Hims & Hers Health Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 24, 2025

There are 10 speakers on the call.

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hims and Hers Fourth Quarter twenty twenty four Earnings 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

Thank you. I would now like to turn the call over to Bill Newby, Head of Investor Relations. Please go ahead.

Speaker 1

Good Good afternoon, everyone, and welcome to the HIMSS and Hertz Health's fourth quarter and full year twenty twenty four earnings call. Today, after the market closed, we released this quarter's shareholder letter, a copy of which you can find on our website at investors.hmmns.com. On the call with me today is Andrew Dutum, our Co Founder and Chief Executive Officer and 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 that could cause actual results to vary materially.

Speaker 1

We take no obligation to update publicly any forward looking statement after this call, whether as a result of new information, future events, changes in assumptions or otherwise. Please see our most recently filed 10 ks and 10 q reports for a discussion of risk factors as they relate to forward looking statements. In today's presentation, we also have certain non GAAP financial measures. We refer you to the reconciliation tables to the most directly comparable GAAP financial measures contained in today's press release and shareholder letter. You can find this information as well as a link to today's webcast at investors.hymns.com.

Speaker 1

After the call, this webcast will be archived on the website for twelve months. And with that, I'll turn the call over to Andrew.

Speaker 2

Thanks, Bill. What an incredible last few months we have had to finish a breakout year. At Hims and Hers, we believe we are building the next generation healthcare platform, a platform that leverages personalization and technology unlike any traditional healthcare system, delivering access to affordable on demand, high quality and precision tailored care to millions of people. The future model of health and wellness that centers around the consumer and the consumer alone. This vision requires extraordinary levels of innovation across technology, infrastructure and services.

Speaker 2

And I'm absolutely in awe at the team's execution across so many avenues to accelerate toward this vision. From our recent acquisition of our new whole body lab testing facilities, which will bring HIMSS and HEARs customers a deeper understanding of the comprehensive health and treatment personalization to our acquisition of our new Menlo Park Peptide facility, which will establish domestic durability of our supply chain for one of the most innovative and exciting areas in medicine to our Super Bowl ad, which sparked an incredible breadth of discussion around our existing healthcare system. And lastly, to our growing bench of impressive talent, making our team an even stronger competitive advantage. We are attracting leaders across disciplines from technology to women's health who recognize the extraordinary opportunity to reshape American healthcare. At the end of twenty twenty four, over 2,000,000 subscribers entrusted HIMS and HERS to aid them in their journey to better health with thousands more joining daily.

Speaker 2

This vision of an on demand personalized healthcare platform is resonating with consumers across America. Over the past twenty five years, Uber and Airbnb reshaped transportation and hospitality. Amazon and Shopify revolutionized e commerce and logistics. Netflix and Spotify redefined media consumption and PayPal and Square modernized digital payments. Yet we haven't seen a similarly transformative shift in one of life's most critical areas, healthcare.

Speaker 2

Recently, however, I felt the same sense of disruption and possibility with what we are building at Hims and Hers. These disruptors introduced a concept of on demand in a manner I had never experienced, hyper personalized and catered to my needs, transparent in their pricing and ultimately reliable and empowering. These are words never uttered when describing healthcare in America. At Hims and Hers, our ambition is simple. We plan to change that.

Speaker 2

We have been breaking the status quo since our founding in 2017. And through our vision of what healthcare can and should look like, we've achieved a breadth of accomplishments that few thought possible. We've engineered a vertically integrated proprietary technology stack that powers over 10,000 patient visits per day and we believe is home to one of the most powerful completely closed loop datasets in healthcare. We've built nearly half a million square feet of cutting edge pharmacies and fulfillment centers that deliver personalized treatments across dozens of conditions and multiple innovative form factors, helping support high quality clinical outcomes through optimized dosing, side effects mitigation and vitamin supplementation. And we broadened our brand from one that's focused on niche men's categories like ED to one that millions of Americans in trust for their health and wellness needs across an ever broadening set of specialties from men's and women's health, dermatology, mental health, adjunctive cardiovascular support and most recently metabolic health.

Speaker 2

We are in the earliest of days in transforming how Americans improve their health and wellness. And when we think about the future, our investment areas fit into simple yet powerful buckets. First, by leveraging advancements in technology, specifically AI, we can expand the scope, quality and capabilities of diagnostic tools available on HIMSS and HEAR's platform. Second, as our technology gets more sophisticated and we bring more data rich integrations onto our ecosystem like lab testing and wearable devices, we can expand the breadth of personalized treatment, including preventative capabilities accessible on our platform. Third, by focusing on the long term consumer journey, we can expand the value of the HIMSS and HERS relationship with improved offerings that drive increased and higher engagement follow-up care.

Speaker 2

And fourth, as our verticalized capabilities and platform gets stronger, we see a path to export our capabilities beyond the walls of hims and hers, helping legacy healthcare enterprises transform to be capable of delivering the same quality, efficiency and personalization for their patients. Our recent investments are in lockstep with this future vision, helping to position us to execute across each of these critical areas. Data is a key differentiator on our platform as we are one of, if not the only, large scale vertically integrated health systems spanning the end to end patient journey. At the end of twenty twenty four, we began negotiations to acquire a provider of at home whole body lab testing, which we were excited to close last week. With this additional capability, we will be able to test for a wide range of critical biomarkers across heart, hormone, liver, thyroid and prostate, helping to proactively identify individual risks for disease.

