Hims & Hers Health, Inc. (HIMS)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K. This section of the Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. Our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date hereof or to conform these statements to actual results or revised expectations. Forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section entitled “Risk Factors” in this Form 10-K.

Overview

Hims & Hers is a consumer-first platform transforming the way customers fulfill their health and wellness needs. Our mission is to help the world feel great through the power of better health. We believe that we have the technical platform, distributed provider network, and access to clinical capabilities to lead the migration of routine office visits to a personalized, digital, accessible format. The Hims & Hers platform includes access to a highly-qualified and technologically-capable provider network, a clinically-focused electronic medical records system, digital prescriptions, cloud-enabled pharmacy fulfillment, and

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personalization capabilities. Our digital platform enables access to treatments for a broad range of conditions, including those related to sexual health, hair loss, dermatology, mental health, and weight loss. Hims & Hers connects patients to licensed healthcare professionals who can prescribe medications when appropriate. Prescriptions are fulfilled online through licensed pharmacies on a subscription basis, making accessing treatments simple, affordable, and straightforward. Through the Hims & Hers mobile applications, consumers can access a range of educational programs, wellness content, community support, and other services that promote lifelong health and wellness.

In addition, we offer access to a range of health and wellness products designed to meet individual needs, which can include curated prescription and non-prescription products. Our products and services are available for purchase directly by customers on our websites and mobile applications. Additionally, Hims & Hers non-prescription products can be found in tens of thousands of top retail locations in the United States.

Revenue and Key Business Metrics

Our management monitors two financial results, Online Revenue and Wholesale Revenue (both defined below), to track our total revenue generation. We also monitor the additional key business metrics set forth below to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. Increases or decreases in these key business metrics may not correspond with increases or decreases in our revenue. We also continually and strategically review our key business metrics to ensure that they are helpful in managing or monitoring the performance of our business as it grows, which may result in changes in our key business metrics over time. As an example, our management primarily uses the Subscribers and Monthly Online Revenue per Average Subscriber metrics, as defined below, to manage and monitor the performance of our business. With the Net Orders and AOV metrics, as defined below, becoming less relevant for our business, we anticipate no longer reporting those metrics beginning with the three months ending March 31, 2025.

The limitations our key business metrics have as an analytical tool include: (i) they might not accurately predict our future financial results pursuant to accounting principles generally accepted in the United States of America (“U.S. GAAP”); and (ii) other companies, including companies in our industry, may calculate our key business metrics or similarly titled measures differently, which reduces their usefulness as comparative measures.

Brief descriptions of our key business metrics are provided below.

“Online Revenue” represents the sales of products and services on our platform, net of refunds, credits, and chargebacks, and includes revenue recognition adjustments recorded pursuant to U.S. GAAP, primarily relating to deferred revenue and returns reserve. Online Revenue is generated by selling directly to consumers through our websites and mobile applications. Our Online Revenue consists of products and services purchased by customers directly through our online platform. The majority of our Online Revenue is subscription-based, where customers agree to be billed on a recurring basis to have products and services automatically delivered to them.

“Wholesale Revenue” represents non-prescription product sales to retailers through wholesale purchasing agreements. Wholesale Revenue also includes non-prescription product sales to third-party platforms through consignment arrangements. In addition to being revenue generative and profitable, wholesale partnerships and consignment arrangements have the added benefit of generating brand awareness with new customers in physical environments and on third-party platforms.

“Subscribers” are customers who have one or more “Subscriptions” pursuant to which they have agreed to be automatically billed on a recurring basis at a defined cadence. The Subscription billing cadence is typically defined as a number of days (for example, billed every 30 days or every 90 days), which are excluded from our reporting when payment has not occurred at the contracted billing cadence. Subscribers can cancel or snooze Subscriptions in between billing periods to stop receiving additional products and/or services and can reactivate Subscriptions to continue receiving additional products and/or services.

“Monthly Online Revenue per Average Subscriber” is defined as Online Revenue divided by “Average Subscribers”, which amount is then further divided by the number of months in a period. “Average Subscribers” are calculated as the sum of the Subscribers at the beginning and end of a given period divided by 2.

“Net Orders” are defined as the number of online customer orders minus transactions related to refunds, credits, chargebacks, and other negative adjustments. Net Orders represent transactions made on our platform during a defined period of time and exclude revenue recognition adjustments recorded pursuant to U.S. GAAP.

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Average Order Value (“AOV”) is defined as Online Revenue divided by Net Orders.

The table below provides a breakdown of total revenue between Online Revenue and Wholesale Revenue, for the years ended December 31, 2024, 2023, and 2022, as well as key metrics that drive Online Revenue (i.e., Subscribers, Monthly Online Revenue per Average Subscriber, Net Orders, and AOV) and the dollar and percentage change between such periods (in thousands, except for Monthly Online Revenue per Average Subscriber and AOV):

We generated $1,437.9 million in Online Revenue for the year ended December 31, 2024, an increase of $595.6 million, or 71%, as compared to $842.4 million for the year ended December 31, 2023. Growth in Online Revenue for the year ended December 31, 2024 was driven by weight loss offerings launched in the fourth quarter of 2023 or later, including new offerings launched in the second quarter of 2024 for which there was no comparable revenue in 2023, as well as continued sustainable growth in Subscribers pertaining to offerings available in all periods presented, from whom we generated recurring revenue. Offerings available in all periods presented represented a substantial majority of Online Revenue for the year ended December 31, 2024. This led to growth in new Subscribers, Monthly Online Revenue per Average Subscriber, AOV, and Net Orders. Online Revenue can fluctuate on a period-to-period basis due to various factors, including launches of new product offerings, the success of our marketing campaigns, and strategic pricing decisions impacting customer uptake of our offerings, as well as product availability and the regulatory landscape impacting our offerings.

We generated $38.6 million in Wholesale Revenue for the year ended December 31, 2024, an increase of $9.0 million, or 30%, as compared to $29.6 million for the year ended December 31, 2023. Wholesale Revenue can fluctuate on a period-to-period basis due to various factors, including delayed inventory purchases from our partners, seasonality trends, launches of new merchants, and timing of specialized campaigns.

Subscribers grew 45% to approximately 2,229,000 as of December 31, 2024 as compared to approximately 1,537,000 Subscribers as of December 31, 2023. Growth in Subscribers for the year ended December 31, 2024 was driven by offerings launched in the fourth quarter of 2023 or later, along with increased traffic to our platform (through our websites and mobile applications) as a result of our marketing activities and improved onsite and customer onboarding experiences. Monthly Online Revenue per Average Subscriber grew 19% to $64 for the year ended December 31, 2024 as compared to $54 for the year ended December 31, 2023, primarily due to newer offerings introduced during the second quarter of 2024 along with changes in product mix.

As a result of growth in Subscribers, we generated approximately 10.5 million Net Orders for the year ended December 31, 2024, an increase of 21% as compared to approximately 8.7 million Net Orders for the year ended December 31, 2023. For the year ended December 31, 2024, AOV was $137, an increase of 41% compared to $97 for the year ended December 31, 2023. AOV growth for the year ended December 31, 2024 was driven primarily by newer offerings introduced during the second quarter of 2024 as well as product mixes shifting towards longer duration Subscriptions.

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We continuously test and optimize the online experience and offerings to improve the customer experience, maximize sales, and improve gross margin. Our Subscribers (sometimes also referred to by us as “members”) select a cadence at which they wish to receive product shipments or a treatment term depending on the offering. In addition to a 30-day cadence or treatment term, we offer Subscribers the ability to select from a range of Subscription shipment cadences or treatment terms, from every 60 days to 360 days, depending on the product. Subscriptions automatically renew on the applicable cadence selected by the Subscriber when purchasing or updating the Subscription. To ensure timely delivery of prescription medications and in accordance with our terms and conditions, Subscribers may sometimes be charged, and products may sometimes be shipped, earlier than their regularly scheduled cadence to accommodate holidays or for other operational reasons to support continuity of treatment. With the exception of prepaid offerings, the Subscriber is typically billed upon each shipment. Subscribers can cancel or snooze Subscriptions in between billing periods to stop receiving additional products and can reactivate Subscriptions at any time. For longer term Subscriptions, we incur shipping and fulfillment expenses fewer times per year than for 30-day Subscriptions. The Subscriber uptake of longer term Subscriptions typically results in lower recurring costs and higher gross margins as compared to 30-day Subscriptions.

Key Factors Affecting Results of Operations

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges.

New customer acquisition

Our ability to attract new customers is a key factor for our future growth. To date, we have successfully acquired new customers through marketing and the development of our brands as well as through acquisitions. As a result, revenue has increased each year since our launch. If we are unable to acquire enough new customers in the future, revenue might decline. New customer acquisition could be negatively impacted if our marketing efforts are less effective in the future. Increases in advertising rates could also negatively impact our ability to acquire new customers. Consumer tastes, preferences, and sentiment for our brands may also change and result in decreased demand for our products and services. Changes in the legal or regulatory environment could also negatively impact our ability to acquire new customers, including changes to privacy, healthcare, or other laws, or the interpretation or enforcement of such laws, and could impact customer acquisition costs.

Retention of customers

Our ability to retain customers is a key factor in our ability to generate revenue. Most of our customers purchase products and services through subscription-based plans, where Subscribers are billed and sent products and/or receive services on a recurring basis. The recurring nature of this revenue provides us with a certain amount of predictability for future revenue if past Subscriber behavior stays relatively consistent in the future. While historically the consistent uptake by Subscribers of our offerings contributed to the stable and predictable nature of our Monthly Online Revenue per Average Subscriber, newer offerings introduced in 2024 have led to increases in this metric, which may continue in the near future. We expect to retain a significant majority of revenue from Subscribers who maintain a Subscription for more than two years (sometimes referred to by us as “long-term revenue retention”). However, if customer behavior changes, or our assumptions regarding long-term revenue retention are incorrect and Subscriber retention decreases in the future, then future revenue will be negatively impacted. Macroeconomic factors including inflation or recessionary pressures or the impact of trade actions may affect the ability of our Subscribers to continue to pay for our products and services, which may also impact the future results of our operations.

Investments in growth

We expect to continue to focus on long-term growth. We intend to continue to invest in our fulfillment, distribution, and operating capabilities, including in our Facilities, with the goal of fulfilling nearly all of our pharmaceutical and over-the-counter customer orders through affiliated and internal fulfillment capabilities. For example, we are making investments in the expansion of our current facilities, which are expected to continue for at least the next 12 months. Additionally, we expect to continue to make significant investments in marketing to acquire new customers and we expect to continue to make investments in product offerings and customer experience. We are working to enhance our offerings and expand the breadth of health and wellness products and services offered on our websites and mobile applications. The number of our Subscribers using personalized solutions has grown in recent periods and represented more than a majority of Subscribers as of the end of fiscal year 2024. As we expect the percentage of Subscribers on our platform using a personalized solution to continue to increase, we plan to continue to invest in personalized product offerings, including in our compounding capabilities. This also includes further investments in and development of mobile phone technology, including our mobile applications, in order to improve the

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customer experience on our platform. We may continue to pursue opportunities to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. In the short term, we expect these investments to increase our operating expenses; however, in the long term, we anticipate that these investments will positively impact our results of operations. If we are unsuccessful at improving our offerings or are unable to generate additional demand for our offerings, we may not recover the financial investments we make into the business and revenue may not increase in the future.

Expansion into new specialties

We expect to continue to expand into new health and wellness specialties with our offerings. Specialty expansion allows us to increase the number of health and wellness consumers for whom we can provide products and services. It also allows us to offer access to treatment of additional conditions that may already affect our current customers. Expanding into new health and wellness specialties has required and will continue to require financial investments in additional headcount, marketing and customer acquisition costs, additional operational capabilities, and may require the purchase of new inventory. If we are unable to generate or maintain sufficient demand in new health and wellness specialties, we may not recover the financial investments we make into new specialties and revenue may not increase in the future.

Seasonality

We expect our weight loss specialty will drive new seasonality considerations for our business. Specifically, we expect individuals’ health and wellness-based New Year's resolutions to result in additional traffic to our platform and thus increase the number of Subscribers utilizing one of our weight loss offerings. This may result in higher Subscriber and Monthly Online Revenue per Average Subscriber growth in the first quarter compared to the remainder of the year.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with U.S. GAAP, we present Adjusted EBITDA (which is a non-GAAP financial measure), Adjusted EBITDA margin (which is a non-GAAP ratio), and Free Cash Flow (which is a non-GAAP financial measure) each as defined below. We use Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We consider Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow to be important measures because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We believe that the use of Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow is helpful to our investors as they are used by management in assessing the health of our business, our operating performance, and our liquidity.

However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures or ratios differently or may use other financial measures or ratios to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow as tools for comparison. Reconciliations are provided below to the most directly comparable financial measures stated in accordance with U.S. GAAP. Investors are encouraged to review our U.S. GAAP financial measures and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes. “Adjusted EBITDA” is defined as net income (loss) before stock-based compensation, depreciation and amortization, acquisition and transaction-related costs (which includes (i) consideration paid for employee compensation with vesting requirements incurred directly as a result of acquisitions, inclusive of revaluation of earn-out consideration recorded in general and administrative expenses prior to 2024, and (ii) transaction professional services), legal settlement expenses that are considered non-recurring, impairment of long-lived assets, change in fair value of liabilities, interest income, and income taxes. “Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue.

