Run. All right, it's Mark Mahaney at Evercore ISI. I gave a commencement address this weekend. I mentioned AI, and I had to spend the next half hour shouting over. I lost my voice and a couple of plane rides, but I'm back. I could use Hims to get a little healthier, and I'm going to use Hims to get healthier. We're thrilled to have Yemi Okupe, who's the Chief CFO of Hims & Hers. We're going to go through a series of questions. I'll try to leave a little time at the end for Q&A. Yemi, thanks a ton for joining us today. Just before I get into-- We had published a bunch of questions as part of this conference prep.
Just before I get into some of the questions, you want to just give us your view on what two or three things investors should focus on when it comes to Hims?
Yeah, sure. I think what I'd focus on is the fact that there is an amazing opportunity in front of us to transform the healthcare space. I think more and more consumers are just taking control of their own health. It's one of the things that's most important to the day-to-day lives, like how you look, how you feel, and show up to society. So I think Hims & Hers is positioned with a closed-loop ecosystem to be a part of that transformation. Thus far, I think we've had a lot of success, but I think in terms of the opportunity in front of us, with elements such as better leveraging our data, broadening the specialties that we have, and now international expansion, I think the sky's really the limit for the opportunities in front of us.
Okay. I always like it when companies lay out these lofty goals or big goals, or concrete goals, I should say. You've done that for 2030. Just talk through what those goals are and then maybe we'll start, and we'll come back to this a couple of times, but we'll start the process of asking how you get there.
Yeah, sure. I think that last year we laid out very ambitious five-year targets that were really more of an output of the opportunity in front of us as opposed to an input. Those goals were to deliver at least $6.5 billion of revenue and $1.3 billion of adjusted EBITDA by 2030. When you look at the components that are in front of us and just how large of a TAM healthcare is, that's what gave us the conviction. Our ability to execute on the key growth levers that we historically have outlined will be an instrumental part of meeting or exceeding those goals. What are those? Those are looking to expand internationally, which we were pleased to welcome the Eucalyptus team to the Hims & Hers family this morning. It's continuing and broadening the specialties that we can serve consumers across.
As we deepen and broaden the specialties, there's the ability to have more and more of a holistic approach to helping our subscribers look and feel better on a daily basis. I think that with the advance of technology, we're seeing the benefits that that provided in terms of removing friction to access to healthcare. I think with the scale of data that we have, the ability to further elevate the overall consumer experience and democratize concierge-type care becomes more and more achievable over the next couple of years. Partnerships remains an important element. We were very pleased with the success of the Novo partnership that we recently launched and we'll look to continue to expand those as well. Lastly, just continuing to deepen the personalized care that we're able to bring to consumers.
I think if we're able to execute across those five levers, the 2030 targets that we have will be a derivative and more than achievable.
When you talk about them being ambitious goals, I think that's the adjective that you used. Which was more ambitious, the $6.5 billion in revenue or the $1.3 billion in EBITDA?
I think collectively, both are ambitious, but I think it's more of an output of executing across what is a very ambitious mission statement. I think that that is to make the world feel greater through the power of better health. The levers that we spoke around of being able to go global, being able to elevate the consumer experience through empowering them and their providers with access to more data, setting up partnerships around the world to deepen the experience and the breadth of choice that consumers have. I think Hims & Hers has always gone after very ambitious things. The ability to personalize medication, the ability to build our own EMR system from the ground up. The ability to structure data to better serve consumers across the healthcare ecosystem.
This is largely in line with how the company thinks and pushes to make the consumer experience for healthcare better and better for consumers.
You mentioned the Novo Nordisk relationship. You just want to give us an update on that?
Yeah. We disclosed within the first few weeks of launch, we added north of 100,000 subscribers to the platform with the addition of that partnership. What we do see is that when we're able to pair breadth of assortment with the overall deep experience and tools on the platform, really a magical experience comes together for our subscribers. We're seeing very deep engagement where north of 85%-90% of people are downloading the Hims & Hers app that come to us for weight loss, as well as the engagement with providers is really, really deep. I think the typical consumer is engaging with us five times within the first few weeks of onboarding. That's a level of care that's almost impossible to get for all but the wealthiest segments of society in a brick-and-mortar setting today.
I think it truly is transforming the access that consumers have to better and better care.
Is this a template for other types of deals?
Yeah, I think that we would look to continue to broaden the partnerships that we have across the platform. I think also with us being one of the few healthcare players that has global reach across numerous markets now, Australia, Canada, the U.K., Germany, I think that that enables us to just have a different partnership with domestic players. Also for many of the players, whether it's large pharmaceutical companies or others, more often than not, they have global ambitions, and we're one of the few players out there that have the ability to meet that need.
