Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Hims & Hers Second Quarter 2023 Earnings Conference Call. Please note that this call is being recorded. All lines have been placed on listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn today's call over to Alice Lopatto, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to the Hims & Hers Health second quarter 2023 earnings call. On the call with me today is Andrew Dudum, our Co-Founder and Chief Executive Officer; as well as Yemi Okupe, our Chief Financial Officer. Before I hand it over to Andrew, I need to remind you of legal safe harbor and cautionary declarations. Certain statements and projections of future results made in this presentation constitute forward-looking statements that are based on among other things, our current market, competitors and regulatory expectations and are subject to risks and uncertainties, and that could cause actual results to vary materially. We take no obligation to update publicly any forward-looking statements after this call, whether as a result of new information, future events, changes in assumptions or otherwise. Please see our most recently filed 10-K and 10-Q reports for a discussion of risk factors as they relate to forward-looking statements. In today's presentation, we have certain non-GAAP financial measures. We refer you to the reconciliation tables contained in today's press release available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information. You'll find a link to the webcast and Investor Relations website at investors.forhims.com. After the call, this webcast will be archived on the website for 12 months. And with that, I'll now turn the call over to Andrew.

Thank you Alice. This quarter, we drove excellent results on both the top and bottom line. Growth remained exceptionally strong with revenue up 83% year-over-year in the second quarter to $207.9 million. Our platform continues to benefit from diversity of the state's brand categories helping lay the foundation for many years of robust growth ahead. Our more mature offerings within the Hims brand continued to expand with little sign of market saturation, as we gain benefits of scale and continue to build a clear market leadership position via the capture of increasing share within the competitive landscape. Newer categories in markets such as mental health and our U.K. operations are growing mid triple digits and demonstrating strong quarter-over-quarter unit economic improvement. In lockstep we continue to drive meaningful efficiency gains from our efforts to verticalize our affiliated pharmacies and optimize our processes, which allowed us to generate $16.8 million in cash flow from operations and $10.6 million in adjusted EBITDA in the second quarter. This increasingly powerful flywheel model provides us reassured confidence in our ability to achieve and surpass our 2025 target of at least $1.2 billion in revenue and over $100 million in adjusted EBITDA. Indeed we believe the strength and composition of revenue and overarching durability of the model we're building is pointing towards many years of robust growth and increased profitability ahead. While I'm proud of the company's quarterly financial outperformance, I'd like to spend most of today sharing some of what's happening under the hood with long-standing initiatives, capabilities and soon-to-launch categories , I believe has believe potential to meaningfully accelerate the already exciting trajectory Hims & Hers. As I've shared in the past, I believe Hims & Hers is a unique competitive advantage. Myself and the rest of the management team think in multi-year…

Thanks, Andrew. Hello, everyone and thank you for joining us today. I'll start by providing an overview of our second quarter's financial performance and then provide additional details behind our expectations for the remainder of the year. We are pleased to see continued strong momentum across Hims & Hers, which we believe reflects the sound execution of our strategy that centers on enabling access to innovative products through world-class technology with the brand that consumers love and trust. Revenue in the second quarter grew 83% year-over-year to $207.9 million. Revenue growth was primarily driven by a robust performance in our online channel. Online revenue increased 87% year-over-year to $201.2 million in the second quarter. The continued addition of subscribers onto the platform was the primary driver of online revenue growth. The number of subscribers on the platform increased 74% year-over-year to 1.3 million subscribers. This quarter, we expanded the portfolio of personalized solutions accessible across the Hims & Hers platform. Notable examples of this include the national rollout of the Hims & Hers offering, additional hair-loss solutions within the Hers portfolio, the launch of Heart Health. Early consumer feedback and reactions, indicate a strong user preference for these personalized offerings. Historically, we have reinvested efficiency gains into marketing as well as the research and development of new solutions. With this much more expensive portfolio of personalized and differentiated offerings, combined with record level gross margins, our investment opportunities have expanded. We made the strategic decision to reinvest a portion of the efficiency gains that scale and strong execution have provided us, into more attractive pricing for a subset of offerings on the platform. Specifically, meaningful changes were made across longer duration and sexual health and Hims & Hers loss subscription plans. The net effect is that more customers than ever…

[Operator Instructions] Our first question comes from Daniel Grosslight with Citi. Your line is now open.

