0:02 Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Hims & Hers Health Fourth Quarter 2021 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. 0:33 Jay Spitzer Senior Vice President and Investor Relations, you may begin your conference.

0:40 Good afternoon ladies and gentlemen. Welcome to the Hims & Hers Health fourth quarter and fiscal year 2021 earnings call. On the call with me today is, Andrew Dudam, Co-Founder and our Chief Executive Officer; as well as Yemi Okupe, our Chief Financial Officer. Beforehand you over to Andrew I was usual take you through the legal and safe harbor and cautionary declarations. 1:03 Certain statements and projections of future results made in this presentation constitutes forward-looking statements that are based on our current market competitive and regulatory expectations and are subject to risks uncertainties that could cause actual results to vary materially. We undertake no obligation to update publicly any forward-looking statement after this call, whether as a result of new information, future events, changes in assumptions or otherwise. Please see our most recently filed 10K and 10Q or discussions of risk factors as relates to forward-looking statements. 1:37 In today's presentation we use certain non-GAAP financial measures. We refer you to the reconciliation table contained in today's press release available on our Investor Relations website. For reconciliations to the most directly comparable GAAP financial measures and related information. You'll find a link to the webcast on our Investor Relations website at investors.forhims.com. After the call, this webcast will be archived on the website for 12 months. 2:05 And with that I'll turn the call over to Andrew.

2:09 Thank you, Jay. Hims & Hers achieved so many milestones in 2021 for which I'm proud. By year-end, we had over 600,000 subscriptions. We grew revenue 83%. We extended our market leadership, invested in building out our management team and grew our omnichannel presence to over 20,000 retail locations. This past quarter was no different, with accelerations and strong execution across our core and emerging categories. Revenue accelerated to $84.7 million in the fourth quarter, a 104% increase year-over-year. Subscriptions grew from 312,000 to 609,000, a 95% increase from year-end 2020. 2:58 As a result of healthier retention, new customer cohorts acquired since 2020 now reached a cumulative gross profit in excess of their paid marketing expense within just two quarters. In terms of brand awareness and traffic, our digital properties grew to over 11 million visits in the fourth quarter, a 90% increase year-over-year while decreasing customer acquisition costs per new sub 13% over the same time period. 3:29 We meaningfully expanded our omnipresence strategy through existing and new long-term partnerships with some of the largest retailers in the United States, including Target, Walgreens, CVS, Bed Bath & Beyond, Vitamin Shoppe and more. And in combination, our core and emerging categories are contributing to an acceleration in revenue diversification, giving us confidence in our ability to deliver robust growth for many years to come. 3:58 We invested heavily in strategic infrastructure this year. This infrastructure both supports the accelerated growth in our core categories, but also lays the foundation for improved customer experiences in our emerging businesses. Improved customer experience is key to our company's ongoing success in creating a loyal customer base. For that reason, we continue to invest in infrastructure verticalization across every aspect of our business. Whether the ultimate benefit be speed, price, quality or…

10:45 Thank you, Andrew. Thank you for your time today. I look forward to engaging with you further in the near future. I am elated to join Hims & Hers at such an exciting moment in the company's life cycle. Over the course of the last decade, technology has disrupted the way that consumers engage with companies across numerous industries, whether that be how they move around in the world, accept remit payments, acquired goods or consume media content. 11:11 Healthcare is an industry that is in the early innings of similar disruption. I firmly believe that we have the components necessary to be at the forefront of this disruption. This includes a strong brand that consumers recognize and increasingly trust, as well as in an outstanding team that has the ability to execute against our mission of providing greater access, high-quality, convenient and affordable healthcare. 11:34 I'll now take you through our fourth quarter and 2021 results. Following that, we will provide guidance and insight into our underlying assumptions for the first quarter of 2022 and the full year. We are delighted by last year's performance which surpassed expectations outlined in our previous guidance. Fourth quarter revenue was $84.7 million, up 104% year-over-year. Revenue for 2021 was $271.9 million, up 83% compared to 2020. When excluding the impact of M&A transactions, fourth quarter revenue grew 89% year-over-year to $78.5 million. Full year 2021, revenue grew 75% year-over-year to $259.7 million when excluding the impact of M&A transactions. 12:25 Several factors contributed to our success in 2021. Online revenue growth continued to remain robust in 2021, increasing 84% year-over-year to $259 million. Growth came primarily from subscriptions, which increased 95% year-over-year to 609,000. Subscriptions on our platform enabled us to surpass 1 million net orders in a quarter for the…

22:05 [Operator Instructions] Your first question today comes from the line of Michael Cherny. with Bank of America, your line is now open.