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The following table reconciles net income (loss) to Adjusted EBITDA for the years ended December 31, 2024, 2023, and 2022 (in thousands):

Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. We compensate for these limitations by providing specific information regarding the U.S. GAAP items excluded from Adjusted EBITDA. When evaluating our performance, you should consider Adjusted EBITDA in addition to, and not as a substitute for, other financial performance measures, including our net income (loss) and other U.S. GAAP results.

Free Cash Flow is a key performance measure that our management uses to assess our liquidity. Because Free Cash Flow facilitates internal comparisons of our historical liquidity on a more consistent basis, we use this measure for business planning purposes. “Free Cash Flow” is defined as net cash provided by (used in) operating activities, less purchases of property, equipment, and intangible assets and investment in website development and internal-use software in investing activities.

The following table reconciles net cash provided by (used in) operating activities to Free Cash Flow for the years ended December 31, 2024, 2023, and 2022 (in thousands):

Some of the limitations of Free Cash Flow include (i) Free Cash Flow does not represent our residual cash flow for discretionary expenditures and our non-discretionary commitments, and (ii) Free Cash Flow includes capital expenditures, the benefits of which may be realized in periods subsequent to those in which the expenditures took place. In evaluating Free Cash

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Flow, you should be aware that in the future we will have cash outflows similar to the adjustments in this presentation. Our presentation of Free Cash Flow should not be construed as an inference that our future results will be unaffected by these cash outflows or any unusual or non-recurring items. When evaluating our performance, you should consider Free Cash Flow in addition to, and not as a substitute for, other financial performance measures, including our net cash provided by (used in) operating activities and other U.S. GAAP results.

Basis of Presentation

Currently, we conduct business through one operating segment. Substantially all our long-lived assets are maintained in, and a significant majority of our results of operations are attributable to, the United States of America. The consolidated financial statements include the accounts of our company, our wholly-owned subsidiaries, and variable interest entities (“VIEs”) for which we are the primary beneficiary. For the periods presented, the VIEs are: (i) “Affiliated Medical Groups,” which are professional corporations or other professional entities owned by licensed physicians and that engage licensed healthcare professionals (physicians, physician assistants, nurse practitioners, and mental health providers; collectively referred to as “Providers” or individually, a “Provider”) to provide consultation services; and (ii) XeCare, LLC (“XeCare”) and Apostrophe Pharmacy LLC (“Apostrophe Pharmacy”, and together with XeCare, the “Affiliated Pharmacies”), which are licensed mail order pharmacies providing prescription fulfillment solely to our customers. We determined that we are the primary beneficiary of the Affiliated Medical Groups and the Affiliated Pharmacies for accounting purposes because we have the ability to direct the activities that most significantly affect these entities’ economic performance and have the obligation to absorb the entities’ losses. Under the variable interest entity model, we present the results of operations and the financial position of the entities as part of our consolidated financial statements as if the consolidated group were a single economic entity.

Components of Results of Operations

Revenue

We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

Our consolidated revenue primarily comprises online sales of health and wellness products through our websites and mobile applications, including prescription and non-prescription products. In contracts that contain prescription products issued as the result of a consultation, revenue also includes medical consultation services and post-consultation service support provided by Affiliated Medical Groups. Additionally, revenue is generated through wholesale arrangements.

Cost of revenue

Cost of revenue consists of costs directly attributable to the products shipped and services rendered, including product costs of purchased and manufactured products, packaging materials, shipping costs, labor costs directly related to revenue generating activities including medical consultation services and manufacturing labor, and overhead costs associated with manufactured products. Costs related to free products where there is no expectation of future purchases from a customer and depreciation and amortization on property, equipment, and software (other than related to manufactured products) are considered to be operating expenses and are excluded from cost of revenue.

Gross profit and gross margin

Our gross profit represents total revenue less our total cost of revenue, and our gross margin is our gross profit expressed as a percentage of our total revenue. Our gross profit and gross margin have been and will continue to be affected by a number of factors, including the prices we charge for our products and services, the costs we incur from our vendors for certain components of our cost of revenues, the mix of the various products and services we sell in a period including the launch of new offerings, the mix of Online Revenue and Wholesale Revenue in a period, volume of fulfillment through affiliated and internal fulfillment capabilities, and our ability to sell our inventory. We expect our gross margin to fluctuate from period to period depending on these and other factors. While gross margin has decreased period to period in the most recent quarters, and we may see this trend continuing in the short term, over the long term we expect gross margin to stabilize as we continue to scale our business and increase our ability to negotiate more favorable costs of revenue.

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Marketing expenses

The largest component of our marketing expenses consists of our discretionary customer acquisition costs. Customer acquisition costs, also called paid marketing expense, are the advertising and media costs associated with our efforts to acquire new customers, promote our brands, and build awareness for our products and services. Customer acquisition costs include advertising in digital media, social media, television, radio, out-of-home media, and various other media outlets and excluding content production costs. Marketing expenses also include overhead expenses, including salaries, benefits, taxes, and stock-based compensation for personnel; agency, contractor, and consulting expenses; content production, software, and other marketing operating costs. Marketing is an important driver of growth and we intend to continue to make significant investments in customer acquisition and our marketing organization. Historically, our marketing expenses have increased quarter-over-quarter and we expect this trend to continue. While marketing expenses may fluctuate as a percentage of revenue due to the timing and discretionary nature of these expenses, with the additional marketing leverage driven by our newer offerings, along with the maturation of our existing Subscriber base, we expect total marketing expenses as a percentage of revenue to continue to decrease over the long term.

Operations and support expenses

Operations and support expenses include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our supply chain, retail, medical group, pharmacy, fulfillment, and customer service functions. These expenses also include operating expenses primarily relating to operating and support functions for facilities, warehousing and storage, fulfillment, transaction processing, third-party software and hosting to support those functions, and related depreciation and amortization. We expect operations and support expenses to increase for the foreseeable future as we continue to invest in our fulfillment and operating capabilities and grow our business, resulting in additional operational efficiencies. As a result, we expect revenue growth to continue to outpace those investments made, leading to a decrease in operations and support expenses as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

Technology and development expenses

Technology and development expenses include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our engineering, product management, product development, and data science functions. These expenses also include operating expenses primarily relating to technology and development functions for the operation, maintenance and enhancement of our digital platform, websites and mobile applications, inclusive of related expenses for third-party software and hosting to support those functions, and related depreciation. Expenses also include investments to develop new health and wellness products and services. We expect technology and development expenses may increase in the foreseeable future as we grow our business and continue to invest in our platform and new offerings and stabilize over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

General and administrative expenses

General and administrative expenses (“G&A”) include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our executive, legal, human resources, finance, brand strategy, communications, public and government relations, and other corporate functions. These expenses also include operating expenses primarily relating to general and administrative functions for insurance, third-party software and hosting to support those functions, related depreciation and amortization, and other general corporate costs. We expect G&A to increase for the foreseeable future as we increase headcount with the growth of our business. However, we anticipate G&A will decrease as a percentage of revenue over the long term, in part due to our expected execution of disciplined headcount growth and overall expense management, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

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Other income (expense)

Other income (expense) primarily consists of interest income from our cash and cash equivalents and investment accounts, and, in prior years, change in fair value of liabilities. Additionally, other income (expense) includes non-operating and one-time charges classified outside of operating expenses.

Benefit (provision) for income taxes

The benefit (provision) for income taxes primarily consists of federal and state taxes, as well as change in valuation allowance. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates. If and when we conclude that we are more likely than not to utilize some or all of our deferred tax assets, we release some or all of our valuation allowance and our tax provision will decrease in the period in which we make such determination, which will cause a corresponding one-time increase to net income.

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Results of Operations

Comparisons for the years ended December 31, 2024 and 2023

The following table sets forth our consolidated statement of operations for the years ended December 31, 2024, 2023, and 2022 and the dollar and percentage change between the three periods (dollars in thousands):

______________

(*)Not meaningful

(1)Includes stock-based compensation expense as follows (in thousands):

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The following table sets forth our results of operations as a percentage of our total revenue for the periods presented:

Revenue

Revenue was $1,476.5 million for the year ended December 31, 2024 compared to $872.0 million for the year ended December 31, 2023, an increase of $604.5 million, or 69%. For detailed discussion of this increase, refer to “Revenue and Key Business Metrics.”

Cost of revenue and gross profit

Cost of revenue was $303.4 million for the year ended December 31, 2024, compared to $157.1 million for the year ended December 31, 2023, an increase of $146.3 million, or 93%. This increase was primarily due to increased product and packaging costs of approximately 147%, increased shipping costs of 47%, and increased costs associated with medical consultation services of 37%. These increases were primarily due to newer offerings as well as overall increased business activity with the addition of new Subscribers.

Gross profit was $1,173.1 million for the year ended December 31, 2024 compared to $714.9 million for the year ended December 31, 2023, an increase of $458.2 million or 64%. Correspondingly, gross margin was 79% for the year ended December 31, 2024 compared to 82% for the year ended December 31, 2023. The decrease in gross margin for the year ended December 31, 2024 was primarily due to the addition of newer offerings, including those launched in the second quarter of 2024, which were strategically priced to attract new customers. The decrease was partially offset by lower costs associated with medical consultation services as a percent of revenue as a result of improving Provider efficiency, synergies gained through increased fulfillment volume, as well as lower shipping costs as a percent of revenue as a result of optimizing costs.

Marketing expenses

Marketing expenses were $678.8 million for the year ended December 31, 2024, compared to $446.4 million for the year ended December 31, 2023, an increase of $232.4 million, or 52%. The most significant component of marketing expenses is customer acquisition costs, which increased to $594.5 million for the year ended December 31, 2024, compared to $379.7 million for the year ended December 31, 2023, an increase of $214.8 million, or 57%. The increase in customer acquisition costs was primarily a result of management’s decision to increase investment in display, search, streaming television, affiliate, and radio and

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podcast marketing, as we continue to identify opportunities to drive new customer growth and which further expanded with the addition of newer offerings.

Operations and support

Operations and support expenses were $185.8 million for the year ended December 31, 2024, compared to $119.9 million for the year ended December 31, 2023, an increase of $65.9 million, or 55%. The increase in operations and support was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $25.0 million, an increase in order fulfillment and transaction processing of $16.3 million, an increase in professional services of $9.4 million, an increase in depreciation, amortization, and technology costs of operations and support functions of $7.6 million, and an increase in stock-based compensation of $3.4 million.

Technology and development

Technology and development expenses were $78.8 million for the year ended December 31, 2024, compared to $48.2 million for the year ended December 31, 2023, an increase of $30.6 million, or 63%. The increase in technology and development expenses was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $15.2 million, an increase in depreciation, amortization, and technology costs of $7.0 million, an increase in stock-based compensation of $5.4 million, and an increase in professional services of $1.4 million.

General and administrative

General and administrative expenses were $167.8 million for the year ended December 31, 2024, compared to $129.9 million for the year ended December 31, 2023, an increase of $37.9 million, or 29%. The increase in general and administrative expenses was primarily driven by an increase in stock-based compensation of $13.5 million, an increase in professional services of $8.1 million, an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $7.2 million, an increase in acquisition costs of $3.6 million, an increase in depreciation, amortization, and technology costs relating to general and administrative functions of $2.0 million, and $2.0 million of legal settlement expenses during the year ended December 31, 2024 that are considered non-recurring.

Other income (expense)

Other income (expense) was $9.8 million for the year ended December 31, 2024, compared to $7.9 million for the year ended December 31, 2023, an increase of $1.9 million. The increase was driven primarily by interest income of $10.3 million for the year ended December 31, 2024, compared to $9.0 million for the year ended December 31, 2023, as well as the loss from the change in fair value of liabilities of $1.1 million during the year ended December 31, 2023 related to the earn-out payable for Honest Health Limited, which is now Hims & Hers UK Limited (“HHL”), that became finalized as of December 31, 2023.

Benefit (provision) for income taxes

Benefit for income taxes was $54.3 million for the year ended December 31, 2024, compared to a provision for income taxes of $2.0 million for the year ended December 31, 2023. The change was mainly due to the change in valuation allowance of $68.0 million, primarily due to the full release of the valuation allowance on our domestic deferred tax assets during the year ended December 31, 2024, partially offset by current period tax activity. The release of the valuation allowance resulted in the recognition of certain deferred tax assets, a decrease to income tax expense, and a corresponding one-time increase to net income for the year ended December 31, 2024.

Liquidity and Capital Resources

As of December 31, 2024, our principal sources of liquidity are cash and cash equivalents in the amount of $220.6 million, which are primarily invested in interest-bearing cash accounts and money market funds, and short-term investments in the amount of $79.7 million, which are invested in U.S. Treasury bills, corporate bonds, and government and government agency securities.

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During the year ended December 31, 2024, we made cash payments for the earn-out payable for HHL, totaling $6.0 million, with such payment amounts determined in fiscal year 2023 in accordance with the terms of the related acquisition agreement. The HHL earn-out payments totaling $6.0 million are recorded: (i) $2.8 million within operating activities; and (ii) $3.2 million within financing activities on the consolidated statements of cash flows. The total earn-out payment also included shares of our Class A common stock. No further earn-out payables are due under the HHL acquisition agreement.

