What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-24 compared with 2024-02-26 · 145 added, 115 removed, 265 unchanged (50% of the section changed)

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Our mission is to help the world feel great through the power of better health.

We believe that we have the technical platform, distributed provider network, and access to clinical capabilities to lead the migration of routine office visits to a digital format.

The Hims & Hers platform includes access to a highly-qualified and technologically-capable provider network, a clinically-focused electronic medical records system, digital prescriptions, and cloud-enabled pharmacy fulfillment.

We believe that we have the technical platform, distributed provider network, and access to clinical capabilities to lead the migration of routine office visits to a personalized, digital, accessible format.

personalization capabilities.

Our digital platform enables access to treatments for a broad range of conditions, including those related to sexual health, hair loss, dermatology, mental health, and weight loss.

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In addition, we offer access to a range of health and wellness products designed to meet individual needs, which can include curated prescription and non-prescription products.

Our products and services are available for purchase directly by customers

on our websites and mobile applications.

Our products and services are available for purchase directly by customers on our websites and mobile applications.

Additionally, Hims & Hers non-prescription products can be found in tens of thousands of top retail locations in the United States.

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Increases or decreases in these key business metrics may not correspond with increases or decreases in our revenue.

We also continually and strategically review our key business metrics to ensure that they are helpful in managing or monitoring the performance of our business as it grows, which may result in changes in our key business metrics over time.

As an example, our management primarily uses the Subscribers and Monthly Online Revenue per Average Subscriber metrics, as defined below, to manage and monitor the performance of our business.

With the Net Orders and AOV metrics, as defined below, becoming less relevant for our business, we anticipate no longer reporting those metrics beginning with the three months ending March 31, 2025.

The limitations our key business metrics have as an analytical tool include:

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Wholesale Revenue also includes non-prescription product sales to third-party platforms through consignment arrangements.

In addition to being revenue generative and profitable, wholesale partnerships and consignment arrangements have the added benefit of generating brand awareness with new customers in physical and online environments.

“Subscribers” are customers who have one or more “Subscriptions” pursuant to which they have agreed to be automatically billed on a recurring basis at a defined cadence.

The Subscription billing cadence is typically defined as a number of days (for example, billed every 30 days or every 90 days), which are excluded from our reporting when payment has not occurred at the contracted billing cadence.

Subscribers can cancel Subscriptions in between billing periods to stop receiving additional products and/or services and can reactivate Subscriptions to continue receiving additional products and/or services.

Subscribers can cancel or snooze Subscriptions in between billing periods to stop receiving additional products and/or services and can reactivate Subscriptions to continue receiving additional products and/or services.

“Monthly Online Revenue per Average Subscriber” is defined as Online Revenue divided by “Average Subscribers”, which amount is then further divided by the number of months in a period.

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We generated $1,437.9 million in Online Revenue for the year ended December 31, 2024, an increase of $595.6 million, or 71%, as compared to $842.4 million for the year ended December 31, 2023.

Growth in Online Revenue for the year ended December 31, 2023 was primarily driven by growth in Subscribers, from whom we generated recurring and stable Monthly Online Revenue per Average Subscriber, as well as growth in AOV and Net Orders.

Growth in Online Revenue for the year ended December 31, 2024 was driven by weight loss offerings launched in the fourth quarter of 2023 or later, including new offerings launched in the second quarter of 2024 for which there was no comparable revenue in 2023, as well as continued sustainable growth in Subscribers pertaining to offerings available in all periods presented, from whom we generated recurring revenue.

Offerings available in all periods presented represented a substantial majority of Online Revenue for the year ended December 31, 2024.

This led to growth in new Subscribers, Monthly Online Revenue per Average Subscriber, AOV, and Net Orders.

Online Revenue can fluctuate on a period-to-period basis due to various factors, including launches of new product offerings, the success of our marketing campaigns, and strategic pricing decisions impacting customer uptake of our offerings, as well as product availability and the regulatory landscape impacting our offerings.

We generated $38.6 million in Wholesale Revenue for the year ended December 31, 2024, an increase of $9.0 million, or 30%, as compared to $29.6 million for the year ended December 31, 2023.

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Subscribers grew 45% to approximately 2,229,000 as of December 31, 2024 as compared to approximately 1,537,000 Subscribers as of December 31, 2023.

Growth in Subscribers for the year ended December 31, 2023 was driven by increased traffic to our platform (through our websites and mobile applications) as a result of our marketing activities, increased customer conversion rates from improved onsite and customer onboarding experiences, and new product offerings.

Monthly Online Revenue per Average Subscriber grew 2% to $54 for the year ended December 31, 2023 as compared to $53 for the year ended December 31, 2022, primarily due to product mix shifting between conditions and longer duration Subscriptions.

Monthly Online Revenue per Average Subscriber has remained relatively stable as a result of generally recurring and predictable uptake of our offerings by Subscribers, but can fluctuate on a period-to-period basis due to various factors, including price changes, product mix, and duration of Subscriptions.

Growth in Subscribers for the year ended December 31, 2024 was driven by offerings launched in the fourth quarter of 2023 or later, along with increased traffic to our platform (through our websites and mobile applications) as a result of our marketing activities and improved onsite and customer onboarding experiences.

Monthly Online Revenue per Average Subscriber grew 19% to $64 for the year ended December 31, 2024 as compared to $54 for the year ended December 31, 2023, primarily due to newer offerings introduced during the second quarter of 2024 along with changes in product mix.

As a result of growth in Subscribers, we generated approximately 10.5 million Net Orders for the year ended December 31, 2024, an increase of 21% as compared to approximately 8.7 million Net Orders for the year ended December 31, 2023.

