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What changed in Hims & Hers Health, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Hims & Hers Health, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+342 added−387 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-27)

Top changes in Hims & Hers Health, Inc.'s 2023 10-K

342 paragraphs added · 387 removed · 294 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe also offer our employees a holistic total rewards package with premier benefit and well-being programs intended to fit the needs of our employees and their family members. In addition to standard medical coverage, we offer employees dental and vision coverage, health savings and flexible spending accounts, employee assistance programs, short-term and long-term disability coverage, and life insurance.
Biggest changeIn addition to standard medical coverage, we offer employees dental and vision coverage, health savings and flexible spending accounts, employee assistance programs, short-term and long-term disability coverage, and life insurance. We also offer a 401(k) Savings Plan and the ability to participate in our Employee Stock Purchase Plan to all U.S. employees.
We currently accept payments only from our customers—not any third-party payors, such as government healthcare programs or health insurers. Because of this approach, we are not subject to many of the laws and regulations that impact other participants in healthcare industry.
We currently accept payments only from our customers—not any third-party payors, such as government healthcare programs or health insurers. Because of this approach, we are not subject to many of the laws and regulations that impact other participants in the healthcare industry.
We make available free of charge at the Investor Relations section of the forhims.com website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we file or furnish such materials with the Securities and Exchange Commission (the “SEC”).
We make available free of charge at the Investor Relations section of the hims.com website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we file or furnish such materials with the Securities and Exchange Commission (the “SEC”).
In 2022, we expanded the Apostrophe Pharmacy facility and opened an approximately 25,000 square foot facility in Phoenix, Arizona. The Affiliated Pharmacies together enable seamless drug delivery, and drive increased operating leverage across the platform by allowing us to further personalize and consolidate shipping of orders as well as expand capabilities quickly for adjacent and other new conditions.
In 2022, we expanded the Apostrophe Pharmacy facility and opened an approximately 25,000 square foot facility in Gilbert, Arizona. The Affiliated Pharmacies together enable seamless drug delivery, and drive increased operating leverage across the platform by allowing us to further personalize and consolidate shipping of orders as well as expand capabilities quickly for adjacent and other new conditions.
In addition, our brand positioning has afforded significant partnerships with leading talent whose promotional efforts drive meaningful awareness of the products and services we make available. As our portfolio of products and services grows across categories, we believe that our market presence and brand recognition will expand, driving more consumers to seek out Hims & Hers for future healthcare needs.
In addition, our brand positioning has afforded significant partnerships with leading talent whose promotional efforts drive meaningful awareness of the products and services we make available. As our portfolio of products and services grows across specialties, we believe that our market presence and brand recognition will expand, driving more consumers to seek out Hims & Hers for future healthcare needs.
We have relationships with leading health systems including Ochsner Health, Mount Sinai Health System, Privia, Carbon Health, and ChristianaCare Health System to provide a clinically focused, telehealth-enabled patient care collaboration. These relationships offer our customers access to applicable in-person care within these systems to enhance their overall healthcare experience.
We have relationships with leading health systems including Ochsner Health, Mount Sinai Health System, Carbon Health, ChristianaCare Health System, and Hartford Healthcare to provide a clinically focused, telehealth-enabled patient care collaboration. These relationships offer our customers access to applicable in-person care within these systems to enhance their overall healthcare experience.
The recent launches of new prescription products in sexual health and dermatology, and launches of hair care and supplement retail products, demonstrate the scalability of the platform. Growth Opportunities Continue to acquire more customers Our brand awareness and innovative, personalized products are core to our ability to attract new customers.
The recent launches of new prescription products in weight loss, sexual health, and dermatology, and launches of hair care and supplement retail products, demonstrate the scalability of the platform. Growth Opportunities Continue to acquire more customers Our brand awareness and innovative, personalized products are core to our ability to attract new customers.
Business Strategy We are a consumer-first health and wellness platform focused on providing modern personalized health and wellness experiences to consumers. We offer access to a range of health and wellness products and services available for customers to purchase through our websites and mobile applications.
Business Strategy We are a consumer-first health and wellness platform focused on providing modern personalized health and wellness solutions to consumers. We offer access to a range of health and wellness products and services available for customers to purchase through our websites and mobile applications.
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.
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.
In addition, the internal Hims & Hers Quality team is responsible for maintaining policies and procedures to ensure non-prescription products comply with quality standards, which include independent laboratory testing of products, supplier and quality and compliance assessments. Most of the offerings on our websites and mobile applications are sold to customers on a subscription basis.
In addition, the internal 2 Table of Contents Hims & Hers Quality team is responsible for maintaining policies and procedures to ensure non-prescription products comply with quality standards, which include independent laboratory testing of products, supplier and quality and compliance assessments. Most of the offerings on our websites and mobile applications are sold to customers on a subscription basis.
We have a number of measures to protect our intellectual property and brand, including trademarks, confidentiality procedures, non-disclosure agreements, and employee non-disclosure and invention assignment agreements, to establish and protect our proprietary rights. Despite these efforts, there can be no assurance that we will adequately protect our intellectual property.
We have a number of measures to protect our intellectual property and brand, including trademarks, confidentiality procedures, non-disclosure agreements, and employee non-disclosure and invention assignment agreements, to establish and 10 Table of Contents protect our proprietary rights. Despite these efforts, there can be no assurance that we will adequately protect our intellectual property.
Category expansion into new conditions We are pursuing a roadmap of rapid category expansion into new conditions that can be treated safely via telehealth, require ongoing and recurring customer relationships, and for which generic medication has been established as an effective means of treatment.
Specialty expansion into new conditions We are pursuing a roadmap of rapid specialty expansion into new conditions that can be treated safely and effectively via telehealth, require ongoing and recurring customer relationships, and for which generic medication has been established as an effective means of treatment.
Because we need to use and disclose customers’ health and personal information in order to provide our services, we have developed and maintain policies and procedures to protect that information, including administrative, physical and technical safeguards.
Because we need to use and disclose customers’ health and personal information in order to provide our services, we have developed and maintain policies and procedures to protect that information, including the adoption of administrative, physical and technical safeguards.
Marketing We are building a trusted brand focused on empowering consumers to feel great by providing modern personalized health and wellness experiences to consumers to address their health and wellness needs. From our launch, we have used a diverse 8 Table of Contents marketing strategy to reach our customers.
Marketing We are building a trusted brand focused on empowering consumers to feel great by providing modern personalized health and wellness experiences to consumers to address their health and wellness needs. From our launch, we have used a diverse marketing strategy to reach our customers.
Commitment to highest standards of provider quality In addition to our employees, as of December 31, 2022, 542 medical providers located throughout all 50 states in the U.S. provided services on the Hims & Hers platform through the Affiliated Medical Groups.
Commitment to highest standards of provider quality In addition to our employees, as of December 31, 2023, 658 medical providers located throughout all 50 states in the U.S. provided services on the Hims & Hers platform through the Affiliated Medical Groups.
Since our founding, we have facilitated more than ten million telehealth consultations, enabling greater access to high-quality, convenient, and affordable care for people in all 50 states and the United Kingdom. Hims & Hers products can also be found in tens of thousands of top retail locations in the United States.
Since our founding, we have facilitated nearly twenty million telehealth consultations, enabling greater access to high-quality, convenient, and affordable care for people in all 50 states and the United Kingdom. Hims & Hers products can also be found in tens of thousands of top retail locations in the United States.
Customers serve as ambassadors for the Hims & Hers brand, further driving organic growth through word of mouth and user-generated content. More than 80% of our first time customers to date indicate that they came to Hims & Hers to learn about and find options for their condition and are seeking treatment for their particular conditions for the first time.
Customers serve as ambassadors for the Hims & Hers brand, further driving organic growth through word of mouth and user-generated content. The large majority of our first time customers to date indicate that they came to Hims & Hers to learn about and find options for their condition and are seeking treatment for their particular conditions for the first time.
Regulatory and/or legal enforcement actions by the FDA or other federal, state, or foreign enforcement authorities could have material adverse consequences on the Company and/or its operations. 7 Table of Contents Health information privacy and security laws Numerous U.S. state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability, integrity, and other processing of health information.
Regulatory and/or legal enforcement actions by the FDA or other federal, state, or foreign enforcement authorities could have material adverse consequences on the Company and/or its operations. 7 Table of Contents Health information privacy and security laws Numerous U.S. state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability, integrity, and other processing of health information and other types of personal data or personally identifiable information (“PII”).
Future care opportunities that show high prevalence within our existing customer base and offer traits similar to our existing categories in terms of business model characteristics include testosterone treatment, menopause, sleep disorders, post- 3 Table of Contents traumatic stress disorder, weight management, fertility, diabetes, cholesterol, and hypertension, which represent significant opportunities.
Future care opportunities that show high prevalence within our existing customer base and offer traits similar to our existing specialties in terms of business model characteristics include testosterone treatment, menopause, sleep disorders, post-traumatic stress disorder, fertility, diabetes, cholesterol, and hypertension, which we believe represent 3 Table of Contents significant opportunities.
These curated non-prescription products include melatonin, biotin, probiotics and collagen protein supplements in the wellness category, moisturizer, creams, sunscreen, serum, face oil and face wash in the skincare category, condoms, climax delay spray and wipes, vibrators and lubricants in the sexual health and wellness category, and shampoos, conditioners, scalp scrubs and topical treatments such as minoxidil in the hair care category.
These curated non-prescription products include melatonin, and biotin in the wellness specialty, moisturizer, creams, sunscreen, serum, face oil, and face wash in the skincare specialty, condoms, climax delay spray and wipes, vibrators, and lubricants in the sexual health and wellness specialty, and shampoos, conditioners, scalp scrubs, and topical treatments such as minoxidil in the hair care specialty.
Additionally, these laws may be similar to or even more protective than, and may not be preempted by, HIPAA and other federal privacy laws, particularly with respect to highly sensitive personal information involving behavioral health or sexually transmitted disease.
Additionally, these laws may be similar to or even more protective than, and may not be preempted by, HIPAA and other federal privacy laws, particularly with respect to highly sensitive PII involving behavioral health or sexually transmitted diseases.
Subscription plans provide an easy and convenient way for customers to get the ongoing treatment they need while simultaneously providing the Company with predictability through a recurring revenue stream. For subscription plans, customers select a desired cadence to receive products, which can range from every month to every two to twelve months, depending on the product.
Subscription plans provide an easy and convenient way for customers to get the ongoing treatment they need while simultaneously providing the Company with predictability through a recurring revenue stream. For subscription plans, customers select a desired cadence to receive products, which can range from every 30 days to every 60 to 360 days, depending on the product.
Food and Drug Administration (“FDA”), if required, and complying with current Good Manufacturing Processes (cGMP) as adopted 2 Table of Contents and enforced by the FDA.