Hi, guys, congrats on the quarter, and thanks for taking the question here. Just a couple of quick ones on the new weight loss category that you're expanding into. So it sounds like there's going to be like a behavior modification aspect to it maybe nutrition coaching, fitness coaching, as well as some type of either nutritional supplement or prescription along with it. But it also seems like the GLP-1s aren't going to be available at these at first. So I was wondering if you can just dig in a little more on what kind of treatment away from the behavior modification and fitness and nutrition. What kind of treatment you're going to provide with this new weight loss category?

Thanks, Dan. It's Andrew. Yeah. So I think what we're going to start with is a wide range of likely generic options and personalized treatments that are going after some of the underlying factors of weight gain. So this could be metabolic resistance, hormonal issues, could be underlying mental health concerns such as depression or unhealthy eating habits. Dr. Craig Primack who joined as our weight management medical director has a couple of decades of experience specifically leveraging, I think this wide range of treatment offerings to go after what is often a multipronged issue for weight gain. And I think that's what the approach is going to be. It's going to be built on, I think a lot of phenotype and archetype data of understanding this patient really well in partnership with the clinical advisors in a way that we can leverage some of those dual action and multi-action treatment capabilities that we recently launched with the Heart Health launch and leverage those same abilities with the wave management category. So really simple protocols. But from a patient standpoint, highly personalized and hoping to go after a lot of those underlying conditions and ultimately have great efficacy, but with affordable and well-tested and safe options.

Yeah, makes sense. And then this quarter AOV growth was really strong. It came in around 22% or so this quarter year-over-year which would be the fastest growth since 2021. Just curious what's driving that AOV growth this quarter given your lowering prices on some treatments and revenue per subscriber is dropping a little bit?

Yeah, Dan, this is Yemi. Thanks for the question. Really there's a few factors. And so I think one of the reasons behind why we made the strategic pricing actions is really to start to make both longer-duration subscription attractive for users as well as the proprietary products attractive to users. And so what we saw as we made those is both users coming in as well as existing users started to switch to longer duration proprietary products that come with a larger commitment upfront. And so you have more people that are on long duration plans as they pay for those upfront. That really is the factor driving AOV and the fact that more customers as Andrew mentioned previously are also switching to the proprietary products which still come at a bit of a premium through the…

Yeah, make sense. Thanks for the color.

Your next question comes from Jack Wallace with Guggenheim. Your line is open.

Hey, congrats on the quarter. And Andrew congrats on the birth of your second child. We've got two questions here. One on the cardiovascular entry. So, this is a statin, we just think that this would help you target maybe an even older demographic maybe that is outside some of the younger millennial demo that you placed so well in. Is that part of the kind of the TAM expansion thought process? And then second is -- are we expecting any attractive pricing with this, or how should we think about pricing with that combined product? Thank you.