For the year ended December 31, 2024, AOV was $137, an increase of 41% compared to $97 for the year ended December 31, 2023.

AOV growth for the year ended December 31, 2023 was driven by product mixes shifting towards longer duration Subscriptions as well as new product offerings.

AOV growth for the year ended December 31, 2024 was driven primarily by newer offerings introduced during the second quarter of 2024 as well as product mixes shifting towards longer duration Subscriptions.

We continuously test and optimize the online experience and offerings to improve the customer experience, maximize sales, and improve gross margin.

Our Subscribers (sometimes also referred to by us as “members”) select a cadence at which they wish to receive product shipments.

In addition to a 30-day cadence, we offer Subscribers the ability to select from a range of Subscription shipment cadences, from every 60 days to 360 days, depending on the product.

Our Subscribers (sometimes also referred to by us as “members”) select a cadence at which they wish to receive product shipments or a treatment term depending on the offering.

In addition to a 30-day cadence or treatment term, we offer Subscribers the ability to select from a range of Subscription shipment cadences or treatment terms, from every 60 days to 360 days, depending on the product.

Subscriptions automatically renew on the applicable cadence selected by the Subscriber when purchasing or updating the Subscription.

To ensure timely delivery of prescription medications and in accordance with our terms and conditions, Subscribers may sometimes be charged, and products may sometimes be shipped, earlier than their regularly scheduled cadence to accommodate holidays or for other operational reasons to support continuity of treatment.

The Subscriber is billed upon each shipment.

Subscribers can cancel Subscriptions in between billing periods to stop receiving additional products and can reactivate Subscriptions at any time.

In addition, our customers can purchase product bundles or defined product kits, either consisting of non-prescription over-the-counter products or non-prescription products together with prescription medications, for a single all-inclusive price.

Such offerings and their uptake by Subscribers have contributed to the generally stable and predictable nature of our Monthly Online Revenue per Average Subscriber.

Additionally, the uptake of these offerings has resulted in higher gross profits and gross margins for our sales of products and services on our platform.

For example, for longer term Subscriptions, we incur shipping and fulfillment expenses fewer times per year than for 30-day Subscriptions.

The Subscriber uptake of longer term Subscriptions results in lower recurring costs and higher gross margins as compared to 30-day Subscriptions.

With the exception of prepaid offerings, the Subscriber is typically billed upon each shipment.

Subscribers can cancel or snooze Subscriptions in between billing periods to stop receiving additional products and can reactivate Subscriptions at any time.

For longer term Subscriptions, we incur shipping and fulfillment expenses fewer times per year than for 30-day Subscriptions.

The Subscriber uptake of longer term Subscriptions typically results in lower recurring costs and higher gross margins as compared to 30-day Subscriptions.

Key Factors Affecting Results of Operations

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Consumer tastes, preferences, and sentiment for our brands may also change and result in decreased demand for our products and services.

Changes in law or regulatory enforcement could also negatively impact our ability to acquire new customers, including changes to privacy, healthcare, or other laws that could impact customer acquisition costs.

Changes in the legal or regulatory environment could also negatively impact our ability to acquire new customers, including changes to privacy, healthcare, or other laws, or the interpretation or enforcement of such laws, and could impact customer acquisition costs.

Retention of customers

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The recurring nature of this revenue provides us with a certain amount of predictability for future revenue if past Subscriber behavior stays relatively consistent in the future.

In addition, the consistent uptake by Subscribers of our offerings has contributed to the stable and predictable nature of our Monthly Online Revenue per Average Subscriber.

While historically the consistent uptake by Subscribers of our offerings contributed to the stable and predictable nature of our Monthly Online Revenue per Average Subscriber, newer offerings introduced in 2024 have led to increases in this metric, which may continue in the near future.

We expect to retain a significant majority of revenue from Subscribers who maintain a Subscription for more than two years (sometimes referred to by us as “long-term revenue retention”).

However, if customer behavior changes, or our assumptions regarding long-term revenue retention are incorrect and Subscriber retention decreases in the future, then future revenue will be negatively impacted.

Macroeconomic factors including inflation or recessionary pressures may affect the ability of our Subscribers to continue to pay for our products and services, which may also impact the future results of our operations.

Macroeconomic factors including inflation or recessionary pressures or the impact of trade actions may affect the ability of our Subscribers to continue to pay for our products and services, which may also impact the future results of our operations.

Investments in growth

We expect to continue to focus on long-term growth.

We intend to continue to invest in our fulfillment and operating capabilities, including our Affiliated Pharmacies (as defined below) and warehousing facilities, with the goal of fulfilling nearly all of our pharmaceutical and over-the-counter customer orders through affiliated and internal fulfillment capabilities.

We intend to continue to invest in our fulfillment, distribution, and operating capabilities, including in our Facilities, with the goal of fulfilling nearly all of our pharmaceutical and over-the-counter customer orders through affiliated and internal fulfillment capabilities.

For example, we are making investments in the expansion of our current facilities, which are expected to continue for at least the next 12 months.

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We are working to enhance our offerings and expand the breadth of health and wellness products and services offered on our websites and mobile applications.

This includes investments in personalized product offerings, including in our compounding capabilities.

This also includes

further investments in and development of mobile phone technology, including our mobile applications, in order to improve the customer experience on our platform.

The number of our Subscribers using personalized solutions has grown in recent periods and represented more than a majority of Subscribers as of the end of fiscal year 2024.

As we expect the percentage of Subscribers on our platform using a personalized solution to continue to increase, we plan to continue to invest in personalized product offerings, including in our compounding capabilities.

This also includes further investments in and development of mobile phone technology, including our mobile applications, in order to improve the

customer experience on our platform.

We may continue to pursue opportunities to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights.

