Hims & Hers Health, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparative figures are for Q1 2022. Financial statements are unaudited. The company operates a consumer telehealth and health-and-wellness platform, including online products, consultations, and pharmacy fulfillment.
Financial and operating performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $190.8 million | $101.3 million | +88% |
| Online revenue | $184.2 million | $94.1 million | +96% |
| Wholesale revenue | $6.6 million | $7.2 million | -9% |
| Gross profit / margin | $153.4 million / 80% | $74.8 million / 74% | Margin +6 percentage points |
| Operating expenses | $164.7 million | $91.7 million | +80% |
| Operating loss | $11.3 million | $16.9 million | Loss narrowed |
| Net loss | $10.1 million; $0.05 per share | $16.3 million; $0.08 per share | Loss narrowed 38% |
| Adjusted EBITDA (non-GAAP) | $6.1 million; 3% margin | $(6.1) million; (6)% margin | Turned positive |
| Operating cash flow | $9.5 million provided | $19.4 million used | Improved |
Gross-margin improvement reflected a greater share of fulfillment through affiliated pharmacies at lower cost and a smaller wholesale share of revenue. Operating expenses rose across categories, led by marketing, which more than doubled to $97.2 million; customer acquisition costs were $84.0 million, up 115%.
End-of-period subscribers were approximately 1.209 million, up 87%. Monthly online revenue per average subscriber was $55, up 6%; net orders increased 70% to approximately 2.047 million; and average order value rose 15% to $90. Management attributed online growth primarily to subscriber growth, with higher average order value supported by bundles, product mix, and longer-duration subscriptions.
Liquidity, balance sheet, and cash flow
At March 31, 2023, cash and cash equivalents were $48.7 million and short-term investments were $135.6 million, for $184.4 million combined. Including $0.9 million of restricted cash, cash and restricted cash totaled $49.6 million. Current assets were $225.5 million and current liabilities $56.3 million; total assets were $376.3 million, total liabilities $63.6 million, and stockholders’ equity $312.7 million.
The balance sheet reports no borrowings or debt balance. Operating lease liabilities totaled $4.9 million. The company reported $15.3 million of contractual obligations and commitments, including $5.1 million payable within 12 months. Investing cash outflow was $4.1 million and financing cash outflow was $3.4 million. Operating cash generation included noncash stock-based compensation of $14.2 million and working-capital inflows, partly offset by a $5.0 million increase in prepaid expenses and other current assets.
Outlook, risks, and unusual items
- No numerical revenue, earnings, or cash-flow guidance is provided. Management expects operating losses to continue for at least the next 12 months as it invests in growth, fulfillment, marketing, products, and customer experience. It believes current resources are sufficient to fund planned operations for at least 12 months after issuance of the statements.
- Management expects continued investment in customer acquisition, affiliated pharmacy and fulfillment capabilities, facilities, new categories, and technology. These investments may raise near-term expenses; management anticipates certain operating costs will decline as a percentage of revenue over the long term.
- Key risks include customer acquisition and retention, marketing efficiency, competition, macroeconomic pressures, and evolving healthcare, telehealth, pharmacy, compounding, privacy, and consumer-protection rules. The company also highlights dependence on providers, affiliated and partner pharmacies, suppliers, cloud services, and fulfillment facilities.
- The company reported a $0.4 million long-lived-asset impairment charge and a $0.3 million loss from remeasurement of fair-value liabilities. Stock-based compensation was $14.2 million, up from $8.9 million. Management cited increased interest income as a contributor to other income.
- Ordinary-course legal matters are disclosed; management said it was not aware of any matter reasonably likely to have a material adverse impact. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether subscriber growth, retention, and monthly revenue per subscriber remain durable, and how customer acquisition costs compare with the value and retention of new customers.
- Whether the 80% gross margin is sustainable as fulfillment mix, product mix, shipping costs, and pharmacy capacity change.
- Whether positive operating cash flow and Adjusted EBITDA persist; both differ from GAAP net income, and Adjusted EBITDA excludes significant items, including stock-based compensation.
- Whether planned investments and contractual commitments alter the stated 12-month liquidity outlook, particularly if growth, cash conversion, or access to financing weakens.
- Developments in telehealth, pharmacy, compounding, provider-structure, and privacy regulation, as well as any material legal, cybersecurity, or fulfillment issues.
- The effects of equity compensation and the dual-class structure: Class V shares carry 175 votes per share, concentrating approximately 90% of voting power with the CEO and affiliated holders.