Thanks Jack. So on the cardio side this is one we're really excited about, because I think it does a couple of things. One, it does to your point massively expand I think the value and differentiation of the platform for that older demographic, right? There's a tremendous overlap with erectile dysfunction and cardiovascular disease. In fact, as we've shared in the release last week, erectile dysfunction is often an early indicator of cardiovascular disease. So the ability to expand in that older audience is something we're really thrilled by. But also in general, we are seeing tens of thousands of men on the platform today, of which we've shared 30% of those men are at risk of heart disease. And so they could be a couple of years away from a heart attack or stroke and most of them are completely unaware of it. And so this launch, I think brings together really what we do best which is partnering with great clinical excellence the American College of Cardiology and LabCorp innovation with this dual capability, which allows our providers to personalize treatment with these statins that are incredibly well tested and safe with base EV medications. And you can imagine that, this heart support could eventually be added on to other categories mental health or hair care or women's products as well for people at risk. And ultimately, I think meaningfully adhere increase adherence to this preventative treatment and ultimately I think actually hopefully save tens of thousands of heart attacks from happening and eventually tens of thousands of lives. And so from a pricing standpoint to kind of round this out our aim is to make this as accessible as possible. I think as Yemi shared, we've been able to meaningfully lower prices in the last couple of months and aim to continue to do so for some of our higher value product bundles, while still maintaining and expanding to record high 82% gross margins. So the operational efficiency and excellence within the business is really humming in a way that's allowing us to take a lot of this value and innovation and pipe it right back into the customers well in a way that allows us to capture more and more competitive market share. And so with heart health by hand, this will be priced at a premium from the core base treatments that are personalized, but at a slight premium. There'll be still a very mass market very accessible. And our aim is to make it such that that price is never the reason why you're choosing the treatment that is truly right for you versus the one that might be a little bit cheaper.

Got you. That's helpful. Thanks. And then Yemi, you mentioned that the marketing environment was a little difficult in the front half of the quarter and there was an elevation of investments in the back half. When you mentioned the difficult marketing environment and thinking about this in the context of the price changes, was there any pickup in churn rates that you're also responding to, or was it just simply some of the -- so the key areas you play in with marketing dollars just got more expensive or the consumer is pulling back? Just trying to get some -- a better understanding for the -- let's call it the environment dynamics. Thanks.

Yes Jack. I think it's a great question. I think it was -- the environment was in line with what we expected for Q2. And in Q1 we definitely saw some surprising favorability that was unanticipated. Before we make pricing changes, we do a lot of research and experimentation. And so, those changes were effectively months in the making, just because we do want to use prices more of a precise tool versus lots of conservative [ph]. We’re very much disconnected effectively like what we do look to when we institute pricing changes as a few consumers basically value those changes. They're very likely to retain on the platform for a longer period of time. And then lastly, because we have so many different cohorts of users that are selecting different products, we're really able to dial in what are the highest LTV products. As we started to see the benefits from scale and our gross margin started to expand, we made the decision to put some of that back into additional customer value. As Andrew mentioned before, we're really looking to make the first lot products mass market, because the objective is really to have our users for a period of decades.

Yes. Awesome. Thank you, guys.

Thanks Jack.

Your next question comes from Michael Cherny with Bank of America. Your line is open.

Good afternoon. Thanks for taking the question. Maybe if I can go back to weight management. I know you talked about GLP-1 products not being available off the bat. But how are you thinking about the characterization of maybe help of the weight management 2.0, given the high demand for the products as well as the logistics that come with an area such as cold storage, for example, on GLP-1s that you may not be as focused on today?

Thanks Michael. Yes, a great question. I think there's a tremendous amount of excitement internally relating to GLP-1s. And both the existing products that are in market as well as frankly the dozen or two dozen that are in the pipeline today and finishing up clinical trials that I think will likely bring to market an oral, some might blue ties [ph] and ones that have hopefully improved efficacy. So without question these are here to stay and the platform is being built in such a way that enables it, including the affiliated pharmacy operational side as you mentioned the cold storage necessity. That's something that we don't feel will be a concern with our operational side. I think the real reason just being really transparent is just the consistency of being able to deliver a world-class experience to our patients and our customers just doesn't feel quite there yet with this offering. And I think you're seeing that from peers in the market, who are pulling back on this offering or turning it off as a result inconsistent supply chain issues or the fact that I think it's 1% or 2% of all those individuals eligible to actually get reimbursed or actually achieving reimbursement. The fact that in the last couple of months, there's tremendous amount of new side effect profiles that are coming out. The reality is that the medicines are only nine to 12 months old and have only been studied for that duration. And so we hold clinical excellence and the trusted brand pillars kind of in the highest regard in the company, that's our greatest asset here over the long haul and want to make sure that everything we bring to market is going to deliver a seamless, effective and safe offering for patients. And right now, I just don't think we have that confidence. So we're staying close to it. We're working with our clinical advisers to make sure that we are up to speed on how things are evolving. Without question, they will be a part of the platform in some form in the future as a lot of these issues get worked out and hopefully the next generations as well, but likely won't be available there on launch by the end of this year.