In the short term, we expect these investments to increase our operating expenses;

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Expanding into new health and wellness specialties has required and will continue to require financial investments in additional headcount, marketing and customer acquisition costs, additional operational capabilities, and may require the purchase of new inventory.

If we are unable to generate sufficient demand in new health and wellness specialties, we may not recover the financial investments we make into new specialties and revenue may not increase in the future.

If we are unable to generate or maintain sufficient demand in new health and wellness specialties, we may not recover the financial investments we make into new specialties and revenue may not increase in the future.

We expect our weight loss specialty will drive new seasonality considerations for our business.

Specifically, we expect individuals’ health and wellness-based New Year's resolutions to result in additional traffic to our platform and thus increase the number of Subscribers utilizing one of our weight loss offerings.

This may result in higher Subscriber and Monthly Online Revenue per Average Subscriber growth in the first quarter compared to the remainder of the year.

Non-GAAP Financial Measures

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Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes.

“Adjusted EBITDA” is defined as net loss before stock-based compensation, depreciation and amortization, acquisition-related costs (which includes (i) acquisition professional services;

and (ii) consideration paid for employee compensation with vesting requirements incurred directly as a result of acquisitions, inclusive of revaluation of earn-out consideration recorded in general and administrative expenses), income taxes, change in fair value of liabilities, impairment of long-lived assets, interest income, one-time Merger bonuses and warrant expense, and amortization of debt issuance costs.

“Adjusted EBITDA” is defined as net income (loss) before stock-based compensation, depreciation and amortization, acquisition and transaction-related costs (which includes (i) consideration paid for employee compensation with vesting requirements incurred directly as a result of acquisitions, inclusive of revaluation of earn-out consideration recorded in general and administrative expenses prior to 2024, and (ii) transaction professional services), legal settlement expenses that are considered non-recurring, impairment of long-lived assets, change in fair value of liabilities, interest income, and income taxes.

“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue.

The following table reconciles net loss to Adjusted EBITDA for the years ended December 31, 2023, 2022, and 2021 (in thousands):

The following table reconciles net income (loss) to Adjusted EBITDA for the years ended December 31, 2024, 2023, and 2022 (in thousands):

Year Ended December 31,

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Revenue $ 1,476,514 $ 872,000 $ 526,916

Net loss (23,546) (65,678) (107,659)

Net income (loss) 126,038 (23,546) (65,678)

Stock-based compensation 92,322 66,080 42,817

Depreciation and amortization 17,088 9,515 7,474

Acquisition-related costs 3,016 1,192 8,105

Provision (benefit) for income taxes 1,975 (31) (3,136)

Change in fair value of liabilities 1,075 (70) (3,802)

Acquisition and transaction-related costs 3,979 3,016 1,192

Legal settlement 2,008 — —

Impairment of long-lived assets 114 429 1,127

Change in fair value of liabilities — 1,075 (70)

Interest income (10,349) (9,029) (2,610)

Merger bonuses — — 5,219

Warrant expense in connection with Merger — — 154

Amortization of debt issuance costs — — 144

(Benefit) provision for income taxes (54,327) 1,975 (31)

Adjusted EBITDA $ 176,873 $ 49,515 $ (15,779)

Net loss as a % of revenue (3) % (12) % (40) %

Net income (loss) as a % of revenue 9 % (3) % (12) %

Adjusted EBITDA margin 12 % 6 % (3) %

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GAAP items excluded from Adjusted EBITDA.

When evaluating our performance, you should consider Adjusted EBITDA in addition to, and not as a substitute for, other financial performance measures, including our net loss and other U.S.

When evaluating our performance, you should consider Adjusted EBITDA in addition to, and not as a substitute for, other financial performance measures, including our net income (loss) and other U.S.

GAAP results.

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Because Free Cash Flow facilitates internal comparisons of our historical liquidity on a more consistent basis, we use this measure for business planning purposes.

“Free Cash Flow” is defined as net cash provided by (used in) operating activities, less purchases of property, equipment, and intangible assets and investment in website and mobile application development and internal-use software in investing activities.

“Free Cash Flow” is defined as net cash provided by (used in) operating activities, less purchases of property, equipment, and intangible assets and investment in website development and internal-use software in investing activities.

The following table reconciles net cash provided by (used in) operating activities to Free Cash Flow for the years ended December 31, 2024, 2023, and 2022 (in thousands):

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purchases of property, equipment, and intangible assets in investing activities (41,655) (17,220) (2,714)

investment in website and mobile application development and internal-use software in investing activities (9,272) (4,533) (4,175)

investment in website development and internal-use software in investing activities (11,095) (9,272) (4,533)

Free Cash Flow $ 198,334 $ 46,991 $ (33,778)

Some of the limitations of Free Cash Flow include (i) Free Cash Flow does not represent our residual cash flow for discretionary expenditures and our non-discretionary commitments, and (ii) Free Cash Flow includes capital expenditures, the benefits of which may be realized in periods subsequent to those in which the expenditures took place.

In evaluating Free Cash Flow, you should be aware that in the future we will have cash outflows similar to the adjustments in this presentation.

In evaluating Free Cash

Flow, you should be aware that in the future we will have cash outflows similar to the adjustments in this presentation.

Our presentation of Free Cash Flow should not be construed as an inference that our future results will be unaffected by these cash outflows or any unusual or non-recurring items.

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Currently, we conduct business through one operating segment.

Substantially all our long-lived assets are maintained in, and a significant majority of our losses are attributable to, the United States of America.

The consolidated financial statements include the accounts of our company, our wholly-owned subsidiaries, and variable interest entities for which we are the primary beneficiary.

The variable interest entities are:

Substantially all our long-lived assets are maintained in, and a significant majority of our results of operations are attributable to, the United States of America.