Food and Drug Administration (“FDA”), if required, and complying with current Good Manufacturing Processes (cGMP) as adopted and enforced by the FDA.
We strive to hire the best and brightest talent across the industry with a focus on individuals determined to improve access to health and wellness solutions for millions. As of December 31, 2022, our team was comprised of 651 full-time employees across various functions.
We strive to hire the best and brightest talent across the industry with a focus on individuals determined to improve access to health and wellness solutions for millions. As of December 31, 2023, our team was comprised of 1,046 employees across various functions.
Partner and Affiliated Pharmacies We have entered into contractual arrangements with three licensed pharmacies (sometimes referred to herein as “Partner Pharmacies”), PostMeds, Inc. (d/b/a TruePill), EHT Pharmacy LLC (d/b/a Curexa Pharmacy), and ITC Inc. (d/b/a ITC Compounding Pharmacy) for fulfillment and distribution of certain prescription and non-prescription products available through the Hims & Hers platform.
Partner and Affiliated Pharmacies We maintain contractual arrangements with three licensed pharmacies (sometimes referred to herein as “Partner Pharmacies”), EHT Pharmacy LLC (d/b/a Curexa Pharmacy), ITC Inc. (d/b/a ITC Compounding Pharmacy), and The London Specialist Pharmacy Limited for fulfillment and distribution of certain prescription and non-prescription products available through the Hims & Hers platform.
Each trademark registration is due for renewal within ten years from the date of its respective registration date and may be renewed in ten year intervals thereafter. In addition, we have registered domain names for websites that we use in 10 Table of Contents our business, such as www.forhims.com, www.forhers.com, www.forhims.co.uk and www.apostrophe.com. We hold no patents at this time.
Each trademark registration is due for renewal within ten years from the date of its respective registration date and may be renewed in ten year intervals thereafter. In addition, we have registered domain names for websites that we use in our business, such as www.hims.com, www.forhers.com, www.forhims.co.uk, and www.apostrophe.com.
We evaluate the data obtained through employee feedback to architect learning pathways and experiences that are truly valuable to our employees. For example, in 2022 we launched people manager training and labs as well as effective communication training across the organization. We are continually working to improve our process and policies to align with our growing and evolving workforce.
We evaluate the data obtained through employee feedback to architect learning pathways and experiences that are truly valuable to our employees. For example, in 2022 we launched people manager training and labs as well as effective communication training across the organization.
As of December 31, 2022, we held 19 registered trademarks in the U.S. and 135 in non-U.S. jurisdictions, and 27 pending trademarks in the U.S. and 99 in non-U.S. jurisdictions, including pending trademarks for our brand, Hims & Hers. We obtained our first registered trademark in December 2018 with the majority of our trademark registrations obtained between 2019 and 2022.
As of December 31, 2023, we held 26 registered trademarks in the U.S. and 188 in non-U.S. jurisdictions, and 33 pending trademarks in the U.S. and 82 in non-U.S. jurisdictions, including pending trademarks for our brand, Hims & Hers. We obtained our first registered trademark in December 2018 with the majority of our trademark registrations obtained between 2019 and 2023.
In addition to HIPAA, numerous other federal, state, and foreign laws and regulations protect the confidentiality, privacy, availability, integrity and security of health information and other types of personal information, including the California Confidentiality of Medical Information Act. These laws and regulations are often uncertain, contradictory, and subject to changing or differing interpretations.
In addition to HIPAA, numerous other federal, state, and foreign laws and regulations protect the confidentiality, privacy, availability, integrity and security of health information and other types of PII, including the California Confidentiality of Medical Information Act, and these laws and regulations are rapidly evolving.
In certain cases, it may be necessary to modify our planned operations and procedures to comply with these more stringent state laws. Not only may some of these state laws impose fines and penalties upon violators, but also some, unlike HIPAA, may afford private rights of action to individuals who believe their personal information has been misused.
Not only may some of these state laws impose fines and penalties upon violators, but also some, unlike HIPAA, may afford private rights of action to individuals who believe their personal information has been misused.
Under the GDPR, data protection authorities have the power to impose significant administrative fines for violations, which may also lead to damages claims by data controllers and data subjects.
Under the GDPR, data protection authorities in the EU have the power to impose significant administrative fines for violations, which may also lead to damages claims by data controllers and data subjects. The UK GDPR sits alongside the UK Data Protection Act 2018 which implements certain derogations in the GDPR into UK law.
Notwithstanding that we do not believe that the Company meets the definition of a covered entity or business associate under HIPAA with respect to our customers or services provided through our platform, we have executed business associate agreements with certain other parties and have assumed obligations that are based upon HIPAA-related requirements.
Regardless of whether or not we meet the definition of a covered entity or business associate under HIPAA, we have executed business associate agreements with certain other parties and have assumed obligations that are based upon HIPAA-related requirements.
These collaborations, which are intended to help Hims & Hers customers obtain in-person care not accessible through the Hims & Hers platform, do not involve any monetary exchange, compensation, or other financial incentives between the parties. For primary care prescriptions, we also allow customers to seamlessly fulfill their prescription for same day delivery through Capsule and Alto in select markets.
These collaborations, which are intended to help Hims & Hers customers obtain in-person care not accessible through the Hims & Hers platform, do not involve any monetary exchange, compensation, or other financial incentives between the parties.
Additionally, our paid time off programs enable and encourage our workforce to enjoy personal time away from their job responsibilities. We also offer generous parental leave benefits for eligible employees.
In addition, the majority of our employees are eligible for equity awards, depending on function, to align incentives and provide the opportunity to share in the Company’s financial success. Additionally, our paid time off programs enable and encourage our workforce to enjoy personal time away from their job responsibilities. We also offer generous parental leave benefits for eligible employees.
The privacy and data protection laws in many states in which we operate are more restrictive than HIPAA and/or may apply more broadly than HIPAA. For example, the California Consumer Privacy Act of 2018 (“CCPA”) protects the personal information of California consumers regardless of the location of the business holding the information.
The privacy and data protection laws in many states in which we operate are more restrictive than HIPAA and/or may apply more broadly than HIPAA..
Additional Information Our website addresses are www.forhims.com, www.forhers.com, www.forhims.co.uk and www.apostrophe.com.
We have one pending patent and hold no registered patents at this time. Additional Information Our website addresses are www.hims.com, www.forhers.com, www.forhims.co.uk and www.apostrophe.com.
Further, we have committed to, and formalized, employee development programs that are focused on feedback, coaching and employee development. Programming includes a formalized performance review process that includes a self-evaluation process and a manager self-evaluation process, together with training and resources on how to approach these evaluations.
Programming includes a formalized performance review process that includes a self-evaluation process and a manager self-evaluation process, together with training and resources on how to approach these evaluations. We also offer our employees a holistic total rewards package with premier benefit and well-being programs intended to fit the needs of our employees and their family members.
While these new state privacy laws emulate the CCPA/CPRA in many respects, each has requirements that will require particular assessment for compliance. Where state laws are more protective than HIPAA or apply more broadly than HIPAA, we must comply with the state laws to which we are subject.
Where state laws are more protective than HIPAA or apply more broadly than HIPAA, we must comply with the state laws to which we are subject. In certain cases, it may be necessary to modify our planned operations and procedures to comply with these more stringent state laws.
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The CCPA went into effect on January 1, 2020. Additionally, the California Privacy Rights Act (“CPRA”), which took effect January 1, 2023, expands upon the rights and requirements implemented through the CCPA. The CPRA significantly modifies the CCPA, requiring the Company to incur additional costs and expenses and modify certain of our privacy practices.
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However, to the extent we begin accepting payment from third parties or insurance providers, we may become subject to HIPAA in relation to our customers and could face penalties and fines if we fail to comply with applicable requirements of HIPAA and its implementing regulations.
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Virginia has similarly adopted a comprehensive privacy law, the Consumer Data Protection Act, which also took effect January 1, 2023. Colorado, Connecticut, and Utah have also passed comprehensive privacy laws, each which will take effect either in July or December of 2023.
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These laws and regulations in many cases are more restrictive than, and may not be preempted by, HIPAA and its implementing rules, particularly with respect to highly sensitive PII involving behavioral health or sexually transmitted diseases.
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The United Kingdom completed its withdrawal from the EU on January 31, 2020 in a process known as “Brexit,” and following the expiry of the Brexit transition period, which ended on December 31, 2020, the UK GDPR has been implemented in the United Kingdom.
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These laws and regulations are often uncertain, contradictory, and subject to changing or differing interpretations, and we expect new laws, rules and regulations regarding privacy, data protection, and information security to be proposed and enacted in the future.
Removed
The UK GDPR sits alongside the UK Data Protection Act 2018 which implements certain derogations in the GDPR into UK law.
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This complex, dynamic legal landscape regarding privacy, data protection, information security, and artificial intelligence creates significant compliance issues for us, the Affiliated Medical Groups, the Affiliated Pharmacies, and the Providers, and potentially exposes us to additional expense, adverse publicity, and liability.
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On October 7, 2022, President Biden executed an Executive Order to implement a new European Union-U.S. Data Privacy Framework to address European concerns over international data transfers. If adopted by the EU, such framework is set to take effect in 2023.
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For example, the California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act (“CPRA”) require, among other things, covered companies to provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. Similar legislation has been proposed or adopted in other states.
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We also offer a 401(k) Savings Plan and the ability to participate in our Employee Stock Purchase Plan to all U.S. employees. In addition, the majority of our employees are eligible for equity awards, depending on 9 Table of Contents function, to align incentives and provide the opportunity to share in the Company’s financial success.
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Aspects of these new and emerging state privacy laws and regulations, as well as their interpretation and enforcement, are dynamic and evolving. These laws and regulations each require particular assessment for compliance, and we may be required to modify our practices in an effort to comply with them, which may impact demand for our offerings.
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Additionally, in July 2023, the European Commission adopted an adequacy decision concluding that the United States ensures an adequate level of protection for personal data transferred from the EEA to the United States under the EU-U.S.
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Data Privacy Framework (followed in October 2023 with the adoption of an adequacy 8 Table of Contents decision in the UK for the UK-United States Data Bridge). However, the adequacy decision does not foreclose, and is likely to face, future legal challenges.