Understood, and I appreciate the perspective there, Andrew. And then maybe as a second question I fully appreciate if it's one that's hard to answer. But beginning of the year you gave the 2025 targets, $1.2 billion, $100 million of revenue. And I very much understand the emphasis on at least which I think was underlined bolded in your presentation, so I get that. And that being said, this is the second straight quarter of being raised on a pacing perspective, you're tracking well ahead of there and that's before market expansion. So, I guess what should we think about in terms of when you plan to update that one way or the other or discuss further changes based on the fact that you're now also expanding your near-term TAM?

Yes Mike. Thanks so much for the question. I think when we set the 2025 targets that was given around line of sight for really what we had at the end of last year. We were seeing so many different things that were compelling in the business that that gave us the conviction to set the floors of $1.2 billion of revenue, $100 million of EBITDA. I think we deliberately did not give a range or set of selling just because there's so much exciting going on in the business right now with the launch of new categories. We've been pleasantly surprised by the some of the newer personalized offerings taking off. But at this point in time, we still leave those as the floors for 2025. As we get closer clearly to 2025, we see the full potential for some of these matters then we'll look to update. But at this time again we can call that those are our floors not going.

Thanks Kevin.

Your next question comes from Glen Santangelo with Jefferies. Your line is open.

Yes, thanks for taking my questions. I just want to follow-up on some of your prepared remarks. It kind of sounds like Andrew that you decided that it was the right move to make some investments in pricing. And if I heard Yemi correctly, it kind of sounds like that's going to cost you $12 million to $18 million in both revenue and EBITDA in just the back half alone. So, it seems like kind of a significant investment, but it doesn't sound like it was related to churn. And it kind of sounds like you're doing that now you're seeing an increased duration of your average customer. So, I was wondering -- and I'm putting all this in the context of the fact that you just raised guidance as well. So, I was wondering if you could just flesh out that decision a little bit more and the ramifications of what you've seen as a result of that investment in price.

That's a lot, that’s a great question. I'll take maybe the first half and let Yemi add some of the quantifiable things we've been seeing because it really is moving some of those numbers. It was really a strategy to leverage the strength of where the business is at right now. As you saw in this quarter, we hit kind of record 82% gross margins. I think there's an incredible amount of efficiency and operational excellence that's taking place under the hood allowing us to deliver on the mission which is to help the very mass market, right? We have -- we've said this in the past, we believe we can build a platform and a value prop that is such where every household in the country is a member and is satisfied and love this business and brand and it's getting real value. And I think in doing so we want to find as much efficiency as we can within the business and bring that back into the customers' pocket, right? That is a clear and aggressive way for us to go take meaningful market share with an offering that we know to be a note to be very sticky and very accretive in individual life. And so that was really the strategy behind this and I think continues to be the strategy. big investment to be able to do so, but I feel like it's a powerful one given the brand opportunity to go after a big chunk of the market that otherwise might be caused outside of the range of an opportunity.

Yes, I mean just to add to that building upon what Andrew said Glen I think that really the objective is how do we make it as easy as -- possible for as many users as possible to stay on the platform for decades. Given the efficiency gains that we are seeing and how the benefits of scale have really come through faster than we anticipated. We really started to look for additional ways given that we have just an entirely different construct out in the market where we're no longer competing on access, but we're also competing on personalized products. When you really combine those things and as we start to bring those into increasingly more and more mass market prices it becomes really powerful. And what we've also observed is the more scale that we get the more efficiency that we generally get and so really basically being able to lean into that flywheel in a way that benefits us as well as our consumers I think it's going to be really powerful to come.