The consolidated financial statements include the accounts of our company, our wholly-owned subsidiaries, and variable interest entities (“VIEs”) for which we are the primary beneficiary.

For the periods presented, the VIEs are:

(i) “Affiliated Medical Groups,” which are professional corporations or other professional entities owned by licensed physicians and that engage licensed healthcare professionals (physicians, physician assistants, nurse practitioners, and mental health providers;

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We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

Our consolidated revenue primarily comprises of online sales of health and wellness products through our websites and mobile applications, including prescription and non-prescription products.

Our consolidated revenue primarily comprises online sales of health and wellness products through our websites and mobile applications, including prescription and non-prescription products.

In contracts that contain prescription products issued as the result of a consultation, revenue also includes medical consultation services and post-consultation service support provided by Affiliated Medical Groups.

Additionally, revenue is generated through wholesale arrangements.

For information on our significant accounting policies, see Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Cost of revenue

Cost of revenue consists of costs directly attributable to the products shipped and services rendered, including product costs, packaging materials, shipping costs, and labor costs directly related to revenue generating activities.

Costs related to free products where there is no expectation of future purchases from a customer and depreciation and amortization on property, equipment, and software are considered to be operating expenses and are excluded from cost of revenue.

Cost of revenue consists of costs directly attributable to the products shipped and services rendered, including product costs of purchased and manufactured products, packaging materials, shipping costs, labor costs directly related to revenue generating activities including medical consultation services and manufacturing labor, and overhead costs associated with manufactured products.

Costs related to free products where there is no expectation of future purchases from a customer and depreciation and amortization on property, equipment, and software (other than related to manufactured products) are considered to be operating expenses and are excluded from cost of revenue.

Gross profit and gross margin

Our gross profit represents total revenue less our total cost of revenue, and our gross margin is our gross profit expressed as a percentage of our total revenue.

Our gross profit and gross margin have been and will continue to be affected by a number of factors, including the prices we charge for our products and services, the costs we incur from our vendors for certain components of our cost of revenues, the mix of the various products and services we sell in a period, the mix of Online Revenue and Wholesale Revenue in a period, volume of fulfillment through affiliated and internal fulfillment capabilities, and our ability to sell our inventory.

Our gross profit and gross margin have been and will continue to be affected by a number of factors, including the prices we charge for our products and services, the costs we incur from our vendors for certain components of our cost of revenues, the mix of the various products and services we sell in a period including the launch of new offerings, the mix of Online Revenue and Wholesale Revenue in a period, volume of fulfillment through affiliated and internal fulfillment capabilities, and our ability to sell our inventory.

We expect our gross margin to fluctuate from period to period depending on these and other factors.

While gross margin has decreased period to period in the most recent quarters, and we may see this trend continuing in the short term, over the long term we expect gross margin to stabilize as we continue to scale our business and increase our ability to negotiate more favorable costs of revenue.

Marketing expenses

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Customer acquisition costs, also called paid marketing expense, are the advertising and media costs associated with our efforts to acquire new customers, promote our brands, and build awareness for our products and services.

Customer acquisition costs include advertising in digital media, social media, television, radio, out-of-home media, and various other media outlets.

Customer acquisition costs include advertising in digital media, social media, television, radio, out-of-home media, and various other media outlets and excluding content production costs.

Marketing expenses also include overhead expenses, including salaries, benefits, taxes, and stock-based compensation for personnel;

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Marketing is an important driver of growth and we intend to continue to make significant investments in customer acquisition and our marketing organization.

Historically, our marketing expenses have increased quarter-over-quarter.

We expect this trend to continue, though marketing expenses may fluctuate as a percentage of revenue due to the timing and discretionary nature of these expenses.

Historically, our marketing expenses have increased quarter-over-quarter and we expect this trend to continue.

While marketing expenses may fluctuate as a percentage of revenue due to the timing and discretionary nature of these expenses, with the additional marketing leverage driven by our newer offerings, along with the maturation of our existing Subscriber base, we expect total marketing expenses as a percentage of revenue to continue to decrease over the long term.

Operations and support expenses

Operations and support expenses include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our supply chain, retail, medical group, pharmacy, fulfillment, and customer service functions.

These expenses also include operating expenses primarily relating to operating and support functions for facilities, warehousing and fulfillment, payment processing, third-party software and hosting to support those functions, and related depreciation.

We expect operations and support expenses to increase for the foreseeable future as we continue to invest in our fulfillment and operating capabilities and grow our business.

However, we anticipate operations and support expenses will decrease as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

These expenses also include operating expenses primarily relating to operating and support functions for facilities, warehousing and storage, fulfillment, transaction processing, third-party software and hosting to support those functions, and related depreciation and amortization.

We expect operations and support expenses to increase for the foreseeable future as we continue to invest in our fulfillment and operating capabilities and grow our business, resulting in additional operational efficiencies.

As a result, we expect revenue growth to continue to outpace those investments made, leading to a decrease in operations and support expenses as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

Technology and development expenses

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Expenses also include investments to develop new health and wellness products and services.

We expect technology and development expenses to increase for the foreseeable future as we grow our business and continue to invest in our platform and new offerings.

However, we anticipate technology and development expenses will decrease as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

We expect technology and development expenses may increase in the foreseeable future as we grow our business and continue to invest in our platform and new offerings and stabilize over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

General and administrative expenses

General and administrative expenses (“G&A”) include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our executive, legal, human resources, finance, brand strategy, and other corporate functions.

These expenses also include operating expenses primarily relating to general and administrative functions for insurance, third-party software and hosting to support those functions, related depreciation and amortization, and other general corporate costs.

We expect G&A to increase for the foreseeable future as we increase headcount with the growth of our business.

