Hims & Hers Health, Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our Form 10-K for the year ended December 31, 2024 (our “2024 Annual Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 of Part II of our 2024 Annual Report and the accompanying unaudited condensed consolidated financial statements and notes thereto included in this quarterly report on Form 10-Q. Our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date hereof or to conform these statements to actual results or revised expectations. Forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under “Risk Factors” in Item 1A of Part II of this quarterly report on Form 10-Q. Unless otherwise indicated or the context otherwise requires, references in this discussion and analysis to “we,” “us,” “our,” the “Company,” and “Hims & Hers” refer to Hims & Hers Health, Inc. and its subsidiaries and variable interest entities. Overview Hims & Hers is a consumer-first platform transforming the way customers fulfill their health and wellness needs. 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 personalized, digital, accessible 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, cloud-enabled pharmacy fulfillment, and personalization capabilities. Our digital platform enables access to treatments for a broad range of conditions, including those related to sexual health, mental health, men’s dermatology, women’s dermatology, and weight loss. Hims & Hers connects patients to licensed healthcare professionals who can prescribe medications when appropriate. Prescriptions are fulfilled online through licensed pharmacies on a subscription basis, making accessing treatments simple, affordable, and straightforward. Through the Hims & Hers mobile applications, consumers can access a range of educational programs, wellness content, community support, and other services that promote lifelong health and wellness. 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. Additionally, Hims & Hers non-prescription products can be found in tens of thousands of top retail locations in the United States. 23 Table of Contents Revenue and Key Business Metrics Our management monitors two financial results, Online Revenue and Wholesale Revenue (both defined below), to track our total revenue generation. We also monitor the additional key business metrics set forth below to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. 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. The Net Orders and AOV metrics have become less relevant for our business, and beginning with the three months ending March 31, 2025 we are no longer reporting them as key business metrics. The limitations our key business metrics have as an analytical tool include: (i) they might not accurately predict our future financial results pursuant to accounting principles generally accepted in the United States of America (“U.S. GAAP”); and (ii) other companies, including companies in our industry, may calculate our key business metrics or similarly titled measures differently, which reduces their usefulness as comparative measures. Brief descriptions of our key business metrics are provided below. “Online Revenue” represents the sales of products and services on our platform, net of refunds, credits, and chargebacks, and includes revenue recognition adjustments recorded pursuant to U.S. GAAP, primarily relating to deferred revenue and returns reserve. Online Revenue is generated by selling directly to consumers through our websites and mobile applications. Our Online Revenue consists of products and services purchased by customers directly through our online platform. The majority of our Online Revenue is subscription-based, where customers agree to be billed on a recurring basis to have products and services automatically delivered to them. “Wholesale Revenue” represents non-prescription product sales to retailers through wholesale purchasing agreements. 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 environments and on third-party platforms. “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 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. “Average Subscribers” are calculated as the sum of the Subscribers at the beginning and end of a given period divided by 2. The table below provides a breakdown of total revenue between Online Revenue and Wholesale Revenue, for the three months ended March 31, 2025 and 2024, as well as key metrics that drive Online Revenue (i.e., Subscribers and Monthly Online Revenue per Average Subscriber) and the dollar and percentage change between such periods (in thousands, except for Monthly Online Revenue per Average Subscriber): Three Months Ended March 31, 2025 2024 Change % Change Online Revenue $ 576,361 $ 267,761 $ 308,600 115 % Wholesale Revenue 9,649 10,410 (761) (7) % Total revenue $ 586,010 $ 278,171 $ 307,839 111 % Subscribers (end of period) 2,366 1,709 657 38 % Monthly Online Revenue per Average Subscriber $ 84 $ 55 $ 29 53 % 24 Table of Contents We generated $576.4 million in Online Revenue for the three months ended March 31, 2025, an increase of $308.6 million, or 115%, as compared to $267.8 million for the three months ended March 31, 2024. Growth in Online Revenue for the three months ended March 31, 2025 was driven by: (i) new Subscriber growth pertaining to weight loss solutions launched in the fourth quarter of 2023 or later, including new Subscribers for compounded semaglutide glucagon-like peptide-1 receptor agonists (“GLP-1s”) offerings launched in the second quarter of 2024 for which there was no comparable revenue for the three months ended March 31, 2024; and (ii) continued sustainable growth in Subscribers pertaining to offerings available in both periods, from whom we generated recurring revenue that was driven in part by ordinary-course marketing campaigns that continued to strengthen our mature offerings. During the three months ended March 31, 2025, our GLP-1 