Okay. You talked about international, so I don't know. You had one of these data points. International revenue grew nearly 10X in Q1. Now, you had some acquisitions, I think, that are in there, but still, that kind of growth is unusual. Talk about not the sustainability of 10X growth, but the sustainability of robust growth for the next couple of years and how is that and to what extent that's organic versus acquisition.
Yeah. I think that there's an immense opportunity here domestically in front of us still. Also from a global perspective, many of the themes that hold true in the U.S., while the regulatory landscape and nuance may change, the overall principle behind human beings fundamentally is consistent. Consumers around the world want to feel healthier. Consumers around the world want to have an amazing experience, and they want to do so in a way that is efficient and is not encumbered by friction. As we look to expand globally, we took our time through launching in the U.K. several years ago, really learned how to navigate the regulatory nuances of a different market, how to navigate differing consumer preferences and a regulatory landscape. With that, from those learnings, we were able to continue to scale more broadly.
When we look at the arc and the trajectory of the U.S. and how that scaled, I think with the platform that we've set up from the acquisitions that we've already acquired, the Livewell, ZAVA, and Eucalyptus, that gives a very robust foundation for continuing to elevate the consumer experience and ultimately establishing a leadership presence across many of these geographies. We're very excited by what's in store across the global opportunity in the years to come.
Eucalyptus just closed this morning?
Yes.
I must have missed that. On time? Ahead of time?
It was roughly in line with our expectations. There was some uncertainty around the exact timing of the close, but I think with the strong execution across both teams, we were able to close that in June.
Talk about what sort of impact we should expect from that acquisition.
Yeah. Eucalyptus was just given the uncertainty around the exact timing for when the deal would close. We did not include it in the guide. We did disclose at the end of last year the run rate revenue was roughly $450 million, and the business was growing in triple digits last year. We think that it's going to be a meaningful accelerant. When we really look at what's most exciting, it's probably less of a direct financial opportunity. Really, it's the fact that you're bringing together two teams that are culturally very similar, two teams that share a very ambitious mission of fundamentally restructuring how consumers are able to access healthcare around the world.
I think the combination of the Hims & Hers team, as well as the Eucalyptus team, truly is going to accelerate the way that we're able to reach consumers around the world. It's something that we're very excited about.
Are there synergies here, or is it more of an add-on business?
I think that there are synergies, not necessarily in the traditional sense, like where we're looking to combine two like-for-businesses and do a ton of cost-cutting. I think the synergies really are around, again, taking the teams that are culturally very similar and leveraging the different points, for where we can learn from each other. I think the Hims & Hers ability to scale multi-specialty and expand into numerous specialties is something that many markets around the world can benefit from. The Eucalyptus's muscle of being able to go in and launch new markets, Avid players have been able to scale the branded medications, I think is something that Hims will benefit from. I think it's really putting together these two forces.
I think that that's the real synergy is it accelerates the breadth and the ability to bring a better experience to consumers around the world.
You're going through a little bit of an investment cycle this year. I think that's the right way to phrase it. Just talk about what are the biggest areas of investment this year, Is it a one-year investment cycle? Is there a way to think about how long it should extend, whether it should extend into 2027 or not?
Yeah, I think we are consistently investing. I think that our focus is less around how do we manage on a quarter-to-quarter basis, but fundamentally, how do we make investments that pay off with long-term yield. Maybe it's helpful just to kind of give an overview around how we f undamentally think around the capital investment priorities and then rewind that into how we think that this plays out. Historically, what we've seen is the team is really great at setting a foundation where efficiencies are able to come with scale. You kind of see this in 2022, 2023, where the business was able to switch to profitability very quickly and expand margins, from negative margins to double-digit EBITDA margins as a result of these principles. I think right now we're entering a similar phase, where we're leveraging some of those principles.
I would say that we are looking to first and foremost become the market leader across each of our specialties. How do we expand market share and serve more and more consumers, both domestically as well as in the international markets that we serve? I think one of the things that also enables us to be powerful is the fact that with positive free cash flow, we're able to control our own destiny.