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We are continually working to improve our process and policies to align with our growing and evolving workforce. 9 Table of Contents Further, we have committed to, and formalized, employee development programs that are focused on feedback, coaching and employee development.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we fail to effectively maintain, promote, and enhance our brand in a cost-effective manner, our business and competitive advantage may be harmed. • If the Affiliated Medical Groups are unable to attract and retain high-quality Providers to perform services on our platform, or if we are unable to develop or maintain satisfactory relationships with these Providers or the Affiliated Medical Groups, our business, financial condition, and results of operations may be materially and adversely affected. • Our pharmacy business subjects us to additional healthcare laws and regulations beyond those we face with our core telehealth business, and increases the complexity and extent of our compliance and regulatory obligations. 11 Table of Contents • If we fail to comply with applicable healthcare and other governmental regulations, we could face substantial penalties, our business, financial condition, and results of operations could be adversely affected, and we may be required to restructure our operations. • Evolving government regulations and enforcement activities may require increased costs or adversely affect our results of operations. • Security breaches, loss of data, and other disruptions could compromise sensitive information related to our business or customers, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. • From time to time we are subject to legal proceedings in the ordinary course of business, which can include intellectual property disputes or claims relating to our marketing or sale of products, any of which may be costly to defend and could materially harm our business and results of operations. • The COVID-19 pandemic has increased interest in and consumer use of telehealth solutions, including our platform, and we cannot guarantee that this increased interest will continue as the pandemic declines. • We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all. • Our dual class common stock structure has the effect of concentrating voting power with our Chief Executive Officer and Co-Founder, Andrew Dudum, which limits an investor’s ability to influence the outcome of important transactions, including a change in control. • The market price of our Class A common stock may be volatile.
Biggest changeIf the state- based licenses maintained by our Affiliated Pharmacies are terminated, suspended, or otherwise limited, or if our Affiliated Pharmacies fail to comply with applicable pharmacy-related laws and regulatory requirements, our business, financial condition, and results of operations may be materially and adversely affected. • If we fail to comply with applicable healthcare and other governmental regulations, we could face substantial penalties, our business, financial condition, and results of operations could be materially and adversely affected, and we may be required to restructure our operations. • Evolving government regulations and enforcement activities may require increased costs or adversely affect our results of operations. • Security breaches, loss of data, and other disruptions could compromise sensitive information related to our business or customers, or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. • From time to time we are subject to legal proceedings in the ordinary course of business, which can include intellectual property disputes or claims relating to our marketing or sale of products, any of which may be costly to defend and could materially harm our business and results of operations. • We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all. • Our dual class common stock structure has the effect of concentrating voting power with our Chief Executive Officer and Co-Founder, Andrew Dudum, which limits an investor’s ability to influence the outcome of important transactions, including a change in control. • The market price of our Class A common stock may be volatile.
In order for our business to continue growing and expanding, we need to continue expanding the scope of products and services we offer our customers, including telehealth consultations, prescription medication for additional conditions, and non-prescription health and wellness products and services.
In order for our business to continue growing, we need to continue expanding the scope of products and services we offer our customers, including telehealth consultations, prescription medication for additional conditions, and non-prescription health and wellness products and services.
Any such failure could adversely affect our reputation, revenue, and results of operations. In addition, an increase in the use of social media for product promotion and marketing may increase the burden on us to monitor compliance of such materials, and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.
Any such failure could adversely affect our reputation, revenue, and results of operations. In addition, an increase in our use of social media for product promotion and marketing may increase the burden on us to monitor compliance of such materials, and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.
We face the risk of product liability claims and may not be able to maintain or obtain insurance. Our business involves third-party medical Providers performing medical consultations and prescribing medication to our customers, as well as the fulfillment and distribution of pharmaceuticals, including compounded pharmaceuticals, by our Affiliated Pharmacies and Partner Pharmacies.
We face the risk of product liability claims and may not be able to maintain or obtain insurance. Our business involves third-party Providers performing medical consultations and prescribing medication to our customers, as well as the fulfillment and distribution of pharmaceuticals, including compounded pharmaceuticals, by our Affiliated Pharmacies and Partner Pharmacies.
The related areas where we face risks include, but are not limited to: • diversion of management’s time and focus from operating our business to addressing acquisition integration challenges; • loss of key employees of the acquired company and other challenges associated with integrating new employees into our culture, as well as reputational harm if integration is not successful; • difficulties in integrating and managing the combined operations, technologies, technology platforms, and products of the acquired companies, and realizing the anticipated economic, operational, and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems; • regulatory complexities of integrating or managing the combined operations or expanding into other industries or parts of the healthcare industry; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights, or increase our risk for liabilities; • failure to successfully further develop the acquired technology or realize our intended business strategy; • uncertainty of entry into markets in which we have limited or no prior experience or in which competitors have stronger market positions; • unanticipated costs associated with pursuing acquisitions; • failure to find commercial success with the products or services of the acquired company; • difficulty of transitioning the acquired technology onto our existing platforms and maintaining the security standards for such technology consistent with our other solutions; • failure to successfully onboard customers or maintain brand quality of acquired companies; • responsibility for the liabilities of acquired businesses, including those that were not disclosed to us or exceed our estimates, as well as, without limitation, liabilities arising out of an acquired business’ failure to maintain effective data protection and privacy controls and comply with applicable regulations; • failure to generate the expected financial results related to an acquisition on a timely manner or at all; and • potential accounting charges to the extent intangibles recorded in connection with an acquisition, such as goodwill, trademarks, client relationships, or intellectual property, are later determined to be impaired and written down in value.
The related areas where we face risks include, but are not limited to: • diversion of management’s time and focus from operating our business to addressing acquisition integration challenges; • loss of key employees of the acquired company and other challenges associated with integrating new employees into our culture, as well as reputational harm if integration is not successful; • difficulties in integrating and managing the combined operations, technologies, technology platforms, and products of the acquired companies, and realizing the anticipated economic, operational, and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems; • regulatory complexities of integrating or managing the combined operations or expanding into other industries or parts of the healthcare industry; • assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights, or increase our risk for liabilities; • failure to successfully further develop the acquired technology or realize our intended business strategy; • uncertainty of entry into markets in which we have limited or no prior experience or in which competitors have stronger market positions; • unanticipated costs associated with pursuing acquisitions; • failure to find commercial success with the products or services of the acquired company; • difficulty of transitioning the acquired technology onto our existing platforms and maintaining the security standards for such technology consistent with our other offerings; • failure to successfully onboard customers or maintain brand quality of acquired companies; • responsibility for the liabilities of acquired businesses, including those that were not disclosed to us or exceed our estimates, as well as, without limitation, liabilities arising out of an acquired business’ failure to maintain effective data protection and privacy controls and comply with applicable regulations; • failure to generate the expected financial results related to an acquisition on a timely manner or at all; and • potential accounting charges to the extent intangibles recorded in connection with an acquisition, such as goodwill, trademarks, client relationships, or intellectual property, are later determined to be impaired and written down in value.
The introduction of competing offerings with lower prices for consumers, fluctuations in prescription prices, changes in consumer purchasing habits, including an increase in the use of mail-order prescriptions, changes in the regulatory landscape, and other factors could result in changes to our contracts or a decline in our revenue, which may have an adverse effect on our business, financial condition, and results of operations.
The introduction of competing offerings with lower prices for consumers, fluctuations in prescription prices, changes in consumer purchasing habits, including an increase in the use of mail-order prescriptions, changes in the regulatory landscape, and other factors could result in changes to our contracts or a decline in our subscription revenue, which may have an adverse effect on our business, financial condition, and results of operations.
In addition, intellectual property rights, including use of an individual’s likeness and related trademarks, are a key asset of the celebrity influencers we work with and any use by us of such assets are often heavily negotiated. Our future success depends in part on not infringing upon the intellectual property rights of others.
In addition, intellectual property rights, including use of an individual’s likeness and related trademarks, are a key asset of the celebrity influencers we work with and any use by us of such assets is often heavily negotiated. Our future success depends in part on not infringing upon the intellectual property rights of others.
We take certain administrative, physical, and technological safeguards to address these risks, such as requiring outsourcing subcontractors who handle customer, user, and patient information for us to enter into agreements that contractually obligate those subcontractors to use reasonable efforts to safeguard sensitive, confidential, and proprietary information.
We take certain administrative, legal, physical, and technological safeguards to address these risks, such as requiring outsourcing subcontractors who handle customer, user, and patient information for us to enter into agreements that contractually obligate those subcontractors to use reasonable efforts to safeguard sensitive, confidential, and proprietary information.
Additionally, if healthcare or healthcare benefits trends shift or entirely new technologies are developed that replace existing offerings, our existing or future services could be rendered obsolete and require that we materially change our technology or business model. If we are unable to do so, our business could be adversely affected.
Additionally, if healthcare or healthcare benefits trends shift or entirely new technologies are developed that replace existing offerings, our existing or future products or services could be rendered obsolete and require that we materially change our technology or business model. If we are unable to do so, our business could be adversely affected.
A security breach or privacy violation that leads to disclosure or unauthorized use or modification of, or that prevents access to or otherwise impacts the confidentiality, security, or integrity of, sensitive, confidential, or proprietary information we or our third-party service providers maintain or otherwise process, could harm our reputation, compel us to comply with breach notification laws, and cause us to incur significant costs for remediation, fines, penalties, notification to individuals and governmental authorities, implementation of measures intended to repair or replace systems or technology, and to prevent future occurrences, potential increases in insurance premiums, and forensic security audits or investigations.
A security breach or privacy violation that leads to disclosure or unauthorized use or modification of, or that prevents access to or otherwise impacts the confidentiality, security, or integrity of, sensitive, confidential, or proprietary information we or our vendors or other third-party service providers maintain or otherwise process, could harm our reputation, compel us to comply with breach notification laws, and cause us to incur significant costs for remediation, fines, penalties, notification to individuals and governmental authorities, implementation of measures intended to repair or replace systems or technology, and to prevent future occurrences, potential increases in insurance premiums, and forensic security audits or investigations.
The lower barriers to entry may allow various new competitors to enter the market more quickly and cost effectively than before the COVID-19 pandemic. Additionally, we believe that the COVID-19 pandemic has introduced many new users to telehealth and further reinforced its benefits to potential competitors.
The lower barriers to entry may allow various new competitors to enter the market more quickly and cost effectively than before the COVID-19 pandemic. Additionally, we believe that the COVID-19 pandemic introduced many new users to telehealth and further reinforced its benefits to potential competitors.
We utilize third-party service providers for important aspects of the collection, storage, transmission, and verification of customer information and other confidential, and sensitive information, and therefore rely on third parties to manage functions that have material cybersecurity risks.
We utilize vendors and other third-party service providers for important aspects of the collection, storage, transmission, and verification of customer information and other confidential, and sensitive information, and therefore rely on third parties to manage functions that have material cybersecurity risks.
Any new offerings or product or service enhancements that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the broad market acceptance necessary to generate sufficient revenue.
Any new offerings or product or service enhancements that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, or may not achieve the market acceptance necessary to generate sufficient revenue.
If we are not able to achieve or maintain positive cash flow in the long term, we may require additional financing, which may not be available on favorable terms or at all and/or which would be dilutive to our stockholders.