22:19 Good afternoon. Thanks so much for the color. And Yemi and Jay, welcome obviously to the first call today. I want to talk a little bit about, Yemi you made a comment regarding marketing spend, some of the targeted marketing that you put in place and how it's already paying its dividends in terms of new customer growth. As you think about some of the category expansion you've had, thinking about some of these marketing partnerships and the wholesale revenue, how does the next couple of years of targeted marketing spend and potentially incremental campaigns dovetail against an eventual pathway towards building to EBITDA breakeven?

23:03 Yes, sure, I can take this one. This is Yemi. I think what we would say is that we will -- given our balance sheet, we will continue to lean into marketing investment while the opportunities remain attractive. What we would point to is the fact that we are able to breakeven on newer cohorts within two quarters. While there are attractive investment opportunities, we will continue to invest in those. But what we are already seeing is the fact that the velocity, which was of course our returning value, is accelerating 23:34 As a result of that, what we did see in Q4 is cash flow from operations was down to roughly negative $3.1 million. And so we do have the flexibility to continue to decide when to make these investments, again given the balance sheet and the already strong performance that these cohorts are returning.

23:53 Got it. And then just in terms of thinking about 2022 guidance, clearly, the net order growth has been remarkably strong. AOV has kind of trended in a fairly similar trajectory over the course of 2021. How should we think about that metric for 2022? And what are the puts and takes that you would expect, especially as the subscription growth continues to build?

24:15 Yeah, let's say we expect AOV to be flat to slightly up through the course of 2020.

24:23 Okay, that does it for me for now. Thank you so much.

24:28 Your next question comes from a line of Matthew Shea with Piper Sandler. Your line is now open.

24:35 Hey, guys, thanks for the question. And Congrats on another strong quarter. I appreciate the commentary that the iOS changes are incorporated in the guidance, but curious if you can provide any colors on some of the new channel -- marketing channels you've invested in beyond the retail partnerships, any kind of relative efficiency gains you have within those and plans to continue investing in any of those channels you're able to provide more color around.

25:04 Thanks. Matt, I can answer a little bit on the front end. We don't really disclose breakdowns of channels. But as we've talked about in the past, really marketing dollars don't go to any one channel more than, let's say, 20%. And so there's really powerful diversification taking place within the business on where we're deploying capital and then also increased diversification when it comes to the categories for which we're deploying capital. So you can think of even in simple terms, seeing advertisements of Jennifer Lopez for post-menopausal hair loss as well as advertisements with Miley Cyrus for early 20s female dermatology. And then Rob Gronkowski for, let's say, men in their 30s suffering from anxiety and depression. So there's this diversification taking place on a channel and category level that I think to Yemi's point has allowed us to continue to scale marketing investments while maintaining that customer acquisition cost efficiency. So if you look over the last year, we've increased marketing spend from Q1 to Q4 by close to 40%. But the actual variance in the acquisition cost per subscriber went up or down no more than just a couple of points. And so there's a ton of innovation and a ton of experimentation taking place at the channel level at the category level to continue to deliver these results, but it's probably the accumulation of a tremendous effort and a large team effort within the company making it possible.

26:34 Got it, that's super helpful. And then my understanding is the Target exclusivity kind of expiring is what's opened up these relations -- or the ability to have these relationships with all these other retailers. So curious where that Target relationship stands today, whether there's any channel conflict with you working with Target and Walmart, and whether it's fair to expect more retail partnerships going forward?

27:02 Yes, the relationship with Target is exceptionally strong. They're contributing a large part of that growth in the retail channel that we mentioned year-over-year. But we've been able to branch out and the demand, I think, on the retail side has really been energizing for all of us, whether it be CVS or Walgreens or Walmart or GMC, Bed Bath & Beyond, Vitamin Shoppe. I mean there's just an incredible demand for the products and those retailers are coming to us with an energy that I think is very rare. So I think to our earlier statements, we believe in those retail channels as brand building, as trust building and is ultimately kind of the first leg of our flywheel that helps accelerate customers to the online platform. 27:47 And so we'll continue to be investing in those channels for that strategic reason. The dollars that come in the door from them are obviously gravy on top that we enjoyed, but I think the strategic benefit from an efficient marketing holistic strategy and the omnipresent trust that comes with those relationships with customers is really what we prioritize more than anything.

