Hims & Hers Health, Inc.

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the HIMSS and HERS second quarter 2023 earnings conference call. Please note that this call is being recorded. All lines have been placed on listen only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. To withdraw your question, again, press star one. I would now like to turn today's call over to Alice Lopato, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to the Hims and Hers Health second quarter 2023 earnings call. On the call with me today is Andrew Dudum, our co-founder and chief executive officer, as well as Yami 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, and 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 see 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 table contained in today's press release available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information. You'll find a link to the webcast and Investor Relations website at investors.forhims.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.

Thank you, Alice. This quarter, we drove excellent results on both the top and bottom line. Growth remained exceptionally strong with revenue up 83% year over year in the second quarter to 207.9 million. Our platform continues to benefit from diversity of distinct brand categories helping lay the foundation for many years of robust growth ahead. Our more mature offerings within the HIMS brand continue to expand with little sign of market saturation, as we gain benefits of scale and continue to build a clear market leadership position via the capture of increasing share within the competitive landscape. Newer categories in markets, such as mental health and our UK operation, are growing mid-triple digits, and demonstrating strong quarter-over-quarter unit economic improvements. In Mark's step, we continued to drive meaningful efficiency gains from our efforts to verticalize our affiliated pharmacies and optimize our processes, which allowed us to generate $16.8 million in cash flow from operations and $10.6 million in adjusted EBITDA in the second quarter. This increasingly powerful flywheel model provides us reassured confidence in our ability to achieve and surpass our 2025 targets of at least $1.2 billion in revenue and over $100 million in adjusted EBITDA. Indeed, we believe the strength and composition of revenue and overarching durability of the model we're building is pointing towards many years of robust growth and increased profitability ahead. While I am proud of the company's quarterly financial outperformance, I'd like to spend most of today sharing some of what's happening under the hood. With long-standing initiatives, capabilities, and soon-to-launch categories, I believe we have the potential to meaningfully accelerate the RA exciting trajectory HIMSS and HERS is on. As I've shared in the past, I believe HIMSS and HERS is a unique competitive advantage. Myself and the rest of the management team think in multi-year horizons. and are not afraid to tackle complex challenges. While not for many years ahead, I wholeheartedly believe most of our management team will retire with this company. This long-term orientation is based upon the foundational belief that over the long term, we can deliver a platform so differentiated and so valuable that nearly every household in the country will benefit from its existence. Our orientation to the long term has been in our DNA from the start. And it's what's enabled us to get to where we are and build a company that today services customers across multiple categories, acquires consumers through some of the most creative channels, and has a foundation from which to bring some of the most innovative, personalized products to market. Looking ahead, the number of lives that we positively impact over the course of the next 10 years is a key benchmark for how we evaluate our progress and celebrate our successes. We believe that step change gains and long-term shareholder value will be a derivative of this. To look under the hood, I'd like to walk you through a few transformative shifts taking place in our business. For simplicity, I'll group them into four buckets. The first is a material mix shift in consumer preference, moving from generic to personalized treatments. The second is the rapidly accelerating strength of our data platform and AI capabilities. that are enabling individual providers to leverage the collective knowledge of hundreds of providers and millions of historical clinical decisions to support these precision treatments. We recently filed multiple trademark applications for the name MedMatch and plan on showcasing this AI technology more specifically and the clinical benefits it's delivering next quarter. Third, our new multi-action capabilities to enable providers to customize single pill treatments for multi-category conditions. And lastly, the exciting new frontiers and offerings we have recently launched and will be launching soon. From the earliest years, HIMSS and HERS delivered on in its simplest form, access. Access to a provider, access to clinically appropriate generic treatment, and access to solutions for a singular issue patients were challenged with. Today, that story has become wildly more exciting. as initiatives that have been in development for years are beginning to come to market. Our story is no longer one of simple access, but a story of bolstered capabilities in diagnostics, treatments, and care that we believe can deliver truly better outcomes. Our mission to help the world feel great was never