Okay. Thanks for the comments.

Thanks, Glen.

Your next question comes from Jungwon Kim with Cowen. Your line is open.

Thanks for taking my questions. Just from a macro standpoint as there is uncertainty in the market have you seen any changes in the consumer behavior and maybe any notable changes quarter-to-date that you can you can, sort of, provide more color on? And another question I had was around marketing strategy. It looks like you're, kind of, the investing behind marketing around new launches. How will that be different versus what you currently have? And just curious if there are more colors you can give around marketing strategies going forward? Thank you so much.

Yes. So I can take the first one Jungwon and then hand it off to Andrew for the second one. I think we've not seen really any pressure on the consumer. I think we've spoken to you how the overall consumer set is diversified across so many aspects from gender, age, income but really leasing success in multiple different environments. I think what we actually saw is as we started to roll out the personalized construct and then also take some of the strategic pricing actions, we really saw behavior from both new consumers as well as the existing consumers really start to lean in and take actions that we feel are signals of stronger retention, stronger LTVs in the future. This includes everything from selecting longer-duration products, selecting the personalized products. The early feedback on those is coming quite strong. And so generally we -- if anything have seen a stronger consumer as a result of the actions both in terms of the product assortment as well as the pricing attractions that we've taken.

Yes. And then John on the marketing strategy side I think it will be a really similar go-to-market than what you've seen from us in the last four, five years which is very omnichannel strategy leveraging a very diverse set of channels and campaigns to educate consumers where they are today right in the comfort of their home across both social, TV out-of-home, streaming with really straightforward destigmatizing straight talk authentic marketing. I think this is really what resonates with the audience we're going after. It's something that people have really come to appreciate and value with the brand. And so I think that will be what it looks like. I think it will also include a lot of the kind of best-in-breed aspects of historical campaigns as well whether that's influencers or celebrity partnerships such as with Kristen Bell for the mental health campaign on Her. Those have also been incredibly powerful in building the awareness of these conditions and the prevalence of these conditions. And I think you'll see us leverage those same tactics in the future.

All right. Thank you.

Your next question comes from Jonathan Young with Credit Suisse. Your line is open.

Hi. Thanks for taking the question. Just on the cardiovascular expansion, I imagine most consumers on ED are utilizing hence for some level of privacy away from their traditional PCP, but stepping into cardiovascular, it may bring the traditional PCP in. So I guess, how are you thinking about this aspect that there is some friction if any from your perspective?

Thanks, Jon. It's a great question. One of the unique things that we've noticed about this business and it continues to be true is overwhelmingly, the patients that come to the platform every day, our first-time customers. And what that means is they often do not actually have a primary physician for which they know the name and have a relationship with. This is overwhelmingly the case for people in their 20s, 30s, 40s and even 50s. And so in many ways, what we are doing is bringing individuals that are outside of the health system today into the health system for the first time. And so we believe we can be that first point of contact in partnership with these organizations, such as the American College of Cardiology and building great clinical protocols into the platform. And then as – we continue to expand through a lot of the brick-and-mortar partnerships we've had such as Ochsner and Carbon Health and Sinai continue to expand that network. So that from a geographical footprint standpoint, we can hand off patients that are necessary to be seen in the brick-and-mortar and in person. And so in a lot of ways that issue doesn't come up for us and it's because those that are coming to us for the most part do not have a deep relationship with an individual provider and are having their first major relationship with Hims & Hers directly. So I think it's a real opportunity actually to expand market share of those engaging with the system and ultimately get those people to the right outcome.

Okay. I appreciate the answer there. And then just on the pricing headwinds that you talked about the $12 million to $18 million. Is there a disproportionate impact on 4Q because it looks like based on your guidance, 4Q revenue could actually be down sequentially from 3Q? And then as we think about 2024, should we think of the lingering impact is maybe one to two-point headwind to growth. Thanks.