offerings generated approximately $230 million in Online Revenue, a significant majority of which came from personalized doses. New Subscriber growth in our GLP-1 offering was driven by both ordinary-course marketing campaigns as well as a specialized marketing campaign as discussed further below. Certain aspects of our GLP-1 compounded offerings were permitted by the Food and Drug Administration (“FDA”) based on shortages of branded GLP-1s, which were affected by regulatory decisions during the first quarter of 2025 as further described below. Excluding our GLP-1 offerings, the remaining Online Revenue of approximately $346 million during the period increased nearly 30% year-over-year as a result of new Subscriber growth. During the three months ended March 31, 2025, we aired a Super Bowl marketing campaign highlighting specialized offerings on our platform and building brand awareness with consumers in order to normalize health and wellness challenges, which resulted in increased traffic to our platform. 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 pricing decisions impacting customer uptake of our offerings, as well as product availability and the regulatory landscape impacting our offerings. As described under Part II, Item 1A: “Risk Factors”, on February 21, 2025, the FDA resolved the semaglutide shortage, which has constrained and is expected to continue to constrain our ability to continue providing access to compounded semaglutide on our platform. The FDA does not limit compounding to drug shortages, and we believe there are paths to continue offering access to certain compounded GLP-1s after the period of FDA enforcement discretion has ended following resolution of the shortage, consistent with the statutory exemptions from the new drug approval requirements. As such, we intend to continue expanding our weight loss offerings and serving our Subscribers with a wide range of weight loss solutions. We generated $9.6 million in Wholesale Revenue for the three months ended March 31, 2025, a decrease of $0.8 million, or 7% as compared to $10.4 million for the three months ended March 31, 2024. Wholesale Revenue can fluctuate on a period-to-period basis due to various factors, including timing of inventory purchases from our partners, seasonality trends, launches of new merchants, and timing of specialized campaigns. During the three months ended March 31, 2025, there were no launches of material new merchants, notable factors impacting timing of inventory purchases, or material specialized campaigns impacting Wholesale Revenue trends. Top partners, comprising over 90% of Wholesale Revenue, remained consistent for both periods presented. As our presence in physical environments and on third-party platforms has matured and we have successfully built brand awareness with new customers in those environments, we do not anticipate launching new material partnerships in the foreseeable future or investing significantly in specialized wholesale marketing campaigns. Subscribers grew 38% to approximately 2.4 million as of March 31, 2025 as compared to approximately 1.7 million Subscribers as of March 31, 2024. Growth in Subscribers was primarily driven by 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 increased $29 to $84 for the three months ended March 31, 2025 as compared to $55 for the three months ended March 31, 2024. This increase was primarily due to Subscriber uptake of our GLP-1 weight loss offering along with changes in product mix. 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 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 offering. 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. 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 25 Table of Contents 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 We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges. New customer acquisition Our ability to attract new customers is a key factor for our future growth. To date, we have successfully acquired new customers through marketing and the development of our brands as well as through acquisitions. As a result, revenue has increased each year since our launch. If we are unable to acquire enough new customers in the future, revenue might decline. New customer acquisition could be negatively impacted if our marketing efforts are less effective in the future. Increases in advertising rates could also negatively impact our ability to acquire new customers. Consumer tastes, preferences, and sentiment for our brands may also change and result in decreased demand for our products and services. Changes in the legal or regulatory environment have and could continue to impact our ability to acquire new customers, including changes to privacy, healthcare, or other laws, or the interpretation or enforcement of such laws, such as the FDA resolving the semaglutide shortage, and could impact customer acquisition costs. Retention of customers Our ability to retain customers is a key factor in our ability to generate revenue. Most of our customers purchase products and services through subscription-based plans, where Subscribers are billed and sent products and/or receive services on a recurring basis. 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. 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. As a result of the FDA resolving the semaglutide shortage, which has constrained and is expected to continue to constrain our ability to continue providing access to compounded semaglutide on our platform, we expect this metric to decrease in the near term relative to the first quarter of 2025 and normalize over the long term. 