Business context and reporting period
Hims & Hers Health, Inc. (NYSE: HIMS) filed this Form 10-K for the fiscal year ended December 31, 2023. The company operates a consumer-focused telehealth and health-and-wellness platform, offering prescription and nonprescription products, provider consultations and pharmacy fulfillment, primarily through recurring subscriptions. It reports one operating segment.
The filing is annual, not a standalone fourth-quarter report. It discloses selected Q4 profitability figures but does not provide a clear value for Q4 revenue in the supplied text.
Financial and operating performance
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $872.0 million (+65%) | $526.9 million |
| Online revenue | $842.4 million (+68%) | $502.5 million |
| Wholesale revenue | $29.6 million (+21%) | $24.4 million |
| Gross profit / margin | $714.9 million / 82% | $408.7 million / 78% |
| Operating loss | $29.5 million | $68.7 million |
| Net loss | $23.5 million | $65.7 million |
| Adjusted EBITDA (non-GAAP) | $49.5 million; 6% margin | $(15.8) million; (3)% margin |
| Operating cash flow | $73.5 million | $(26.5) million |
| Free cash flow (non-GAAP) | $47.0 million | $(33.8) million |
For Q4 2023, the filing states net income of $1.2 million and Adjusted EBITDA of $20.6 million; it does not provide a clear Q4 revenue figure in the supplied text. Adjusted EBITDA and free cash flow are non-GAAP measures and should be considered alongside GAAP results.
At year-end, cash and cash equivalents were $96.7 million, short-term investments $124.3 million, and total current assets $265.1 million versus current liabilities of $88.5 million. The company reported $97.2 million of total liabilities, including lease liabilities and earn-out payable; the filing does not identify outstanding borrowings as debt. Contractual obligations and commitments totaled $27.7 million, with $14.4 million due within 12 months. Management said available cash and investments should fund operations for at least one year from the financial statements’ issuance.
Subscribers increased 48% to approximately 1.537 million. Monthly online revenue per average subscriber rose 2% to $54; net orders grew 42% to 8.7 million and average order value increased 18% to $97.
Material changes versus the prior comparable period
- Revenue rose 65%, primarily from subscriber growth, higher average order value and increased order volume.
- Gross margin expanded to 82% from 78%, which management attributed mainly to lower product and packaging costs as more orders were fulfilled through affiliated pharmacies, and a lower wholesale share of revenue.
- Operating loss narrowed to $29.5 million from $68.7 million; annual net loss narrowed to $23.5 million from $65.7 million. The company nevertheless remained GAAP net-loss-making for the year.
- Adjusted EBITDA turned positive at $49.5 million versus a $15.8 million loss, and operating cash flow turned positive at $73.5 million versus cash use of $26.5 million.
- Marketing expense increased 64% to $446.4 million, including $379.7 million in customer acquisition costs, as the company increased advertising investment. Stock-based compensation rose to $66.1 million from $42.8 million.
Outlook, risks and unusual items
Management expects to continue investing in marketing, new specialties and products, customer experience, and fulfillment and pharmacy capacity; these investments are expected to raise operating expenses in the near term. It anticipates long-term operating leverage but provides no specific revenue or earnings guidance in the supplied filing text. Management believes existing resources are sufficient for at least 12 months.
- Regulatory exposure: Telehealth, pharmacy operations, compounded medicines, off-label prescribing and state corporate-practice-of-medicine rules are evolving. The company warns that regulatory action or changes could require operating changes or constrain offerings. It currently accepts customer payments rather than third-party insurance reimbursement.
- Privacy and cybersecurity: The business processes sensitive health and personal data and relies on third parties. The company reported no material cybersecurity incidents in recent years, while warning that future breaches could cause liability and reputational harm.
- Growth and execution: Results depend on customer acquisition and retention, subscription demand, marketing efficiency, provider availability, pharmacy fulfillment, and successful expansion into new specialties and markets.
- Profitability and capital: The company has a history of annual net losses and a $368.2 million accumulated deficit, and says future investments could require additional financing. Positive 2023 cash flow and Adjusted EBITDA do not assure sustained GAAP profitability.
- Concentration of voting power: CEO and co-founder Andrew Dudum controls approximately 90% of voting power through Class V shares, limiting other shareholders’ influence.
- Unusual financial/audit matters: The auditor identified evaluation of impairment indicators for certain trade-name assets as a critical audit matter. Trade names had a $17.3 million carrying value at year-end; no impairment charge was recorded on intangible assets in 2023, while $0.4 million of long-lived-asset impairment was recorded. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
- Legal matters: The company said it was not party to proceedings that management believed would individually or collectively have a material adverse effect.
Important facts for investors to verify
- Check the full quarterly disclosures for Q4 revenue, GAAP operating results and cash-flow detail; the supplied filing text gives Q4 net income and Adjusted EBITDA but not a clear Q4 revenue value.
- Assess how much of 2023’s margin and cash-flow improvement is repeatable, including the effects of fulfillment mix, longer subscription durations, working-capital movements and non-GAAP adjustments.
- Monitor subscriber retention, customer acquisition costs, average order value and marketing returns as the company expands offerings.
- Review regulatory developments affecting telehealth, asynchronous consultations, compounding, pharmacy fulfillment, privacy and the company’s provider arrangements.
- Track fulfillment expansion, contractual obligations, stock-based compensation and dilution, and any use of the remaining $48 million share-repurchase authorization.