If we are not able to achieve or maintain positive cash flow in the long term, we may require additional financing, which may not be available on favorable terms or at all and which may be dilutive to our stockholders.
We depend on the Affiliated Medical Groups and their Providers to deliver quality healthcare consultations and services through our platform, and the Affiliated Pharmacies to provide efficient fulfillment and distribution of prescription medication.
We depend on the Affiliated Medical Groups and their Providers to deliver quality healthcare consultations and services through our platform, and the Partner Pharmacies and Affiliated Pharmacies to provide efficient fulfillment and distribution of prescription medication.
If these service providers do not perform adequately or if our relationships with these service providers were to terminate, our ability to accept orders through the platform could be adversely affected and our business could be harmed.
If these service providers do not perform adequately or if our relationships with these service providers were to terminate, our ability to accept orders through our platform could be adversely affected and our business could be harmed.
Conducting business internationally involves a number of risks, including: • uncertain legal and regulatory requirements applicable to telehealth and prescription medication; • our inability to replicate our domestic business structure consistently outside of the United States, especially as it relates to our contractual arrangement with affiliated professional entities; • multiple, conflicting and changing laws and regulations such as tax laws, privacy and data protection laws and regulations, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • obtaining regulatory approvals or clearances where required for the sale of our offerings, products, and services in various countries; • requirements to maintain data and the processing of that data on servers located within the United States or in other countries; • protecting and enforcing our intellectual property rights; • logistics and regulations associated with prescribing medicine online and engaging with Partner Pharmacies to ship the prescribed medication; • natural disasters, political and economic instability, including wars, terrorism, social or political unrest, including civil unrest, protests, and other public demonstrations, outbreaks of disease, pandemics or epidemics, boycotts, curtailment of trade, and other market restrictions; and • regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the U.S.
Conducting business internationally involves a number of risks, including: • uncertain legal and regulatory requirements applicable to telehealth and prescription medication; • our inability to replicate our domestic business structure consistently outside of the United States, especially as it relates to our contractual arrangement with affiliated professional entities; • multiple, conflicting and changing laws and regulations such as tax laws, privacy and data protection laws and regulations including the use of big data analytics and artificial intelligence, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • obtaining regulatory approvals or clearances where required for the sale of our offerings, products, and services in various countries; • requirements to maintain data and the processing of that data on servers located within the United States or in other countries; • protecting and enforcing our intellectual property rights; • logistics and regulations associated with prescribing medicine online and engaging with Partner Pharmacies to ship the prescribed medication; • natural disasters, political and economic instability, including wars, terrorism, social or political unrest, including civil unrest, protests, and other public demonstrations, outbreaks of disease, pandemics or epidemics, boycotts, curtailment of trade, and other market restrictions; and • regulatory and compliance risks that relate to maintaining accurate information and control over activities subject to regulation under the U.S.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to valuation of inventory, valuation and recognition of stock-based compensation expense, valuation of contingent consideration in business combinations, purchase price allocation for business combinations, estimates used in the capitalization of website and mobile application development and internal-use software costs, and judgements relating to impairment triggering events for long-lived assets.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to valuation of inventory, valuation and recognition of stock-based compensation expense, valuation of contingent consideration in business combinations, purchase price allocation for business combinations, estimates used in the capitalization of website and mobile application development and internal-use software costs, and judgments relating to impairment triggering events for long-lived assets.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee, agent, or stockholder, (iii) any action arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws (as either may be amended from time to time), or (iv) any action asserting a claim against us governed by the internal affairs doctrine.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, employee, agent, or stockholder, (iii) any action arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws (as either may be amended from time to time), or (iv) any action asserting a claim against us governed 44 Table of Contents by the internal affairs doctrine.
If we are unable to cost-effectively use social media platforms as marketing tools, if the social media platforms we use change their policies or algorithms, or if evolving laws and regulations limit how we can market through these channels, we may not be able to fully optimize our use of such platforms and our ability to retain current customers and acquire new customers may suffer.
If we are unable to cost-effectively use social media platforms as marketing tools, if the social media platforms we use change their policies or algorithms, or if evolving laws and regulations limit how we can market through these channels, if at all, we may not be able to fully optimize our use of such platforms and our ability to retain current customers and acquire new customers may suffer.
We have encountered and will continue to encounter significant risks and uncertainties frequently experienced by new and growing companies in rapidly changing and heavily regulated industries, such as attracting new customers and Providers to our platform, retaining our customers and encouraging them to utilize new offerings we make available, increasing the number of conditions that can be treated by Providers through our platform, operating licensed pharmacies and the compounding and distribution of pharmaceutical products, competition from other companies, including online healthcare providers and traditional healthcare providers, hiring, integrating, training, and retaining skilled personnel, verifying the identity of customers and credentials of Providers serving our customers, developing new solutions, determining prices for our solutions, unforeseen expenses, challenges in forecasting accuracy, and new or adverse regulatory developments affecting the use of telehealth, pharmaceutical products or operations, or other aspects of the healthcare industry.
We have encountered and will continue to encounter significant risks and uncertainties frequently experienced by growing companies in rapidly changing and heavily regulated industries, such as attracting new customers and Providers to our platform, retaining our customers and encouraging them to utilize new offerings we make available, increasing the number of conditions that can be treated by Providers through our platform, operating licensed pharmacies and the compounding and distribution of pharmaceutical products, competition from other companies, including online healthcare providers and traditional healthcare providers, hiring, integrating, training, and retaining skilled personnel, verifying the identity of customers and credentials of Providers serving our customers, developing new solutions, determining prices for our solutions, unforeseen expenses, challenges in forecasting accuracy, and new or adverse regulatory developments affecting the use of telehealth, pharmaceutical products or operations, data privacy, use of artificial intelligence, or other aspects of the healthcare industry.
If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, or if it is perceived that we have been unable to do so, our operations could be disrupted, we may be unable to provide access to our platform, and could suffer a loss of customers or Providers or a decrease in the use of our platform, and we may suffer loss of reputation, adverse impacts on customer, Provider, and partner confidence, financial loss, governmental investigations or other 34 Table of Contents actions, regulatory or contractual penalties, and other claims and liability.
If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, or if it is perceived that we have been unable to do so, our operations could be disrupted, we may be unable to provide access to our platform, and could suffer a loss of customers or Providers or a decrease in the use of our platform, and we may suffer loss of reputation, adverse impacts on customer, Provider, and partner confidence, financial loss, governmental investigations or other actions, regulatory or contractual penalties, and other claims and liability.
Failure to effectively manage growth and execute our business plan could result in difficulty or delays in increasing the size of our customer base, declines in quality of customer support or customer satisfaction, increases in costs, difficulties in introducing new products or features, or other operational difficulties, and any of these difficulties could adversely affect our business performance and results of operations.
Failure to effectively manage growth and execute our business plan could result in difficulty or delays in increasing the size of our customer base, declines in quality of customer support or customer satisfaction, increases in costs, difficulties in introducing new products or services, or other operational difficulties, and any of these difficulties could adversely affect our business performance and results of operations.
While we believe that most of our operations can be performed remotely, there is no guarantee that we will be as effective while working remotely because our team is dispersed and many employees may have additional personal needs to attend to or distractions in their remote work environment.
While we believe that most of our non-fulfillment operations can be performed remotely, there is no guarantee that we will be as effective while working remotely because our team is dispersed and many employees may have additional personal needs to attend to or distractions in their remote work environment.
Failure to meet, or changes to any international, federal, state, or local requirements attendant to the testing, production, distribution, labeling, packaging, handling, sales and marketing, continued safety and/or other aspects of a regulated product, including any changes to the interpretation or enforcement of such requirements, could result in enforcement actions, impede our ability to provide access to affected products, and have a material adverse effect on our business, financial condition, and results of operations.
Failure to meet, or changes to any international, federal, state, or local requirements attendant to the testing, production, distribution, labeling, packaging, handling, sales and marketing, continued safety and/or other aspects of a regulated product, including any changes to the interpretation or enforcement of such requirements, could result in enforcement actions, impede our ability to 31 Table of Contents provide access to affected products, and have a material adverse effect on our business, financial condition, and results of operations.
We believe that, because of our operating processes, in relation to our customers, we are not a covered entity or a business associate under the Health Insurance Portability and Accountability Act (“HIPAA”), which establishes a set of national privacy and security standards for the protection of protected health information by health plans, healthcare clearinghouses, and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services.
We believe that, because of our operating processes, in relation to our customers, we are not a covered 32 Table of Contents entity or a business associate under the Health Insurance Portability and Accountability Act (“HIPAA”), which establishes a set of national privacy and security standards for the protection of protected health information by health plans, healthcare clearinghouses, and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services.
Similarly, negative publicity regarding customer confidentiality and privacy in the context of telehealth could limit market acceptance of our business model and services. The healthcare industry in the United States is continually undergoing or threatened with significant structural change and is rapidly evolving.
Similarly, negative publicity regarding customer confidentiality and privacy in the context of telehealth and artificial intelligence could limit market acceptance of our business model and services. The healthcare industry in the United States is continually undergoing or threatened with significant structural change and is rapidly evolving.
Risks Related to Intellectual Property and Legal Proceedings Failure to protect or enforce our intellectual property rights could harm our business and results of operations. Our intellectual property includes the content of our websites, our software code, our electronic medical record system, our mobile applications, our unregistered copyrights, our trademarks, and our trade secrets.
Risks Related to Intellectual Property and Legal Proceedings Failure to protect or enforce our intellectual property rights could harm our business and results of operations. Our intellectual property includes the content of our websites, software code, electronic medical records system, mobile applications, unregistered copyrights, trademarks, and trade secrets.
In addition, any failure, or perceived failure, by us or other telehealth companies to comply with any federal, state, or local laws or regulations governing our marketing activities could adversely affect the perception of our industry, our reputation, brand, and business, and may result in claims, proceedings, or actions against us by governmental entities, consumers, suppliers or others or other liabilities or may require us to change our operations and/or cease using certain marketing strategies.
In addition, any failure, or perceived failure, by us or other telehealth companies to comply with any federal, state, or local laws or regulations governing our marketing activities could adversely affect the perception of our industry, our reputation, brand, and business, and may result in claims, proceedings, or actions against us by 13 Table of Contents governmental entities, consumers, suppliers or others or other liabilities or may require us to change our operations and/or cease using certain marketing strategies.
If we or these third parties are found to have violated such laws, rules, or regulations, it could result in government-imposed fines, orders requiring that we or these third parties change our or their practices, or criminal charges, which could adversely affect our business.
If we or these third parties are found to have violated such laws, rules, or regulations, it could result in government-imposed fines, orders requiring that we or these third parties change our or their practices, or criminal charges, which could materially and adversely affect our business.