In September 2024, we satisfied all closing conditions of the executed purchase agreement to acquire all of the membership interests of Seaview Enterprises LLC (d/b/a MedisourceRx) (“MedisourceRx”), a 503B compounding outsourcing facility registered with the Food and Drug Administration and located in the United States, for total cash and stock consideration of approximately $31.0 million, including cash payments of $15.5 million and Class A common stock of $15.5 million. The cash payments, net of cash acquired, are included within investing activities on the consolidated statements of cash flows.

In February 2025, we satisfied all closing conditions of an asset purchase agreement, executed in December 2024, to acquire certain manufacturing assets from a company located in the United States, for total cash and Class A common stock consideration up to approximately $65.0 million. The upfront cash and Class A common stock consideration is approximately $30.0 million, with an additional maximum of $5.0 million in Class A common stock consideration payable on the one year anniversary of closing in accordance with the terms of the asset purchase agreement. A maximum additional $30.0 million in cash and Class A common stock consideration is payable upon reaching certain earn-out conditions, which is subject to a continued service condition as defined in the agreement.

Additionally, in February 2025, we entered into a Revolving Credit and Guaranty Agreement with certain lenders and JPMorgan Chase Bank, N.A., as administrative and collateral agent, which provides for a three-year senior secured revolving line of credit in an amount up to $175.0 million (the “Revolving Credit Facility”). The Revolving Credit Facility includes letter of credit and swing line loan sub-limits of $40.0 million and $20.0 million, respectively, and an accordion option, which, if exercised, would allow us to increase the aggregate revolving commitment amount by up to $125.0 million, plus additional amounts if we are able to satisfy a leverage test and certain other conditions.

We believe our existing cash resources, together with our availability under our Revolving Credit Facility, are sufficient to support planned operations for the next 12 months. As a result, management believes that our current financial resources are sufficient to continue operating activities for at least one year past the issuance date of the consolidated financial statements.

Our future capital requirements will depend on many factors, including the number of orders we receive, the size of our customer base, the continuing market acceptance of telehealth, and the timing and extent of spend to support the expansion of sales, marketing, development activities, and our facilities, which may be impacted by inflationary, recessionary, supply chain, or other macroeconomic factors, including the impact of trade actions. We expect to continue to pursue opportunities to expand our manufacturing and internal fulfillment capabilities and may acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. From time to time, we order inventory with sufficient lead time in order to ensure our ability to fulfill customer demand for supply chain, seasonality, or other reasons, which may have an impact on our cash and cash equivalents in a given quarter. We may also use our cash and cash equivalents to repurchase up to $65.0 million of our Class A common stock through August 31, 2027 at management’s discretion pursuant to our 2024 Share Repurchase Program. We have based our estimate of our future capital requirements on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise or access additional capital when desired, our business, financial condition, and results of operations would be harmed.

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Cash Flows

The following table provides a summary of cash flow data (in thousands):

Cash flows from operating activities

Our largest source of operating cash flows is cash collections from our customers. Our primary use of cash from operating activities includes costs of revenue, marketing expenses, and personnel-related expenditures to support the growth of our business.

Net cash provided by operating activities was $251.1 million for the year ended December 31, 2024. Net cash provided by operating activities included net income of $126.0 million, non-cash expense related to stock-based compensation of $92.3 million, and depreciation and amortization of $17.1 million, partially offset by benefit for deferred taxes of $61.6 million and a net accretion on securities of $4.4 million. In addition, a net cash inflow totaling $78.6 million was attributable to changes in operating assets and liabilities, primarily as a result of an increase in deferred revenue of $67.6 million and an increase in accounts payable and accrued liabilities of $67.5 million. This inflow was partially offset by an increase in inventory of $41.6 million, an increase in prepaid expenses of $9.5 million, and a decrease in earn-out payable of $2.8 million.

Net cash provided by operating activities was $73.5 million for the year ended December 31, 2023. Net cash provided by operating activities included non-cash expense related to stock-based compensation of $66.1 million, depreciation and amortization of $9.5 million, non-cash acquisition-related costs of $2.7 million, and change in fair value of liabilities of $1.1 million, partially offset by a net loss of $23.5 million and net accretion on securities of $5.7 million. In addition, a net cash inflow totaling $20.8 million was attributable to changes in operating assets and liabilities, primarily as a result of an increase in accounts payable and accrued liabilities of $23.8 million and an increase in deferred revenue of $6.3 million. This inflow was partially offset by an increase in prepaid expenses of $6.4 million.

Cash flows from investing activities

Cash flows from investing activities primarily relate to our treasury operations of investing in available-for-sale investments and acquisitions, as well as investment in website development and internal-use software and purchases of property, equipment, and intangible assets.

Net cash used in investing activities for the year ended December 31, 2024 was $19.0 million, which was primarily due to $41.7 million in purchases of property, equipment, and intangible assets, $15.4 million for the acquisition of MedisourceRx, and investments of $11.1 million in website development and internal-use software. This cash outflow was partially offset by net investment cash inflows of $49.1 million.

Net cash used in investing activities for the year ended December 31, 2023 was $12.1 million, which was primarily due to $17.2 million in purchases of property, equipment, and intangible assets and investments of $9.3 million in website development and internal-use software. This cash outflow was partially offset by net investment cash inflows of $14.4 million.

Cash flows from financing activities

Net cash used in financing activities for the year ended December 31, 2024 was $107.8 million, which was primarily due to repurchases of our Class A common stock of $83.0 million, payments for taxes related to net share settlement of equity awards of $52.5 million, and payments for acquisition-related earn-out consideration of $3.2 million. This cash outflow was partially offset by proceeds from the exercise of stock options of $26.7 million and proceeds from employee stock purchase plan of $3.9 million.

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Net cash used in financing activities for the year ended December 31, 2023 was $11.5 million, which was due to payments for taxes related to net share settlement of equity awards of $14.1 million and repurchases of our Class A common stock of $2.0 million. This cash outflow was partially offset by proceeds from the exercise of stock options of $2.3 million and proceeds from employee stock purchase plan of $2.3 million.

Contractual Obligations and Commitments

Our contractual obligations and commitments include operating leases and non-cancelable purchase obligations primarily related to cloud-based software contracts used in operations. Total contractual obligations and commitments as of December 31, 2024 were $36.4 million, of which $9.9 million was payable within 12 months.

Critical Accounting Estimates

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in our financial statements and accompanying notes. Management believes that the estimates, judgments, and assumptions upon which it relies are reasonable based upon information available to it at the time that these estimates, judgments, and assumptions were made. Actual results may differ from management’s estimates. To the extent that there are material differences between these estimates and actual results, our consolidated financial statements will be affected.

Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. These are the policies that we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Income Taxes

We are required to assess whether it is more likely than not that we will realize our deferred tax assets. Realization of deferred tax assets is dependent upon the generation of future taxable income, the timing and amount of which are uncertain. If we believe that they are not more likely than not to be fully realizable before the expiration dates applicable to such assets, then to the extent we believe that recovery is not more likely than not, we must establish a valuation allowance.

We evaluate our deferred tax assets for realizability considering both positive and negative evidence, including our historical financial performance, projections of future taxable income, future reversals of existing taxable temporary differences, tax planning strategies, and any carryback availability. In evaluating the need for a valuation allowance, we estimate future taxable income based on management’s approved business plans. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results. Changes in the net deferred tax assets, less offsetting valuation allowance, in a period are recorded through the income tax provision and could have a material impact on the consolidated statements of operations and comprehensive income (loss).

During 2024, we determined that a valuation allowance against our domestic deferred tax assets was no longer required, primarily due to sustained tax profitability (pre-tax earnings or loss adjusted by permanent book to tax differences) beginning in the fourth quarter of 2023 and continuing throughout 2024, which is objective and verifiable evidence, as well as anticipated future earnings. As a result, there was a change in valuation allowance of $68.0 million during the year ended December 31, 2024, primarily due to the full release of the valuation allowance on our domestic deferred tax assets, partially offset by current period tax activity. We continue to believe it is more likely than not that we will realize our domestic deferred tax assets.

Business combinations

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with determination of fair values, we may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations.

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During the year ended December 31, 2024, we acquired MedisourceRx. The most significant estimate for the acquisition accounting related to the valuation of the 503B pharmacy license, and the acquisition date fair value of $28.6 million was determined using the income approach.

Performance restricted stock units

Estimating the probable level of achievement of our performance restricted stock units (“Performance RSUs” or “PRSUs”) on the grant date and at the end of each reporting period, which determines stock-based compensation recognition, requires management to use significant judgment and estimates. The probable level of achievement is based on certain revenue and Adjusted EBITDA performance metrics for the fiscal year ending approximately three years after the date of the grant. We estimate the probable level of achievement on the grant date and at the end of each reporting period using a variety of factors, including primarily internal financial forecasts, our performance compared to such forecasts, and publicly disclosed financial guidance and our performance compared to such guidance.

If management determines that the probable level of achievement has increased, we recognize a cumulative catch-up of stock-based compensation expense based on the level of achievement determined at period end in comparison to the prior period. If we determine it is no longer probable that any level of achievement will occur, we discontinue recognition of stock-based compensation expense. If we determine that it is improbable that any level of achievement will occur, we reverse previously recognized stock-based compensation expense. During the year ended December 31, 2024, $16.7 million of stock-based compensation was recognized for the PRSUs, of which $5.5 million was related to cumulative catch-ups due to increases in the probable level of achievement during the year.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K. This section of the Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022. Our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date hereof or to conform these statements to actual results or revised expectations. Forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section entitled “Risk Factors” in this Form 10-K.

Overview

Hims & Hers is a consumer-first platform transforming the way customers fulfill their health and wellness needs. Our mission is to help the world feel great through the power of better health. We believe that we have the technical platform, distributed provider network, and access to clinical capabilities to lead the migration of routine office visits to a digital format. The Hims & Hers platform includes access to a highly-qualified and technologically-capable provider network, a clinically-focused electronic medical records system, digital prescriptions, and cloud-enabled pharmacy fulfillment. Our digital platform enables access to treatments for a broad range of conditions, including those related to sexual health, hair loss, dermatology, mental health, and weight loss. Hims & Hers connects patients to licensed healthcare professionals who can prescribe medications when appropriate. Prescriptions are fulfilled online through licensed pharmacies on a subscription basis, making accessing treatments simple, affordable, and straightforward. Through the Hims & Hers mobile applications, consumers can access a range of educational programs, wellness content, community support, and other services that promote lifelong health and wellness.

In addition, we offer access to a range of health and wellness products designed to meet individual needs, which can include curated prescription and non-prescription products. Our products and services are available for purchase directly by customers

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on our websites and mobile applications. Additionally, Hims & Hers non-prescription products can be found in tens of thousands of top retail locations in the United States.

Revenue and Key Business Metrics

Our management monitors two financial results, Online Revenue and Wholesale Revenue (both defined below), to track our total revenue generation. We also monitor the additional key business metrics set forth below to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. Increases or decreases in these key business metrics may not correspond with increases or decreases in our revenue.

The limitations our key business metrics have as an analytical tool include: (i) they might not accurately predict our future financial results pursuant to accounting principles generally accepted in the United States of America (“U.S. GAAP”); and (ii) other companies, including companies in our industry, may calculate our key business metrics or similarly titled measures differently, which reduces their usefulness as comparative measures.

Brief descriptions of our key business metrics are provided below.

“Online Revenue” represents the sales of products and services on our platform, net of refunds, credits, and chargebacks, and includes revenue recognition adjustments recorded pursuant to U.S. GAAP, primarily relating to deferred revenue and returns reserve. Online Revenue is generated by selling directly to consumers through our websites and mobile applications. Our Online Revenue consists of products and services purchased by customers directly through our online platform. The majority of our Online Revenue is subscription-based, where customers agree to be billed on a recurring basis to have products and services automatically delivered to them.

“Wholesale Revenue” represents non-prescription product sales to retailers through wholesale purchasing agreements. Wholesale Revenue also includes non-prescription product sales to third-party platforms through consignment arrangements. In addition to being revenue generative and profitable, wholesale partnerships and consignment arrangements have the added benefit of generating brand awareness with new customers in physical and online environments.

“Subscribers” are customers who have one or more “Subscriptions” pursuant to which they have agreed to be automatically billed on a recurring basis at a defined cadence. The Subscription billing cadence is typically defined as a number of days (for example, billed every 30 days or every 90 days), which are excluded from our reporting when payment has not occurred at the contracted billing cadence. Subscribers can cancel Subscriptions in between billing periods to stop receiving additional products and/or services and can reactivate Subscriptions to continue receiving additional products and/or services.

“Monthly Online Revenue per Average Subscriber” is defined as Online Revenue divided by “Average Subscribers”, which amount is then further divided by the number of months in a period. “Average Subscribers” are calculated as the sum of the Subscribers at the beginning and end of a given period divided by 2.

“Net Orders” are defined as the number of online customer orders minus transactions related to refunds, credits, chargebacks, and other negative adjustments. Net Orders represent transactions made on our platform during a defined period of time and exclude revenue recognition adjustments recorded pursuant to U.S. GAAP.

Average Order Value (“AOV”) is defined as Online Revenue divided by Net Orders.

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The table below provides a breakdown of total revenue between Online Revenue and Wholesale Revenue, for the years ended December 31, 2023, 2022, and 2021, as well as key metrics that drive Online Revenue (i.e., Subscribers, Monthly Online Revenue per Average Subscriber, Net Orders, and AOV), and the dollar and percentage change between such periods (in thousands, except for Monthly Online Revenue per Average Subscriber and AOV):

We generated $842.4 million in Online Revenue for the year ended December 31, 2023, an increase of $339.9 million, or 68%, as compared to $502.5 million for the year ended December 31, 2022. Growth in Online Revenue for the year ended December 31, 2023 was primarily driven by growth in Subscribers, from whom we generated recurring and stable Monthly Online Revenue per Average Subscriber, as well as growth in AOV and Net Orders.