28:10 Got it. Thank you. Congrats again, guys.

28:15 Yeah. Thank you.

28:16 Your next question comes from the line of Jailendra Singh Credit Suisse. Your line is now open.

28:21 Hi, this is Adam on for Jailendra today. Just wanted to go back and look at the guidance between 2022 for a bit and just comparing the 34% to 40% revenue growth versus the thoughts around the 3Q call, 30% growth. Just curious if you could elaborate a little bit on what you attribute that raise to? And just maybe more of a high-level question in terms of, like the level of conservatism around the guidance for 2022. Has that changed at all as we think back as when you guys put guidance for last year for 2021?

29:01 Sure, Hi Adam, this is Yemi. I'll go and take that one. I think that there's a few factors going on. So one is the -- as we mentioned, the investment on the file that we made in the second half of 2021. We are seeing some of those dividends start to pay off in 2022. And so given the fact that we have a larger base that we actually in 2021 with, that does give us the conviction to increase and elevate the range. What I would say is that we are focused on sustaining repeated growth, not just for one year, but for multiple years. And so given many of the dynamics that you've seen that Andrew mentioned previously, we do have some convection and ability to maintain the long-term growth rate north of 30%. Again, just given the large time that we have on some of our historical categories as well as some of the early single irrigated emerging categories gives us our convection.

29:52 Got it? And then just a question on the 1Q 2019 and 1Q 2021 cohort comparison in the presentation, should we think about the 1Q 2021 cohort is kind of the new normal for the business moving forward? And how much of a benefit did the multi-month purchases, I guess, contribute to the 1Q 2021 for performance compared to the 1Q 2019? Thanks.

30:17 Sure, There are several factors embedded in the overall improvement. Some of it, as you mentioned, is the multi-month ordering. We also did see operational efficiencies as well as higher retention rates. That did result in and for the economics across the cohorts. Given the fact that we have seen this not just occur with just the Q1 2021 cohort, but several repeated cohorts since then, we do have the conviction that this is a sustainable trend -- a sustainable trend on a go-forward basis.

30:48 Got it. Thanks a lot. Congrats again.

30:51 Thank you.

30:53 Your next question comes from the line of Daniel Grosslight with Citi, your line is now open.

30:58 Hi, guys, thanks for taking the question. Some of your competitors have branched out into diagnostic testing and the treatment of higher acuity conditions. You noted that product expansion will be a driver of growth, but perhaps more of a medium-term driver. Can you provide more details around which additional conditions you're looking to expand into first and then the timeline for that expansion?

31:23 Yes, I can take that, Daniel. I think as we shared the combination of the core categories and the emerging categories, is really what's helping us accelerate that revenue diversification and unlock that 30% confidence on a long-term basis. And so I think what you can expect from us in the future is similar to what you've seen from us in the past, which is one to two major category expansions every couple of quarters. This is what we've done essentially since we launched the company 4-plus years ago, and I think this is the strategy on I think a go-forward basis. We're not a team that is going to be doing dozens of expansions and dozens of new categories every quarter. But I think we'd like to focus on one or two and do them really every few months. And so I think that's kind of about the timing dynamic. What you can expect from actual categories, there's a lot that the team is always looking at, one that we believe are very well suited for the platform that we spend on time investing in and researching our categories such as insomnia, pain management, weight management, fertility, hypertension, hyperlipidemia, those are categories that we believe are very well suited on the platform and the platform that is today really well equipped to tackle. And there are also categories, frankly, that affect tens and tens of millions of people in the country. And so we know that they are high impact when it comes to general healthcare improvements for the aggregate population. So I think that hopefully provides a little bit of guidance on where the focus is and maybe what the timing of those rollouts could look like.

32:59 Yep, that makes sense. And then on gross margins for 2022, you mentioned we should see a bit of degradation this year due to the mix shift to wholesale. Apart from this shift, are you seeing any cost pressures from shipping rates from wage inflation as you build out your pharmacy? Any other cost pressures you're seeing in that line item?