However, we anticipate G&A will decrease as a percentage of revenue over the long term, in part due to our expected execution of disciplined headcount growth, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

However, we anticipate G&A will decrease as a percentage of revenue over the long term, in part due to our expected execution of disciplined headcount growth and overall expense management, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

Other income (expense)

Other income (expense) primarily consists of interest income from our cash and cash equivalents and investment accounts, as well as the change in fair value of liabilities.

Other income (expense) primarily consists of interest income from our cash and cash equivalents and investment accounts, and, in prior years, change in fair value of liabilities.

Additionally, other income (expense) includes non-operating and one-time charges classified outside of operating expenses.

(Provision) benefit for income taxes

The (provision) benefit for income taxes primarily consists of federal and state taxes, as well as change in valuation allowance.

Benefit (provision) for income taxes

The benefit (provision) for income taxes primarily consists of federal and state taxes, as well as change in valuation allowance.

Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized.

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Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates.

If and when we conclude that we are more likely than not to utilize some or all of our deferred tax assets, we release some or all of our valuation allowance and our tax provision will decrease in the period in which we make such determination, which will cause a corresponding one-time increase to net income.

Results of Operations

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Total operating expenses 1,111,232 366,830 49 % 744,402 266,983 56 % 477,419

Loss from operations (29,453) 39,244 (57) % (68,697) 46,345 (40) % (115,042)

Income (loss) from operations 61,903 91,356 * (29,453) 39,244 (57) % (68,697)

Other income (expense):

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Total other income, net 9,808 1,926 24 % 7,882 4,894 164 % 2,988

Loss before income taxes (21,571) 44,138 (67) % (65,709) 45,086 (41) % (110,795)

(Provision) benefit for income taxes (1,975) (2,006) * 31 (3,105) (99) % 3,136

Net loss $ (23,546) $ 42,132 (64) % $ (65,678) $ 41,981 (39) % $ (107,659)

Income (loss) before income taxes 71,711 93,282 * (21,571) 44,138 (67) % (65,709)

Benefit (provision) for income taxes 54,327 56,302 * (1,975) (2,006) * 31

Net income (loss) $ 126,038 $ 149,584 * $ (23,546) $ 42,132 (64) % $ (65,678)

______________

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Total operating expenses 75 % 86 % 91 %

Loss from operations (4) % (13) % (42) %

Income (loss) from operations 4 % (4) % (13) %

Other income (expense):

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Total other income, net 1 % 1 % 1 %

Loss before income taxes (3) % (12) % (41) %

(Provision) benefit for income taxes — % — % 1 %

Net loss (3) % (12) % (40) %

Income (loss) before income taxes 5 % (3) % (12) %

Benefit (provision) for income taxes 4 % — % — %

Net income (loss) 9 % (3) % (12) %

Revenue was $1,476.5 million for the year ended December 31, 2024 compared to $872.0 million for the year ended December 31, 2023, an increase of $604.5 million, or 69%.

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Cost of revenue was $303.4 million for the year ended December 31, 2024, compared to $157.1 million for the year ended December 31, 2023, an increase of $146.3 million, or 93%.

This increase was primarily due to increased shipping costs of 49%, increased costs associated with Providers of 48%, and increased product and packaging costs of approximately 20%.

These increases were due to overall increased business activity with the addition of new Subscribers.

This increase was primarily due to increased product and packaging costs of approximately 147%, increased shipping costs of 47%, and increased costs associated with medical consultation services of 37%.

These increases were primarily due to newer offerings as well as overall increased business activity with the addition of new Subscribers.

Gross profit was $1,173.1 million for the year ended December 31, 2024 compared to $714.9 million for the year ended December 31, 2023, an increase of $458.2 million or 64%.

Correspondingly, gross margin was 79% for the year ended December 31, 2024 compared to 82% for the year ended December 31, 2023.

The increase in gross margin for the year ended December 31, 2023 was primarily due to lower product and packaging costs as a percent of revenue as a result of fulfilling greater order volume by Affiliated Pharmacies at lower costs as compared to third-party pharmacies.

This increase was also due to Wholesale Revenue, which is lower margin than Online Revenue, comprising a smaller proportion of total revenue.

The decrease in gross margin for the year ended December 31, 2024 was primarily due to the addition of newer offerings, including those launched in the second quarter of 2024, which were strategically priced to attract new customers.

The decrease was partially offset by lower costs associated with medical consultation services as a percent of revenue as a result of improving Provider efficiency, synergies gained through increased fulfillment volume, as well as lower shipping costs as a percent of revenue as a result of optimizing costs.

Marketing expenses

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The most significant component of marketing expenses is customer acquisition costs, which increased to $594.5 million for the year ended December 31, 2024, compared to $379.7 million for the year ended December 31, 2023, an increase of $214.8 million, or 57%.

The increase in customer acquisition costs was a result

of management’s decision to increase investment in display, search, and linear and streaming television marketing, as we continue to identify opportunities to drive new customer growth.

The increase in customer acquisition costs was primarily a result of management’s decision to increase investment in display, search, streaming television, affiliate, and radio and

podcast marketing, as we continue to identify opportunities to drive new customer growth and which further expanded with the addition of newer offerings.

Operations and support

Operations and support expenses were $185.8 million for the year ended December 31, 2024, compared to $119.9 million for the year ended December 31, 2023, an increase of $65.9 million, or 55%.

The increase in operations and support was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $22.7 million, an increase in order fulfillment, transaction processing, and selling costs of $9.1 million, an increase in stock-based compensation of $4.1 million, and an increase in depreciation, amortization, and technology costs of operations and support functions of $3.6 million.