Yes, Jonathan, I think that's a great question. I think that really the impact will be spread across Q3, Q4 – our guide anticipating as Andrew mentioned, we're going to be very precise with these changes. We still do want to retain the flexibility to potentially as newer categories roll out and if we see more efficiency only into those. Again, I don't think we're going to use pricing as a blunt tool. We use this as a very precise tool of all the data that we collect. Really, what we expect to see is as the marketing teams continue to their acquisition message as well as we start to head into kind of the Q2 time frame of 2024, you'll start to get the benefit on both acquisition as well as we feel all signals point to even higher retention, that we'll have across our base. And so there might be some pressure in early 2024. But really, we expect to start to lock that in Q2 and then kind of see the full strength of the effects in Q3, Q4.

Thanks.

Your next question comes from Jailendra Singh with Truist Securities. Your line is open.

Yes, thank you and thanks for taking my questions. I just want to stay with this last topic about pricing changes impacting in the quarter and the year guidance. Just trying to reconcile that with strong trends in AOV. You talked about it earlier. Are you saying that just because you lower the prices and longer duration offering you saw more adoption and that drove AOV higher, and if that's the case then are you – $5 million headwind in the quarter and $12 million to $18 million headwinds for the year is that before that benefit on AOV, or is it net of AOV benefit?

Yes. Thanks for the question Jailendra. I would reiterate that while we provide AOV statistics, management is definitely not optimizing on AOV. I think we're really optimizing for the total share of the customer which comes in the form of the monthly average online revenue as well as basically what the total LTV for a cumulative customer look like. That said, the AOV dynamic is when a customer makes a commitment upfront, their monthly rate what they pay per month may be lower, but because they're committing to you more months upfront. That in essence starts to drive the AOV higher. And so I think that the guidance that we gave in the $12 million to $18 million range is fully comprehensive of all of the different puts and takes on that.

Okay. And then, my follow-up on all this focus on personalized treatment. Maybe talk a lot -- a little bit more about the investments you're doing not only technology and platform point of view, but also in terms of provider training or new providers you're bringing on your platform. And related to that, I was wondering, if you can spend some time on your relationship structure with the affiliated medical groups given all the recent confusion and concerns, on that partnership has been?

Thanks Jailendra. There's a lot of education that goes into this platform across the bar. So we leverage a lot of the kind of best-in-class clinical and academic partnerships outside of our walls as well as our medical directors to bring together what those protocols should be, because a lot of this is truly innovative. And for heart health as an example, partnering with the American Cardiology was critical in an underlying or identifying the underlying risk factors that these patients are having. So there's a big coalition building aspect of this, that then gets consolidated down and actually built into the EMR and into trading programs. So the teams are able to get fully informed about these guidelines, and the providers are able to make those independent choices and clinical best practices that they feel are appropriate for the patient. And generally this is how the platform has always worked. And as we expand these capabilities and expand the pharmacy relationships and the treatment ranges, it allows providers to go after treating patients more holistically.

All right. Thanks guys.

Your next question comes from George Hill with Deutsche Bank. Your line is open.

Yeah. Good evening guys and thanks for taking my questions. I have one for Andrew and one for Yemi. And I guess Andrew, first, I'm going to kind of take the opposite tack on the new cardio product with the launch of the cardio product and the behavioral initiatives, you guys are getting into more disease states that are not self-diagnosable or not typically considered self-diagnosable, so I'd love to hear how you think about like what other disease states that the company feels like it can go into for market growth. And then Yemi this is just kind of a housekeeping question. Is the 12 -- I want to parse pieces here is the $12 million to $18 million headwind in the back half of the year, solely the headwind from the repricing initiatives, or is there a way to parse out the repricing from the expectations on a tough comp in the back half of the year? And kind of like I know that's kind of splitting out the a little bit, but would appreciate any color.