Measures taken to protect our systems, those of our third-party service providers, or sensitive, confidential, and proprietary information that we or our third-party service providers process or maintain, may not adequately protect us from the risks associated with the collection, storage, and transmission of such information.
Measures taken to protect our systems, those of our vendors or other third-party service providers, or sensitive, confidential, and proprietary information that we or such third-party service providers process or maintain, may not adequately protect us from the risks associated with the collection, storage, and transmission of such information.
Currently, nine of our eleven directors have been determined by our Board of Directors to be independent. We also have an independent compensation committee in addition to an independent audit committee. We do not have a nominating and corporate governance committee. The typical functions of this committee are addressed by our full Board of Directors.
Currently, seven of our nine directors have been determined by our Board of Directors to be independent. We also have an independent compensation committee in addition to an independent audit committee. We do not have a nominating and corporate governance committee. The typical functions of this committee are addressed by our full Board of Directors.
Any claims made against us, our Partner Pharmacies, our Affiliated Pharmacies, the Affiliated Medical Groups, and/or the Providers that are not fully covered by insurance could be costly to defend against, result in substantial damage awards against 19 Table of Contents us, and divert the attention of our management, our Partner Pharmacies, our Affiliated Pharmacies, Affiliated Medical Groups, and/or Providers from their respective operations, which could have a material adverse effect on our business, financial condition, and results of operations.
Any claims made against us, our Partner Pharmacies, our Affiliated Pharmacies, the Affiliated Medical Groups, and/or the Providers that are not fully covered by insurance could be costly to defend against, result in substantial damage awards against us, and divert the attention of our management, our Partner Pharmacies, our Affiliated Pharmacies, Affiliated Medical Groups, and/or Providers from their respective operations, which could have a material adverse effect on our business, financial condition, and results of operations.
Our ability to develop and maintain satisfactory relationships with Providers and the Affiliated Medical Groups also may be negatively impacted by other factors not associated with us, such as pressures on Providers, consolidation activity among hospitals, physician groups, and other healthcare providers, changes in the patterns of delivery and payment for healthcare services, and any perceived liability risks associated with the use of telehealth.
Our ability to develop and maintain satisfactory relationships with Providers and the Affiliated Medical Groups also may be negatively impacted by other factors not associated with us, such as pressures on Providers, consolidation activity among hospitals, physician groups, and other healthcare providers, changes in the patterns of delivery and payment for healthcare 19 Table of Contents services, and any perceived liability risks associated with the use of telehealth.
It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court 44 Table of Contents were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
Moreover the cost to enter into arrangements with celebrity influencers may increase over time, which could have an adverse impact on our financial condition and results of operations . Negative commentary regarding our business, or celebrity influencers who endorse our products and other third parties who are affiliated with or endorse us, may also be posted on social media platforms.
Moreover, the cost to enter into arrangements with celebrity influencers may increase over time, which could have an adverse impact on our financial condition and results of operations . 14 Table of Contents Negative commentary regarding our business, or celebrity influencers who endorse our products and other third parties who are affiliated with or endorse us, may also be posted on social media platforms.
If we do not adequately protect our intellectual property, our brand and reputation could be harmed and competitors may be able to use our technologies and erode or negate any competitive advantage we may have, 35 Table of Contents which could materially harm our business, negatively affect our position in the marketplace, limit our ability to commercialize our technology, and delay or render impossible our achievement of profitability.
If we do not adequately protect our intellectual property, our brand and reputation could be harmed and competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could materially harm our business, negatively affect our position in the marketplace, limit our ability to commercialize our technology, and delay or render impossible our achievement of profitability.
Market acceptance and adoption of our business model and the products and services we make available depend on educating potential customers who may find our products and services useful, as well as potential partners, suppliers, and Providers, as to the distinct features, ease-of-use, positive lifestyle impact, cost savings, and other perceived benefits of our offerings as compared to those of competitors.
Market acceptance and adoption of our business model and the products and services we make available depend on educating potential customers who may find our products and services useful, as well as potential partners, suppliers, and Providers, as to the distinct features, ease-of-use, positive lifestyle impact, cost savings, and other perceived benefits of our offerings as 15 Table of Contents compared to those of competitors.
We cannot provide assurance that we have accurately interpreted each such law and regulation. Moreover, these laws and regulations may change significantly as this manner of providing products and services evolves. New or revised laws and regulations (or interpretations thereof) could have a material adverse effect on our business, financial condition, and results of operations.
We cannot provide assurance that we have accurately interpreted each such law and regulation. Moreover, these laws and regulations may change significantly as this 28 Table of Contents manner of providing products and services evolves. New or revised laws and regulations (or interpretations thereof) could have a material adverse effect on our business, financial condition, and results of operations.
Our financial condition and results of operations are and will continue to be highly dependent on the ability of our marketing function to adequately promote, market, and attract customers 14 Table of Contents to our platform and offerings in a manner that complies with applicable laws and regulations and at a cost that does not exceed our current budget allocated to marketing.
Our financial condition and results of operations are and will continue to be highly dependent on the ability of our marketing function to adequately promote, market, and attract customers to our platform and offerings in a manner that complies with applicable laws and regulations and at a cost that does not exceed our current budget allocated to marketing.
Our ability to achieve our strategic objectives will depend, among other things, on our ability to enable fast and efficient telehealth consultations, maintain comprehensive and affordable offerings, ensure the successful operation of our Affiliated 16 Table of Contents Pharmacies, and deliver an accessible and reliable platform that is more appealing and user-friendly than available alternatives.
Our ability to achieve our strategic objectives will depend, among other things, on our ability to enable fast and efficient telehealth consultations, maintain comprehensive and affordable offerings, ensure the successful operation of our Affiliated Pharmacies, and deliver an accessible and reliable platform that is more appealing and user-friendly than available alternatives.
If we fail to maintain, protect, and enhance our intellectual property rights, our business, financial condition, and results of operations may be harmed. 36 Table of Contents We may in the future be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.
If we fail to maintain, protect, and enhance our intellectual property rights, our business, financial condition, and results of operations may be harmed. We may in the future be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.
Our business, including our ability to operate and to continue to expand internationally, could be adversely affected if legislation or regulations are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices, the design of our websites, mobile applications, solutions, features, or our privacy policies.
Our business, including our ability to operate and to continue to expand internationally, could be adversely affected if legislation or regulations are adopted, interpreted, or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices, the design of our websites, mobile applications, offerings, or our privacy policies.
Dudum holds, directly or indirectly, approximately 90% of the outstanding voting power and will be able to control matters submitted 42 Table of Contents to our stockholders for approval, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. Mr.
Dudum holds, directly or indirectly, approximately 90% of the outstanding voting power and will be able to control matters submitted to our stockholders for approval, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. Mr.
In addition, our employees or third parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of 13 Table of Contents intellectual property, as well as the public disclosure of proprietary, confidential, or sensitive personal information of our business, employees, consumers or others.
In addition, our employees or third parties acting at our direction may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential, or sensitive personal information of our business, employees, consumers or others.
If we are unable to renew our agreements with these third-party service providers on commercially reasonable terms, if our agreements with these providers are prematurely terminated, or if in the future we add additional data, call center, or pharmacy providers, we may experience costs or downtime in connection with the transfer to, or the addition of, such new providers.
If we are unable to renew our agreements with these third- 24 Table of Contents party service providers on commercially reasonable terms, if our agreements with these providers are prematurely terminated, or if in the future we add additional data, call center, or pharmacy providers, we may experience costs or downtime in connection with the transfer to, or the addition of, such new providers.
Because of the nature of the sensitive, confidential, and proprietary information that we and our service providers collect, store, transmit, and otherwise process, the security of our technology platform and other aspects of our services, including those provided or facilitated by our third-party service providers, are important to our operations and business strategy.
Because of the nature of the sensitive, confidential, and proprietary information that we and our service providers collect, store, transmit, and otherwise process, the security of our and our vendors’ technology platforms and other aspects of our services, including those provided or facilitated by third-party service providers, are important to our operations and business strategy.
In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating financial statements from prior period(s). Any of these circumstances could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations.
In some cases, we could be required to apply a new or revised standard retroactively, resulting in restating financial statements from prior periods. Any of these circumstances could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations.
If our operations are found to be in violation of any of the federal, state, and foreign laws described above or any other current or future fraud and abuse or other healthcare laws and regulations that apply to us, we may be subject to penalties, including significant criminal, civil and administrative penalties, damages and fines, disgorgement, additional reporting requirements and oversight, imprisonment for individuals, and exclusion from the ability to participate in government healthcare programs, such as Medicare and Medicaid, as well as contractual damages and reputational harm.
If our operations or those of our Affiliated Pharmacies or Affiliated Medical Groups are found to be in violation of any of the federal, state, and foreign laws described above or any other current or future fraud and abuse or other healthcare laws and regulations that apply to us, we may be subject to penalties, including significant criminal, civil and administrative penalties, damages and fines, disgorgement, additional reporting requirements and oversight, imprisonment for individuals, and exclusion from the ability to participate in government healthcare programs, such as Medicare and Medicaid, as well as contractual damages and reputational harm.
These authorities can enforce regulations related to methods and documentation of the testing, production, compounding, control, safety, quality assurance, labeling, packaging, sterilization, storage, and shipping of products.
These authorities can enforce regulations related to methods and documentation of the testing, production, compounding, control, safety, quality assurance, labeling, packaging, sterilization, storage, shipping, marketing, and sale of products.
In each case, our revenue may decline and our business, financial condition, and results of operations could be adversely affected. Additionally, the introduction of new products, services or solutions to our platform may require us to comply with additional, yet undetermined, laws and regulations.
In each case, our revenue may decline and our business, financial condition, and results of operations could be adversely affected. 30 Table of Contents Additionally, the introduction of new products, services or solutions to our platform may require us to comply with additional, yet undetermined, laws and regulations.
These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. To date, we have financed our operations principally from the sale of our equity, revenue from our platform, and the incurrence of indebtedness.
These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently 39 Table of Contents to offset these higher expenses. To date, we have financed our operations principally from the sale of our equity, revenue from our platform, and the incurrence of indebtedness.
These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our Board of 43 Table of Contents Directors or taking other corporate actions, including effecting changes in our management.
These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of our Board of Directors or taking other corporate actions, including effecting changes in our management.
As a result of the complexity involved in complying with the rules and regulations applicable to public companies, 40 Table of Contents our management’s attention may be diverted from other business concerns, which could harm our business, results of operations, and financial condition.
As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, results of operations, and financial condition.
Foreign, state, and local laws governing the definition or classification of independent contractors, or changes thereto, or judicial decisions regarding independent contractor classification, could require classification of Providers as employees (or workers or quasi-employees where those statuses exist) of the Affiliated Medical Groups.