Speaker 2

We believe this type of comprehensive health testing should be available to everyone given the possible life altering learnings. Given this, we look forward to expanding the value each HIMSS and HERS subscriber receives this year with comprehensive testing at extraordinarily affordable cost to our customers. Whole body testing gives providers even more insights into their patients' health, enabling a more holistic individualized treatment plan inclusive of personalized medication, supplements, workout routines and nutrition. Whole body lab testing will also enable us to expand into specialties such as menopausal support, low testosterone and more. With this acquisition, we are elevating the personalization of care individuals will be able to access on our platform.

Speaker 2

Expanding datasets enable us to identify elements of a member's health such as vitamin deficiencies and unoptimized health indicators leading to better personalization of treatment through expanded offerings that take these diagnostic components into account. As we deepen the personalized care we can offer, investments across our nearly half a million square foot footprint across Ohio, Arizona and California will set the foundation to potentially move from offering hundreds of personalized treatment variations to eventually offering thousands of treatments over the coming years. At the end of twenty twenty four, we also signed an agreement to acquire a California peptide facility. As we work to address chronic conditions and areas of need among Americans, this facility will provide the ability to explore innovative advances in preventative health, metabolic optimization, cognitive performance, recovery science and biological resistances. I'm thrilled with the potential range of treatments and peptide science and we are committed to being at the forefront.

Speaker 2

We believe that this acquisition will provide us with opportunities to more closely participate in this innovation and also bolster our domestic supply chain for treatments that could be critical to America's future. As the breadth of treatments and services expand in our platform over the course of the next decade, our belief is that advancements in technology can facilitate materially better outcomes and unlock a level of access unlike anything available today. We believe that AI and scaled de identified data will help power extremely important network effects for our platform, enabling each new customer's experience to drive improvement to the care and experience of the next. We also believe that leveraging AI and our current clinical expertise and intelligence can elevate the types of follow-up care available for millions of individuals. We see great healthcare as a combination of appropriate treatment, high frequency provider support and access to services that help individuals achieve healthier habits.

Speaker 2

In 2024, we launched tools such as BMI calculators and trackers to help members monitor water intake, nutrition, movement and sleep, all focused on helping our subscribers build a healthier lifestyle. In this next generation of healthcare, we see a world where AI can substantially elevate the subscriber experience by providing resources with greater sophistication such as AI coaches, therapists, nutritionists and trainers available for twenty fourseven on demand support to help our customers make meaningful lifestyle changes in pursuit of their health and wellness goals, trusted and empathetic AI powered care coordinators to help customers navigate their healthcare journey, and greater transparency and visibility into the reasoning that drives each treatment and service recommendation on our platform in a manner not constrained by the availability of provider time on the platform. While our ambitions and technology advancement are far reaching, we have been energized by the market receptivity to this vision. Leading engineering executives, world class AI researchers and operators responsible for building and massively scaling some of the most notable businesses in the world have been part of our year long search for our Chief Technology Officer. We have been humbled by the shared excitement for our vision and the widespread passion to transform the American healthcare system.

Speaker 2

We are thrilled to share that we have signed an offer for our new chief technology officer and we expect to share more about our latest executive team member in the coming weeks. Our focus in 2025 will be on continuing to further progress our platform capabilities, deepening our competitive moat and expanding our value to customers. We will do this through continued execution across five key priorities. First, through the integration of whole body lab testing, we will provide access to richer insights for consumers into their health. I cannot stress the transformative unlocks we believe will come from empowering customers with their data.

Speaker 2

Diagnostic capabilities will serve consumers by supporting our expansion into additional specialties such as menopause and low testosterone and pave the way for a greater breadth of personalized offerings inclusive of medications, supplements and lifestyle changes. Second, we will continue to invest in our pharmacies and infrastructure. These investments will come in the form of expanding our capacity for sterile compounding as well as further automation of facilities to unlock the capacity to offer access to thousands of more highly personalized treatments in the future. Third, we'll broaden and deepen the capabilities of our technology stack to facilitate even better recommendations from providers to each individual patient as well as lay the foundation for AI centric tools and coaches capable of even further improving the quality of follow-up care received on the platform. And fourth, we expect to conduct R and D for the launch of future specialties and subspecialties that leverage our capabilities and reach an even broader set of customers.

Speaker 2

And finally, we'll continue to position ourselves to be a leader in addressing the chronic obesity epidemic across America. There may not be a more impactful use case for precision medicine than America's Obesity Epidemic, which impacts one hundred million individuals across the country and results in zero point five million preventable deaths per annum. North of two hundred thousand individuals joining the HIMSSHERS platform in the span of a year to meet their weight loss needs is evidence of the benefits that consumers see in our approach to personalized medicine. As we shared last year, we believe our approach can enable material improvements in clinical adherence and compelling customer satisfaction And we're seeing gains in the realization of this goal. In order to truly address the epidemic, patients need comprehensive care that extends beyond medicine to making lifestyle changes from nutrition to exercise to mental health and we are dedicated to this approach.

Speaker 2

Precision medicine is about using the right tools for the right patient at the right time. We believe this approach to personalized medicine will ultimately drive better clinical outcomes by enabling providers to personalize the dose, form factor and other clinical delivery aspects of existing clinically validated medications. In our work, we are committed to integrity and transparency. We are not bypassing the regulatory process nor are we creating new drugs. The regulatory framework for compounding and the FDA have long recognized the need for compounders to be able to compound medication to meet patient needs that utilize ingredients of but that are not essential copies of existing drugs.

Speaker 2

We focus on providing access to better care in this framework through personalization, period. We believe that Americans deserve transparency about the system and their options and we will continue to passionately push back against any attempts to confuse or scare consumers about whether compounding can be done legally and safely. We won't claim improved efficacy until the data substantiates it. We will continue to show our quality and safety process across every step of the customer journey. We take a logical approach that lets patients and providers draw their own conclusions because we believe that patients, not pharmaceutical profits should drive our healthcare system.