We generated $29.6 million in Wholesale Revenue for the year ended December 31, 2023, an increase of $5.2 million, or 21%, as compared to $24.4 million for the year ended December 31, 2022. Wholesale Revenue can fluctuate on a period-to-period basis due to various factors, including delayed inventory purchases from our partners, seasonality trends, launches of new merchants and timing of specialized campaigns.

Subscribers grew 48% to approximately 1,537,000 as of December 31, 2023 as compared to approximately 1,040,000 Subscribers as of December 31, 2022. Growth in Subscribers for the year ended December 31, 2023 was driven by increased traffic to our platform (through our websites and mobile applications) as a result of our marketing activities, increased customer conversion rates from improved onsite and customer onboarding experiences, and new product offerings. Monthly Online Revenue per Average Subscriber grew 2% to $54 for the year ended December 31, 2023 as compared to $53 for the year ended December 31, 2022, primarily due to product mix shifting between conditions and longer duration Subscriptions. Monthly Online Revenue per Average Subscriber has remained relatively stable as a result of generally recurring and predictable uptake of our offerings by Subscribers, but can fluctuate on a period-to-period basis due to various factors, including price changes, product mix, and duration of Subscriptions.

As a result of growth in Subscribers, we generated approximately 8.7 million Net Orders for the year ended December 31, 2023, an increase of 42% as compared to approximately 6.1 million Net Orders for the year ended December 31, 2022. For the year ended December 31, 2023, AOV was $97, an increase of 18% compared to $82 for the year ended December 31, 2022. AOV growth for the year ended December 31, 2023 was driven by product mixes shifting towards longer duration Subscriptions as well as new product offerings.

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We continuously test and optimize the online experience and offerings to improve the customer experience, maximize sales, and improve gross margin. Our Subscribers (sometimes also referred to by us as “members”) select a cadence at which they wish to receive product shipments. In addition to a 30-day cadence, we offer Subscribers the ability to select from a range of Subscription shipment cadences, from every 60 days to 360 days, depending on the product. Subscriptions automatically renew on the applicable cadence selected by the Subscriber when purchasing or updating the Subscription. To ensure timely delivery of prescription medications and in accordance with our terms and conditions, Subscribers may sometimes be charged, and products may sometimes be shipped, earlier than their regularly scheduled cadence to accommodate holidays or for other operational reasons to support continuity of treatment. The Subscriber is billed upon each shipment. Subscribers can cancel Subscriptions in between billing periods to stop receiving additional products and can reactivate Subscriptions at any time. In addition, our customers can purchase product bundles or defined product kits, either consisting of non-prescription over-the-counter products or non-prescription products together with prescription medications, for a single all-inclusive price. Such offerings and their uptake by Subscribers have contributed to the generally stable and predictable nature of our Monthly Online Revenue per Average Subscriber. Additionally, the uptake of these offerings has resulted in higher gross profits and gross margins for our sales of products and services on our platform. For example, for longer term Subscriptions, we incur shipping and fulfillment expenses fewer times per year than for 30-day Subscriptions. The Subscriber uptake of longer term Subscriptions results in lower recurring costs and higher gross margins as compared to 30-day Subscriptions.

Key Factors Affecting Results of Operations

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges.

New customer acquisition

Our ability to attract new customers is a key factor for our future growth. To date, we have successfully acquired new customers through marketing and the development of our brands as well as through acquisitions. As a result, revenue has increased each year since our launch. If we are unable to acquire enough new customers in the future, revenue might decline. New customer acquisition could be negatively impacted if our marketing efforts are less effective in the future. Increases in advertising rates could also negatively impact our ability to acquire new customers. Consumer tastes, preferences, and sentiment for our brands may also change and result in decreased demand for our products and services. Changes in law or regulatory enforcement could also negatively impact our ability to acquire new customers, including changes to privacy, healthcare, or other laws that could impact customer acquisition costs.

Retention of customers

Our ability to retain customers is a key factor in our ability to generate revenue. Most of our customers purchase products and services through subscription-based plans, where Subscribers are billed and sent products and/or receive services on a recurring basis. The recurring nature of this revenue provides us with a certain amount of predictability for future revenue if past Subscriber behavior stays relatively consistent in the future. In addition, the consistent uptake by Subscribers of our offerings has contributed to the stable and predictable nature of our Monthly Online Revenue per Average Subscriber. We expect to retain a significant majority of revenue from Subscribers who maintain a Subscription for more than two years (sometimes referred to by us as “long-term revenue retention”). However, if customer behavior changes, or our assumptions regarding long-term revenue retention are incorrect and Subscriber retention decreases in the future, then future revenue will be negatively impacted. Macroeconomic factors including inflation or recessionary pressures may affect the ability of our Subscribers to continue to pay for our products and services, which may also impact the future results of our operations.

Investments in growth

We expect to continue to focus on long-term growth. We intend to continue to invest in our fulfillment and operating capabilities, including our Affiliated Pharmacies (as defined below) and warehousing facilities, with the goal of fulfilling nearly all of our pharmaceutical and over-the-counter customer orders through affiliated and internal fulfillment capabilities. For example, we are making investments in the expansion of our current facilities, which are expected to continue for at least the next 12 months. Additionally, we expect to continue to make significant investments in marketing to acquire new customers and we expect to continue to make investments in product offerings and customer experience. We are working to enhance our offerings and expand the breadth of health and wellness products and services offered on our websites and mobile applications. This includes investments in personalized product offerings, including in our compounding capabilities. This also includes

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further investments in and development of mobile phone technology, including our mobile applications, in order to improve the customer experience on our platform. In the short term, we expect these investments to increase our operating expenses; however, in the long term, we anticipate that these investments will positively impact our results of operations. If we are unsuccessful at improving our offerings or are unable to generate additional demand for our offerings, we may not recover the financial investments we make into the business and revenue may not increase in the future.

Expansion into new specialties

We expect to continue to expand into new health and wellness specialties with our offerings. Specialty expansion allows us to increase the number of health and wellness consumers for whom we can provide products and services. It also allows us to offer access to treatment of additional conditions that may already affect our current customers. Expanding into new health and wellness specialties has required and will continue to require financial investments in additional headcount, marketing and customer acquisition costs, additional operational capabilities, and may require the purchase of new inventory. If we are unable to generate sufficient demand in new health and wellness specialties, we may not recover the financial investments we make into new specialties and revenue may not increase in the future.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with U.S. GAAP, we present Adjusted EBITDA (which is a non-GAAP financial measure), Adjusted EBITDA margin (which is a non-GAAP ratio), and Free Cash Flow (which is a non-GAAP financial measure) each as defined below. We use Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We consider Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow to be important measures because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We believe that the use of Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow is helpful to our investors as they are used by management in assessing the health of our business, our operating performance, and our liquidity.

However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures or ratios differently or may use other financial measures or ratios to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow as tools for comparison. Reconciliations are provided below to the most directly comparable financial measures stated in accordance with U.S. GAAP. Investors are encouraged to review our U.S. GAAP financial measures and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes. “Adjusted EBITDA” is defined as net loss before stock-based compensation, depreciation and amortization, acquisition-related costs (which includes (i) acquisition professional services; and (ii) consideration paid for employee compensation with vesting requirements incurred directly as a result of acquisitions, inclusive of revaluation of earn-out consideration recorded in general and administrative expenses), income taxes, change in fair value of liabilities, impairment of long-lived assets, interest income, one-time Merger bonuses and warrant expense, and amortization of debt issuance costs. “Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue.

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The following table reconciles net loss to Adjusted EBITDA for the years ended December 31, 2023, 2022, and 2021 (in thousands):

Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. We compensate for these limitations by providing specific information regarding the U.S. GAAP items excluded from Adjusted EBITDA. When evaluating our performance, you should consider Adjusted EBITDA in addition to, and not as a substitute for, other financial performance measures, including our net loss and other U.S. GAAP results.

Free Cash Flow is a key performance measure that our management uses to assess our liquidity. Because Free Cash Flow facilitates internal comparisons of our historical liquidity on a more consistent basis, we use this measure for business planning purposes. “Free Cash Flow” is defined as net cash provided by (used in) operating activities, less purchases of property, equipment, and intangible assets and investment in website and mobile application development and internal-use software in investing activities.

The following table reconciles net cash provided by (used in) operating activities to Free Cash Flow for the years ended December 31, 2023, 2022, and 2021 (in thousands):

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Some of the limitations of Free Cash Flow include (i) Free Cash Flow does not represent our residual cash flow for discretionary expenditures and our non-discretionary commitments, and (ii) Free Cash Flow includes capital expenditures, the benefits of which may be realized in periods subsequent to those in which the expenditures took place. In evaluating Free Cash Flow, you should be aware that in the future we will have cash outflows similar to the adjustments in this presentation. Our presentation of Free Cash Flow should not be construed as an inference that our future results will be unaffected by these cash outflows or any unusual or non-recurring items. When evaluating our performance, you should consider Free Cash Flow in addition to, and not as a substitute for, other financial performance measures, including our net cash provided by (used in) operating activities and other U.S. GAAP results.

Basis of Presentation

Currently, we conduct business through one operating segment. Substantially all our long-lived assets are maintained in, and a significant majority of our losses are attributable to, the United States of America. The consolidated financial statements include the accounts of our company, our wholly-owned subsidiaries, and variable interest entities for which we are the primary beneficiary. The variable interest entities are: (i) “Affiliated Medical Groups,” which are professional corporations or other professional entities owned by licensed physicians and that engage licensed healthcare professionals (physicians, physician assistants, nurse practitioners, and mental health providers; collectively referred to as “Providers” or individually, a “Provider”) to provide consultation services; and (ii) XeCare, LLC (“XeCare”) and Apostrophe Pharmacy LLC (“Apostrophe Pharmacy”, and together with XeCare, the “Affiliated Pharmacies”), which are licensed mail order pharmacies providing prescription fulfillment solely to our customers. We determined that we are the primary beneficiary of the Affiliated Medical Groups and the Affiliated Pharmacies for accounting purposes because we have the ability to direct the activities that most significantly affect these entities’ economic performance and have the obligation to absorb the entities’ losses. Under the variable interest entity model, we present the results of operations and the financial position of the entities as part of our consolidated financial statements as if the consolidated group were a single economic entity.

Components of Results of Operations

Revenue

We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

Our consolidated revenue primarily comprises of online sales of health and wellness products through our websites and mobile applications, including prescription and non-prescription products. In contracts that contain prescription products issued as the result of a consultation, revenue also includes medical consultation services and post-consultation service support provided by Affiliated Medical Groups. Additionally, revenue is generated through wholesale arrangements.

For information on our significant accounting policies, see Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Cost of revenue

Cost of revenue consists of costs directly attributable to the products shipped and services rendered, including product costs, packaging materials, shipping costs, and labor costs directly related to revenue generating activities. Costs related to free products where there is no expectation of future purchases from a customer and depreciation and amortization on property, equipment, and software are considered to be operating expenses and are excluded from cost of revenue.

Gross profit and gross margin

Our gross profit represents total revenue less our total cost of revenue, and our gross margin is our gross profit expressed as a percentage of our total revenue. Our gross profit and gross margin have been and will continue to be affected by a number of factors, including the prices we charge for our products and services, the costs we incur from our vendors for certain components of our cost of revenues, the mix of the various products and services we sell in a period, the mix of Online Revenue and Wholesale Revenue in a period, volume of fulfillment through affiliated and internal fulfillment capabilities, and our ability to sell our inventory. We expect our gross margin to fluctuate from period to period depending on these and other factors.

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Marketing expenses

The largest component of our marketing expenses consists of our discretionary customer acquisition costs. Customer acquisition costs, also called paid marketing expense, are the advertising and media costs associated with our efforts to acquire new customers, promote our brands, and build awareness for our products and services. Customer acquisition costs include advertising in digital media, social media, television, radio, out-of-home media, and various other media outlets. Marketing expenses also include overhead expenses, including salaries, benefits, taxes, and stock-based compensation for personnel; agency, contractor, and consulting expenses; content production, software, and other marketing operating costs. Marketing is an important driver of growth and we intend to continue to make significant investments in customer acquisition and our marketing organization. Historically, our marketing expenses have increased quarter-over-quarter. We expect this trend to continue, though marketing expenses may fluctuate as a percentage of revenue due to the timing and discretionary nature of these expenses.