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 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, distribution, and operating capabilities, including in our Affiliated Pharmacies (also referred to herein as our “Pharmacies”), MedisourceRx, our recently acquired lab testing facility, and our recently acquired peptide manufacturing facility (collectively sometimes herein referred to as our “Facilities”), with the goal of fulfilling a significant majority 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. Additionally, we expect to continue to make significant investments in marketing to acquire new customers and we expect to continue to make investments in product offerings and customer experience. 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. The number of our Subscribers using personalized solutions has grown in recent periods and represented more than a majority of Subscribers as of March 31, 2025. 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; however, in the long term, we anticipate that these investments will positively impact our 26 Table of Contents results of operations. If we are unsuccessful at improving our offerings or are unable to generate additional demand for our offerings, we may not recover the financial investments we make into the business and revenue may not increase in the future. Expansion into new specialties We expect to continue to expand into new health and wellness specialties with our offerings. Specialty expansion allows us to increase the number of health and wellness consumers for whom we can provide products and services. It also allows us to offer access to treatment of additional conditions that may already affect our current customers. 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 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. Seasonality Our weight loss specialty might 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 In addition to our financial results determined in accordance with U.S. GAAP, we present Adjusted EBITDA (which is a non-GAAP financial measure), Adjusted EBITDA margin (which is a non-GAAP ratio), and Free Cash Flow (which is a non-GAAP financial measure) each as defined below. We use Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We consider Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow to be important measures because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We believe that the use of Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow is helpful to our investors as they are used by management in assessing the health of our business, our operating performance, and our liquidity. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures or ratios differently or may use other financial measures or ratios to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow as tools for comparison. Reconciliations are provided below to the most directly comparable financial measures stated in accordance with U.S. GAAP. Investors are encouraged to review our U.S. GAAP financial measures and not to rely on any single financial measure to evaluate our business. Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. 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 income before stock-based compensation, income taxes, depreciation and amortization, acquisition and transaction-related costs (which includes (i) consideration paid for employee and nonemployee compensation with vesting requirements incurred directly as a result of acquisitions, and (ii) transaction professional services), impairment of long-lived assets, and interest income and expense, net. “Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue. 27 Table of Contents The following table reconciles net income to Adjusted EBITDA for the three months ended March 31, 2025 and 2024 (in thousands): Three Months Ended March 31, 2025 2024 Revenue $ 586,010 $ 278,171 Net income 49,485 11,128 Stock-based compensation 24,858 19,032 Provision for income taxes 11,010 1,275 Depreciation and amortization 8,276 3,001 Acquisition and transaction-related costs 24 376 Impairment of long-lived assets — 75 Interest income and expense, net (2,596) (2,540) Adjusted EBITDA $ 91,057 $ 32,347 Net income as a % of revenue 8 % 4 % Adjusted EBITDA margin 16 % 12 % Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. We compensate for these limitations by providing specific information regarding the U.S. 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 income and other U.S. GAAP results. Free Cash Flow is a key performance measure that our management uses to assess our liquidity. 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 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 operating activities to Free Cash Flow for the three months ended March 31, 2025 and 2024 (in thousands): Three Months Ended March 31, 2025 2024 Net cash provided by operating activities $ 109,090 $ 25,838 Less: purchases of property, equipment, and intangible assets in investing activities (55,327) (10,581) Less: investment in website development and internal-use software in investing activities (3,711) (3,377) Free Cash Flow $ 50,052 $ 11,880 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. 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. When evaluating our performance, you should consider Free Cash Flow in addition to, and not as a substitute for, other financial performance measures, including our net cash provided by operating activities and other U.S. GAAP results. 28 Table of Contents Basis of Presentation Currently, we conduct business through one operating segment. 