Speaker 2

We are aware that change can be scary for industry incumbents. Big Pharma's reaction to our call to fix today's stuck in sick healthcare system has been to band together and question the need for affordable compounded solutions and incite fear in regular Americans through broad stroke statements about the safety of all compounded medications. As always, we will continue to monitor and comply with regulatory requirements related to the GLP-one shortages. And we will continue to primarily focus within our weight loss category on bringing care to individuals that stand to benefit from our oral based offerings, liraglutide later this year and clinically necessary personalized dosages of semaglutide. The investments we've made on our platform will help ensure that we can effectively help the millions of potential Americans that can benefit from our holistic approach to weight loss treatment.

Speaker 2

Additionally, these investments position us to be a leader in providing access to high quality treatment to millions of more Americans as more brand name GLP-one medications go generic in the coming years. As a founder led company, we have one rare advantage that most companies do not, extreme patients. While most might get lost in the noise of today's realities, the future is where we are focused. A future where high quality personalized care is available to everyone on demand at affordable prices from the comfort of their home. This vision is coming to reality and it's shaking the incumbent system.

Speaker 2

We believe that in the coming years that future will be obvious and available to all. We look forward to updating you on our progress across these priorities over the course of 2025. With that, I'll pass it over to Yemi to talk through our financial performance and outlook for 2025.

Speaker 3

Thanks, Andrew. I will start by providing an overview of our fourth quarter financial performance before diving further into our outlook for 2025. The success of our platform in 2024 is a reflection of how our ability to democratize access to high quality personalized treatments and services is resonating with consumers. Revenue was $481,000,000 and $1,500,000,000 for the fourth quarter and 2024 fiscal year respectively. This represents year over year revenue growth of 95% for the fourth quarter and 69% for 2024.

Speaker 3

Helping drive our success is our ability to attract and retain subscribers across our tenured specialties and secondarily, an ability to scale new offerings such as our weight loss treatments. Revenue outside of our GLP-one offering increased 43% year over year to $1,200,000,000 in 2024, reflecting an ability to achieve the floor of our revenue expectations for 2025 a year early. Expansion of personalized treatments on our platform is continuing to result in strong subscriber growth. Total subscribers on the platform increased 45% to over 2,200,000 in the fourth quarter with over 55% of those subscribers subscribing to at least one personalized solution. Unique form factors, multi condition treatments and personalized dosages are unlocking growth in some of our most tenured specialties and serving as an accelerant for some of our newer specialties.

Speaker 3

For example, in the fourth quarter, subscribers in men's and women's dermatology grew over 55100% year over year respectively. Our belief is that lab diagnostics will unlock a greater breadth of personalized treatments, which will further expand the runway for growth across our existing specialties. Almost 100,000,000 Americans are currently struggling with weight loss. We launched an oral based weight loss offering in the fourth quarter of twenty twenty three, which saw great success as it scaled to a revenue run rate of over $100,000,000 in just over seven months. Our GLP-one offering, which launched in the second quarter of twenty twenty four, has experienced similar success, delivering north of $225,000,000 of incremental revenue in 2024.

Speaker 3

We believe success behind this offering is a result of the brand equity we have built over the years, as well as our high touch model that includes frequent provider engagement, tools to build healthier lifestyle habits and access to personalized treatments. Line of sight to future operational efficiencies gave us comfort to make our injectable offering even more affordable. We reduced the price for our twelve month SKU from $199 a month to $165 per month in December. The majority of weight loss subscribers are now opting for treatment plans of six months or more, which we believe will translate into strong retention and improved adherence for our weight loss subscribers. Similar to previous strategic pricing actions, we are confident that these changes will be long term accretive to the platform and provide a path to unlock economies of scale in the future.

Speaker 3

Additionally, we believe that the ability of providers on our platform to personalize successful titration plans and steady state dosages strengthens with each subscriber that has success on our platform, making our ability to rapidly scale a distinct competitive advantage. While the addition of subscribers remains the primary component of our growth, monthly online average revenue per subscriber is becoming a more meaningful contributor as well. Monthly online average revenue per subscriber increased 38% year over year to $73 in the fourth quarter. Scaling of GLP-1s as well as subscribers shifting to more premium personalized offerings are the primary growth drivers. Significant investment was made in the fourth quarter in areas that we believe set the foundation to drive future economies of scale.

Speaker 3

Despite this investment, adjusted EBITDA margins remained strong at over 11% as adjusted EBITDA increased over 160% year over year to $54,000,000 in the fourth quarter. For the fiscal year of 2024, our platform delivered $177,000,000 of adjusted EBITDA as adjusted EBITDA margins more than doubled year over year to 12%. Gross margins declined approximately two points quarter over quarter in line with expectations highlighted earlier this year. The scaling of our GLP-one offering as well as strategic pricing actions enacted within our GLP-one offering in the fourth quarter are the primary drivers of this change. We expect margins to start to recover in the second quarter as we reach milestones for pre adjusted volume driven discounts across our operation with further opportunity as we expand sterile fulfillment capabilities within our affiliated facilities later this year.

Speaker 3

In the fourth quarter, we lean into specialty specific marketing on national stages at scale for the first time. Marketing as a percentage of revenue in the fourth quarter was 46 percent representing a five point improvement from the prior year and a one point degradation from the prior quarter. Higher retention as a result of an increasing shift toward personalization as well as acquisition of customers organically and through lower cost channels continues to provide confidence in our ability to achieve between one to three points of leverage on our marketing spend per annum. For the fiscal year of 2024, we exceeded this goal, driving marketing as a percentage of revenue down to 46% reflecting over five points of leverage relative to the prior year. Strict management of our operating costs continues to allow us to gain leverage on our G and A as well as operations and support costs.