Operations and support expenses

Operations and support expenses include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our supply chain, retail, medical group, pharmacy, fulfillment, and customer service functions. These expenses also include operating expenses primarily relating to operating and support functions for facilities, warehousing and fulfillment, payment processing, third-party software and hosting to support those functions, and related depreciation. We expect operations and support expenses to increase for the foreseeable future as we continue to invest in our fulfillment and operating capabilities and grow our business. However, we anticipate operations and support expenses will decrease as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

Technology and development expenses

Technology and development expenses include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our engineering, product management, product development, and data science functions. These expenses also include operating expenses primarily relating to technology and development functions for the operation, maintenance and enhancement of our digital platform, websites and mobile applications, inclusive of related expenses for third-party software and hosting to support those functions, and related depreciation. Expenses also include investments to develop new health and wellness products and services. We expect technology and development expenses to increase for the foreseeable future as we grow our business and continue to invest in our platform and new offerings. However, we anticipate technology and development expenses will decrease as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

General and administrative expenses

General and administrative expenses (“G&A”) include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our executive, legal, human resources, finance, brand strategy, and other corporate functions. These expenses also include operating expenses primarily relating to general and administrative functions for insurance, third-party software and hosting to support those functions, related depreciation and amortization, and other general corporate costs. We expect G&A to increase for the foreseeable future as we increase headcount with the growth of our business. However, we anticipate G&A will decrease as a percentage of revenue over the long term, in part due to our expected execution of disciplined headcount growth, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

Other income (expense)

Other income (expense) primarily consists of interest income from our cash and cash equivalents and investment accounts, as well as the change in fair value of liabilities. Additionally, other income (expense) includes non-operating and one-time charges classified outside of operating expenses.

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(Provision) benefit for income taxes

The (provision) benefit for income taxes primarily consists of federal and state taxes, as well as change in valuation allowance. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates.

Results of Operations

Comparisons for the years ended December 31, 2023 and 2022

The following table sets forth our consolidated statement of operations for the years ended December 31, 2023, 2022, and 2021 and the dollar and percentage change between the three periods (dollars in thousands):

______________

(*)Not meaningful

(1)Includes stock-based compensation expense as follows (in thousands):

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The following table sets forth our results of operations as a percentage of our total revenue for the periods presented:

Revenue

Revenue was $872.0 million for the year ended December 31, 2023 compared to $526.9 million for the year ended December 31, 2022, an increase of $345.1 million, or 65%. For detailed discussion of this increase, refer to “Revenue and Key Business Metrics.”

Cost of revenue and gross profit

Cost of revenue was $157.1 million for the year ended December 31, 2023, compared to $118.2 million for the year ended December 31, 2022, an increase of $38.9 million, or 33%. This increase was primarily due to increased shipping costs of 49%, increased costs associated with Providers of 48%, and increased product and packaging costs of approximately 20%. These increases were due to overall increased business activity with the addition of new Subscribers.

Gross profit was $714.9 million for the year ended December 31, 2023 compared to $408.7 million for the year ended December 31, 2022, an increase of $306.2 million or 75%. Correspondingly, gross margin was 82% for the year ended December 31, 2023 compared to 78% for the year ended December 31, 2022. The increase in gross margin for the year ended December 31, 2023 was primarily due to lower product and packaging costs as a percent of revenue as a result of fulfilling greater order volume by Affiliated Pharmacies at lower costs as compared to third-party pharmacies. This increase was also due to Wholesale Revenue, which is lower margin than Online Revenue, comprising a smaller proportion of total revenue.

Marketing expenses

Marketing expenses were $446.4 million for the year ended December 31, 2023, compared to $272.6 million for the year ended December 31, 2022, an increase of $173.8 million, or 64%. The most significant component of marketing expenses is customer acquisition costs, which increased to $379.7 million for the year ended December 31, 2023, compared to $230.4 million for the year ended December 31, 2022, an increase of $149.3 million, or 65%. The increase in customer acquisition costs was a result

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of management’s decision to increase investment in display, search, and linear and streaming television marketing, as we continue to identify opportunities to drive new customer growth.

Operations and support

Operations and support expenses were $119.9 million for the year ended December 31, 2023, compared to $77.4 million for the year ended December 31, 2022, an increase of $42.5 million, or 55%. The increase in operations and support was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $22.7 million, an increase in order fulfillment, transaction processing, and selling costs of $9.1 million, an increase in stock-based compensation of $4.1 million, and an increase in depreciation, amortization, and technology costs of operations and support functions of $3.6 million.

Technology and development

Technology and development expenses were $48.2 million for the year ended December 31, 2023, compared to $29.2 million for the year ended December 31, 2022, an increase of $19.0 million, or 65%. The increase in technology and development expenses was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $9.5 million, an increase in depreciation, amortization, and technology costs of $4.9 million, and an increase in stock-based compensation of $2.8 million.

General and administrative

General and administrative expenses were $129.9 million for the year ended December 31, 2023, compared to $98.2 million for the year ended December 31, 2022, an increase of $31.7 million, or 32%. The increase in general and administrative expenses was primarily driven by an increase in stock-based compensation of $15.5 million, an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $13.9 million, an increase in depreciation, amortization, and technology costs relating to general and administrative functions of $2.4 million, an increase in professional services of $2.1 million, and an increase in corporate events and travel costs of $1.5 million. The increase in general and administrative expenses was partially offset by a decrease in insurance premiums of $2.8 million.

Other income

Other income was $7.9 million for the year ended December 31, 2023, compared to $3.0 million for the year ended December 31, 2022, an increase of $4.9 million. The change was driven primarily by an increase in interest income of $6.4 million. The increase was partially offset by a loss from the change in fair value of liabilities of $1.1 million for the year ended December 31, 2023 compared to a gain of $0.1 million for the year ended December 31, 2022.

(Provision) benefit for income taxes

Provision for income taxes was $2.0 million for the year ended December 31, 2023, compared to a benefit of less than $0.1 million for the year ended December 31, 2022. The change was primarily due to an increase in current federal and state income taxes.

Liquidity and Capital Resources

As of December 31, 2023, our principal sources of liquidity are cash and cash equivalents in the amount of $96.7 million, which are primarily invested in interest-bearing cash accounts and money market funds, and investments in the amount of $124.3 million, which are invested in U.S. Treasury bills, corporate bonds, government and government agency securities, and asset-backed bonds.

We have historically incurred negative cash flows from operating activities and significant losses from operations. While we had positive cash flows from operating activities for the year ended December 31, 2023, we may continue to incur operating losses in the future due to continued investments in our business. We believe our existing cash resources are sufficient to support planned operations for the next 12 months. As a result, management believes that our current financial resources are sufficient to continue operating activities for at least one year past the issuance date of the consolidated financial statements.

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Our future capital requirements will depend on many factors, including the number of orders we receive, the size of our customer base, the continuing market acceptance of telehealth, and the timing and extent of spend to support the expansion of sales, marketing, development activities, and our facilities, which may be impacted by inflationary, recessionary, or other macroeconomic factors. We expect to continue to pursue opportunities to expand our internal fulfillment capabilities and may acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may also use our cash and cash equivalents to repurchase up to an additional $48 million of our Class A common stock through the fourth quarter of 2025 at management’s discretion pursuant to our share repurchase program. We have based our estimate of our future capital requirements on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise or access additional capital when desired, our business, financial condition, and results of operations would be harmed.

Cash Flows

The following table provides a summary of cash flow data (in thousands):

Cash flows from operating activities

Our largest source of operating cash flows is cash collections from our customers. Our primary use of cash from operating activities includes costs of revenue, marketing expenses, and personnel-related expenditures to support the growth of our business.

Net cash provided by operating activities was $73.5 million for the year ended December 31, 2023. Net cash provided by operating activities included non-cash expense related to stock-based compensation of $66.1 million, depreciation and amortization of $9.5 million, non-cash acquisition-related costs of $2.7 million, and change in fair value of liabilities of $1.1 million, partially offset by a net loss of $23.5 million and net accretion on securities of $5.7 million. In addition, a net cash inflow totaling $20.8 million was attributable to changes in operating assets and liabilities, primarily as a result of an increase in accounts payable and accrued liabilities of $23.8 million and an increase in deferred revenue of $6.3 million. This inflow was partially offset by an increase in prepaid expenses of $6.4 million.

Net cash used in operating activities was $26.5 million for the year ended December 31, 2022. The most significant component of our cash used was a net loss of $65.7 million. This included non-cash expense related to stock-based compensation of $42.8 million, depreciation and amortization of $7.5 million, and impairment of long-lived assets of $1.1 million. In addition, a net cash outflow totaling $14.2 million was attributable to changes in operating assets and liabilities, primarily as a result of a decrease in earn-out payable of $10.2 million, an increase in inventory of $8.0 million, an increase in prepaid expenses of $6.3 million, and a decrease in deferred revenue of $1.7 million. This outflow was partially offset by an increase in accounts payable and accrued liabilities of $13.6 million.

Cash flows from investing activities

Cash flows from investing activities primarily relate to our treasury operations of investing in available-for-sale investments, as well as investment in website and mobile application development and internal-use software, purchases of property, equipment, and intangible assets, and acquisitions.

Net cash used in investing activities for the year ended December 31, 2023 was $12.1 million, which was primarily due to purchases of property, equipment, and intangible assets of $17.2 million and investments of $9.3 million in website development and internal-use software, partially offset by net investment cash inflows of $14.4 million.

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Net cash provided by investing activities for the year ended December 31, 2022 was $34.7 million, which was primarily due to net investment cash inflows of $42.4 million, partially offset by investments of $4.5 million in website development and internal-use software, including investment in our mobile technology, and purchases of property, equipment, and intangible assets of $2.7 million.

Cash flows from financing activities

Net cash used in financing activities for the year ended December 31, 2023 was $11.5 million, which was due to payments for taxes related to net share settlement of equity awards of $14.1 million and repurchases of common stock of $2.0 million, partially offset by proceeds from the exercise of stock options of $2.3 million and proceeds from employee stock purchase plan of $2.3 million.

Net cash used in financing activities for the year ended December 31, 2022 was $33.1 million, which was due to payments for earn-out consideration for acquisitions of $32.7 million and payments for taxes related to net share settlement of equity awards of $3.9 million, partially offset by proceeds from the exercise of stock options of $2.2 million and proceeds from employee stock purchase plan of $1.2 million.

Contractual Obligations and Commitments

Our contractual obligations and commitments include earn-out payable related to an acquisition, operating leases, and non-cancelable purchase obligations primarily related to cloud-based software contracts used in operations. Total contractual obligations and commitments as of December 31, 2023 were $27.7 million, of which $14.4 million was payable within 12 months.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in our financial statements and accompanying notes. Management believes that the estimates, judgments, and assumptions upon which it relies are reasonable based upon information available to it at the time that these estimates, judgments, and assumptions were made. Actual results may differ from management’s estimates. To the extent that there are material differences between these estimates and actual results, our consolidated financial statements will be affected.

Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. These are the policies that we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Business combinations

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with determination of fair values, we may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations.

Any acquired assets from a business combination including intangible assets subject to amortization are continuously monitored and reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, recoverability of assets to be held and used is assessed by comparing the carrying amount of assets with their future underlying net undiscounted cash flows without interest charges. If such assets are considered to be impaired, an impairment is recognized as the amount by which the carrying amount of the assets exceeds the estimated fair values of the assets.

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Performance restricted stock units

Determining the fair value of our performance restricted stock units (“Performance RSUs” or “PRSUs”) on the grant date and at the end of each reporting period requires management to use significant judgment and estimates. The grant date fair value is based on the probable level of achievement of performance targets and closing price of our Class A common stock on the grant date. We estimate the probable level of achievement on the grant date and at the end of each reporting period using a variety of factors, including primarily internal financial forecasts, our performance compared to such forecasts, and publicly disclosed financial guidance and our performance compared to such guidance.

If management determines that it is probable that the level of achievement has increased, we recognize a cumulative catch-up of stock-based compensation expense based on the level of achievement determined at period end in comparison to the prior period. If we determine it is no longer probable that any level of achievement will occur, we discontinue recognition of stock-based compensation expense. If we determine that it is improbable that any level of achievement will occur, we reverse previously recognized stock-based compensation expense.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K. This section of the Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. With the exception of certain 2020 operating expenses which were reclassified during 2022 and certain new key business metrics introduced in this Form 10-K, discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion includes forward-looking statements that involve risks and uncertainties as a result of many factors, including those factors set forth in, or incorporated by reference into, the section entitled “Risk Factors” in this Form 10-K. Our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date hereof or to conform these statements to actual results or revised expectations.

Overview

Hims & Hers is a consumer-first platform transforming the way customers fulfill their health and wellness needs. Our mission is to help the world feel great through the power of better health. We believe that we have the technical platform, distributed provider network, and access to clinical capabilities to lead the migration of routine office visits to a digital format. The Hims & Hers platform includes access to a highly-qualified and technologically-capable provider network, a clinically-focused electronic medical record system, digital prescriptions, and cloud pharmacy fulfillment. Our digital platform enables access to treatments for a broad range of conditions, including those related to sexual health, hair loss, dermatology, mental health, and primary care. Hims & Hers connects patients to licensed healthcare professionals who can prescribe medications when appropriate. Prescriptions are fulfilled online through licensed pharmacies on a subscription basis, making accessing treatments simple, affordable, and straightforward. Through the Hims & Hers mobile applications, consumers can access a range of educational programs, wellness content, community support, and other services that promote lifelong health and wellness.

In addition, we also offer access to a range of health and wellness products designed to meet individual needs, which can include curated prescription and non-prescription products. Our products and services are available for purchase directly by customers on our websites and mobile applications. Additionally, Hims & Hers products can be found in tens of thousands of top retail locations in the United States.

Reclassifications

During the year ended December 31, 2022, we voluntarily reclassified certain operating expenses within the consolidated statements of operations and comprehensive loss. Prior period amounts have been reclassified to conform to this presentation. These changes have no impact on our previously reported financial position or results of operations. We elected the new presentation to provide additional granularity on our costs and to better align with management’s view of our operating results.