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 unaudited condensed 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; collectively referred to as “Providers” or individually, a “Provider”) to provide consultation services; and (ii) XeCare, LLC (“XeCare”) and Apostrophe Pharmacy LLC (“Apostrophe Pharmacy”, and together with XeCare, the “Affiliated Pharmacies”), which are licensed mail order pharmacies providing prescription fulfillment solely to our customers. We determined that we are the primary beneficiary of the Affiliated Medical Groups and the Affiliated Pharmacies for accounting purposes because we have the ability to direct the activities that most significantly affect these entities’ economic performance and have the obligation to absorb the entities’ losses. Under the variable interest entity model, we present the results of operations and the financial position of the entities as part of our unaudited condensed consolidated financial statements as if the consolidated group were a single economic entity. In April 2025, as a result of a change of ownership, Apostrophe Pharmacy became a wholly-owned subsidiary of our company and is no longer considered an Affiliated Pharmacy or a VIE. For additional information, see Note 20 – Subsequent Events to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Components of Results of Operations Revenue 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 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. 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 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 and optimize more favorable costs of revenue. 29 Table of Contents Marketing expenses The largest component of our marketing expenses consists of our discretionary customer acquisition costs. 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 and excluding content production costs. Marketing expenses also include overhead expenses, including salaries, benefits, taxes, and stock-based compensation for personnel; agency, contractor, and consulting expenses; content production, software, and other marketing operating costs. 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 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, pharmacy, fulfillment, customer service, and quality functions. These expenses also include operating expenses primarily relating to operating and support functions for our 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 Technology and development expenses include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our engineering, product management, product development, and data science functions. These expenses also include operating expenses primarily relating to technology and development functions for the operation, maintenance and enhancement of our digital platform, websites and mobile applications, inclusive of related expenses for third-party software and hosting to support those functions, and related depreciation. Expenses also include investments to develop new health and wellness products and services. 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, communications, public and government relations, 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 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. 30 Table of Contents Other income and expense, net Other income and expense, net primarily consists of interest income from our cash and cash equivalents and investment accounts. Additionally, other income and expense, net includes expenses associated with our credit facility, as well as non-operating and one-time charges classified outside of operating expenses. Provision for income taxes Provision for income taxes primarily consists of federal and state taxes, as well as any changes 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. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. 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. Any future releases of our current valuation allowance would be immaterial to the unaudited condensed consolidated statements of operations. Results of Operations Comparisons for the three months ended March 31, 2025 and 2024 The following table sets forth our unaudited condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024, and the dollar and percentage change between the two periods (dollars in thousands): Three Months Ended March 31, 2025 2024 Change % Change Revenue $ 586,010 $ 278,171 $ 307,839 111 % Cost of revenue 155,321 49,076 106,245 216 % Gross profit 430,689 229,095 201,594 88 % Operating expenses: (1) Marketing 231,235 130,553 100,682 77 % Operations and support 63,033 38,747 24,286 63 % Technology and development 29,914 15,324 14,590 95 % General and administrative 48,610 34,568 14,042 41 % Total operating expenses 372,792 219,192 153,600 70 % Income from operations 57,897 9,903 47,994 485 % Other income and expense, net 2,598 2,500 98 4 % Income before income taxes 60,495 12,403 48,092 388 % Provision for income taxes (11,010) (1,275) (9,735) 764 % Net income $ 49,485 $ 11,128 $ 38,357 345 % ______________ (*) Not meaningful (1) Includes stock-based compensation expense as follows (in thousands): Three Months Ended March 31, 2025 2024 Marketing $ 2,774 $ 1,904 Operations and support 3,006 2,155 Technology and development 4,045 2,205 General and administrative 15,033 12,768 Total stock-based compensation expense $ 24,858 $ 19,032 31 Table of Contents The following table sets forth our results of operations as a percentage of our total revenue for the periods presented: Three Months Ended March 31, 2025 2024 Revenue 100 % 100 % Cost of revenue 27 % 18 % Gross profit 73 % 82 % Operating expenses: Marketing 39 % 47 % Operations and support 11 % 14 % Technology and development 5 % 6 % General and administrative 8 % 12 % Total operating expenses 63 % 79 % Income from operations 10 % 3 % Other income and expense, net — % 1 % Income before income taxes 10 % 4 % Provision for income taxes (2) % — % Net income 8 % 4 % Revenue Revenue was $586.0 million for the three months ended March 31, 2025, compared to $278.2 million for the three months ended March 31, 2024, an increase of $307.8 million, or 111%. For a detailed discussion of this increase, refer to “—Revenue and Key Business Metrics.” Cost of revenue and gross profit Cost of revenue was $155.3 million for the three months ended March 31, 2025, compared to $49.1 million for the three months ended March 31, 2024, an increase of $106.2 million, or 216%. This increase was primarily due to increased product and packaging costs of approximately 