Speaker 3

In the fourth quarter, G and A and operations and support costs as a percentage of revenue improved three points and one point year over year respectively. Net income was $26,000,000 in the fourth quarter and $126,000,000 for the full year, marking our first full year of GAAP profitability. The full year figure included a tax benefit primarily related to the release of a domestic tax valuation allowance, partially offset by current period tax expense. Cash flow generation remains strong as we delivered nearly $60,000,000 of free cash flow in the fourth quarter, bringing the total free cash flow generated in 2024 to nearly $200,000,000 Cash and short term investments on our balance sheet were over $300,000,000 at the end of the year. 2024 was an exceptional year for Hims and Hers, but as Andrew mentioned, we believe that we are just scratching the surface of what our platform can deliver in the years to come.

Speaker 3

Before going into our outlook for the year, I will provide insight into how we expect to allocate capital in 2025. We expect more capital investment across a few key areas in 2025 to continue building toward our long term vision for the company. These areas include: first, an investment and expansion of sterile capabilities and capacity within our 503A and 503B facilities. These investments will ultimately enable us to more economically provide offerings such as liraglutide on our platform, which we believe will further enhance the durability of our weight loss offering. Additionally, sterile capabilities provide a critical component necessary to expand into other areas such as menopausal support and low testosterone in the future.

Speaker 3

Second, we are investing to expand capacity for a greater breadth of personalized offerings through investment in equipment with increased automation capabilities as well as the launch of a larger facility in Arizona later this year. Our ambition is to have the capacity to leverage additional de identified data points from interactions on our platform and lab diagnostics to increase the depth of personalized treatments available to subscribers, whether that be through additional form factors or multi condition treatments. Third, we expect to integrate lab diagnostic capabilities into our platform in a way that allows us to offer it to subscribers at a low cost or in some instances for free. We believe lab diagnostics can be an additional value add service for subscribers that serve as a foundation for more personalized treatments as well as enable expansion in other specialties in the future. Lastly, we will continue our focus on strengthening the long term durability of our domestic supply chain through investment in our recently acquired peptide facility.

Speaker 3

We view this facility and peptide capabilities as providing an additional long term anchor for our focus on U. S. Based operations as well as an opportunity to explore innovations in medicine made possible through peptide development in the coming years. Similar to prior years, we will be thoughtful in our allocation of capital across these initiatives and expect to continue to deliver strong free cash flow in the future. With that backdrop, I will provide an additional perspective into our outlook for 2025.

Speaker 3

In the first quarter, we are anticipating revenue in the range of $520,000,000 to $540,000,000 representing a year over year increase of 87% to 94%. We expect adjusted EBITDA to be between $55,000,000 to $65,000,000 representing an adjusted EBITDA margin of 11% at the midpoint of both ranges. For the full year, we are anticipating revenue of between $2,300,000,000 to $2,400,000,000 representing a year over year increase of 56% to 63%. It is our expectation that 2025 adjusted EBITDA will be between $270,000,000 and $320,000,000 These adjusted EBITDA and revenue ranges imply an adjusted EBITDA margin of 13% at the midpoint of both ranges. Embedded within our outlook are the following assumptions.

Speaker 3

First, given what we know today, we anticipate 2025 revenue contributions from our weight loss specialty of at least seven twenty five million dollars This figure excludes contributions from commercially available dosages of semiglutide, which will not be offered on the platform after the first quarter. There may be the potential to offer commercially available dosages of compounded semiglutide throughout the year. However, we see our steady state weight loss offering being primarily composed of our evolving oral based solutions as well as liraglutide later this year. Personalized semiglutide dosages will supplement these core offerings for the subset of consumers for whom it is a clinical necessity. Supply chain consistency across 2025 inclusive of affiliated pharmacy and third party fulfillment and distribution dynamics is a key assumption in our guidance.

Speaker 3

Second, our expectation is that the first quarter will remain an investment quarter as a result of the strategic pricing actions made in December and investment in our one minute Super Bowl campaign. We expect some pressure on growth and adjusted EBITDA margins in the first quarter, but anticipate improvement through 2025 beginning in the second quarter. Line of sight exists to realize volume driven discounts across our ecosystem later in the second quarter and further benefit is expected as greater sterile fulfillment capacity from our facilities comes online throughout the year. Third, we remain committed to ensuring that our voice is heard during the most culturally relevant moments across America and expect to continue to have a significant voice for the most pertinent issues across healthcare relevant to our platform. Our expectation is that we will maintain a one year payback period on our investments while executing these activities.

Speaker 3

Additionally, we have high confidence in our ability to continue driving between one to three points of marketing leverage per annum as a result of first, an increasing amount of our spend becoming semi fixed in nature second, an ability to draw a broader audience and retain them as a result of high quality personalized solutions available on the platform third, an increasing amount of customers acquired organically and through lower cost channels as a result of historical investments in our brand as well as entry into specialties more conducive to word-of-mouth referrals and lastly, the continued penetration of additional subscriber cohorts on our platform. Marketing leverage is an instrumental component of our path toward margins of at least 20% by 02/1930, which we believe we are on track to achieve. Lastly, we expect long term revenue retention to remain above 85% as subscribers engage with personalized products across more specialties. Ongoing subscriber adoption of personalized solutions present both acquisition and retention benefits across each of our specialties. Recent trends give us confidence that each of our specialties will deliver more than $100,000,000 of revenue in 2025.

Speaker 3

Capabilities that were built organically as well as recently acquired provide a pathway to an exciting future for Hims and Hers in 2025 and beyond. Investments that we make in 2025 will position us to transform the way millions of individuals optimize their health through the examples that Andrew highlighted for our long term vision. Our ability to drive these strong results would not be possible without the dedication of over 1,000 employees across Hims and Hers. I'd like to thank them as well as all of our customers and partners that support us in our mission of helping the world feel great through the power of Better Health. We appreciate the support of our subscribers and shareholders and look forward to keeping you updated on our progress.

Speaker 3

With that, I will now turn the call back over to Bill to kick off Q and A with two questions from our retail community.

Speaker 1

Thanks, Yemi. And thank you to all the investors that sent us questions over the weekend. It's clear that that part of the investor base continues to expand and we're excited to more regularly engage with this part of the group. To get things started, this was a top question from the HIMSS House, a retail community dedicated to HIMSS that is growing in popularity. The question is, what are the top three to four strategies that will allow HIMSS to reach tens of millions of subscribers on his platform?

Speaker 1

And what is the rough timeframe for reaching this goal?

Speaker 2

Thanks, Bill. And thanks, HIMSS House. It's been fun to watch you guys grow as a community. You know, I think 10,000,000 subs on the platform to me feels, you know, really quite in reach. And I think frankly, pretty straightforward from a growth standpoint if you look at historical growth over the last five to six years.

Speaker 2

My optimistic hope and personally ambition would be to try to achieve this in the next five to six years. I think the top strategies are the ones frankly that the business is operating against today, which is first to expand the categories and the specialties on the platform. So you'll see deeper segmentation, more indications. I think the lab testing, acquisition this past week is something that will massively accelerate that breadth of conditions. The second I think is a broad expansion of the personalized treatments on the platform.

Speaker 2

And as we talked about in the prepared remarks, my ambition is really to go from a place where we have you know, 300 personalized treatments which exist today on the platform to a place in the not so distant future where you've got thousands of treatment variations. And this is hyper personalization across dosing, side effects mitigation, multi condition support, vitamin supplementation, and ultimately form factor, which we know has a massive adherence contribution. So I think as you expand those personalized treatments, you're unlocking different groups of people who feel like there's something on the platform, that better represents their needs. And then I think lastly, there's going to be a real accelerated investment in technology that can be necessary to empower this type of scale. Right now, as I shared, we're powering more than 10,000 visits on the platform per day.

Speaker 2

You need to be able to power 90,000 visits on the platform per day. And so there's a real necessary investment across decision making tools for providers to help them be more efficient and more precise, more long term capabilities with AI that allow the customer to have a higher touch experience after they've been treated and more handheld throughout the long term of their journey. And so all of that I think is kind of a big area. So very excited from a technology standpoint to have our CTO joining and be able to share more about that offer in the next couple of weeks.

Speaker 1

Thanks, Andrew. We kind of on that last point, we received a lot of questions on AI and its applications on the platform. This one comes from Stephen W. Who asked, how is HIMSS leveraging AI and data analytics to enhance the telehealth offerings today, as well as the personalized treatments and drive increased efficiency in the healthcare ecosystem? Are there plans for AI driven diagnostics or automation to improve patient outcomes?

Speaker 2

Yeah. Thanks, Stephen, for the question. Absolutely. Across both of those, both diagnostics and and long term patient outcome management. You know, I think increasingly AI is at the core of, everything that we're discussing as a management team.

Speaker 2

What we are building, I believe, is possibly the most, powerful dataset in health care because it's really the only, at scale fully verticalized end to end system. So we are overseeing and managing not only the initial patient intake, but the diagnostic component, the treatment component, the long term relationship the chronic care, the adjustment to treatment, and ultimately whether or not the outcome is delivered. And so that data set delivers a really powerful flywheel. I think what you'll see from a diagnostic standpoint is real investments in med match, the ability to more precisely identify diagnosis for patients, but also personalized treatments for patients. I think you'll obviously see lab work be built into med match in a way that expands the range of diagnostic capabilities and treatment case capabilities.

Speaker 2

And then lastly, I think on that follow-up care side and on the patient improvement side, I think you'll see us meaningfully change the status quo for what it looks like to be a him and hers customer long term. You know, one of the things that I think about a lot as a as an entrepreneur is what are things that the ultra rich have access to? And then how can we broaden that and give that to everybody? So things that people have are, on demand therapists. Right?

Speaker 2

They've got nutritionists. They have fitness coaches. They have meditation coaches. These are people that are in your life, helping you to live healthier lifestyle. I think we are capable of building incredible AI versions of all of those coaches, which really, really changed the paradigm for how easy it is to change the lifestyle dynamics in your house, and ultimately expand that to tens of millions of more people down the line.

Speaker 2

Now at the end of all of this, I think what is maybe even the most exciting from an AI standpoint is as we build these fairly proprietary models internally and validate them internally across our data set, I think there's one day the opportunity to open this up and in partnership actually help, help power the existing legacy healthcare systems and help transform those legacy healthcare systems to actually be able to deliver the hims and hers quality and experience and personalization at scale. And I think that ambition is really exciting for us because it means that we're not only changing healthcare for the customers that are coming to hims and hers, but we're also one day possibly helping power the rest of the system in delivering great healthcare to others.

Speaker 1

Great. Thanks, Andrew. Thanks again to all who sent in questions. We look forward to hearing from you again next quarter. And with that, I'll pass it back to the operator and we can begin the regular way Q and A.

Operator

Ladies and gentlemen, we will now begin the question and answer session. As we move into the Q and A session, we ask that you please limit your input to one question and one follow-up. At this time, I would like to remind everyone to ask a question Your first question comes from the line of Maria Ripps of Canaccord. Please go ahead.

Speaker 4

Great. Congrats on strong results and thanks so much for taking my questions. First, I just wanted to ask about KLIP1 personalization. Can you maybe just help us understand some of the mechanics around assessing new patients when deciding if they're good candidates for personalized semaglutide dosing? I guess, especially for some of the patients that are new to JOKI-one and maybe haven't had experience with side effects.