These classification changes are related to breaking out our previous selling, general, and administrative caption into three new captions entitled: (i) operations and support, (ii) technology and development, and (iii) general and administrative. The operations and support caption includes costs related to our supply chain, fulfillment, and customer support functions. The technology and development caption includes costs related to the operation and enhancement of our digital platform and product development. The general and administrative caption includes costs relating to our corporate functions, including personnel costs, professional services, insurance, depreciation and amortization relating to corporate operating activities, and other general corporate costs.

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Revenue and Key Business Metrics

Our management monitors two financial results, Online Revenue and Wholesale Revenue (both defined below), to track our total revenue generation. We also monitor the additional key business metrics set forth below to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. Increases or decreases in these key business metrics may not correspond with increases or decreases in our revenue.

The limitations our key business metrics have as an analytical tool include: (i) they might not accurately predict our future financial results pursuant to accounting principles generally accepted in the United States of America (“U.S. GAAP”); and (ii) other companies, including companies in our industry, may calculate our key business metrics or similarly titled measures differently, which reduces their usefulness as comparative measures.

As our business grows and evolves, we continually and strategically review our key metrics. Beginning with this Annual Report on Form 10-K, we commenced reporting “Subscribers” and “Monthly Online Revenue Per Average Subscriber” as additional key business metrics (as defined below). As a result of broadening the number of health and wellness categories the Company serves, we believe it is important to measure the holistic relationship that we have with our customers. Additionally, the recurring nature of our revenue necessitates the need for metrics that provide greater visibility into both the breadth and engagement of users on our platform. We believe Subscribers represent a more accurate reflection of the number of distinct users that we have on our platform relative to the number of subscriptions, and beginning with the three months ending March 31, 2023, we anticipate no longer reporting “Subscriptions” as a key business metric. Monthly Online Revenue per Average Subscriber reflects how users’ engagement with products across our platform is evolving. These changes are intended to better align our key business metrics with our internal priorities and business plans.

Brief descriptions of our key business metrics, beginning with our new metrics, are provided below.

“Subscribers” are customers who have one or more Subscriptions pursuant to which they have agreed to be automatically billed on a recurring basis at a defined cadence.

“Monthly Online Revenue per Average Subscriber” is defined as Online Revenue divided by “Average Subscribers”, which amount is then further divided by the number of months in a period. “Average Subscribers” are calculated as the sum of the Subscribers at the beginning and end of a given period divided by 2.

“Online Revenue” represents the sales of products and services on our platform, net of refunds, credits, and chargebacks, and includes revenue recognition adjustments recorded pursuant to U.S. GAAP, primarily relating to deferred revenue and returns reserve. Online Revenue is generated by selling directly to consumers through our websites and mobile applications. Our Online Revenue consists of products and services purchased by customers directly through our online platform. The majority of our Online Revenue is subscription-based, where customers agree to be billed on a recurring basis to have products and services automatically delivered to them.

“Wholesale Revenue” represents non-prescription product sales to retailers through wholesale purchasing agreements. We sell only non-prescription products to wholesale partners. In addition to being revenue generative and profitable, wholesale partnerships have the added benefit of generating brand awareness with new customers in physical environments.

“Subscriptions” are defined as the number of customer agreements where the customer has agreed to be automatically billed on a recurring basis at a defined cadence. The billing cadence is typically defined as a number of months (for example, billed every month or every three months). Subscriptions are excluded from our reporting when payment has not occurred at the contracted billing cadence. Subscription billing is preferred by many of our customers because most of the products and services we make available are most effective when taken consistently and continuously. Customers can cancel subscriptions in between billing periods to stop receiving additional products and services and can reactivate subscriptions to continue receiving additional products and services. Subscriptions are sometimes also referred to by us as “subscription memberships” or “memberships.”

“Net Orders” are defined as the number of online customer orders minus transactions related to refunds, credits, chargebacks, and other negative adjustments. Net Orders represent transactions made on our platform during a defined period of time and exclude revenue recognition adjustments recorded pursuant to U.S. GAAP.

Average Order Value (“AOV”) is defined as Online Revenue divided by Net Orders.

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The table below provides a breakdown of total revenue between Online Revenue and Wholesale Revenue, for the years ended December 31, 2022, 2021, and 2020, as well as key metrics that drive Online Revenue (i.e., Subscribers, Monthly Online Revenue per Average Subscriber, Subscription, Net Orders, and AOV), and the dollar and percentage change between such periods (in thousands, except for Monthly Online Revenue per Average Subscriber and AOV):

We generated $502.5 million in Online Revenue for the year ended December 31, 2022, an increase of $243.3 million, or 94%, as compared to $259.2 million for the year ended December 31, 2021. Growth in Online Revenue for the year ended December 31, 2022 was primarily driven by growth in Subscribers, from whom we generated recurring and stable Monthly Online Revenue per Average Subscriber, as well as a full year of revenue for both Honest Health Limited, which was acquired in June 2021 and is now Hims & Hers UK Limited (“HHL”), and YoDerm, Inc. (“Apostrophe”), which was acquired in July 2021.

We generated $24.4 million in Wholesale Revenue for the year ended December 31, 2022, an increase of $11.7 million, or 92%, as compared to $12.7 million for the year ended December 31, 2021. This increase was primarily due to the addition of new retail partners in the fourth quarter of 2021 and throughout 2022, which increased the overall volume of wholesale orders. Wholesale Revenue has trended upward historically but can fluctuate on a quarter-to-quarter basis due to various factors, including delayed inventory purchases from our partners, seasonality trends, launches of new merchants and timing of specialized campaigns.

Subscribers grew 88% to approximately 1,040,000 as of December 31, 2022 as compared to approximately 554,000 Subscribers as of December 31, 2021. Subscriptions grew 83% to approximately 1,116,000 as of December 31, 2022 as compared to approximately 609,000 Subscriptions as of December 31, 2021. Growth in Subscribers and Subscriptions for the year ended December 31, 2022 was driven by increased marketing expenses, increased traffic to our platform (through our websites and mobile applications), and increased customer conversion rates from improved onsite and customer onboarding experiences. Subscribers grew 91% to approximately 554,000 as of December 31, 2021 as compared to approximately 290,000 Subscribers as of December 31, 2020. Growth in Subscribers for the year ended December 31, 2021 was driven by increased customer conversion rates from improved onsite and customer onboarding experiences, increased customer engagement with our marketing campaigns, increased retention rates of existing Subscribers and increased marketing expenses and the addition of Subscribers from the acquisitions of Apostrophe and HHL. Monthly Online Revenue per Average Subscriber grew 4% to $53 for the year ended December 31, 2022 as compared to $51 for the year ended December 31, 2021. Monthly Online Revenue per Average Subscriber grew 2% to $51 for the year ended December 31, 2021 as compared to $50 for the year ended December 31, 2020. The Monthly Online Revenue per Average Subscriber has remained relatively stable as a result of recurring and predictable uptake of our offerings by Subscribers.

As a result of growth in Subscribers and Subscriptions, we generated approximately 6.1 million Net Orders for the year ended December 31, 2022, an increase of 75% as compared to approximately 3.5 million Net Orders for the year ended December 31, 2021. For the year ended December 31, 2022, AOV was $82, an increase of 11% compared to $74 for the year ended December 31, 2021. AOV growth for the year ended December 31, 2022 was driven by higher price points from product bundles with product mixes shifting towards higher priced items and longer duration multi-month Subscriptions.

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We continuously test and optimize the online experience and offerings to improve the customer experience, maximize sales, and improve gross margin. Our Subscribers (sometimes also referred to by us as “members”) select a cadence at which they wish to receive product shipments. In addition to a monthly cadence, we offer Subscribers the ability to select from a range of multi-month Subscription shipment cadences, from every two to twelve months, depending on the product. The Subscriber is billed upon each shipment. Subscribers can cancel subscriptions in between billing periods to stop receiving additional products and can reactivate subscriptions at any time. In addition, our customers can purchase product bundles or defined product kits, either consisting of non-prescription over-the-counter products or non-prescription products together with prescription medications, for a single all-inclusive price. Such offerings and their uptake by customers have contributed to the stable and predictable nature of our Monthly Online Revenue per Average Subscriber. Additionally, the uptake of these offerings has resulted in higher gross profits and gross margins for our sales of products and services on our platform. For example, for multi-month Subscriptions, we may incur shipping and fulfillment expenses two or four times per year (for six-month and three-month Subscription cadences, respectively) versus twelve times per year for monthly Subscriptions. The customer uptake of multi-month Subscriptions results in lower recurring costs and higher gross margins as compared to monthly Subscriptions.

Key Factors Affecting Results of Operations

We believe that our performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges.

New customer acquisition

Our ability to attract new customers is a key factor for our future growth. To date, we have successfully acquired new customers through marketing and the development of our brands as well as through acquisitions. As a result, revenue has increased each year since our launch. If we are unable to acquire enough new customers in the future, revenue might decline. New customer acquisition could be negatively impacted if our marketing efforts are less effective in the future. Increases in advertising rates could also negatively impact our ability to acquire new customers. Consumer tastes, preferences, and sentiment for our brands may also change and result in decreased demand for our products and services. Changes in law or regulatory enforcement could also negatively impact our ability to acquire new customers, including changes to privacy laws that could impact customer acquisition costs.

Retention of customers

Our ability to retain customers is a key factor in our ability to generate revenue. Most of our customers purchase products and services through Subscription-based plans, where Subscribers are billed and sent products and/or receive services on a recurring basis. The recurring nature of this revenue provides us with a certain amount of predictability for future revenue if past Subscriber behavior stays consistent in the future. In addition, the consistent uptake by Subscribers of our offerings has contributed to the stable and predictable nature of our Monthly Online Revenue per Average Subscriber. We expect to retain a majority or a higher percentage of revenue from Subscribers who have maintained a Subscription for more than two years (sometimes referred to by us as “long-term revenue retention”). However, if customer behavior changes, or our assumptions regarding long-term revenue retention are incorrect and Subscriber retention decreases in the future, then future revenue will be negatively impacted. The ability of our Subscribers to continue to pay for our products and services will also impact the future results of our operations.

Investments in growth

We expect to continue to focus on long-term growth. We intend to continue to invest in our fulfillment and operating capabilities, including our Affiliated Pharmacies (as defined below) and warehousing facilities, with the goal of fulfilling nearly all of our pharmaceutical and over-the-counter customer orders through affiliated and internal fulfillment capabilities. For example, we expect to make investments in the expansion of our current facilities over the next two years. Additionally, we expect to make significant investments in marketing to acquire new customers and we expect to continue to make investments in product offerings and customer experience. We are working to enhance our offerings and expand the breadth of health and wellness products and services offered on our websites and mobile applications. This includes investments in personalized product offerings, including in our compounding capabilities. This also includes further investments in and development of mobile phone technology, including our mobile applications, in order to improve the customer experience on our platform. In the short term, we expect these investments to increase our operating expenses; however, in the long term, we anticipate that

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these investments will positively impact our results of operations. If we are unsuccessful at improving our offerings or are unable to generate additional demand for our offerings, we may not recover the financial investments we make into the business and revenue may not increase in the future.

Expansion into new categories

We expect to continue to expand into new health and wellness categories with our offerings. Category expansion allows us to increase the number of health and wellness consumers for whom we can provide products and services. It also allows us to offer access to treatment of additional conditions that may already affect our current customers. Expanding into new health and wellness categories has required and will continue to require financial investments in additional headcount, marketing and customer acquisition costs, additional operational capabilities, and may require the purchase of new inventory. If we are unable to generate sufficient demand in new health and wellness categories, we may not recover the financial investments we make into new categories and revenue may not increase in the future.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with U.S. GAAP, we present Adjusted EBITDA (which is a non-GAAP financial measure), and Adjusted EBITDA margin (which is a non-GAAP ratio), each as defined below. We use Adjusted EBITDA and Adjusted EBITDA margin to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA and Adjusted EBITDA margin, when taken together with the corresponding U.S. GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook. We consider Adjusted EBITDA and Adjusted EBITDA margin to be important measures because they help illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We believe that the use of Adjusted EBITDA and Adjusted EBITDA margin is helpful to our investors as they are used by management in assessing the health of our business and our operating performance.

However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP financial measures or ratios differently or may use other financial measures or ratios to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA or Adjusted EBITDA margin as tools for comparison. Reconciliations are provided below to the most directly comparable financial measures stated in accordance with U.S. GAAP. Investors are encouraged to review our U.S. GAAP financial measures and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes. “Adjusted EBITDA” is defined as net loss before stock-based compensation, depreciation and amortization, acquisition-related costs (which includes (i) acquisition professional services; and (ii) consideration paid for employee compensation with vesting requirements incurred directly as a result of acquisitions, inclusive of revaluation of earn-out consideration recorded in general and administrative expenses), impairment of long-lived assets, income taxes, change in fair value of liabilities, net interest, one-time Merger bonuses and warrant expense, and amortization of debt issuance costs. “Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue.

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The following table reconciles net loss to Adjusted EBITDA for the years ended December 31, 2022, 2021, and 2020 (in thousands):

Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. We compensate for these limitations by providing specific information regarding the U.S. GAAP items excluded from Adjusted EBITDA. When evaluating our performance, you should consider Adjusted EBITDA in addition to, and not as a substitute for, other financial performance measures, including our net loss and other U.S. GAAP results.