The increase in operations and support was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $25.0 million, an increase in order fulfillment and transaction processing of $16.3 million, an increase in professional services of $9.4 million, an increase in depreciation, amortization, and technology costs of operations and support functions of $7.6 million, and an increase in stock-based compensation of $3.4 million.

Technology and development

Technology and development expenses were $78.8 million for the year ended December 31, 2024, compared to $48.2 million for the year ended December 31, 2023, an increase of $30.6 million, or 63%.

The increase in technology and development expenses was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $9.5 million, an increase in depreciation, amortization, and technology costs of $4.9 million, and an increase in stock-based compensation of $2.8 million.

The increase in technology and development expenses was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $15.2 million, an increase in depreciation, amortization, and technology costs of $7.0 million, an increase in stock-based compensation of $5.4 million, and an increase in professional services of $1.4 million.

General and administrative

General and administrative expenses were $167.8 million for the year ended December 31, 2024, compared to $129.9 million for the year ended December 31, 2023, an increase of $37.9 million, or 29%.

The increase in general and administrative expenses was primarily driven by an increase in stock-based compensation of $15.5 million, an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $13.9 million, an increase in depreciation, amortization, and technology costs relating to general and administrative functions of $2.4 million, an increase in professional services of $2.1 million, and an increase in corporate events and travel costs of $1.5 million.

The increase in general and administrative expenses was partially offset by a decrease in insurance premiums of $2.8 million.

Other income was $7.9 million for the year ended December 31, 2023, compared to $3.0 million for the year ended December 31, 2022, an increase of $4.9 million.

The change was driven primarily by an increase in interest income of $6.4 million.

The increase was partially offset by a loss from the change in fair value of liabilities of $1.1 million for the year ended December 31, 2023 compared to a gain of $0.1 million for the year ended December 31, 2022.

(Provision) benefit for income taxes

Provision for income taxes was $2.0 million for the year ended December 31, 2023, compared to a benefit of less than $0.1 million for the year ended December 31, 2022.

The change was primarily due to an increase in current federal and state income taxes.

The increase in general and administrative expenses was primarily driven by an increase in stock-based compensation of $13.5 million, an increase in professional services of $8.1 million, an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $7.2 million, an increase in acquisition costs of $3.6 million, an increase in depreciation, amortization, and technology costs relating to general and administrative functions of $2.0 million, and $2.0 million of legal settlement expenses during the year ended December 31, 2024 that are considered non-recurring.

Other income (expense)

Other income (expense) was $9.8 million for the year ended December 31, 2024, compared to $7.9 million for the year ended December 31, 2023, an increase of $1.9 million.

The increase was driven primarily by interest income of $10.3 million for the year ended December 31, 2024, compared to $9.0 million for the year ended December 31, 2023, as well as the loss from the change in fair value of liabilities of $1.1 million during the year ended December 31, 2023 related to the earn-out payable for Honest Health Limited, which is now Hims & Hers UK Limited (“HHL”), that became finalized as of December 31, 2023.

Benefit (provision) for income taxes

Benefit for income taxes was $54.3 million for the year ended December 31, 2024, compared to a provision for income taxes of $2.0 million for the year ended December 31, 2023.

The change was mainly due to the change in valuation allowance of $68.0 million, primarily due to the full release of the valuation allowance on our domestic deferred tax assets during the year ended December 31, 2024, partially offset by current period tax activity.

The release of the valuation allowance resulted in the recognition of certain deferred tax assets, a decrease to income tax expense, and a corresponding one-time increase to net income for the year ended December 31, 2024.

Liquidity and Capital Resources

As of December 31, 2023, our principal sources of liquidity are cash and cash equivalents in the amount of $96.7 million, which are primarily invested in interest-bearing cash accounts and money market funds, and investments in the amount of $124.3 million, which are invested in U.S.

Treasury bills, corporate bonds, government and government agency securities, and asset-backed bonds.

We have historically incurred negative cash flows from operating activities and significant losses from operations.

While we had positive cash flows from operating activities for the year ended December 31, 2023, we may continue to incur operating losses in the future due to continued investments in our business.

We believe our existing cash resources are sufficient to support planned operations for the next 12 months.

As of December 31, 2024, our principal sources of liquidity are cash and cash equivalents in the amount of $220.6 million, which are primarily invested in interest-bearing cash accounts and money market funds, and short-term investments in the amount of $79.7 million, which are invested in U.S.

Treasury bills, corporate bonds, and government and government agency securities.

During the year ended December 31, 2024, we made cash payments for the earn-out payable for HHL, totaling $6.0 million, with such payment amounts determined in fiscal year 2023 in accordance with the terms of the related acquisition agreement.

The HHL earn-out payments totaling $6.0 million are recorded:

(i) $2.8 million within operating activities;

and (ii) $3.2 million within financing activities on the consolidated statements of cash flows.

The total earn-out payment also included shares of our Class A common stock.

No further earn-out payables are due under the HHL acquisition agreement.

In September 2024, we satisfied all closing conditions of the executed purchase agreement to acquire all of the membership interests of Seaview Enterprises LLC (d/b/a MedisourceRx) (“MedisourceRx”), a 503B compounding outsourcing facility registered with the Food and Drug Administration and located in the United States , for total cash and stock consideration of approximately $31.0 million, including cash payments of $15.5 million and Class A common stock of $15.5 million.

The cash payments, net of cash acquired, are included within investing activities on the consolidated statements of cash flows.

In February 2025, we satisfied all closing conditions of an asset purchase agreement, executed in December 2024, to acquire certain manufacturing assets from a company located in the United States , for total cash and Class A common stock consideration up to approximately $65.0 million.

The upfront cash and Class A common stock consideration is approximately $30.0 million, with an additional maximum of $5.0 million in Class A common stock consideration payable on the one year anniversary of closing in accordance with the terms of the asset purchase agreement.