Foreign, state, and local laws governing the definition or classification of independent contractors, or changes thereto, or judicial decisions regarding independent contractor classification, could require classification of 20 Table of Contents Providers as employees (or workers or quasi-employees where those statuses exist) of the Affiliated Medical Groups.
If our customers experience difficulty accessing or using, or if they elect not to use, our mobile websites or mobile applications, our business and results of operations may be adversely affected. Our business depends on continued and unimpeded access to the internet and mobile networks.
If our customers experience difficulty accessing or using, or if they elect not to use, our mobile websites or mobile applications, our business and results of operations may be adversely affected. 23 Table of Contents Our business depends on continued and unimpeded access to the internet and mobile networks.
These requirements could result in delays to an Affiliated Pharmacy obtaining licensure in a given jurisdiction or disruptions to our business in the event of a change of control with respect to an Affiliated Pharmacy, which could adversely affect our revenue or results of operations.
These requirements could result in delays to an 25 Table of Contents Affiliated Pharmacy obtaining licensure in a given jurisdiction or disruptions to our business in the event of a change of control with respect to an Affiliated Pharmacy, which could adversely affect our revenue or results of operations.
Imposition of such taxes on our services going forward or collection of sales tax from our customers in respect of prior sales could also adversely affect our sales activity and have a negative impact on our results of operations and cash flows.
Imposition of such taxes on our services going forward or collection of sales tax from our 42 Table of Contents customers in respect of prior sales could also adversely affect our sales activity and have a negative impact on our results of operations and cash flows.
Widespread acceptance of personalized healthcare enabled by technology is critical to our future growth and success. A reduction in the growth of technology-enabled personalized healthcare could reduce the demand for our services and result in a lower revenue growth rate or decreased revenue.
Widespread acceptance of personalized healthcare enabled by technology is critical to our future growth and success. A 16 Table of Contents reduction in the growth of technology-enabled personalized healthcare could reduce the demand for our services and result in a lower revenue growth rate or decreased revenue.
For as long as the “controlled company” exemption is available, our Board of Directors in the future may not consist of a majority of independent directors and may not have an independent nominating and corporate governance committee or compensation committee.
For as long as the “controlled company” exemption is available, our Board of Directors in the future may not consist of a majority of 43 Table of Contents independent directors and may not have an independent nominating and corporate governance committee or compensation committee.
To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial, and management controls and our reporting systems and procedures, and we will need to ensure that we maintain high levels of customer support.
To manage the expected growth of our operations and personnel, we will need to 18 Table of Contents continue to improve our operational, financial, and management controls and our reporting systems and procedures, and we will need to ensure that we maintain high levels of customer support.
The market price of our Class A common stock may fluctuate due to a variety of factors, including: • changes in the industries in which we operate; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual results of operations; • publication of research reports by securities analysts about us or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of debt; • the volume of shares of our Class A common stock available for public sale; and • general economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks, the ongoing COVID-19 pandemic or other pandemics, and acts of war or terrorism.
The market price of our Class A common stock may fluctuate due to a variety of factors, including: • changes in the industries in which we operate; • variations in our operating performance and the performance of our competitors in general; • actual or anticipated fluctuations in our quarterly or annual results of operations; • publication of research reports by securities analysts about us or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • changes in laws and regulations, or enforcement thereof, affecting our business; • commencement of, or involvement in, litigation or governmental action involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of debt; • the volume of shares of our Class A common stock available for public sale; and • general economic and political conditions such as recessions, interest rates, fuel prices, inflation, foreign currency fluctuations, international tariffs, social, political and economic risks, pandemics or epidemics, and acts of war or terrorism or other geopolitical conflicts.
We believe demand for our offerings has been driven in part by rapidly growing costs in the traditional healthcare system, difficulties accessing the healthcare system, patient stigma associated with sensitive medical conditions, the movement toward patient-centricity and personalized healthcare, advances in technology, and general movement to telehealth accelerated by the COVID-19 pandemic.
We believe demand for our offerings has been driven in part by rapidly growing costs in the traditional healthcare system, difficulties accessing the healthcare system, patient stigma associated with sensitive medical conditions, the movement toward patient-centricity and personalized healthcare, advances in technology, and general movement to telehealth.
Other federal, state, or foreign enforcement authorities might also 31 Table of Contents take action against us or the Affiliated Pharmacies, Partner Pharmacies, Affiliated Medical Groups or Providers if they determine that compounded drug products available through our platform do not meet applicable legal or regulatory requirements.
Other federal, state, or foreign enforcement authorities might also take action against us or the Affiliated Pharmacies, Partner Pharmacies, Affiliated Medical Groups or Providers if they determine that compounded drug products available through our platform do not meet applicable legal or regulatory requirements.
From time to time, we are subject to legal proceedings in the ordinary course of business, which can include intellectual property disputes or claims related to our marketing or sale of products, any of which may be costly to defend and could materially harm our business and results of operations.
Any of these results could harm our results of operations. 37 Table of Contents From time to time, we are subject to legal proceedings in the ordinary course of business, which can include intellectual property disputes or claims related to our marketing or sale of products, any of which may be costly to defend and could materially harm our business and results of operations.
For example, U.S. and international regulators, investors and other stakeholders are increasingly focused on environmental, social, and governance (“ESG”) matters. For example, new domestic and international laws and regulations relating to ESG matters, including climate change, cybersecurity, human capital, diversity and sustainability, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or other obligations.
For example, U.S. and international regulators, investors and other stakeholders have increasingly focused on environmental, social, and governance (“ESG”) matters in recent years. New domestic and international laws and regulations relating to ESG matters, including climate change, human capital, diversity and sustainability, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or other obligations.
Economic uncertainty and associated macroeconomic conditions, including geopolitical tensions, escalating inflation, supply chain issues and the availability and cost of credit and government stimulus programs in the United States and other countries have contributed to increased market volatility or market declines, make it extremely difficult for our partners, suppliers, and us to accurately forecast and plan future business activities, could cause our customers to slow spending on our offerings, and could limit the ability of our Partner Pharmacies and our Affiliated Pharmacies to purchase sufficient quantities of pharmaceutical products from suppliers, which could adversely affect our ability to fulfill customer orders and attract new Providers.
Economic uncertainty and associated macroeconomic conditions, including geopolitical tensions, inflation, trade and supply chain issues and the availability and cost of credit in the United States and other countries have contributed to increased market volatility or market declines, make it extremely difficult for our partners, suppliers, and us to accurately forecast and plan future business activities, 22 Table of Contents could cause our customers to slow spending on our offerings, and could limit the ability of our Partner Pharmacies and our Affiliated Pharmacies to purchase sufficient quantities of pharmaceutical products from suppliers, which could adversely affect our ability to fulfill customer orders and attract new Providers.
GAAP and our key metrics require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes 41 Table of Contents and amounts reported in our key metrics. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.
GAAP and our key metrics require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes and amounts reported in our key metrics. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.
We compete directly not only with other established telehealth providers but also traditional healthcare providers, pharmacies, large retailers that sell non-prescription products, including, for example, nutritional supplements, vitamins, and hair care treatments, as well as technology companies entering into the health and wellness industry.
We compete directly not only with other established telehealth providers but also traditional healthcare providers, pharmacies, pharmaceutical companies, large retailers that sell non-prescription products, including, for example, over-the-counter medical devices, nutritional supplements, vitamins, and hair care treatments, as well as technology companies entering into the health and wellness industry.
Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price could decline.
Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price 45 Table of Contents could decline.
As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements and may have the ability to initiate or withstand substantial price competition.
As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing 17 Table of Contents opportunities, technologies, standards, or customer requirements and may have the ability to initiate or withstand substantial price competition.
Our historical cash flows from operations were negative for the years ended December 31, 2020, 2021, and 2022.
Our cash flows from operations were negative for the years ended December 31, 2021 and 2022.
While we have not experienced material supply chain issues to date, the loss or disruption of such supply arrangements for any reason, including as a result of the Russian invasion of Ukraine, other acts of war or terrorism, trade sanctions, escalating inflation, the COVID-19 or other health epidemics or pandemics, labor disputes, loss or impairment of key manufacturing sites, inability to procure sufficient raw materials, quality control issues, ethical sourcing issues, a supplier’s financial distress, natural disasters, looting or other external factors over which we have no control, could interrupt product supply and, if not effectively managed and remedied, have a material adverse impact on our business, results of operations and financial condition.
While we have not experienced material supply chain issues to date, the loss or disruption of such supply arrangements for any reason, including as a result of ongoing conflict arising out of the Russian invasion of Ukraine and the hostilities and conflict in the Middle East, other acts of war or terrorism, trade sanctions, inflation, health epidemics or pandemics, labor disputes, loss or impairment of key manufacturing sites, inability to procure sufficient raw materials, quality control issues, ethical sourcing issues, a supplier’s financial distress, natural disasters, looting or other external factors over which we have no control, could interrupt product supply and, if not effectively managed and remedied, have a material adverse impact on our business, results of operations and financial condition.
Factors that may contribute to the variability of our results of operations include: • new developments on our platform or in our product offerings; • our ability to attract and retain Providers to our platform; 39 Table of Contents • changes in our pricing policies and those of our competitors; • our ability to execute our plans to add treatment options and Provider expertise for additional medical conditions; • long-term treatment outcomes of customers on our platform; • medical, technological, or other innovations in our industry or in connection with specific products that we make available on our platform; • our ability to maintain relationships with customers, partners, and suppliers; • our ability to retain key members of our executive leadership team; • successful expansion of licensure and capabilities of the Affiliated Pharmacies; • breaches of security or privacy; • the amount and timing of operating costs and capital expenditures related to the expansion of our business; • our ability to complete acquisitions on commercially reasonable terms and integrate acquired businesses; • costs related to litigation, investigations, regulatory enforcement actions, or settlements; • changes in the legislative or regulatory environment, including with respect to practice of medicine, telehealth, consumer protection, privacy or data protection, or enforcement by government regulators, including fines, orders, or consent decrees; • announcements by competitors or other third parties of significant new products or acquisitions or entrance into certain markets; • our ability to make accurate accounting estimates and appropriately recognize revenue for our platform and offerings for which there are no relevant comparable products; • seasonality trends in our Wholesale Revenue; • instability in the financial markets; • global economic conditions; • the duration and extent of the COVID-19 pandemic; and • political, economic, and social instability, including as a result of the Russian invasion of Ukraine or other war or terrorist activities, and any disruption these events may cause to the global economy.