Basis of Presentation

Currently, we conduct business through one operating segment. Substantially all our long-lived assets are maintained in, and our losses are attributable to, the United States of America. Foreign operations are immaterial to the consolidated financial statements. The consolidated financial statements include the accounts of our company, our wholly-owned subsidiaries, and variable interest entities for which we are the primary beneficiary. The variable interest entities are: (i) “Affiliated Medical Groups,” which are professional corporations or other professional entities owned by licensed physicians and that engage licensed healthcare professionals (physicians, physician assistants, nurse practitioners, and mental health providers; collectively referred to as “Providers” or individually, a “Provider”) to provide consultation services; and (ii) XeCare, LLC (“XeCare”) and Apostrophe Pharmacy LLC (“Apostrophe Pharmacy”, and together with XeCare, the “Affiliated Pharmacies”), which are licensed mail order pharmacies providing prescription fulfillment solely to our customers. We determined that we are the primary beneficiary of the Affiliated Medical Groups and the Affiliated Pharmacies for accounting purposes because we have the ability to direct the activities that most significantly affect these entities’ economic performance and have the obligation to absorb the entities’ losses. Under the variable interest entity model, we present the results of operations and the financial position of the entities as part of our consolidated financial statements as if the consolidated group were a single economic entity.

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Components of Results of Operations

Revenue

We recognize revenue when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

Our consolidated revenue primarily comprises of online sales of health and wellness products through our websites and mobile applications, including prescription and non-prescription products. In contracts that contain prescription products issued as the result of a consultation, revenue also includes medical consultation services provided by Affiliated Medical Groups. Additionally, revenue is generated through wholesale arrangements.

For information on our significant accounting policies, see Note 2 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Cost of revenue

Cost of revenue consists of costs directly attributable to the products shipped and services rendered, including product costs, packaging materials, shipping costs, and labor costs directly related to revenue generating activities. Costs related to free products where there is no expectation of future purchases from a customer and depreciation and amortization on property and equipment are considered to be operating expenses and are excluded from cost of revenue.

Gross profit and gross margin

Our gross profit represents total revenue less our total cost of revenue, and our gross margin is our gross profit expressed as a percentage of our total revenue. Our gross profit and gross margin have been and will continue to be affected by a number of factors, including the prices we charge for our products and services, the costs we incur from our vendors for certain components of our cost of revenues, the mix of the various products and services we sell in a period, the mix of Online Revenue and Wholesale Revenue in a period, the impact of acquisitions, and our ability to sell our inventory. We expect our gross margin to fluctuate from period to period depending on these and other factors.

Marketing expenses

The largest component of our marketing expenses consists of our discretionary customer acquisition costs. Customer acquisition costs, also called paid marketing expense, are the advertising and media costs associated with our efforts to acquire new customers, promote our brands, and build awareness for our products and services. Customer acquisition costs include advertising in digital media, social media, television, radio, out-of-home media, and various other media outlets. Marketing expenses also include overhead expenses, including salaries, benefits, taxes, and stock-based compensation for personnel; agency, contractor, and consulting expenses; content production, software, and other marketing operating costs. Marketing is an important driver of growth and we intend to continue to make significant investments in customer acquisition and our marketing organization. Historically, our marketing expenses have increased quarter-over-quarter, with such increases typically reflecting a decreasing percentage of revenue over recent quarters with respect to a given cohort. We expect this trend to continue, though marketing expenses may fluctuate as a percentage of revenue due to the timing and discretionary nature of these expenses.

Operations and support expenses

Operations and support expenses include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our supply chain, retail, medical group, pharmacy, fulfillment, and customer service functions. These expenses also include operating expenses primarily relating to operating and support functions for facilities, warehousing and fulfillment, payment processing, third-party software and hosting to support those functions, and related depreciation. We expect operations and support expenses to increase for the foreseeable future as we continue to invest in our fulfillment and operating capabilities and grow our business. However, we anticipate operations and

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support expenses will decrease as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

Technology and development expenses

Technology and development expenses include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our engineering, product management, product development, and data science functions. These expenses also include operating expenses primarily relating to technology and development functions for the operation, maintenance and enhancement of our digital platform, websites and mobile applications, inclusive of related expenses for third-party software and hosting to support those functions, and related depreciation. Expenses also include investments to develop new health and wellness products and services. We expect technology and development expenses to increase for the foreseeable future as we grow our business and continue to invest in our platform and new offerings. However, we anticipate technology and development expenses will decrease as a percentage of revenue over the long term, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

General and administrative expenses

General and administrative expenses (“G&A”) include the salaries, benefits, taxes, professional services expenses, and stock-based compensation for personnel, consultants, and contractors for our executive, legal, human resources, finance, brand strategy, and other corporate functions. These expenses also include operating expenses primarily relating to general and administrative functions for insurance, third-party software and hosting to support those functions, related depreciation and amortization, and other general corporate costs. We expect G&A to increase for the foreseeable future as we increase headcount with the growth of our business. However, we anticipate G&A will decrease as a percentage of revenue over the long term, in part due to our expected execution of disciplined headcount growth, although it may fluctuate as a percentage of total revenue from period to period due to the timing and amount of these expenses.

Other income (expense)

Other income (expense) primarily consists of the change in fair value of liabilities, as well as interest income from our cash and cash equivalents and investment accounts. Additionally, other income (expense) includes non-operating and one-time charges classified outside of operating expenses and interest expense related to our past borrowing arrangements with a leading financial institution, which have been paid in full.

Benefit (provision) for income taxes

The benefit (provision) for income taxes primarily consists of state taxes and change in valuation allowance. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates.

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Results of Operations

Comparisons for the years ended December 31, 2022, 2021, and 2020

The following table sets forth our consolidated statement of operations for the years ended December 31, 2022, 2021, and 2020 and the dollar and percentage change between the three periods (dollars in thousands):

*______________

(*)Not meaningful

(1)Includes stock-based compensation expense as follows (in thousands):

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The following table sets forth our results of operations as a percentage of our total revenue for the periods presented:

Revenue

Revenue was $526.9 million for the year ended December 31, 2022 compared to $271.9 million for the year ended December 31, 2021, an increase of $255.0 million, or 94%. For detailed discussion of this increase, refer to “—Revenue and Key Business Metrics.”

Cost of revenue and gross profit

Cost of revenue was $118.2 million for the year ended December 31, 2022, compared to $67.4 million for the year ended December 31, 2021, an increase of $50.8 million, or 75%. This increase was primarily due to increased costs associated with medical consultation services of 97%, increased shipping costs of 74%, and increased product and packaging costs of approximately 67%. These increases were due to overall increased business activity with the addition of new Subscribers, as well as a full year of operations for both HHL and Apostrophe for the year ended December 31, 2022.

Gross profit was $408.7 million for the year ended December 31, 2022 compared to $204.5 million for the year ended December 31, 2021, an increase of $204.2 million or 100%. Correspondingly, gross margin was 78% for the year ended December 31, 2022 compared to 75% for the year ended December 31, 2021. The increase in gross margin for the year ended December 31, 2022 was primarily due to lower product and packaging costs as a percent of revenue as a result of fulfilling greater order volume by Affiliated Pharmacies at lower costs as compared to third-party pharmacies. This increase was partially offset by including a full year of operations for both HHL and Apostrophe for the year ended December 31, 2022.

Marketing expenses

Marketing expenses were $272.6 million for the year ended December 31, 2022, compared to $135.9 million for the year ended December 31, 2021, an increase of $136.7 million or 101%. The most significant component of marketing expenses is customer acquisition costs, which increased to $230.4 million for the year ended December 31, 2022, compared to $99.1 million for the year ended December 31, 2021, an increase of $131.3 million or 132%. The increase in customer acquisition costs was a result of management’s decision to increase investment in display, search, and linear and streaming television marketing, as we

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continue to identify opportunities to drive new customer growth, as well as the customer acquisition costs associated with a full year of the operations of HHL and Apostrophe for the year ended December 31, 2022.

Operations and support

Operations and support expenses were $77.4 million for the year ended December 31, 2022, compared to $47.6 million for the year ended December 31, 2021, an increase of $29.8 million or 63%. The increase in operations and support was primarily driven by an increase in employee compensation (comprising salaries and wages, benefits, taxes, and performance bonuses, and excluding stock-based compensation) of $12.3 million, an increase in order fulfillment, transaction processing, and selling costs of $9.0 million, an increase in professional services of $5.0 million, and depreciation, amortization, and technology costs of operations and support functions of $1.8 million.

Operations and support expenses were $47.6 million for the year ended December 31, 2021, compared to $28.3 million for the year ended December 31, 2020, an increase of $19.3 million or 68%. The increase in operations and support was primarily driven by an increase in employee compensation (excluding stock-based compensation) of $8.1 million, an increase in order fulfillment, transaction processing, and selling costs of $5.2 million, an increase in stock-based compensation of $2.6 million, and an increase in depreciation, amortization, and technology costs of operations and support functions of $1.7 million.

Technology and development

Technology and development expenses were $29.2 million for the year ended December 31, 2022, compared to $22.4 million for the year ended December 31, 2021, an increase of $6.9 million or 31%. The increase in technology and development expenses were primarily driven by an increase in employee compensation (excluding stock-based compensation) of $5.3 million and an increase in depreciation, amortization, and technology costs of $2.8 million. These costs were partially offset by a decrease in product development costs of $1.3 million, which primarily resulted from one-time costs incurred during the third quarter of 2021.

Technology and development expenses were $22.4 million for the year ended December 31, 2021, compared to $11.2 million for the year ended December 31, 2020, an increase of $11.1 million or 99%. The increase in technology and development expenses were primarily driven by an increase in stock-based compensation of $4.2 million, an increase in employee compensation (excluding stock-based compensation) of $4.1 million, an increase in product development costs of $1.6 million, and an increase in depreciation, amortization, and technology costs of $1.2 million.

General and administrative

General and administrative expenses were $98.2 million for the year ended December 31, 2022, compared to $113.7 million for the year ended December 31, 2021, a decrease of $15.5 million or 14%. The decrease in general and administrative expenses was primarily driven by a decrease in stock-based compensation of $19.2 million. The decrease in stock-based compensation was attributable to the expenses incurred during the year ended December 31, 2021 related to the earn-out consideration issued as part of the Merger (as defined in Note 1 – Organization to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K) as well as the recognition of expense related to stock options granted to the Chief Executive Officer and vesting of restricted stock units, which were both contingent upon the achievement of a liquidity event that was satisfied upon the closing of the Merger. All of these resulted in either one-time expenses or cumulative catch-up expense as a result of the Merger. In the year ended December 31, 2021, we also incurred $5.2 million of bonus expense almost entirely as a result of the previously disclosed transaction bonus related to the Merger. Additionally, for the year ended December 31, 2022, the decrease in general and administrative expenses was attributable to acquisition fees of $6.9 million related to the Merger in 2021. These decreases were partially offset by an increase in employee compensation (excluding stock-based compensation) of $8.5 million, an increase in depreciation, amortization, and technology costs relating to general and administrative functions of $3.8 million, an increase in insurance premiums of $1.3 million, and an increase in corporate events and travel costs of $1.0 million. Even though employee compensation increased year over year, it resulted in a decrease in general and administrative expenses as a percent of revenue due in part to the Company’s execution of disciplined headcount growth.

General and administrative expenses were $113.7 million for the year ended December 31, 2021, compared to $26.0 million for the year ended December 31, 2020, an increase of $87.6 million, or 337%. The increase in general and administrative expenses was primarily driven by an increase in stock-based compensation of $46.1 million. The increase in stock-based compensation was primarily attributable to the expenses incurred during the year ended December 31, 2021 for either one-time expenses or

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cumulative catch-up expense as a result of the Merger as discussed above. In the year ended December 31, 2021, we also incurred $5.2 million of bonus expense almost entirely as a result of the previously disclosed transaction bonus related to the Merger. Furthermore, for the year ended December 31, 2021, the increase in general and administrative expenses was also attributable to an increase in employee compensation (excluding stock-based compensation) of $9.9 million, an increase in professional services of $8.3 million, an increase in insurance premiums of $7.2 million, an increase in acquisition fees of $6.9 million, and an increase in depreciation, amortization, and technology costs relating to general and administrative functions of $4.1 million.

Other income

Other income was $3.0 million for the year ended December 31, 2022, compared to $4.2 million for the year ended December 31, 2021, a decrease of $1.3 million. The change was driven primarily by a decrease in the gain from the change in fair value of liabilities of $3.7 million, partially offset by an increase in interest income of $2.2 million.

Benefit (provision) for income taxes

Benefit for income taxes was less than $0.1 million for the year ended December 31, 2022 compared to $3.1 million for the year ended December 31, 2021. The change was primarily due to the partial release of valuation allowance totaling $3.1 million in the third quarter of 2021 as a result of the tax liability recorded for the Apostrophe acquisition, serving as a source of income for existing tax assets.

Liquidity and Capital Resources

As of December 31, 2022, our principal sources of liquidity are cash and cash equivalents in the amount of $46.8 million, which are invested in money market funds and government bonds, and investments in the amount of $132.9 million, which are invested in corporate bonds, as well as government and government agency securities.

During the year ended December 31, 2022, we made payments for the Apostrophe acquisition earn-out payable totaling $42.8 million, with such payment amounts determined in fiscal year 2021 in accordance with the terms of the related acquisition agreement. The Apostrophe earn-out payments totaling $42.8 million are recorded: (i) $10.1 million within operating activities; and (ii) $32.7 million within financing activities on the consolidated statements of cash flows. No further earn-out payments are due under the Apostrophe acquisition agreement.