That is something that we also do want to retain. While we will continue to invest to expand share, we'll do so in a way that's thoughtful and disciplined, that still enables us to generate that positive free cash flow. When we think around, okay, what does the investment cycle look like? I think our ability to establish a leadership position across each specialty, each market, will be the priority. We expect to then realize economies of scale. If we take individual markets as an approach, ultimately some markets will be heavier investment opportunities, and ultimately over time, those will switch to become the future profit centers for the organization. When we look at where the investment is going, I think it's really across a few areas. The first being we'll continue to invest and scale our international operations.
We expect those to run roughly collectively at break even in the near term. Over time, for many of those markets to become the future profit generators for the organization. We've invested very heavily in our technology team. We expect that to continue to yield. We've hired some of the best minds in AI, some of the most distinguished engineers that have enabled the overall platform to move much faster. Our ability to launch three specialties last year, menopause, labs, and low testosterone, is a reflection of that. I would say that you can continue to expect us to invest in technology, continue to expect us to invest in scaling international markets. Lastly, the combination of those two, elevating the overall consumer experience, both domestically and internationally.
I want to ask you about AI, but first, so you made this comment about the goal is to be the market leader in each of your specialties. Grid this out for us. Which specialties do you think now you're closest to being, or you are or closest to being the market leader, and which specialties do you have the most work to do in order to be the market leader?
I would say across most of our specialties, we are very close to being the market leader from our vantage point. I would say that we're probably in the very early innings of certain specialties such as Weight Loss, just as the consumer market continues to grow and expand. It's not something that we can sit and rest our laurels around. I think that where the power really comes into play is the ability to combine the breadth of specialties that we offer that few other players do to truly become this closed loop platform that elevates the overall experience for consumers. What does that structurally mean? It means the ability for a consumer to maybe come to Hims for one condition, get insights into their health, and discover treatments for elements that they may not even have known.
Using myself as a real example, as I've undergone lab testing and looked to optimize my own care.
it became very apparent to me that the ecosystem is very fragmented. You can go do a test from one provider to interpret what that actually m eans. The traditional healthcare ecosystem is usually not equipped for that for most players. As opposed to being a partner in that experience, oftentimes providers are asking, "Well, why are you doing these tests?" That leaves consumers to either, if you're fortunate enough, go to concierge level doctors or leverage AI, or do some combination of those two. If you structurally find what you're able to or what is the appropriate treatment, you need to find a path to go get treated. Hims & Hers has the ability to remove all of those friction points over time and democratize that experience from the Labs to obtaining the insights, to having the provider network and solutions to act upon those.
I think the real magic is our ability to bring those together in a consistent experience for consumers over time. I think then at that point, as you have a leadership position in each of the specialties, that gives you the right to do it and potentially discover new specialties for our subscriber base, to help them improve their overall health.
Okay. You mentioned AI a couple of times, let's go to that. Just talk about the uses of AI to drive cost efficiencies, to improve, to boost product development, and to actually create new revenue opportunities.
I would say, I think there's a few buckets. I think AI definitely has the potential to elevate cost efficiencies, whether that's how we think around the expense of CX, that can be manual or customer experience operations at times. We're already seeing an ability for AI to start to transform the experience. Number one, get consumers access to answers faster, at the same time, do so in a way that is more and more cost-efficient. I think what's even more exciting, though, is the way that AI can elevate the consumer experience. When consumers come to any healthcare provider, one of the first things that they want to know is, has this solution worked for someone like me?
The breadth of data that we have across our platform increasingly can help consumers with those types of questions as well as equip them with tools to improve their overall experience. To give real examples of what exists today and what that could be, with over 2.5 million patients on our platform, the wealth of data that we're getting from things like Labs, what treatments have worked, what treatments have not worked, can enable us to help consumers get to the right treatments, the right dosage levels, that ultimately elevates retention. That represents an opportunity for us, but at the same time enables consumers to benefit. We also see the opportunity for things like the recently launched Labs AI companion that helps go through that experience and interpret the results, as I mentioned. Over time, I think I would expect more tooling for consumers to roll out.
We'll continue to use AI to leverage cost efficiencies across the corporate organization as well as the consumer experience. Really the ability to elevate the consumer interaction with the platform, I think is what's the most exciting and also is where the most financial benefit over the long term will be driven from higher revenue and ultimately higher margins.
Let me switch gears a little bit on capital allocation. The setup here is that you've got, what, $300 million in operating cash flow, $225 million in CapEx, so modestly positive on free cash flow. When you think about the uses of cash going forwards between organic investments, M&A, and shareholder returns, what do you want the right balance to be? What do you want investors to think you're thinking about in terms of the right balance?
