8 million, in line with guidance. We made several investments this quarter that we expect to provide future tailwinds, including the upfront marketing expenses associated with our Miley Cyrus and Rob Gronkowski partnerships, the close of the Apostrophe acquisition in July, and continued investments in people and capabilities across our core business and new categories. Now moving on to financial guidance. For Q4 2021, we are raising our revenue guidance to a range of $76 to $78 million. This includes approximately $2 million from our new wholesale agreement with Walgreens. Excluding Walgreens, we're guiding to a Q4 revenue range that is roughly in line with Q3 revenue. We've provided this guidance that Q4 revenues would be in line with Q3 for the last seven months, starting on our earnings call in May. We are reiterating this guidance as it reflects our run rate of Q4 trends and the uncertainty around seasonal ad markets, particularly in light of what we observed last year. I also want to note that we expect gross margins to sequentially decline by approximately two points in Q4, driven by a higher mix of wholesale revenue from Walgreens. and increased seasonal shipping costs that have been indicated by our shipping carriers. We expect full-year revenue of $263 to $265 million, implying 77% year-over-year growth at the midpoint. For Q4 adjusted EBITDA loss, we are guiding to a range of $12 to $14 million. For the full year, we continue to narrow the range to an adjusted EBITDA loss of $35 to $37 million. And finally, as we were working on our plan and budget for 2022, I wanted to provide some thoughts about next year. In October 2020, we shared an investor presentation during our SPAC process that provided revenue growth projections of 30% for both 2021 and 2022. We've completely outstripped our growth projections for 2021. We're currently guiding to $264 million in revenue at the midpoint for 2021, growing 77% feeding our previous projection by $85 million. However, our revenue projections from last October are instructive on how management views the long-term growth prospects of the company, that we believe we are addressing numerous multibillion-dollar markets, that we are uniquely positioned to address this new generation of healthcare consumers with a brand and set of experiences to meet their needs, and that we are well-positioned to be a long-term, high-growth business. As we finalize our plans, we expect to provide formal guidance for 2022 on our next call. As we close out this incredibly strong year, we thought it would be worthwhile to share that we continue to feel good about a 30% revenue growth rate for 2022. Before I pass the call back to the operator, I wanted to quickly reflect on 2021. We continue to be an exceptionally fast growing company, guiding to a 77% revenue growth this year. which is basically maintaining our 80% growth rate from last year. We are growing at this rate while on track to generate well over a quarter billion dollars in revenue this year, reaching this incredible scale in roughly our fourth year of operation. On our first earnings call as a public company this past March, we guided to a full year adjusted EBITDA loss of $35 to $45 million. We've continued to converge on the low end of this original range every quarter while continuously exceeding our revenue estimates. Our current adjusted EBITDA guidance for the year means we are losing, on average, only about $3 million per month, which seems very reasonable given our exceptional growth, impressive scale, and the fact that we owe over $250 million in cash and investments on the balance sheet. 2021 is turning out to be an unbelievably strong year. I couldn't be more proud of what we've achieved. Operator, I'm happy to open up the call for questions.