just about providing access to the existing system of healthcare. While this is where we began, our true purpose all along has been to transform that system for the better. We want to improve the intelligence and capabilities of providers so that a customer's clinical experience and outcomes are not dependent on the sole experience of an individual provider, but rather the collective knowledge derived from hundreds of thousands or even millions of clinical encounters. Our ambitions were never just to provide access to commonly prescribed medications, but to build capabilities across pharmacy and clinical excellence to establish a new standard of entirely personalized, customized solutions. And lastly, our mission was never limited to enabling treatment of a patient for singular issues, but rather to build on human relationships and patient trust such that we could expand into a multi-treatment experience that tackles not only the patient's initial concern, but key underlying conditions that impact their overall health and ultimately their life. From a business that delivers on access alone to now a business that is personalizing the patient experience and treatment opportunities in order to deliver on better results and outcomes, we are propelling one of the most meaningful industry transformations that I have been witness to. We believe this transformation has massive implications for the future of hims and hers. From competitive differentiation to enduring growth, improved customer lifetime values, extensive and deep moats, and an offering that can no longer be compared to those in market. Something truly unique. To dig in further, let's start with that first bucket. The material product mix shift within our customer base from that of generic treatments to personalized treatment opportunities. Our confidence in personalized solutions is high, based upon insights and feedback from hundreds of thousands of customers on our platform. Feedback is confirming our belief that our innovations on this front are delivering on an unmet customer need that radically changes the relationship with and appreciation of our platform. Category-wide, the personalization of patient treatment by providers has rocketed, reflecting the desire and need for customized treatment of patients. Over 35% of online revenue from customers acquired in the second quarter came from personalized treatments. From our most tenured categories, like ED, providers and patients are increasingly turning to personalized solutions made available through hard mint and multi-action heart support. In him's hair, over 80% of new subscribers in the quarter opted for personalized treatments. The ability to tailor treatment in dose, form, and composition is giving many of our providers and customers their first real experience with precision medicine. The simple takeaway, customers are loving it. They're selecting it more, willing to pay more, engaging with the platform more, adhering to treatment more, and even indicating that they have no desire to return to the world of generic treatment. We expect to have personalized offerings across each of our main categories by the end of this year and anticipate that curated, personalized experiences and treatment will increasingly drive the differentiation of our business in the coming years. This business transformation is the result of years of innovation in pharmacy, clinical excellence, and platform technology. As the shift continues to flow through our business, we'll enter a world where HIMSS and HERS is known for these personalized capabilities, lifting the platform to new levels of customer appreciation and value. Personalization is not possible without our second bucket, which is the massively improved data and AI capabilities that we've spent years building in the background. As mentioned previously, we recently filed a trademark application for the name MedMatch and plan on showcasing this AI technology more specifically and the clinical benefits it's delivering next quarter. The move to personalized medicine and dramatically improved data capabilities are intrinsic to the third bucket, which is our new multi-action capabilities to enable providers to customize single pill treatments for multi-category conditions. Our newest offering launched just last week was our first foray into preventative cardiovascular care, Heart Health by HIMSS. Heart Health is one of the most meaningful launches since our founding. Heart disease is the number one cause of deaths for men worldwide, and approximately 30% of our male customers have at least one risk factor of developing it. This extension enables providers to prescribe compounded formulas that combine the active ingredients found in ED medications and statins, like the generics for Lipitor and Crestor, which can reduce the risk of having a heart attack by upwards of 33% and death by 8%. In partnership with the American College of Cardiology and LabCorp, we've brought together what Henle does best, innovative products, leading technology, and clinical excellence that work together to deliver on experience in defending the curve of deaths caused by heart disease. The market for cardiovascular support is massive, with nearly 100 million people suffering from heart disease in the United States alone. And I couldn't be more proud of the team for being patient and strategic in building the foundational capabilities over the last few years in anticipation of this launch. And this is just the beginning of what we will be able to do for our patients. For many years, patients