A maximum additional $30.0 million in cash and Class A common stock consideration is payable upon reaching certain earn-out conditions, which is subject to a continued service condition as defined in the agreement.

Additionally, in February 2025, we entered into a Revolving Credit and Guaranty Agreement with certain lenders and JPMorgan Chase Bank, N.A., as administrative and collateral agent, which provides for a three-year senior secured revolving line of credit in an amount up to $175.0 million (the “Revolving Credit Facility”).

The Revolving Credit Facility includes letter of credit and swing line loan sub-limits of $40.0 million and $20.0 million, respectively, and an accordion option, which, if exercised, would allow us to increase the aggregate revolving commitment amount by up to $125.0 million, plus additional amounts if we are able to satisfy a leverage test and certain other conditions.

We believe our existing cash resources, together with our availability under our Revolving Credit Facility, are sufficient to support planned operations for the next 12 months.

As a result, management believes that our current financial resources are sufficient to continue operating activities for at least one year past the issuance date of the consolidated financial statements.

Our future capital requirements will depend on many factors, including the number of orders we receive, the size of our customer base, the continuing market acceptance of telehealth, and the timing and extent of spend to support the expansion of sales, marketing, development activities, and our facilities, which may be impacted by inflationary, recessionary, or other macroeconomic factors.

We expect to continue to pursue opportunities to expand our internal fulfillment capabilities and may acquire or invest in complementary businesses, services, and technologies, including intellectual property rights.

We may also use our cash and cash equivalents to repurchase up to an additional $48 million of our Class A common stock through the fourth quarter of 2025 at management’s discretion pursuant to our share repurchase program.

We expect to continue to pursue opportunities to expand our manufacturing and internal fulfillment capabilities and may acquire or invest in complementary businesses, services, and technologies, including intellectual property rights.

From time to time, we order inventory with sufficient lead time in order to ensure our ability to fulfill customer demand for supply chain, seasonality, or other reasons, which may have an impact on our cash and cash equivalents in a given quarter.

We may also use our cash and cash equivalents to repurchase up to $65.0 million of our Class A common stock through August 31, 2027 at management’s discretion pursuant to our 2024 Share Repurchase Program.

We have based our estimate of our future capital requirements on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

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Net cash (used in) provided by investing activities (19,048) (12,106) 34,699

Net cash (used in) provided by financing activities (11,475) (33,127) 235,043

Net cash used in financing activities (107,845) (11,475) (33,127)

Cash flows from operating activities

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Net cash provided by operating activities was $251.1 million for the year ended December 31, 2024.

Net cash provided by operating activities included net income of $126.0 million, non-cash expense related to stock-based compensation of $92.3 million, and depreciation and amortization of $17.1 million, partially offset by benefit for deferred taxes of $61.6 million and a net accretion on securities of $4.4 million.

In addition, a net cash inflow totaling $78.6 million was attributable to changes in operating assets and liabilities, primarily as a result of an increase in deferred revenue of $67.6 million and an increase in accounts payable and accrued liabilities of $67.5 million.

This inflow was partially offset by an increase in inventory of $41.6 million, an increase in prepaid expenses of $9.5 million, and a decrease in earn-out payable of $2.8 million.

Net cash provided by operating activities was $73.5 million for the year ended December 31, 2023.

Net cash provided by operating activities included non-cash expense related to stock-based compensation of $66.1 million, depreciation and amortization of $9.5 million, non-cash acquisition-related costs of $2.7 million, and change in fair value of liabilities of $1.1 million, partially offset by a net loss of $23.5 million and net accretion on securities of $5.7 million.

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This inflow was partially offset by an increase in prepaid expenses of $6.4 million.

Net cash used in operating activities was $26.5 million for the year ended December 31, 2022.

The most significant component of our cash used was a net loss of $65.7 million.

This included non-cash expense related to stock-based compensation of $42.8 million, depreciation and amortization of $7.5 million, and impairment of long-lived assets of $1.1 million.

In addition, a net cash outflow totaling $14.2 million was attributable to changes in operating assets and liabilities, primarily as a result of a decrease in earn-out payable of $10.2 million, an increase in inventory of $8.0 million, an increase in prepaid expenses of $6.3 million, and a decrease in deferred revenue of $1.7 million.

This outflow was partially offset by an increase in accounts payable and accrued liabilities of $13.6 million.

Cash flows from investing activities

Cash flows from investing activities primarily relate to our treasury operations of investing in available-for-sale investments, as well as investment in website and mobile application development and internal-use software, purchases of property, equipment, and intangible assets, and acquisitions.

Net cash used in investing activities for the year ended December 31, 2023 was $12.1 million, which was primarily due to purchases of property, equipment, and intangible assets of $17.2 million and investments of $9.3 million in website development and internal-use software, partially offset by net investment cash inflows of $14.4 million.

Net cash provided by investing activities for the year ended December 31, 2022 was $34.7 million, which was primarily due to net investment cash inflows of $42.4 million, partially offset by investments of $4.5 million in website development and internal-use software, including investment in our mobile technology, and purchases of property, equipment, and intangible assets of $2.7 million.

Cash flows from investing activities primarily relate to our treasury operations of investing in available-for-sale investments and acquisitions, as well as investment in website development and internal-use software and purchases of property, equipment, and intangible assets.

Net cash used in investing activities for the year ended December 31, 2024 was $19.0 million, which was primarily due to $41.7 million in purchases of property, equipment, and intangible assets, $15.4 million for the acquisition of MedisourceRx, and investments of $11.1 million in website development and internal-use software.

This cash outflow was partially offset by net investment cash inflows of $49.1 million.