Speaker 4

I guess, what's your approach to understanding if someone needs a personalized solution versus some patients that have been attracted to more affordable prices?

Speaker 2

Hey, Maria, that's a great question. I think first off, we see a lot of patients that come onto the platform that have already experienced GLP-one. And I think there's no shortage of data to support this. I think a huge portion of the population has started tried and, unfortunately, you know, turned off of them and that data is quite public. A lot of it as we've talked about muscle loss concerns, extreme nausea, extreme vomiting.

Speaker 2

So what we do from a medical standpoint in partnership with our clinical advisors and clinical leaders is build the information and intake to allow for, essentially an understanding of their existing situation, whether or not they've tried them before, their side effects sensitivities, their nausea sensitivities. There's a tremendous amount of personalization with these medications with regard to actual goal weight loss, right? No individual body is the same. No individual person has the same, ideal health outcomes. And so I think the idea of a single dose regimen for this medication, especially given the extreme side effects nature of it and also the extreme efficacy of it is actually really well tailored.

Speaker 2

So with all of that information that then gets piped into the EMR within the platform served up to the provider and in partnership with the provider's expertise and their experience as well as Med Match, which is able to educate the provider on similar patients with similar dynamics and how they've had great outcomes. Those decisions can be made between the patient and the provider.

Speaker 4

Great. That's very helpful. And then can you maybe talk about how the short ending could impact the competitive setup and some of the dynamics among platforms that have been offering compounded fumaglutide?

Speaker 2

Yes. I mean, we are pretty clear with regard to what the regulation states. So my expectation is most parties in market that have been offering commercial available doses of semaglutide will cease to do that in the next couple of months. Again, the FDA outlines very clearly when you can and cannot compound one during a shortage, which has now indicated is no longer. And then second, when there's a clinical necessity for that personalization to the A facilities.

Speaker 2

So I think on an ongoing basis outside of the next quarter, as commercial doses come out of the market, you'll see probably a smaller amount of personalization happening through the A for those that are clinically required in that level of tailoring.

Speaker 4

Got it. That's very helpful. Thank you very much.

Operator

Your next question comes from the line of Craig Hettenbach, Morgan Stanley. Please go

Speaker 2

ahead. Yes.

Operator

Thank you. Outside of semaglutide, can

Speaker 5

you talk about just rough expectations for liraglutide in terms of possible timing for this year? And then also an update on the oral weight loss drugs. You've mentioned on prior calls as well the $100,000,000 run rate. Just are you sustaining some of that momentum? Or what's the latest on the oral side?

Speaker 3

Yes. Thanks for the question, Craig. We see the oral business continue to remain incredibly strong. And so the guidance of expecting at least $725,000,000 of revenue contribution from our weight business effectively excludes any contribution from the commercially available dosages of semaglutide. We set the guidance typically based upon what we have line of sight to today.

Speaker 3

There's a few things that we do know hold true and we've seen the oral business benefit as a result of it. The first is, we know that our subscribers value the benefits the platform brings beyond the medication. Consumers are very motivated to lose weight and have a holistic platform to do so. We also know that consumers are looking for health and treatments from platforms that they do trust. So those are the elements, being one of the reasons why the oral weight loss was able to scale so quickly.

Speaker 3

We see continued momentum, even when we had personalized or compounded commercially available dosages of Temiquetech on the platform, oral operating continue to remain quite popular as a result of broader eligibility requirements and as a result of many consumers just being candidly more comfortable with the modality. And so as we look to what 2025 looks like, we do expect a continued meaningful contribution from our business. We're excited for Lyricutide to come later this year. We expect those to be foundational pieces of the overall ecosystem for weight loss specialty that can be supplemented as Andrew mentioned by the subset of consumers for whom personally or personalized dosages of compound semaglutide are an effective solution for.

Speaker 5

Got it. And then just as a follow-up on the HERS platform reaching 30% of the business, Outside of GLP-one, can you maybe just give some color in terms of some of the key categories that are driving traction on the HERS side?

Speaker 3

Yes. I think one of the things that we're seeing HERS really benefit from, first and foremost, there's just many of the learnings that we had around marketing effectiveness from HIMSS, as well as strategies around personalization, we also brought over to HRRRs. What we also do see is that many of the categories for HRRRs are visible in nature. So things in dermatology that are inclusive of both skincare as well as hair loss prevention for women remain incredibly popular. And so that is one of our fastest scaling specialties.

Speaker 3

We also, as we talked around at various points last year, see a very successful mental health business, that is also thriving underneath hers as well. And then the full ecosystem of weight, we're seeing that gain traction across both hers and hims. And so really we're seeing a healthy composition across multiple specialties driving the acceleration of the HIMS. And a large part of that is, it's benefiting from many of the learnings that we had on the HIMS side, being able to bring those over and drive faster acceleration to the HIMS brand.

Operator

Got it. Thank you. Your next question comes from the line of Eric Percher of Nephron Research. Please go ahead.

Speaker 6

Thank you. A question on the transition beyond commercial semaglutide. Maybe question one, what happens to the patients and subscribers currently on the commercial product? How do you think about supporting them? And what portion do you expect would be viable for personalization?

Speaker 2

Yes, that's a great question, Eric. I would suspect we will have to start notifying customers in the coming month and two that they will need to start looking for alternative options on the commercial dosing. Obviously, we have the expansive platform whether it's the oral medications that are already out there or if there is some reason that this patient would qualify for some level of personalization that exists. But I would suspect just being very direct that a lot of those patients will try to go into the open market and try to secure a branded option in some form factors. So that transition is inevitable.