have come to us to solve a single issue while actually struggling with many. PIMS and HERS now offers providers the clinical capability to address multiple conditions in a single treatment. leveraging the demand from high-interest categories to treat other clinical areas for which patients need support. In the e-commerce world, this is a cross-sell strategy. In our world, it's a clinical capability that allows patients to access more personalized, meaningful care, addressing a multitude of issues simultaneously, supporting simpler treatment regimens, and ultimately increasing the value we are delivering to our customers. Multi-action capabilities further deepen the defensibility of our platform as the offerings become more and more customized and inimitable to customers. It's easy to imagine the many powerful avenues where this could be beneficial, from chronic disease management, like heart disease and diabetes, to bundled cosmetic capabilities for anyone interested in treatments across categories. and even to help providers address sometimes stubborn and challenging issues more comprehensively, such as menopause or the interrelated dynamics between mental health, metabolic health, insulin resistance, and weight gain. These multi-action capabilities open us up to the last bucket, which are the new frontiers and categories we can bring to market in a way that's competitive, effective, affordable, and attractive to existing and new customers alike. We're excited to announce that HIMS and HERS will launch our comprehensive weight management offering in time for this coming January's New Year rush to self-improvement. Our weight management category will leverage all of the strengths of our platform. This means access to personalized treatments customized for a customer's clinical needs. Powered by our enhanced pharmacy capabilities, This offering will enable providers to more comprehensively address a range of underlying conditions clinically tied to weight gain, such as metabolic disorders, insulin resistance, overeating habits, depression, and more. At launch, the offerings will include access to treatment formulations that are affordable and that can combine and leverage the active ingredients in proven prescription medications and supplements, as well as behavioral and nutritional-focused plans. The platform is being built to support both existing GLP-1s and future pharmaceutical innovations. But given the instability of the current supply chain, inconsistent reimbursement, and outstanding safety evaluations, these products likely will not be available at launch. Dr. Craig Primack joins us this week as our new medical director in weight management, bringing to our organization nearly two decades optimizing treatment protocols for the complex underlying factors driving weight gain. Our weight management offering has been in research and development for over a year, and with nearly 100 million Americans suffering from the disease of obesity, we want to ensure it is positioned to make a real dent in this crisis. That means delivering on an offering to a mass market audience with pricing in line with core, everyday prices offered across our categories, an experience that's streamlined and consistent, and a focus on safety and efficacy. Leveraging widely understood and available treatments, sophisticated pharmacy capabilities, and deep data-driven archetype matching, we hope to deliver exciting treatment efficacy at scale. Like I said at the start, our mission is to make the world feel great through the power of better health. An often underappreciated aspect of this mission is the necessity of ensuring our platform can reach as many people as possible. The level of scale that we have combined with the efficiency of our affiliated pharmacies enables us to orient users to a model with a treatment-based construct versus a pill-based construct at exceptional value to them. This will continue to become more meaningful as we move further away from subscribers with one treatment to subscribers with multi-category treatments. As part of this mission and our ambition to reach as many people as possible, we're excited to share that in the past few months, we've begun to systematically lower prices for many of our longer duration offerings to make our more personalized subscriptions even more mass market accessible. Pricing rollouts, which we expect to continue in the coming months, have been in process while simultaneously expanding gross margins to 82%. as our operational scale and efficiency allows us to accelerate profitability on an adjusted EBITDA basis and also expand market share and access. We are already seeing the signs that these strategic actions are having a strong market impact. After the implementation of strategic pricing adjustments, the ratio of new HIMS hair loss subscribers that selected a personalized offering with a duration of five months or more increased over 25 points, during the course of the second quarter. Our belief is that consumers making longer upfront commitments for effective and unique products is an equation that provides a path for users to remain on the platform for decades. This quarter's announcement reflects years of hard work from the team, and I'm thankful for their commitment to building this platform the right way. I'm confident the methodical nature of our team and their time horizon for investments will have a uniquely meaningful impact to our customers and ultimately our shareholders. With that, I'll turn the conversation over to Yemi to discuss further financials.