33:25 Yes. Hi Dan, this is Yemi. Thus far, we've not seen any incremental pressure beyond just the product mix that we mentioned. Given trends that we saw in the back half of Q4 of 2021, we have rolled forward many of those assumptions into 2022. I think what I would say to you is that we do have -- we're very excited to have several opportunities to continue to increase our overall operational efficiency. That does give us the flexibility to potentially accommodate any additional fluctuations, but we'll constantly keep a pull for how the market evolves on that front.

34:04 Got it. Thanks for the color. Congrats on the quarter.

34:08 Thank you.

34:10 Your next question comes from the line of Ivan Feinseth with Tigress Financial Partners. Your line is now open.

34:17 Hi, thanks for taking my question. And Congratulations to Yemi and Jay for joining the team. My first question on your retail partnerships, do you have the same products available across for all of them or are you segmenting in any way or do you envision segmenting your product line in retail for specific retailers?

34:45 Thanks, Ivan. Appreciate the question. I think generally speaking, we have a lot of consistency across retail partnerships across both the Hims & Hers brands, whether it's dermatology products, sexual health hair care products, vitamins, supplements, a lot of consistency. We are seeing, however, a desire from retailers to focus and lean into specific verticals within the company. And I think the flexibility that Hims & Hers offers the breadth of services and treatments that we offer allow us to work with these retail partners on a fairly personalized basis. 35:20 So, I think there is an increased level of personalization taking place on the shelves, but more so than not, you have a lot of consistency in those 20,000 physical retail locations nationwide.

35:34 And when you bring on or a new retailer brings you on, are they covering all the onboarding costs? Are you sharing any, are there any onboarding costs?

35:46 Given the fulfilment center that we built out in Ohio and the simplicity of the logistics that we have here, having done this with Target for quite a while. It's relatively low cost for us to get these going, which is some nice leverage for the business.

36:00 Okay. And switching to categories without specifically saying, where do you see the biggest opportunity in the next couple of categories that you could take advantage of?

36:13 Yeah, that's great Ivan. I think I'd probably echo what I shared with Dan. We're really excited about the categories, both in the core and emerging markets that we're in today, whether that be dermatology, sexual health, mental health and so big investments in those categories as mentioned. And then the new categories, things like insomnia, pain management, weight management and then more chronic conditions such as hypolipidemia are areas that we get really energized by. So that's where I think we can kind of point to for some of the categories we believe could be coming down the pipeline.

36:52 And then how do you feel that the brand equity that you have created since the launch of your company can help you best to penetrate those new categories?

37:03 I think what we're seeing is that the consistent investment in that omnichannel brand and the diversity of the brand and who it's targeting and the audiences that I think have trust and relationships with us is paying tremendous dividends right. I think this is why when you look at Q4 and last year 2021, we've been able to increase our investment dollars in customer acquisition. We've been able to nearly double our subscription members on the platform. However, we've been able to keep that cost per customer and the acquiring cost for each subscriber relatively flat or improved on a year-over-year basis. I think there are incredible dynamics in the market, iOS 14, privacy dynamics that a lot of people have struggled with. And I think the brand equity, the omnichannel presence and the diversity of the offering that we have has really helped us surpass those challenges and drive really consistent and accelerated growth.

38:01 Okay. That’s all great. And the one last question, where are you and your views and progress on insurance reimbursement for, let’s say, some of the treatment categories?

38:11 It's a great question. I'm glad you asked. We are continuing to invest in that integration on the insurance side. We believe that, that's a critical part of having a cost-effective platform for a very wide range of conditions. So I think it's something that you can look to hear from us with confidence in the coming months on where we stand, but I'm very energized by the team's progress on that initiative.

38:34 Very good. Thank you. And congratulations again, and we look forward to another successful year.

38:40 Thank you, Ivan.

38:42 [Operator Instructions] At this time, there are no further questions. Mr. Jay Spitzer, I turn the call back over to you.

39:04 Perfect. Thank you, Emma, and thank you everyone for listening in today. We look forward to continue engaging with you if you have any questions, please reach out to myself, Andrew, and Yemi and have a good afternoon. Thank you very much.

39:18 This concludes today's conference call. You may now disconnect.