We have historically incurred negative cash flows from operating activities and significant losses from operations in the past. We expect to continue to incur operating losses at least for the next 12 months due to the investments that we intend to make in our business. We believe our existing cash resources and funds raised from the closing of the Merger are sufficient to support planned operations for the next 12 months. As a result, management believes that our current financial resources are sufficient to continue operating activities for at least one year past the issuance date of the consolidated financial statements.

Our future capital requirements will depend on many factors, including the number of orders we receive, the size of our customer base, the continuing market acceptance of telehealth, and the timing and extent of spend to support the expansion of sales, marketing, development activities, and our facilities, which may be impacted by inflationary or other macroeconomic factors. We completed two acquisitions in 2021 and expect to continue to pursue opportunities to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We have based our estimate of our future capital requirements on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations would be harmed.

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Cash Flows

The following table provides a summary of cash flow data (in thousands):

Cash flows from operating activities

Our largest source of operating cash flows is cash collections from our customers. Our primary use of cash from operating activities includes costs of revenue, marketing expenses, and personnel-related expenditures to support the growth of our business.

Net cash used in operating activities was $26.5 million for the year ended December 31, 2022. The most significant component of our cash used was a net loss of $65.7 million. This included non-cash expense related to stock-based compensation of $42.8 million, depreciation and amortization of $7.5 million, and impairment of long-lived assets of $1.1 million. In addition, a net cash outflow totaling $14.2 million was attributable to changes in operating assets and liabilities, primarily as a result of a decrease in earn-out payable of $10.2 million, an increase in inventory of $8.0 million, an increase in prepaid expenses of $6.3 million, and a decrease in deferred revenue of $1.7 million. This outflow was partially offset by an increase in accounts payable and accrued liabilities of $13.6 million.

Net cash used in operating activities was $34.4 million for the year ended December 31, 2021. The most significant component of our cash used was a net loss of $107.7 million. This included non-cash expense related to stock-based compensation of $67.2 million, depreciation and amortization of $4.1 million, net amortization on securities of $2.2 million, and non-cash acquisition-related costs of $1.2 million. Non-cash expense was partially offset by non-cash income of $3.8 million related to the change in fair value of liabilities and benefit for deferred taxes of $3.4 million. In addition, a net cash inflow totaling $3.5 million was attributable to changes in operating assets and liabilities, primarily as a result of an increase in accounts payable and accrued liabilities of $10.1 million, a decrease in prepaid expenses of $3.2 million, and an increase in deferred revenue of $1.4 million. This inflow was partially offset by an increase in inventory of $9.6 million.

Cash flows from investing activities

Cash flows from investing activities primarily relate to our treasury operations of investing in available-for-sale investments, as well as acquisitions, investment in website and mobile application development and internal-use software, and purchases of property and equipment.

Net cash provided by investing activities for the year ended December 31, 2022 was $34.7 million, which was primarily due to net investment cash inflows of $42.4 million, partially offset by investments in website development and internal-use software, including investment in our mobile technology of $4.5 million, and purchases of property, equipment, and intangible assets of $2.7 million.

Net cash used in investing activities for the year ended December 31, 2021 was $156.3 million, which was primarily due to net investment cash outflows of $104.8 million, as well as acquisition of businesses, net of cash acquired, of $46.5 million and website development and internal-use software, including investment in our mobile technology of $4.2 million.

Cash flows from financing activities

Net cash used in financing activities for the year ended December 31, 2022 was $33.1 million, which was primarily due to payments for earn-out consideration for acquisitions of $32.7 million and payments for taxes related to net share settlement of equity awards of $3.9 million, partially offset by proceeds from the exercise of stock options of $2.2 million and proceeds from employee stock purchase plan of $1.2 million.

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Net cash provided by financing activities for the year ended December 31, 2021 was $235.0 million, which was primarily due to the proceeds from the issuance of Class A common stock as a result of the Merger of $197.7 million, proceeds from the PIPE Investment (as defined in the accompanying consolidated financial statements) of $75.0 million, proceeds from the exercise of warrants and stock options of $2.0 million, and proceeds received from employee repayment of promissory notes of $1.2 million. This cash inflow was partially offset by payments related to pre-closing stock repurchase of $22.0 million, Merger transaction costs of $12.9 million, and payments for taxes related to net share settlement of equity awards of $6.0 million.

Contractual Obligations and Commitments

Our contractual obligations and commitments include earn-out liabilities related to an acquisition, operating leases, and non-cancelable purchase obligations primarily related to cloud-based software contracts used in operations. Total contractual obligations and commitments as of December 31, 2022 were $10.1 million, of which $3.1 million was payable within 12 months.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results may differ from management’s estimates. To the extent that there are material differences between these estimates and actual results, our consolidated financial statements will be affected.

On an ongoing basis, we evaluate our estimates, judgements, and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. These are the policies that we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.

Revenue recognition

Our consolidated revenue primarily comprises online sales of health and wellness products and services through our websites and mobile applications, including prescription and non-prescription products. In contracts that contain prescription products issued as the result of a consultation, revenue also includes medical consultation services provided by Affiliated Medical Groups. Additionally, we offer a range of health and wellness products through wholesale partners.

For Online Revenue, we define our customer as an individual who purchases products or services through our websites or mobile applications. For Wholesale Revenue, we define our customer as a wholesale partner, with the exception of consignment arrangements, where our customer is defined as an individual who purchases products through certain third-party platforms. The transaction price in our contracts with customers is the total amount of consideration to which we expect to be entitled in exchange for transferring products or services to the customer.

Our contracts that contain prescription products issued as the result of a consultation include two performance obligations: access to (i) products and (ii) consultation services. Our contracts for prescription refills and contracts that do not contain prescription products have a single performance obligation. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product to the customer and, in contracts that contain services, by the provision of consultation services to the customer. We satisfy our performance obligation for products at a point in time, which is upon delivery of the products to a third-party carrier. We satisfy our performance obligation for services over the period of the consultation service, which is typically within one day. The customer obtains control of the products and services upon our completion of our performance obligations.

For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling price is based on the prices at which we separately sell the products and services, as well as market and cost plus estimates.

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To fulfill our promise to customers for contracts that include professional medical consultations, we maintain relationships with various Affiliated Medical Groups and Providers. We account for service revenue as a principal in the arrangement with our customers. This conclusion is reached because (i) we determine which Affiliated Medical Group and Provider provides the consultation to the customer; (ii) we are primarily responsible for the satisfactory fulfillment and acceptability of the services; (iii) we incur costs for consultation services even for visits that do not result in a prescription and the sale of products; and (iv) we, at our sole discretion, set all listed prices charged on our websites and mobile applications for products and services.

Additionally, to fulfill our promise to customers for contracts that include sale of prescription products, we maintain relationships with (i) certain third-party pharmacies (“Partner Pharmacies” or individually, a “Partner Pharmacy”) and (ii) Affiliated Pharmacies. The Partner Pharmacies and the Affiliated Pharmacies fill prescription orders for customers who have received a prescription from a prescribing Provider through our websites and mobile applications. We account for prescription product revenue as a principal in the arrangement with our customers. This conclusion is reached because (i) we have sole discretion in determining which Partner Pharmacy or Affiliated Pharmacy fills a customer’s prescription; (ii) Partner Pharmacies and Affiliated Pharmacies fill the prescription based on fulfillment instructions provided by us, including using our branded packaging for generic products; (iii) we are primarily responsible to the customer for the satisfactory fulfillment and acceptability of the order; (iv) we are responsible for refunds of the prescription medication after transfer of control to the customer; and (v) we, at our sole discretion, set all listed prices charged on our websites and mobile applications for products and services.

We estimate refunds using the expected value method primarily based on historical refunds granted to customers. We update our estimate at the end of each reporting period and recognize the estimated amount as contra-revenue with a corresponding refund liability. Sales, value-added, and other taxes are excluded from the transaction price and, therefore, from revenue.

We account for shipping activities, consisting of direct costs to ship products performed after the control of a product has been transferred to the customer, in cost of revenue.

For online sales, payment for prescription medication and non-prescription products is typically collected from the customer a few days in advance of product shipment. Contract liabilities are recorded when payments have been received from the customer for undelivered products or services and are recognized as revenue when the performance obligations are later satisfied. Contract liabilities consisting of balances related to customer prepayments are recognized as current deferred revenue on the consolidated balance sheets since the associated revenue will be primarily recognized within the following month. For wholesale arrangements, payments are collected in accordance with contract terms.

Consolidation of variable interest entities

U.S. GAAP requires variable interest entities to be consolidated if an entity is the primary beneficiary. Under the variable interest model, the primary beneficiary is determined based on which entity, if any, has (i) the power to direct the activities of the variable interest entity that most significantly impacts the variable interest entity’s economic performance and (ii) the obligations to absorb losses that could potentially be significant to the variable interest entity or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity.

We determined that we are the primary beneficiary of the Affiliated Medical Groups and Affiliated Pharmacies for accounting purposes because we have the ability to direct the activities that most significantly affect the entities’ economic performance and have the obligation to absorb the entities’ losses.

We perform ongoing reassessments of whether changes in the facts and circumstances regarding our involvement with the Affiliated Medical Groups and Affiliated Pharmacies would cause our consolidation conclusion to change. The consolidation status of the variable interest entities with which we are involved may change as a result of such reassessments. Changes in consolidation status are applied in accordance with applicable U.S. GAAP.

Business combinations

We account for our business combinations using the acquisition method of accounting. The purchase price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded

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as goodwill. The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of acquisition.

When we issue stock-based or cash awards to an acquired company’s shareholders, we evaluate whether the awards are consideration or compensation for post-acquisition services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the acquired company’s stockholders beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with determination of fair values, we may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations.

Any acquired assets from a business combination including intangible assets subject to amortization are continuously monitored and reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, recoverability of assets to be held and used is assessed by comparing the carrying amount of assets with their future underlying net undiscounted cash flows without interest charges. If such assets are considered to be impaired, an impairment is recognized as the amount by which the carrying amount of the assets exceeds the estimated fair values of the assets.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K. This section of the Form 10-K generally discusses 2021, 2020, and 2019 items and year-to-year comparisons of 2021 to 2020 and 2020 to 2019. This discussion includes forward-looking statements that involve risks and uncertainties as a result of many factors, including those factors set forth in, or incorporated by reference into, the section entitled “Risk Factors” in this Form 10-K. Our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date hereof or to conform these statements to actual results or revised expectations.

Overview

Hims & Hers, formerly known as Oaktree Acquisition Corp. (“OAC”), is a direct-to-customer telehealth company incorporated in Delaware. Our mission is to make healthcare accessible, affordable, and convenient for everyone. Our proprietary websites, telehealth platform, electronic medical records system, and pharmacy integration combine to provide customers with a seamless, easy-to-use, digital-first experience. We are leading the transformation in healthcare by becoming the digital front door for healthcare consumers.

We believe the future of healthcare will be driven by consumer brands that empower people and give them full control over their healthcare. We have endeavored to build a healthcare model that squarely focuses on the needs of the healthcare consumer. To further our mission, we offer a range of health and wellness products and services available for purchase directly by customers on our websites and mobile application, and through wholesale partners.

Revenue and Key Business Metrics

Our management monitors two financial results, Online Revenue and Wholesale Revenue (both defined below), to track our total revenue generation.

“Online Revenue” represents the sales of products and services on our platform, net of refunds, credits, and chargebacks, and includes revenue recognition adjustments recorded pursuant to accounting principles generally accepted in the United States of America (“U.S. GAAP”), primarily relating to deferred revenue and returns reserve. Online Revenue is generated by selling directly to consumers through our websites. Our Online Revenue consists of products and services purchased by customers directly through our online platform. The majority of our Online Revenue is subscription-based, where customers agree to be billed on a recurring basis to have products and services automatically delivered to them.

“Wholesale Revenue” represents non-prescription product sales to retailers through wholesale purchasing agreements. We sell only non-prescription products to wholesale partners. In addition to being revenue generative and profitable, wholesale partnerships have the added benefit of generating brand awareness with new customers in physical environments.

“Subscriptions” are defined as the number of customer agreements where the customer has agreed to be automatically billed on a recurring basis at a defined cadence. The billing cadence is typically defined as a number of months (for example, billed every month or every three months). Subscriptions are excluded from our reporting when payment has not occurred at the contracted billing cadence. Subscription billing is preferred by many of our customers because most of the products and services we make available treat chronic conditions and these product and service offerings are most effective when taken consistently and continuously. Customers can cancel subscriptions in between billing periods to stop receiving additional products and services and can reactivate subscriptions to continue receiving additional products and services.

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“Net Orders” are defined as the number of online customer orders minus transactions related to refunds, credits, chargebacks, and other negative adjustments. Net Orders represent transactions made on our platform during a defined period of time and exclude revenue recognition adjustments recorded pursuant to U.S. GAAP.

Average Order Value (“AOV”) is defined as Online Revenue divided by Net Orders.

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions. We believe the following metrics are useful in evaluating our business. The table below provides a breakdown of total revenue between Online Revenue and Wholesale Revenue, for the years ended December 31, 2021, 2020, and 2019, as well as key metrics that drive Online Revenue (i.e., Net Orders, AOV, and Subscriptions), and the dollar and percentage change between such periods (in thousands, except for AOV):