Yeah, I think first and foremost, the priority is always going to be around durable growth. I think that we have continued to grow the platform in a way that is both sustainable and durable, and so continuing to invest across the levers, both organically as well as through M&A and things such as international, the technology experience that consumers receive on our platform, as well as partnerships and setting up that ecosystem will be something that's critical for us on a go-forward basis. We've been highly acquisitive over the course of the last 12-18 months, and so a lot of the focus right now from an M&A perspective is around integrating those acquisitions in the ecosystem to truly be a success. We'll put investment around that to ensure that each of those is successful. The first priority will be growth.
We still have left ourselves the flexibility through our buyback program to return capital to shareholders when there is a disconnect between the market value and the intrinsic value of our stock. For the time being, when we look at the opportunity in front of us, the potential for growth is truly immense and something that we want to lean into and ensure that we are able to benefit from that.
I'm sorry, on the third one, in the returns to shareholders, how did you want to weigh that versus the other two?
Yeah. In terms of the priorities that we laid out, those are going to be the priorities. We will return value to shareholders. Right now, the ROI on many of the investments that we're making, we feel will be quite high.
Okay. I may see if there's questions in the audience. Georgia, I may call on you. You know the asset very well. When you talked about M&A, yeah, you have done a lot of M&A recently. How should we think about your M&A plans over the next 12- 24 months? You're in consolidation now, so you should be limited M&A, or you're just going to be just as opportunistic now as you were the last 12- 24 months?
Yeah, I think we hold a very high bar for M&A. I think what's less exciting for us is to acquire assets just for revenue purposes. Every M&A deal that we do serves a fundamental strategic purpose. I think that if an amazing strategic opportunity emerged, I don't know that we would not pursue it as a result of having done M&A, but we would look at is the capacity across the organization to take on something new and what is the strategic value that it serves. I think we would still be open to M&A. That said, I think the focus is going to be how do we take each of the assets that we have, ensure that they're properly integrated to bring forward the full value.
Eucalyptus, that is setting up the ability to scale internationally across each of the markets that we're currently present in. We're very excited by the Eurobio acquisition and how that can ultimately make lab testing more accessible for the masses through removing the friction of going into a facility today and allowing consumers to test from their own home. CS Bio sets a great foundation for us to go explore and go into peptides as the regulatory landscape permits. Really over the course of the next 12 to 24 months, the focus is on ensuring that those assets are productive in nature.
Let me ask you this last question. We put this in our report. Long-term strategy, for investors who have followed Hims & Hers through a lot of different changes, this multi-specialty expansion, GLP-1 ramp, international M&A, AI build. What do you want investors to most take away from these about you and how you're managing the business between now and 2030?
I think that the biggest takeaway is to be, number one, the opportunity in front of us is immense, right? I think healthcare is something that is fundamentally one of the most important things to consumers around the world. Thus far, in many markets, has not necessarily been the greatest experience. I think that Hims has already removed a lot of friction historically, and has the ability to continue to remove greater and greater friction for consumers around the world. I think the second thing is, across our capabilities, I truly believe that we are one of the few players that has the scale, has the technology, has the talent to transform that experience through many of the things that we talked about. The global scale that provides the ability to deepen partnerships around the world.
The data that's structured across the platform to equip AI models to elevate the consumer experience, and help providers better pair consumers with treatments. I think our ability to maintain those advantages is what gives us the ability to help reshape the healthcare, or health and wellness space that ultimately enables a line of sight to the 2030 targets.
Okay. Georgia.
I wanted to cover some big ground here. I guess, in thinking about the new specialties that you've built out over the last couple of months, thinking about Labs and testosterone and hair loss, with each of them being framed as kind of $100 million+ revenue opportunities on top of an already kind of broad multi-specialty platform. How are you guys kind of weighing the things like category expansion against deepening monetization within existing specialties, and what's the kind of internal framework you're using to decide where to lean in next? Is it TAM? Is it the touch rate, retention impact? Can you just help us break it down?
You'll need to kind of rephrase that question.
Yeah, sure. The question was effectively around how do we balance monetization of the existing specialties with the nascent specialties, with new specialties. I think what we are seeing, so maybe answer the first part of the question, which is how our new specialties are doing. I think they're tracking in line with our expectations. We see a lot of success from specialties like low testosterone, as well as Labs. I think how we think around balancing core/the existing tenured specialties with the new specialties, I think the two are actually fairly correlated, right? Our ability The way we think around it is less around launch this new specialty at the expense of another specialty, and it's really more around how do we broaden the way that we're able to serve consumers across the platform.