Thanks George, great question. I think you're exactly right. This is one of the first categories I think that we're launching into where it requires a coalition of outside collaboration. It requires deep integration of kind of predictive analysis in the consultation flow to be able to identify patients at risk. It involves third-party partnerships such as the one we announced with Labcorp to be able to gather that data set in a way that can more completely allow providers to identify these patients at risk and then actually treat them. I think the infrastructure that we put in place with this launch is one that can be replicated quite easily actually. And I think replicated in most of the remaining categories from a health care system standpoint that play in the country that we are not in. So this could be metabolic disorders. This could be insulin-resistant disorders. This could be diabetes. This could be things like menopause and hormonal balancing. We've already obviously spoken quite a bit about weight management. But I think a lot of the chronic conditions that the business has yet to launch into have similarities in the diagnosis the validation and then the ongoing treatment relationship with patients as the launch of Heart Health by Hims. And so that I think is a template for us that we believe in the coming years can be replicated. We think it's a really innovative platform given the simplicity for customers the ease of it, the leveraging of other categories that a patient might be more interested in learning about, but then the ability to diagnose and treat those patients for possibly even riskier conditions they were unaware of. And then ultimately that innovation on the pharmacy side to deliver a personalized treatment and even in this situation a single pill treatment with a multi-category benefit. We think that's going to massively improve adherence and engagement and retention and truly value for these patients. So I've said this from the beginning, I think, the business is capable of attacking upwards of 70% or 80% of the traditional health care system. I think more and more as these third-party integrations whether it's through Labcorp, or through diagnostic testing at-home, or through tracking systems on the individual, or Apple watches, et cetera, you'll be able to more sophisticatedly treat these patients on the go and leveraging truly best-in-class clinical guidelines at the platform level, and then offer a really data-oriented and ML capabilities to better prescribe and diagnose and treat these individuals. So I think that's where we're running towards. We mentioned we filed a number of provisional trademarks around the name MEDMATCH and are going to be sharing a lot of that AI technology in the next quarter. But a big part of this is the ability to predict the diagnosis and the appropriate treatment to help providers make more informed and clinically appropriate decisions.

And then George at the back half of your question the $12 million to $18 million range exclusively correlates to pricing. Effectively that is the impact of repricing the majority of the existing base that are already on some of those SKUs with the updated pricing and as those folks start to renew, they will get the updated pricing. There will be some mitigation just from new users starting to select a different mix of products that we expect will skew more towards the personalized and longer duration offering as well as the continued upgrades for some of the existing users that are switching from generic solutions or shorter duration solutions in the back half of the year.

Okay. Maybe just a quick follow-up here. Yemi did you -- are you guys willing to communicate kind of like what's the net impact of the price customer percentage perspective? Like what's the price markdown on the hair products?

Yes. I think it varies. Like I don't think we're going to go SKU by SKU. And we did it in a very precise way. So the overall package is relatively complex particularly as you get into sexual health. But at the general genesis given what we did, number one we wanted to remove the concept of having a pill-based offering and [indiscernible] to your treatment-based offering or many of the SKUs we started to remove premiums on things like stronger dosages and things to start truly just to ensure that customers are able to get to the solution that they need. Additionally, what we also did is we started to just make the price point for the personalized SKUs more attractive. And so in some of the instances for a longer duration SKU the price cuts can be north of 25% to 30%.

Very helpful. Thank you, very much.

Your next question comes from Korinne Wolfmeyer with Piper Sandler. Your line is open.

Hey good afternoon guys. Thanks for taking the question and congrats on a quarter on the good quarter. I'll just stick it to one question. I'd like to kind of break down the outlook for the gross margin going forward. And I know you guys have talked a little bit about kind of that 75% plus range longer term and I think the slide deck had that as well. At what point, are we going to start seeing more gross margin degradation. I know you're taking pricing down a bit. You've talked about adding more innovation. That's going to pressure margins, but we're still not seeing that yet. So, just how should we be thinking about that gross margin going forward over the next couple of quarters and into 2024? Thank you.