336%, increased shipping costs of 109%, and increased costs associated with medical consultation services of 66%, compared to the three months ended March 31, 2024. This increase in cost of revenue for the three months ended March 31, 2025 was primarily due to newer offerings as well as overall increased business activity with the addition of new Subscribers. Gross profit was $430.7 million for the three months ended March 31, 2025, compared to $229.1 million for the three months ended March 31, 2024, an increase of $201.6 million, or 88%. Correspondingly, gross margin was 73% for the three months ended March 31, 2025, compared to 82% for the three months ended March 31, 2024. This decrease in gross margin 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. This decrease was partially offset by lower costs associated with medical consultation services as a percent of revenue as a result of improving Provider efficiency, as well as synergies gained through increased fulfillment volume. Marketing expenses Marketing expenses were $231.2 million for the three months ended March 31, 2025, compared to $130.6 million for the three months ended March 31, 2024, an increase of $100.7 million, or 77%. Customer acquisition costs increased to $201.6 million in the three months ended March 31, 2025, compared to $113.2 million for the three months ended March 31, 2024, an increase of $88.4 million. The increase in customer acquisition costs was primarily a result of management’s decision to increase investment in display, search, streaming and linear television (including our Super Bowl marketing campaign), affiliate, and radio and podcast marketing, as we continue to identify opportunities to drive new customer growth and which investment further expanded with the addition of newer offerings introduced during 2024. 32 Table of Contents Operations and support Operations and support expenses were $63.0 million for the three months ended March 31, 2025, compared to $38.7 million for the three months ended March 31, 2024, an increase of $24.3 million or 63%. The increase in operations and support was primarily driven by an increase in order fulfillment and transaction processing of $8.9 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 professional services of $4.0 million, and an increase in depreciation, amortization, and technology costs relating to operations and support functions of $2.6 million. Technology and development Technology and development expenses were $29.9 million for the three months ended March 31, 2025, compared to $15.3 million for the three months ended March 31, 2024, an increase of $14.6 million or 95%. 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 $5.4 million, an increase in depreciation, amortization, and technology costs of $4.2 million, an increase in professional services of $2.3 million, and an increase in stock-based compensation of $1.8 million. General and administrative General and administrative expenses were $48.6 million for the three months ended March 31, 2025, compared to $34.6 million for the three months ended March 31, 2024, an increase of $14.0 million, or 41%. The increase in general and administrative expenses was primarily driven by an increase in professional services of $4.9 million, an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $3.8 million, an increase in stock-based compensation of $2.3 million, an increase in depreciation, amortization, and technology costs relating to general and administrative functions of $1.5 million, and an increase in insurance costs of $1.0 million. Other income and expense, net Other income and expense, net was $2.6 million for the three months ended March 31, 2025, compared to $2.5 million for the three months ended March 31, 2024, an increase of $0.1 million. There were no significant changes within the components of other income and expense, net during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Provision for income taxes Provision for income taxes was $11.0 million for the three months ended March 31, 2025, compared to $1.3 million for the three months ended March 31, 2024. This change was primarily due to taxes on current year income based on forecasted pretax income and associated taxes. Pretax income was higher during the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Liquidity and Capital Resources As of March 31, 2025, our principal sources of liquidity are cash and cash equivalents in the amount of $273.7 million, which are primarily invested in interest-bearing cash accounts and money market funds, and short-term investments in the amount of $48.9 million, which are invested in U.S. Treasury bills and corporate bonds. In February 2025, we acquired via an asset purchase agreement, executed in December 2024, certain manufacturing assets from C S Bio Co. (the “Seller”), a company located in the United States , for total cash and Class A common stock consideration payable and issuable in connection with the closing of the transaction of up to approximately $39.1 million. A maximum additional amount of $32.7 million in cash and Class A common stock consideration is payable to the Seller upon satisfying certain earn-out conditions, which is subject to a continued service condition by the Seller’s CEO, as defined in the asset purchase agreement. The cash payments are included within investing activities on the unaudited condensed consolidated statements of cash flows. 33 Table of Contents 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 commitment amount by up to $125.0 million, plus additional amounts if we are able to satisfy a leverage test and certain other conditions. As of March 31, 2025, we had no loans or letters of credit outstanding under the Revolving Credit Facility. As such, $175.0 million remained available under the Revolving Credit Facility as of March 31, 2025. Additionally, as of March 31, 2025, we were not yet required to be in compliance with all covenants and conditions thereunder. Compliance will be required beginning in the second quarter of 2025. For additional details regarding the Revolving Credit Facility, see Note 13 – Revolving Credit Facility to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. 