Factors that may contribute to the variability of our results of operations include: • new developments on our platform or in our product offerings; • our ability to attract and retain customers and Providers to our platform; • changes in our pricing policies and those of our competitors; • our ability to execute our plans to add treatment options and Provider expertise for additional medical conditions; • long-term treatment outcomes of customers on our platform; • medical, technological, or other innovations in our industry or in connection with specific products that we make available on our platform; • our ability to maintain relationships with customers, partners, and suppliers; • our ability to retain key members of our executive leadership team; • successful expansion of licensure and capabilities of the Affiliated Pharmacies; • breaches of security or privacy; • the amount and timing of operating costs and capital expenditures related to the expansion of our business; • our ability to complete acquisitions on commercially reasonable terms and integrate acquired businesses; • costs related to litigation, investigations, regulatory enforcement actions, or settlements; • changes in the legislative or regulatory environment, including with respect to practice of medicine, telehealth, pharmaceuticals or compounding, consumer protection, privacy or data protection, or enforcement by government regulators, including fines, orders, or consent decrees; • announcements by competitors or other third parties of significant new products or acquisitions or entrance into certain markets; • our ability to make accurate accounting estimates and appropriately recognize revenue for our platform and offerings for which there are no relevant comparable products; • seasonality trends in our Wholesale Revenue; • instability in the financial markets; • global economic conditions; and • political, economic, and social instability, including as a result of ongoing conflict arising out of the Russian invasion of Ukraine, the hostilities and conflict in the Middle East, or other war or terrorist activities, and any disruption these events may cause to the global economy. 40 Table of Contents The impact of one or more of the foregoing and other factors may cause our results of operations to vary significantly.
The process of integrating acquired 20 Table of Contents companies, businesses, or technologies has created, and will continue to create, unforeseen operating difficulties and expenditures.
The process of integrating acquired companies, businesses, or technologies has created, and will continue to create, unforeseen operating difficulties and expenditures.
The market for our model is new, rapidly evolving and increasingly competitive. We are expanding our business by offering technology-driven access to consultation and treatment options for new conditions, but it is uncertain whether our offerings will achieve and sustain high levels of demand and market adoption.
The market for our model is new, rapidly evolving and increasingly competitive. We are expanding our business by offering technology-driven access to consultation and treatment options for new conditions, including the utilization and integration of artificial intelligence in our offerings, but it is uncertain whether our offerings will achieve and sustain high levels of demand and market adoption.
Our payments system depends on third-party service providers and is subject to evolving laws and regulations. We have engaged third-party service providers to perform underlying card processing, currency exchange, and identity verification.
Our payments system depends on third-party service providers and is subject to evolving laws and regulations. We engage third-party service providers to perform underlying card processing, currency exchange, and identity verification for our payments system.
Any such interruption in access, improper access, disclosure or other loss of such information could result in legal claims or proceedings, liability under laws and regulations that protect the privacy of customer information or other personal information, such as the CCPA, the CPRA or the UK GDPR, and regulatory penalties.
Any such interruption in access, improper access, disclosure or other loss of such information could result in legal claims or proceedings, liability under laws and regulations that protect the privacy of customer information or other personal information, and regulatory penalties.
In the case of infringement or misappropriation caused by technology that we obtain from third parties, any indemnification or other contractual protections we obtain from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such infringement or misappropriation. Any of these results could harm our results of operations.
In the case of infringement or misappropriation caused by technology that we obtain from third parties, any indemnification or other contractual protections we obtain from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such infringement or misappropriation.
Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our solution or require us to stop offering certain features, all of which could negatively impact our acquisition of customers and revenue growth.
Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, require us to modify our platform or business practices or require us to stop offering certain features, products, or services, any of which could negatively impact our acquisition of customers and revenue growth.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeHims & Hers’ workforce is 45 Table of Contents currently working on a fully remote basis with the exception of those employees serving our fulfillment operations and Affiliated Pharmacies, whose presence is required for operation of the pharmacies, fulfillment, and distribution.
Biggest changeHims & Hers’ workforce is currently working on a fully remote basis with the exception of those employees serving our fulfillment operations and Affiliated Pharmacies, whose presence is required for operation of the pharmacies, fulfillment, and distribution, along with those utilizing our corporate facility.
Item 2. Properties Hims & Hers’ address is 2269 Chestnut Street, #523, San Francisco, California 94123. In addition, we lease and operate fulfillment centers and Affiliated Pharmacy facilities in New Albany, Ohio and Gilbert, Arizona.
Item 2. Properties Hims & Hers’ address is 2269 Chestnut Street, #523, San Francisco, California 94123. In addition, we lease and operate fulfillment centers and Affiliated Pharmacy facilities in New Albany, Ohio and Gilbert, Arizona, along with a corporate facility in New York, New York.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The information concerning our equity compensation plans is incorporated by reference herein to the section of the Proxy Statement entitled “Equity Compensation Plan Information.” Stock Performance Graph The following graph compares the cumulative total return to stockholders on our Class A common stock relative to the cumulative total returns of the Nasdaq Internet Index, the S&P 500 Health Care Sector Index, and the Russell 2000 Index.
Biggest changeThe repurchase program expires on November 8, 2025. Stock Performance Graph The following graph compares the cumulative total return to stockholders on our Class A common stock relative to the cumulative total returns of the Nasdaq Internet Index, the S&P 500 Health Care Sector Index, and the Russell 2000 Index.
Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. However, we believe a substantially greater number of beneficial owners hold shares of Class A common stock through brokers, banks, or other nominees.
Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. However, we believe a substantially greater number of beneficial owners hold shares of our Class A common stock through brokers, banks, or other nominees.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index on January 21, 2021, the date our Class A common stock began trading on the NYSE, and its relative performance is tracked through December 31, 2022.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each index on January 21, 2021, the date our Class A common stock began trading on the NYSE, and its relative performance is tracked through December 31, 2023.
The returns shown are based on historical results and are not intended to suggest future performance. 47 Table of Contents Item 6. [Reserved]
The returns shown are based on historical results and are not intended to suggest future performance. 48 Table of Contents Item 6. [Reserved]
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “HIMS”. Holders On February 24, 2023 , there were 148 holders of record of our Class A common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “HIMS”. Holders On February 23, 2024 , there were 129 holders of record of our Class A common stock.
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Securities Authorized for Issuance under Equity Compensation Plans The information concerning our equity compensation plans is incorporated by reference herein to the section of the 2024 Proxy Statement entitled “Equity Compensation Plan Information.” Issuer Purchases of Equity Securities Share repurchase activity during the three months ended December 31, 2023 was as follows (in thousands, except share and per share data): Total Number of Shares of Class A Common Stock Purchased Average Price Paid per Share (1) Total Number of Shares Purchased as Part of the Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Publicly Announced Program (2) October 1, 2023 to October 31, 2023 — $ — — November 1, 2023 to November 30, 2023 237,458 $ 8.42 237,458 December 1, 2023 to December 31, 2023 — $ — — Total repurchases 237,458 $ 48,001 ______________ (1) Average price paid per share includes costs associated with the repurchases.
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(2) On November 6, 2023, we announced that our Board of Directors had authorized a repurchase program, pursuant to which we may repurchase up to $50.0 million of our Class A common stock through open market purchases, privately negotiated transactions or other means, including through 10b5-1 trading plans As of December 31, 2023, approximately $2.0 million of our shares had been repurchased under the authorization.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeManagement makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates. 55 Table of Contents 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): Year Ended December 31, 2022 Change % Change 2021 Change % Change 2020 Revenue $ 526,916 $ 255,038 94 % $ 271,878 $ 123,121 83 % $ 148,757 Cost of revenue 118,194 50,810 75 % 67,384 28,077 71 % 39,307 Gross profit 408,722 204,228 100 % 204,494 95,044 87 % 109,450 Operating expenses:(1) Marketing 272,587 136,685 101 % 135,902 76,913 130 % 58,989 Operations and support 77,403 29,810 63 % 47,593 19,257 68 % 28,336 Technology and development 29,237 6,858 31 % 22,379 11,141 99 % 11,238 General and administrative 98,192 (15,470) (14) % 113,662 87,631 337 % 26,031 Total operating expenses 477,419 157,883 49 % 319,536 194,942 156 % 124,594 Loss from operations (68,697) 46,345 (40) % (115,042) (99,898) 660 % (15,144) Other income (expense): Change in fair value of liabilities 70 (3,732) (98) % 3,802 6,903 * (3,101) Other income, net 2,918 2,473 556 % 445 187 72 % 258 Total other income (expense), net 2,988 (1,259) (30) % 4,247 7,090 * (2,843) Loss before income taxes (65,709) 45,086 (41) % (110,795) (92,808) 516 % (17,987) Benefit (provision) for income taxes 31 (3,105) (99) % 3,136 3,263 * (127) Net loss $ (65,678) $ 41,981 (39) % $ (107,659) $ (89,545) 494 % $ (18,114) *______________ (*) Not meaningful (1) Includes stock-based compensation expense as follows (in thousands): Year Ended December 31, 2022 2021 2020 Marketing $ 4,648 $ 9,664 $ 1,172 Operations and support 2,684 2,735 155 Technology and development 4,327 4,481 269 General and administrative 31,158 50,331 4,235 Total stock-based compensation expense $ 42,817 $ 67,211 $ 5,831 56 Table of Contents The following table sets forth our results of operations as a percentage of our total revenue for the periods presented: Year Ended December 31, 2022 2021 2020 Revenue 100 % 100 % 100 % Cost of revenue 22 % 25 % 26 % Gross profit 78 % 75 % 74 % Operating expenses: Marketing 52 % 50 % 40 % Operations and support 15 % 17 % 19 % Technology and development 6 % 8 % 8 % General and administrative 18 % 42 % 17 % Total operating expenses 91 % 117 % 84 % Loss from operations (13) % (42) % (10) % Other income (expense): Change in fair value of liabilities — % 1 % (2) % Other income, net 1 % — % — % Total other income (expense), net 1 % 1 % (2) % Loss before income taxes (12) % (41) % (12) % Benefit (provision) for income taxes — % 1 % — % Net loss (12) % (40) % (12) % 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%.
