Hims & Hers Health, Inc. — Q1 2024 10-Q Summary
Business context and reporting period
For the three months ended March 31, 2024, Hims & Hers operated a consumer telehealth and health-and-wellness platform offering consultations, prescription and non-prescription products, and subscription services across specialties including sexual health, dermatology, mental health, and weight loss. The company also sells certain non-prescription products through wholesale partners. Results are unaudited and prepared under U.S. GAAP.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $278.2 million | $190.8 million |
| Gross profit / margin | $229.1 million / 82% | $153.4 million / 80% |
| Operating income (loss) | $9.9 million | $(11.3) million |
| Net income (loss) | $11.1 million | $(10.1) million |
| Adjusted EBITDA / margin | $32.3 million / 12% | $6.1 million / 3% |
| Operating cash flow | $25.8 million | $9.5 million |
| Free cash flow (non-GAAP) | $11.9 million | $7.0 million |
At March 31, 2024, cash and cash equivalents were $105.2 million and short-term investments were $98.4 million, totaling $203.6 million. Current assets were $261.7 million and current liabilities $93.3 million. The balance sheet reported no conventional borrowings; liabilities included $11.8 million of operating lease liabilities and a $7.4 million current earn-out payable. Total liabilities were $103.6 million.
Material changes versus the prior comparable period
- Revenue rose 46%. Online revenue increased 45% to $267.8 million; wholesale revenue increased 58% to $10.4 million.
- Subscribers grew 41% to approximately 1.7 million. Monthly online revenue per average subscriber was unchanged at $55; net orders rose 20% to 2.5 million and average order value increased 21% to $109.
- Gross margin expanded to 82% from 80%, which management attributed to provider efficiency, fulfillment-volume synergies, and lower shipping costs as a share of revenue.
- Operating expenses increased 33% to $219.2 million. Marketing expense rose 34% to $130.6 million, including customer acquisition costs of $113.2 million versus $84.0 million a year earlier.
- Operating cash flow improved to $25.8 million from $9.5 million. Investing cash flow was positive $13.0 million, mainly reflecting net maturities of investments; financing cash flow was negative $30.3 million, including $28.1 million of share repurchases.
- The company repurchased 2.0 million Class A shares for $28.1 million during the quarter; $19.9 million remained under its $50 million authorization.
Outlook, commentary, risks, and unusual items
- Management stated existing resources are expected to fund planned operations for at least 12 months after issuance of the financial statements. It cautioned that recent operating income may not continue given planned business investment.
- The company expects continued investment in marketing, fulfillment and pharmacy capabilities, facilities, product offerings, customer experience, and new specialties. It anticipates near-term expense increases, while expressing an expectation that several expense categories may decline as a share of revenue over the longer term. No specific revenue or earnings guidance is provided in the supplied filing text.
- Management cited growth in subscribers and newer offerings as revenue drivers; longer-duration subscriptions and product-mix changes supported higher average order value and gross margin.
- Principal risks include healthcare, telehealth, pharmacy and compounding regulation; privacy and cybersecurity; customer acquisition and retention; competition; provider and pharmacy availability; supply-chain and fulfillment disruptions; and the possibility of needing additional financing. The filing also highlights uncertainty around maintaining profitability and cash generation.
- The company reported $5.8 million of purchase obligations, primarily cloud-software contracts, and total contractual obligations and commitments of $28.7 million, of which $13.9 million was payable within 12 months. Management was not aware of legal matters reasonably likely to have a material adverse impact.
- Stock-based compensation was $19.0 million, up from $14.2 million. The company recorded $0.1 million of long-lived asset impairment. It maintains a full valuation allowance on deferred tax assets; a future release, if warranted, could reduce tax expense.
- Class V shares carry 175 votes per share; the CEO and affiliates hold approximately 90% of voting power, concentrating control.
Important facts for investors to verify
- Whether subscriber growth, retention, and average order value continue to support online revenue growth, particularly while monthly revenue per average subscriber remains flat.
- Whether higher marketing spend produces durable customer growth and acceptable acquisition economics.
- Whether gross-margin improvements persist as product mix, fulfillment volumes, and pharmacy operations change.
- How operating cash flow and free cash flow develop after considering inventory, capital investment, share repurchases, and stock-based compensation.
- Whether the company can sustain GAAP profitability while funding planned growth investments, and whether any additional financing becomes necessary.
- Regulatory developments affecting telehealth, pharmacy operations, compounded products, marketing, and handling of sensitive customer data.
- The impact of the remaining share-repurchase authorization, equity-award dilution, and concentrated voting control on public shareholders.