Speaker 2

I think that transition is going to have

Operator

to take place and has been built into the guidance that

Speaker 2

Yemi provided.

Speaker 6

And as you look out toward the end of the year when you have Lyra and our building on personalization, do you have a feel for what portion of the weight loss population may be spread across those? Yemi, I might also ask you, I think we have seven twenty five million dollars dollars as the goal this year. We know $229,000,000 last year for GLP-one hundred million dollars for weight loss. Can you help us on the equivalent

Speaker 2

or at least $100,000,000

Speaker 6

for weight loss? Can you help us on the equivalent to that number of $725,000,000

Speaker 3

Yeah. I think what we would expect as we look to the end of this year, given the fact that we, as Andrew mentioned, are one of the platforms that has the ability to provide data insights to consumers. We also are trusted and affordable brand. We do expect to see the oral based offering be quite popular, given the fact that many other platforms will no longer be offering commercially available dosages of semaglutide, we are likely to receive benefits from that across both of our specialties on the oral side as well as liraglutide. And so I think that the competitive advantages that have served as a foundation for how we've been able to scale specialties in the past, the trusted brand, the value that we bring to consumers beyond the medication will be a critical component of maintaining our existing ecosystem of subscribers, but then also continuing to draw a broader set of subscribers to the platform.

Speaker 2

I would add there, one thing we talked about last quarter I think is, again, as Yemi mentioned, the platform's capability to deliver a more comprehensive offering, higher touch care, increased personalization, whatever the actual medications are is delivering what we believe is really fantastic results. And so even when you think about the oral medications, which I think a lot of people forget, that's a category with that type of personalization that is delivering. I believe we share 10% weight loss at more than or less than half the cost of the semi bleed time, Right? Both the commercial and the personalization. And so I think there's a real group of customers out there.

Speaker 2

I think it's overwhelmingly the majority that is looking for handheld care. And we can help achieve weight loss in different ways and different mechanisms with different treatments. But I think that's why you're, you know, there's a strong degree of confidence in the delivery of that, you know, 700 plus this year without the branded medications or the commercial doses. Just because I

Speaker 7

think what we see under the

Speaker 2

hood is patients really need help. They want to be cared for. They want that high touch. And that's really what the platform is able to deliver for them.

Speaker 6

Thank you.

Operator

Your next question comes from the line of Daniel Gosloy with Citi. Please go ahead.

Speaker 8

Hi. Thanks for taking the question. I just had a really a numbers question here on the GLP-one contribution this quarter. So it seems like for the full year, you guys were at, I mean, did you say $225,000,000 or so of GLP-one contribution? In my model, in fact, I could be off in my model, but I had you doing around $75,000,000 in 2Q and 3Q.

Speaker 8

So that would put the fourth quarter GLP revenue somewhere in that $150,000,000 range, which would be a pretty nice step up quarter over quarter. But then it does also imply very limited or even declining sequential growth in non GLP revenue from 3Q to 4Q. So just wanted to put a finer point on GLP-one contribution in the fourth quarter specifically? And then maybe if you can comment on the quarter over quarter trends in the non GLP-one revenue? Thank you.

Speaker 3

Yes. Thanks so much for the question, Dan. So I think across the year, both on the full year basis as well as within quarters, the vast majority of the revenue is still coming from the non GLP-one related offering. We still see that the overall tenured specialties remain quite durable. Much of the increase in personalized subscribers that you're seeing, that number drive north of 55% is driven in part by the continued shifting of subscribers to those categories.

Speaker 3

So overall, I think it's we're not necessarily speaking on a quarter to quarter basis of the performance at a specialty level, but we do see the overall core specialties outside of GLP-one remain quite durable. As we start to bring on some of the capabilities that Andrew mentioned in his prepared remarks such as lab testing and bring greater precision around personalization, we do see the ability for that to strengthen even further as we've seen acceleration in some of our tenure specialties in the past.

Speaker 8

Okay. Okay. And then on as we think about that $725,000,000 of weight loss guidance for this fiscal year, I'm wondering if there's I don't know, is there any way to partner with some of the branded companies out there? One of your competitors does have a partnership with Lilly on tirzepatide vials. I'm curious if you would pursue something on the branded side of GLP-1s outside of liraglutide, or are you going to kind of stick with your knitting on what you got currently?

Speaker 2

Thanks, Daniel. Yeah, great question.

Speaker 3

We've spoken to both

Speaker 2

the leadership teams at Novo and Lilly and looked at the deal that Roe did with Lilly and Lilly Direct. It's not off the table, right? I think the branded medications without question and we see this on our platform today with branded Viagra and other branded products. There is a subset of people that always want to get them. I think right now what is challenging is twofold.

Speaker 2

One, the actual reliability of sourcing those medication and not to be kind of snickering here, but we still really can't actually source the branded medications from our pharmacies for our own platform. And so there is a limited supply in a way that prevents us from having any durable offering on the existing HIMSS and HEARTS platform at the scale that we offer it. Obviously, for other players who have smaller scale, that's a different story. But that is still a challenge. And then I think the other thing that is a challenge is just the reimbursement rates are continuing to go down.

Speaker 2

And so frankly the reliability that we can say to a patient that, hey, you're going to have this price and here's a guaranteed kind of locked in experience, it's kind of crumbling a little bit. And so, I think we still need to see how that pans out from a customer relationship standpoint. We want to have consistency, we We wanna have price transparency like we've always talked about. We wanna have seamlessness and the current ecosystem across supply chain, reimbursement rate, cost, just really doesn't hit those marks in any way yet. Hopefully, those do change, right?