I think what we've observed by that, as we broaden specialties, consumers are proactively deepening their engagement with us across the platform. As we also add more specialties, the data set that we're able to get around how do we treat consumers across more and more specialties also broadens as well. I think from our vantage point, we look to thoughtfully deploy capital across each area. When we really think around what is a differentiated benefit for where Hims & Hers benefits from, it's really this concept around shaping a platform that enables consumers to come and benefit in numerous ways, whether that's the technology tools or coming in from one specialty and then being able to get treated for another. I think that the two actually have synergies with one another.
The final component that I'll say is I think that with Labs and some of the other specialties that we've introduced, historically, Hims & Hers has focused on the things that you can see, right? Things like hair loss, Weight Loss, sexual health. Increasingly, with the data that we have on the platform, as well as with the rollout of Labs, we are moving into a world of where you're able to help consumers prevent and optimize their health. For things like low testosterone, you can't look and say, "I have low testosterone." The ability to remove the friction of needing to go into a facility multiple times a year to do testing and enable consumers to test from their own home, identify if they have low testosterone. As an example, how we remove the friction from the consumers in an existing specialty.
I think that the two are actually correlated with one another. We view it more as build a platform that has multiple touch points with the consumers, and ultimately that's a differentiating force that enables Hims & Hers to win.
Okay. That's helpful. You touched a bit on your competitive advantages and the ability to be able to build the scale that Hims has so successfully built over the past couple of years. If you could really nail down what your, I guess, moat is in an age where people are coming up with new concepts and AI tools are allowing startups to come to the market at a much greater speed than we've seen before. What do you think is Hims' biggest true competitive moat in today's environment?
Yeah. The question was really around, what is the competitive moat around Hims & Hers. I think any company that tells you that they have one single thing, it's not a moat. I think that Hims & Hers has an ability to take something that's incredibly complex and make it look really easy. When you think around the elements that we've built, the infrastructure, the scale that also gives us access to data to better treat consumers, that is a distinct advantage that Hims & Hers has that very few other players have. The ability to lay a global foundation that also extends the reach is something that no other player has out there. The provider network is also something that we fundamentally benefit from.
I think one of the assets that are underappreciated is the first, is the brand that we've historically invested in that draws consumers to the platform. That is fundamentally key because when you step back, you're putting things on or in your body. Consumers want to know that it's safe, it's effective, and I think Hims & Hers has done a great job of establishing that trust with consumers. The final component is really just the data, where we've built an ecosystem where fundamentally the platform gets better with each consumer that comes to the platform, and each dataset that consumers are providing to providers enables us to better treat them. I would say it's the combination of our ability to execute across several things.
The operational excellence to build the infrastructure that we've historically talked around, the richness of the dataset and the scale of the dataset and the technology talent that we have to translate that into an elevated experience for consumers. The global reach now that we have across the platform and the brand. When you look at what it takes to actually replicate all of those, whether you're a large player or a startup, that is a lot to execute on that we've built over the course of the last several years that I think will continue to be a differentiating factor for us as an organization.
Yeah. That makes a lot of sense. I guess my last question is on the economics of the Novo Nordisk partnership that you guys announced on the Q1 call. One, can you kind of refresh us on the nature of that partnership? With the expansion into Canada announced last week with the generic kind of brands there, is that structured similarly to Novo Nordisk, and kind of like the brands you're distributing in the U.S., and is that how we should think about Canada as well?
I think the question was around the economics and the Novo Nordisk partnership, and then the Canadian concept. What does that effectively look like overseas in Canada as well? I think on a dollar basis, the economics for the previously compounded products in Novo Nordisk are relatively similar. There's two components when a user comes to the platform that they're paying for. One is the cost of the medication. Given the engagement tools, the ability to engage with the provider, there's also a membership fee on the Weight Loss products as well, for roughly $149 a month. That membership fee is what enables consumers to access the provider. It's what enables consumers to access all of the tooling that we have across the ecosystem.
We're seeing a lot of success with the pairing of those elements that results in an economic profile similar to what we previously distributed before. With respect to Canada, we've always seen some consumers on the platform still prefer branded products. We've sold both branded and generic sexual health products and products across other specialties as well. Really what we've found is giving consumers a breadth of options is fundamentally what results in success. Canada, we're pleased to offer generics. We also offer that alongside the branded medications as well, and that enables consumers to work with their provider to identify what's the right treatment for their preference, and we've seen a lot of success with that so far.
Okay. Yemi Okupe, Chief Financial CFO of Hims & Hers. Thank you very much.
Yeah. Thanks, Mark