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 and available financial resources are sufficient to continue operating activities for at least one year past the issuance date of the unaudited condensed 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, t he 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, supply chain, or other macroeconomic factors, including the impact of trade actions. 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. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise or access additional capital when desired, our business, financial condition, and results of operations would be harmed. Cash Flows The following table provides a summary of cash flow data (in thousands): Three Months Ended March 31, 2025 2024 Net cash provided by operating activities $ 109,090 $ 25,838 Net cash (used in) provided by investing activities (32,796) 13,042 Net cash used in financing activities (23,018) (30,308) Cash flows from operating activities Our largest source of operating cash flows is cash collections from our customers. Our primary use of cash from operating activities includes costs of revenue, marketing expenses, and personnel-related expenditures to support the growth of our business. Net cash provided by operating activities was $109.1 million for the three months ended March 31, 2025. Net cash provided by operating activities included net income of $49.5 million, non-cash expense related to stock-based compensation of $24.9 million, and depreciation and amortization of $8.3 million. In addition, a net cash inflow totaling $24.3 million was attributable to changes in operating assets and liabilities, primarily as a result of an increase in deferred revenue of $35.5 million and an increase in accounts payable and accrued liabilities of $18.8 million. This inflow was partially offset by an increase in prepaid expenses and other current assets of $17.2 million and an increase in inventory of $11.7 million. 34 Table of Contents Net cash provided by operating activities was $25.8 million for the three months ended March 31, 2024. Net cash provided by operating activities included non-cash expense related to stock-based compensation of $19.0 million, net income of $11.1 million, and depreciation and amortization of $3.0 million, partially offset by net accretion on securities of $1.1 million. In addition, a net cash outflow totaling $7.3 million was attributable to changes in operating assets and liabilities, primarily as a result of an increase in inventory of $7.4 million, an increase in prepaid expenses and other current assets of $6.7 million, and a decrease in accrued liabilities of $2.3 million. This outflow was partially offset by an increase in deferred revenue of $6.0 million and an increase in accounts payable of $3.6 million. Cash flows from investing activities Cash flows from investing activities primarily relate to our treasury operations of investing in available-for-sale investments 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 three months ended March 31, 2025 was $32.8 million, which was primarily due to $55.3 million in purchases of property, equipment, and intangible assets, including the cash payments made in connection with the C S Bio Co. asset acquisition, $5.1 million for the acquisition of a business , net of cash acquired, and investments of $3.7 million in website development and internal-use software. This cash outflow was partially offset by $31.3 million in maturities of investments. Net cash provided by investing activities for the three months ended March 31, 2024 was $13.0 million, which was primarily due to net investment cash inflows of $27.0 million. This cash inflow was partially offset by $10.6 million in purchases of property, equipment, and intangible assets and investments of $3.4 million in website development and internal-use software. Cash flows from financing activities Net cash used in financing activities for the three months ended March 31, 2025 was $23.0 million, which was primarily due to payments for taxes related to net share settlement of equity awards of $25.7 million and payments for debt issuance costs of $1.2 million. This cash outflow was partially offset by proceeds from the exercise of stock options of $3.9 million. Net cash used in financing activities for the three months ended March 31, 2024 was $30.3 million, which was primarily due to repurchases of our Class A common stock of $28.1 million and payments for taxes related to net share settlement of equity awards of $7.3 million. This cash outflow was partially offset by proceeds from the exercise of stock options of $5.1 million. Contractual Obligations and Commitments 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 March 31, 2025 were $115.4 million, of which $16.7 million was payable within 12 months. Critical Accounting Estimates The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management believes that the estimates, judgments, and assumptions upon which it relies are reasonable based upon information available to it at the time that these estimates, judgments, and assumptions were made. Actual results may differ from management’s estimates. To the extent that there are material differences between these estimates and actual results, our unaudited condensed consolidated financial statements will be affected. For a discussion of our critical accounting estimates, please refer to Item 7 under Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Annual Report for the year ended December 31, 2024. Since December 31, 2024, there have been no material changes to our critical accounting estimates. 35 Table of Contents