Biggest changeResults 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): Year Ended December 31, 2023 Change % Change 2022 Change % Change 2021 Revenue $ 872,000 $ 345,084 65 % $ 526,916 $ 255,038 94 % $ 271,878 Cost of revenue 157,051 38,857 33 % 118,194 50,810 75 % 67,384 Gross profit 714,949 306,227 75 % 408,722 204,228 100 % 204,494 Operating expenses:(1) Marketing 446,435 173,848 64 % 272,587 136,685 101 % 135,902 Operations and support 119,857 42,454 55 % 77,403 29,810 63 % 47,593 Technology and development 48,227 18,990 65 % 29,237 6,858 31 % 22,379 General and administrative 129,883 31,691 32 % 98,192 (15,470) (14) % 113,662 Total operating expenses 744,402 266,983 56 % 477,419 157,883 49 % 319,536 Loss from operations (29,453) 39,244 (57) % (68,697) 46,345 (40) % (115,042) Other income (expense): Change in fair value of liabilities (1,075) (1,145) * 70 (3,732) (98) % 3,802 Other income, net 8,957 6,039 207 % 2,918 2,473 556 % 445 Total other income, net 7,882 4,894 164 % 2,988 (1,259) (30) % 4,247 Loss before income taxes (21,571) 44,138 (67) % (65,709) 45,086 (41) % (110,795) (Provision) benefit for income taxes (1,975) (2,006) * 31 (3,105) (99) % 3,136 Net loss $ (23,546) $ 42,132 (64) % $ (65,678) $ 41,981 (39) % $ (107,659) ______________ (*) Not meaningful (1) Includes stock-based compensation expense as follows (in thousands): Year Ended December 31, 2023 2022 2021 Marketing $ 5,477 $ 4,648 $ 9,664 Operations and support 6,815 2,684 2,735 Technology and development 7,126 4,327 4,481 General and administrative 46,662 31,158 50,331 Total stock-based compensation expense $ 66,080 $ 42,817 $ 67,211 57 Table of Contents The following table sets forth our results of operations as a percentage of our total revenue for the periods presented: Year Ended December 31, 2023 2022 2021 Revenue 100 % 100 % 100 % Cost of revenue 18 % 22 % 25 % Gross profit 82 % 78 % 75 % Operating expenses: Marketing 51 % 52 % 50 % Operations and support 14 % 15 % 17 % Technology and development 6 % 6 % 8 % General and administrative 15 % 18 % 42 % Total operating expenses 86 % 91 % 117 % Loss from operations (4) % (13) % (42) % Other income (expense): Change in fair value of liabilities — % — % 1 % Other income, net 1 % 1 % — % Total other income, net 1 % 1 % 1 % Loss before income taxes (3) % (12) % (41) % (Provision) benefit for income taxes — % — % 1 % Net loss (3) % (12) % (40) % 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%.
“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” 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.
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.
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.
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.
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.
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.
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.
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.
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.
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 51 Table of Contents these investments will positively impact our results of operations.
This also includes 52 Table of Contents 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.
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 .
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 .
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
However, we anticipate operations and 54 Table of Contents 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.
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.
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.
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.
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.
We expect our gross margin to fluctuate from period to period depending on these and other factors. 55 Table of Contents Marketing expenses The largest component of our marketing expenses consists of our discretionary customer acquisition 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.
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 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.
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.
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”).
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”).
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.
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.
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.
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.
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.
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.
“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue. 52 Table of Contents The following table reconciles net loss to Adjusted EBITDA for the years ended December 31, 2022, 2021, and 2020 (in thousands): Year Ended December 31, 2022 2021 2020 Revenue $ 526,916 $ 271,878 $ 148,757 Net loss (65,678) (107,659) (18,114) Stock-based compensation 42,817 67,211 5,831 Depreciation and amortization 7,474 4,075 1,057 Acquisition-related costs 1,192 8,105 — Impairment of long-lived assets 1,127 — — (Benefit) provision for income taxes (31) (3,136) 127 Change in fair value of liabilities (70) (3,802) 3,101 Interest (income) / expense, net (2,610) (390) (438) Merger bonuses — 5,219 — Warrant expense in connection with Merger — 154 — Amortization of debt issuance costs — 144 322 Adjusted EBITDA $ (15,779) $ (30,079) $ (8,114) Net loss as a % of revenue (12) % (40) % (12) % Adjusted EBITDA margin (3) % (11) % (5) % 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.
“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by revenue. 53 Table of Contents The following table reconciles net loss to Adjusted EBITDA for the years ended December 31, 2023, 2022, and 2021 (in thousands): Year Ended December 31, 2023 2022 2021 Revenue $ 872,000 $ 526,916 $ 271,878 Net loss (23,546) (65,678) (107,659) Stock-based compensation 66,080 42,817 67,211 Depreciation and amortization 9,515 7,474 4,075 Acquisition-related costs 3,016 1,192 8,105 Provision (benefit) for income taxes 1,975 (31) (3,136) Change in fair value of liabilities 1,075 (70) (3,802) Impairment of long-lived assets 429 1,127 — Interest income (9,029) (2,610) (390) Merger bonuses — — 5,219 Warrant expense in connection with Merger — — 154 Amortization of debt issuance costs — — 144 Adjusted EBITDA $ 49,515 $ (15,779) $ (30,079) Net loss as a % of revenue (3) % (12) % (40) % Adjusted EBITDA margin 6 % (3) % (11) % 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.
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, 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. 60 Table of Contents 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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%.
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 .
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 .
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.
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.
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.
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.
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.
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.
For the year ended December 31, 2022, AOV was $82, an increase of 11% compared to $74 for the year ended December 31, 2021.
For the year ended December 31, 2023, AOV was $97, an increase of 18% compared to $82 for the year ended December 31, 2022.
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.
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.
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.
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.
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.
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.
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%.
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%.
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, 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.
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.
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.
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. 50 Table of Contents We continuously test and optimize the online experience and offerings to improve the customer experience, maximize sales, and improve gross margin.
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. 51 Table of Contents We continuously test and optimize the online experience and offerings to improve the customer experience, maximize sales, and improve gross margin.
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%.
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%.
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.
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.
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 57 Table of Contents 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.
The increase in customer acquisition costs was a result 58 Table of Contents 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.
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.
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.
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.
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 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.
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.
Average Order Value (“AOV”) is defined as Online Revenue divided by Net Orders. 49 Table of Contents 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): Year Ended December 31, 2022 Change % Change 2021 Change % Change 2020 Online Revenue $ 502,507 $ 243,337 94 % $ 259,170 $ 118,442 84 % $ 140,728 Wholesale Revenue 24,409 11,701 92 % 12,708 4,679 58 % 8,029 Total revenue $ 526,916 $ 255,038 94 % $ 271,878 $ 123,121 83 % $ 148,757 Subscribers (end of period) 1,040 486 88 % 554 264 91 % 290 Monthly Online Revenue per Average Subscriber $ 53 $ 2 4 % $ 51 $ 1 2 % $ 50 Subscriptions (end of period) 1,116 507 83 % 609 297 95 % 312 Net Orders 6,122 2,618 75 % 3,504 1,225 54 % 2,279 AOV $ 82 $ 8 11 % $ 74 $ 12 19 % $ 62 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.
Average Order Value (“AOV”) is defined as Online Revenue divided by Net Orders. 50 Table of Contents 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): Year Ended December 31, 2023 Change % Change 2022 Change % Change 2021 Online Revenue $ 842,381 $ 339,874 68 % $ 502,507 $ 243,337 94 % $ 259,170 Wholesale Revenue 29,619 5,210 21 % 24,409 11,701 92 % 12,708 Total revenue $ 872,000 $ 345,084 65 % $ 526,916 $ 255,038 94 % $ 271,878 Subscribers (end of period) 1,537 497 48 % 1,040 486 88 % 554 Monthly Online Revenue per Average Subscriber $ 54 $ 1 2 % $ 53 $ 2 4 % $ 51 Net Orders 8,676 2,554 42 % 6,122 2,618 75 % 3,504 AOV $ 97 $ 15 18 % $ 82 $ 8 11 % $ 74 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.
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.
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.
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%.
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%.
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. 60 Table of Contents 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.
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.
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.
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. 59 Table of Contents 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.
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.
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.
“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.
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.
(“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.
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.
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.
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.
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.
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.
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.
Our products and services are available for purchase directly by customers 49 Table of Contents 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.
If we are unable to raise additional capital when desired, our business, financial condition, and results of operations would be harmed. 59 Table of Contents Cash Flows The following table provides a summary of cash flow data (in thousands): Year Ended December 31, 2022 2021 2020 Net cash used in operating activities $ (26,531) $ (34,412) $ (2,479) Net cash provided by (used in) investing activities 34,699 (156,268) (39,701) Net cash (used in) provided by financing activities (33,127) 235,043 47,742 Cash flows from operating activities Our largest source of operating cash flows is cash collections from our customers.
Cash Flows The following table provides a summary of cash flow data (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 73,483 $ (26,531) $ (34,412) Net cash (used in) provided by investing activities (12,106) 34,699 (156,268) Net cash (used in) provided by financing activities (11,475) (33,127) 235,043 Cash flows from operating activities Our largest source of operating cash flows is cash collections from our customers.
“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” 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.
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.
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.
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.
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.
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. 53 Table of Contents 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.
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.
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.
(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.
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.
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.
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 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.
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.
Additionally, other income (expense) includes non-operating and one-time charges classified outside of operating expenses. 56 Table of Contents (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.
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.
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.
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.
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.
The Monthly Online Revenue per Average Subscriber has remained relatively stable as a result of recurring and predictable uptake of our offerings by Subscribers.
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.
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.
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.
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 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.
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 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe had cash and cash equivalents and short-term investments totaling $179.6 million and $247.3 million as of December 31, 2022 and 2021, respectively, which were held for working capital purposes. Our cash equivalents are comprised of money market funds and government bonds, and our short-term investments are comprised of corporate bonds, government bonds, and asset-backed bonds.
Biggest changeWe had cash and cash equivalents and short-term investments totaling $221.0 million and $179.6 million as of December 31, 2023 and 2022, respectively, which were held for working capital purposes. Our cash and cash equivalents are comprised of interest-bearing cash accounts and money market funds, and our short-term investments are comprised of corporate bonds, U.S.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to certain market risks in the ordinary course of our business, including sensitivities as follows: Interest Rate Risk Our exposure to interest rate fluctuations relate primarily to our cash equivalents and short-term investments.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to certain market risks in the ordinary course of our business, including sensitivities as follows: Interest Rate Risk Our exposure to interest rate fluctuations relate primarily to our cash and cash equivalents and short-term investments.
Foreign Currency Risk There was no material foreign currency risk for the years ended December 31, 2022, 2021, and 2020 since we operate primarily in the United States. Our operations in the United Kingdom are not considered significant. Accordingly, we believe we do not have a material exposure to foreign currency risk.
Foreign Currency Risk There was no significant foreign currency risk for the years ended December 31, 2023, 2022, and 2021 since we operate primarily in the United States. Our operations in the United Kingdom are not considered significant. Accordingly, we believe we do not have a material exposure to foreign currency risk.
Our investments are made for capital preservation purposes. We do not hold or issue financial instruments for trading or speculative purposes. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
Treasury bills, government and government agency securities, and asset-backed bonds. Our investments are made for capital preservation purposes. We do not hold or issue financial instruments for trading or speculative purposes. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

Other HIMS 10-K year-over-year comparisons