Speaker 2

Because again, as a platform that likes to be Switzerland, we benefit from having more offerings on the platform and our patients also benefit. So I think we're keeping our eyes open and seeing how the dynamics change and always have a really open conversation with any of those companies that can be helpful in getting more breadth to the platform for these patients.

Speaker 8

Makes sense. Thank you.

Operator

Your next question comes from the line of Ryan MacDonald of Needham. Please go ahead.

Speaker 9

Hi. Thanks for taking my questions. Congrats on a great quarter. As we look at the GLP-one business, you talked about personalized and commercial. Give us a sense of what the rough mix is across that.

Speaker 9

And then as we get past Q1 here, is there any risk whether it be from a legal or regulatory perspective on continuing to offer the personalized version in your view? Thanks.

Speaker 3

Maybe I can take the first part and then we'll hand the second part over to Andrew to address. I think we initially launched the platform with just commercially available messages. What we see in general in our platform is, as Andrew mentioned, many of the folks that are coming to our platform have come and have had struggles with GLP-1s in the past. That was a genesis behind one of the reasons behind why we very quickly look to roll out the personalized dosages as well. And so we see between that as well as the other benefits that we offer on the platform, the high touch provider engagement.

Speaker 3

Is it given the fact that many folks have already experienced side effect concerns with the commercially available dosages, a majority of individuals on the platform today are utilizing personalized dosages versus the commercially available dosages. Manjorie, you want to take the second part?

Speaker 2

Yes, sure. I think the regulatory framework for the allowance of personalization and actually what that means, right? To Maria's question, the documentation, the clinical necessity of it, what the actual experience of it looks like, what personalization means from an actual dosing standpoint and a difference from commercially available drug. All of this is very clear and regulated. And so, we play by the rules and the rules are quite clear.

Speaker 2

And so I don't expect there to be meaningful conflict when it comes to the personalization standpoint. I think historically, the broad industry and inclusive of the pharmaceutical companies are recognized and respected, I think the need for this type of clinical personalization of medications. I think what they have always really had issue with, understanding understandably just given the bottom line implications is the mass scale production through the 503Bs, right? Commercial mass scale production is something that they would prefer doesn't exist. It is again, regulatory allowed.

Speaker 2

But with that closing as a result of the shortage, I think you'll see a meaningful meaningfully smaller number of players in market. I think the necessity for kind of a high filter of who those customers are and what the experience looks like and how it's documented will be very important, and ultimately I think will be respected by most of those industry leaders.

Speaker 9

Thanks. I appreciate all the color there. And then as you think about the liraglutide launch, any more specifics you can give us on sort of what we should expect in terms of the timeline for when that will be become available on HIMSS? And how are you thinking from a pricing strategy perspective for generic leiraglutide relative to the ranges that you have of orals at $70 up to compounded GLP-one at $165

Operator

How should

Speaker 9

we think about where that could come in the pricing range here? Thanks.

Speaker 2

Yes, it's a great question. From a timing standpoint, I would expect sometime midyear or early second half of the year to bring that to market. On the pricing side, our ambition is always to bring this to market in the most mass affordable way possible. Now with liraglutide, it's a bit of a challenge because you have more medication that's needed given at the daily injection versus the weekly sterile needles that are required on a weekly basis given this. So everything from raw API to packaging is more expensive.

Speaker 2

So I would suspect that there's going to be some trickle down effect that results in this having a similar price point to the commercial dosing in the couple hundred buck range. But again, I think our ambition will always try to get to scale quickly, negotiate either through our own, third party partners or through the verticalization of our own infrastructure to be able to then bring that price down over the coming year and bring it to people in a way that ultimately delivers great outcomes. And I think with liraglutide, you know, the base level, the base level dosing has okay results compared to the newer generation GLP-one. But there's a lot of people that have very strong results when you pair it with other treatments, whether it's, compounds on the oral side or healthy lifestyle or calorie deficit or even personalized doses of the liraglutide. So I think we have a lot of excitement for that medication, because we think it will be a nice thing to add to the arsenal and be very successful for a certain group of people.

Operator

Your last question comes from the line of Aaron Kessler of Seaport Research. Please go ahead.

Speaker 7

Hey, guys. Maybe just on the kind of for the testing, you kind of mentioned menopause testing as well as low T or low testosterone. Any thoughts on timing potentially for that offering? And then just maybe how to think about kind of that growth versus revenue per stub for the year as well? Thank you.

Speaker 2

Yes. Thanks, Aaron. We're really excited about the whole body testing. I think you'll hopefully see us start to get that in the market in the first half of the year, but it's not early second as well as we integrate drive in. And that's going to really unlock not only more precise treatments, vitamin supplementation, but also I think multi condition treatments because you're able to really start to get early biomarkers for things like metabolic disorders, insulin resistance, cardio disorders on the lipid profile side.

Speaker 2

So I think there's going to be a real expansion opportunities there that can expand not only the number of customers that are coming to us every day, but also just the stickiness of

Speaker 8

the relationship. And then Yamile, I'll

Speaker 2

let you speak a little bit on the second half.

Speaker 3

Yes. So on the second half, we do expect continued expansion on revenue per sub. I think the pace of that will vary depending on a few factors. One is just as Andrew mentioned, as we start to roll out more multi condition treatments, those typically carry a bit of a premium to the existing treatments on the platform. So that will drive us some expansion.

Speaker 3

And as we see continued adoption on both the oral as well as liraglutide in the back half of this year, But likely you'll see some expansion in revenue per subscriber as well.

Speaker 7

Great. Thank you.

Operator

There are no further questions at this time. With that, ladies and gentlemen, that concludes your conference call. We thank you for participating and ask that you please disconnect your lines.

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Earnings Conference Call
Hims & Hers Health Q4 2024
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