Yes. I think, we continue to unlock additional efficiencies across the board. And so I think that -- from our vantage point, we still see that there's meaningful efficiency gains in front of us, whether that's in the form of lower product costs, opportunities on shipping. We'll hold us of things that as we get bigger, I think we'll continue to optimize. I think we're going to be very thoughtful. Like, we're not going to give up gross margin points just to do it. We're going to run experiments and be very precise. And really the investments can come into a multitude of things as we look for that can be pricing, bundled offerings, loyalty programs, how we think around the category assortment. I think we'll start to weigh all those different factors. That's going to take at least a couple of quarters to really identify those things. And so, it's not going to necessarily be just a linear line down to the midpoint. As we're testing things and as we're gaining efficiency there might be periods of time somewhere this quarter where it actually goes up, remain steady. But I do think that the way to think around it is there are definitely efficiency gains in front of us. But at the same time, we also are very thoughtful in a precise way we'll look to continue to get value back to the customer.

Thank you.

Your next question comes from Ivan Feinseth with Tigress Financial Partners. Your line is open.

Thanks for taking my questions and congratulations on another great quarter and ongoing success and the birth of our second son too, that's great news. Can you go into a little more detail on some of the platforms you're going to have for the weight loss management and also for heart health. Like for example, it looks like it would be a great opportunity to partner with more traditional providers because a lot of heart health diagnostics, things like EKGs are very pricey and you would need your insurance to cover that as part of the diagnostic, but also do you envision like a subscription platform to track your way track out food logs and things like that, so you can kind of learn your eating habits and help to get modification. And there are some products that are on subscription that I think would lend itself for you to create a great subscription-based product. And then further with all of the data you have what kind of applications of AI to kind of clean patterns like you said, if you have a rectal dysfunction it is a lot of times an indication of heart health.

Thanks Ivan for the question, and congratulations as well. I think on the on the -- both parts of that question were things were really excited by. So, on the subscription offering side, Yemi spoke about how these pricing changes move from a pill-based construct to a treatment-based construct. And what that allows us to do is offer more kind of membership level and subscription level pricing and value for that single price point, right? And so when you think about weight management, there's a really holistic approach here. There is the necessity for great nutrient and great calorie intake, right? There's the necessity to move your body right 5,000, 7,000 10,000 steps per day. There's a physiological requirement to get great sleep. I mean, you can be doing all of these things, but if you're not sleeping well you will not shed those pounds. And so it is comprehensive. And I think Dr. Primark on the Wave management side of the house as been able to educate us and our outside partners have been able to inform us on kind of the necessity of all of those factors. So you should absolutely expect that over the coming quarters, you'll see the mobile app which has increasingly become the core dominant destination for customers, expand to represent content, nutrition, tools, tracking et cetera such that we can more appropriately and holistically gets you to a great outcome. And that could be on weight management that could be on dermatology-related issues that could be on cardiovascular health, because each of these really does require a broad set of approaches. So absolutely on the subscription and the comprehensiveness that's something we're really excited by and spending a lot of time investing in. And then on the AI side of the house, there's just a tremendous amount of opportunity for us to better inform patients better educate patients ultimately get them to a better outcome. This could be on the diagnosis and treatment side of the house as we expand more personalized treatment options using AI to help providers make really, really great informed decisions about which specific treatment and which specific dose are going to result in great outcomes and that's a little bit of what we talked about already with Med Match. But also on the post-treatment side of the house once you've actually started the treatment what are the things you can do to really drive better efficacy and adherence and ultimately better outcomes. And there's a lot of predictive abilities that we can build, and are currently building to help inform patients and get the right content in front of patients such that they can have the best outcome possible. So it's very early days on this front, but it's frankly I think one of the things we're most excited about as a business because it can overarchingly improve the experience from diagnostic to treatment to eventual adherence and ultimately increase medical efficacy quite dramatically.

I'm excited for you, because obviously heart health and weight management -- weight management and heart health go hand in hand. So this sounds like it goes up like a tremendous new platform of opportunities. So congratulations.

Thanks, Ivan.

This will conclude today's conference call. Thank you for joining us today. You may now disconnect.