Net cash used in investing activities for the year ended December 31, 2023 was $12.1 million, which was primarily due to $17.2 million in purchases of property, equipment, and intangible assets and investments of $9.3 million in website development and internal-use software.

This cash outflow was partially offset by net investment cash inflows of $14.4 million.

Cash flows from financing activities

Net cash used in financing activities for the year ended December 31, 2023 was $11.5 million, which was due to payments for taxes related to net share settlement of equity awards of $14.1 million and repurchases of common stock of $2.0 million, partially offset by proceeds from the exercise of stock options of $2.3 million and proceeds from employee stock purchase plan of $2.3 million.

Net cash used in financing activities for the year ended December 31, 2022 was $33.1 million, which was due to payments for earn-out consideration for acquisitions of $32.7 million and payments for taxes related to net share settlement of equity awards of $3.9 million, partially offset by proceeds from the exercise of stock options of $2.2 million and proceeds from employee stock purchase plan of $1.2 million.

Net cash used in financing activities for the year ended December 31, 2024 was $107.8 million, which was primarily due to repurchases of our Class A common stock of $83.0 million, payments for taxes related to net share settlement of equity awards of $52.5 million, and payments for acquisition-related earn-out consideration of $3.2 million.

This cash outflow was partially offset by proceeds from the exercise of stock options of $26.7 million and proceeds from employee stock purchase plan of $3.9 million.

This cash outflow was partially offset by proceeds from the exercise of stock options of $2.3 million and proceeds from employee stock purchase plan of $2.3 million.

Contractual Obligations and Commitments

Our contractual obligations and commitments include earn-out payable related to an acquisition, operating leases, and non-cancelable purchase obligations primarily related to cloud-based software contracts used in operations.

Our contractual obligations and commitments include operating leases and non-cancelable purchase obligations primarily related to cloud-based software contracts used in operations.

Total contractual obligations and commitments as of December 31, 2024 were $36.4 million, of which $9.9 million was payable within 12 months.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with U.S.

The preparation of our consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in our financial statements and accompanying notes.

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These are the policies that we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

We are required to assess whether it is more likely than not that we will realize our deferred tax assets.

Realization of deferred tax assets is dependent upon the generation of future taxable income, the timing and amount of which are uncertain.

If we believe that they are not more likely than not to be fully realizable before the expiration dates applicable to such assets, then to the extent we believe that recovery is not more likely than not, we must establish a valuation allowance.

We evaluate our deferred tax assets for realizability considering both positive and negative evidence, including our historical financial performance, projections of future taxable income, future reversals of existing taxable temporary differences, tax planning strategies, and any carryback availability.

In evaluating the need for a valuation allowance, we estimate future taxable income based on management’s approved business plans.

This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results.

Changes in the net deferred tax assets, less offsetting valuation allowance, in a period are recorded through the income tax provision and could have a material impact on the consolidated statements of operations and comprehensive income (loss).

During 2024, we determined that a valuation allowance against our domestic deferred tax assets was no longer required, primarily due to sustained tax profitability (pre-tax earnings or loss adjusted by permanent book to tax differences) beginning in the fourth quarter of 2023 and continuing throughout 2024, which is objective and verifiable evidence, as well as anticipated future earnings.

As a result, there was a change in valuation allowance of $68.0 million during the year ended December 31, 2024, primarily due to the full release of the valuation allowance on our domestic deferred tax assets, partially offset by current period tax activity.

We continue to believe it is more likely than not that we will realize our domestic deferred tax assets.

Business combinations

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In connection with determination of fair values, we may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations.

Any acquired assets from a business combination including intangible assets subject to amortization are continuously monitored and reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In such cases, recoverability of assets to be held and used is assessed by comparing the carrying amount of assets with their future underlying net undiscounted cash flows without interest charges.

If such assets are considered to be impaired, an impairment is recognized as the amount by which the carrying amount of the assets exceeds the estimated fair values of the assets.

During the year ended December 31, 2024, we acquired MedisourceRx.

The most significant estimate for the acquisition accounting related to the valuation of the 503B pharmacy license, and the acquisition date fair value of $28.6 million was determined using the income approach.

Performance restricted stock units

Determining the fair value of our performance restricted stock units (“Performance RSUs” or “PRSUs”) on the grant date and at the end of each reporting period requires management to use significant judgment and estimates.

The grant date fair value is based on the probable level of achievement of performance targets and closing price of our Class A common stock on the grant date.

Estimating the probable level of achievement of our performance restricted stock units (“Performance RSUs” or “PRSUs”) on the grant date and at the end of each reporting period, which determines stock-based compensation recognition, requires management to use significant judgment and estimates.

The probable level of achievement is based on certain revenue and Adjusted EBITDA performance metrics for the fiscal year ending approximately three years after the date of the grant.

We estimate the probable level of achievement on the grant date and at the end of each reporting period using a variety of factors, including primarily internal financial forecasts, our performance compared to such forecasts, and publicly disclosed financial guidance and our performance compared to such guidance.

If management determines that it is probable that the level of achievement has increased, we recognize a cumulative catch-up of stock-based compensation expense based on the level of achievement determined at period end in comparison to the prior period.

If management determines that the probable level of achievement has increased, we recognize a cumulative catch-up of stock-based compensation expense based on the level of achievement determined at period end in comparison to the prior period.

If we determine it is no longer probable that any level of achievement will occur, we discontinue recognition of stock-based compensation expense.

If we determine that it is improbable that any level of achievement will occur, we reverse previously recognized stock-based compensation expense.

During the year ended December 31, 2024, $16.7 million of stock-based compensation was recognized for the PRSUs, of which $5.5 million was related to cumulative catch-ups due to increases in the probable level of achievement during the year.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis