Q1 2023 Hims & Hers Health Inc Earnings Call
Participants
Alice Lopatto
Andrew Dudum; Co-Founder, Chairman & CEO; Hims & Hers Health, Inc.
Yemi Okupe; CFO; Hims & Hers Health, Inc.
Daniel Clark
Glen Joseph Santangelo; Equity Analyst; Jefferies LLC, Research Division
Jack Dawson Wallace; Research Analyst; Guggenheim Securities, LLC, Research Division
Jenny Cao; Research Analyst; Truist Securities, Inc., Research Division
Korinne N. Wolfmeyer; VP & Senior Research Analyst; Piper Sandler & Co., Research Division
Luismario Higuera
Maxi Ma; Research Associate; Deutsche Bank AG, Research Division
Presentation
Operator
Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Hims & Hers First Quarter 2023 Earnings Conference Call. (Operator Instructions)
It is now my pleasure to turn today's call over to Alice Lopatto, Vice President of Investor Relations. Ma'am, please go ahead.
Alice Lopatto
Good afternoon, everyone, and welcome to the Hims & Hers Health First Quarter 2023 Earnings Call. On the call today, our prepared remarks will be presented by Andrew Dudum, Co-Founder and Chief Executive Officer; as well as Yemi Okupe, our Chief Financial Officer.
Before I hand it over to Andrew, I need to remind you of legal safe harbor and cautionary declarations. Certain statements and projections of future results made in this presentation constitute forward-looking statements that are based on, among other things, our current market, competitors and regulatory expectations and are subject to risks and uncertainties, and that could cause actual results to vary materially. We take no obligation to update publicly any forward-looking statement after this call, whether as a result of new information, future events, changes in assumptions or otherwise. Please see our most recently filed 10-K and 10-Q reports for a discussion of risk factors as they relate to forward-looking statements.
In today's presentation, we have certain non-GAAP financial measures. We refer you to the reconciliation table contained in today's press release available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information. You'll find a link to the webcast and investor relations website at investors.forhims.com. After the call, this webcast will be archived on the website for 12 months.
Before jumping into our results, I wanted to note that Andrew is currently on paternity leave, and our prepared remarks are prerecorded. Following these remarks, Yemi will host the live Q&A.
And with that, I'll now turn the call over to Andrew.
Andrew Dudum
Thanks, Alice. Welcome, everyone, and thank you for joining us. 2023 is off to an incredible start as we made significant progress towards our mission of helping the world feel great through the power of better health. The momentum of our business model is stronger than ever. Strong execution across our 4 strategic pillars: trusted brand, leading technology, innovative products and services and clinical excellence is enabling us to draw in more consumers and emerge as a leader at the forefront of an immense opportunity.
When we look at our market opportunity, there are more than 100 million Americans suffering from a chronic condition. And in some cases, as high as 90% of the population have yet to be treated. These statistics are staggering, and they highlight why our mission is so crucial. Therefore, we're not just focused on providing access to treatments. We're also dedicated to empowering people to take charge of their own health and well-being through a trusted and beloved brand. We believe that by helping people make positive changes in their lives, we can make a meaningful impact on the health and happiness of millions of people across the world.
Now diving into the details of our first quarter results. In the first quarter, we generated revenue of $190.8 million, up 88% year-over-year, driven by our growing subscriber base of over 1.2 million subscribers, up 87% year-over-year. We achieved these strong growth rates all while increasing adjusted EBITDA $2.2 million over the fourth quarter to $6.1 million in Q1. These results are in large part due to over 90% of our Q1 revenue coming from online recurring subscriptions.
Our ability to execute on our mission is powered by our 4 strategic pillars. These pillars create a powerful network effect that starts with our trusted brand, which drives consumer demand. Through the growth of our consumer base, we're able to gather insights and feedback to garner better personalized customer care and preferences that help us refine our technology platform, which then informs our product road map to deliver access to more personalized products and treatments. All of this, done in partnership and collaboration with leading clinical and pharmaceutical specialists, enables an experience, which we believe is unlike anything available in the market.
The development of our trusted brand is critical to our ability to drive and retain consumers on our platform through increased awareness and deep relationships. It allows us to secure strategic partnerships with leading retailers and celebrities. These partnerships enable us to deploy a powerful omnichannel approach, reaching consumers at multiple stages and in multiple forms during their journey towards improving their health and wellness.
In the first quarter, we partnered with Kristen Bell as our mental health ambassador for the Hers platform. Kristen's reputation as a trusted figure and her ability to authentically talk about her mental health struggles resonated with customers and made dealing with mental health challenges more approachable for thousands of people. This, paired with our multi-platform marketing approach, resulted in record level acquisition in our Hers mental health offering for the first quarter. Our platform has enabled the Hims & Hers brand to scale across numerous offerings, including men's health, women's health, dermatology and now mental health.
With our diverse offerings, we're able to speak to a broader set of consumers earlier in their health and wellness journey in an efficient manner. Our multi-category campaigns have been instrumental in building awareness of the wide array of solutions on our platform. We're excited to continue this momentum and to create more engaging content that speaks to the needs of our customers across different conditions.
As our platform continues to scale, we will deploy our leading technology to leverage unique insights, delivering access to world-class care for our customers and best-in-class tools for our providers. In the first quarter, we made a number of updates to our platform to ensure customers have an easy-to-use, educational and personalized experience. The rollout of account management tools made it more seamless for our consumers to get the treatment that they need at the cadence they desire and in a broader variety of form factors to meet their needs. Additionally, we were pleased to see conversion across several offerings increase as consumers experienced more personalized and specialized onboarding experiences.
Through the power of scale, our platform generates insights that are enabling us to deliver an expanding number of innovative products and services that customers love. Our over-the-counter products are a great example of this and has become increasingly popular, especially our hair care products. In the first quarter, we added a new anti-dandruff shampoo for Hims customers, which expands our existing line of men's hair care products and can be bundled with our prescription offerings.
Moving to our more personalized products. We strive to provide customers with access to treatments that fit in their diverse needs. In February, we launched Hard Mints by Hims, a personalized men's sexual health solution, which was met with tremendous consumer response. The ability to obtain a customized treatment, beautiful and discrete packaging and best-in-class provider services are resonating with our consumers. We feel that personalization of products and services is the way of the future, and you can expect more launches from us throughout the year.
In the second quarter, we expect to expand access to personalized solutions for hair regrowth on the Hers side of the business. It's often believed that hair loss is caused simply by factors like aging or stress. It is not necessarily understood as a medical condition that can be treated. From our customers' feedback, we've learned that this can lead to women feeling anxious and ashamed. We're incredibly proud to be working on future offerings that provide more personalized treatment to help remove barriers around (inaudible) health.
Finally, we view the integrity of clinical excellence on the platform as critical to every decision we make. In the first quarter, we deepened our medical bench with the addition of Dr. Dan Lieberman as our SVP of Mental Health. Dr. Lieberman will oversee our psychiatry and mental wellness strategy, working to ensure this offering continues to maintain high clinical excellence as we work towards more innovative solutions for customers.
We are confident in our platform's ability to help users access treatment across a broader set of conditions. Medical expertise to ensure both efficacy and safety is central to our ability to do that effectively. That is why we've added 5 new experts to our Medical Advisory Board that bring expertise across conditions such as weight management, menopause and cardiometabolic health.
We are proud of the execution at the start of this year across our 4 strategic pillars and the strong performance that come as a result. This has enabled us to attract talent at all levels of the organization. In our first quarter, we welcomed a new SVP of Product and continuing to further augment leaders across each of our functions.
Additionally, Christiane Pendarvis joined our Board of Directors. Christiane brings over 25 years of experience leading global consumer and retail brands, including Old Navy and Victoria's Secret, and is a proven customer-centric leader with a track record in helping brands drive growth. She's currently the Co-President and Chief Merchandising and Design Officer for Rihanna's Savage X Fenty, a revolutionary intimate apparel brand known for its focus on inclusivity. In just a short period, Christiane's expertise has added significant value as we work to help the world feel great through the power of better health.
We made significant progress in Q1 across all facets of the business and have tremendous confidence in our ability to continue to expand our market leadership position and drive long-term growth. Given the strong customer demand we're seeing and the scale that we are generating in our model, we are raising our 2023 guidance and now expect to achieve revenue growth of 54% to 58% and adjusted EBITDA profitability of between $25 million and $30 million.
Our platform is scaling in a unique way that is enabling us to leverage economies of scale that we believe few others can. Over 60% of our orders are fulfilled through affiliated pharmacies, and we expect that number to continue to increase as we progress throughout the year. We're excited to reinvest back into the customer experience in a way that drives more value to a broader consumer base in a way that is truly unique.
I want to especially thank our teams throughout the organization for their passion and hard work, which is helping us drive robust and consistent results across the business. Equally important, we greatly appreciate the continued support of our customers and shareholders. We look forward to delivering strong growth and profitability and building increased shareholder value for all of our stakeholders over the long term.
Now I'll turn the call over to Yemi to discuss the financials and provide more detail on our increased outlook for 2023.
Yemi Okupe
Thanks, Andrew. Hello, everyone, and thank you for joining us today. I'll start by providing additional color into our financial performance and expand upon Andrew's comments related to our past performance and future outlook. We are proud of our results in the first quarter, which showcased the power of our flywheel across our 4 pillars at work and through it, our ability to drive both higher revenue and adjusted EBITDA.
First quarter revenue grew 88% year-over-year to $190.8 million. Longer-tenured offerings in men's health continued to exhibit strong signs of growth with some offering even experiencing accelerating growth. This indicates that we are just scratching the surface of the opportunity. And with continued innovation and execution, we believe we have a long runway ahead of us. Additionally, we see many of our more recently launched offerings across our platform continuing to scale, which signals that we have a robust pipeline of newer offerings with significant potential for the foreseeable future as well.
Similar to prior quarters, revenue growth was primarily driven by our online channel. In the first quarter, online revenue increased 96% year-over-year to $184.2 million. Growth in our online channel was driven primarily by an increase in our subscriber count. In the first quarter, subscribers grew 169,000 quarter-over-quarter to over $1.2 million, representing an increase of 87% relative to the first quarter of 2022. Our omnichannel marketing strategy, which includes partnerships with leading retailers and celebrities like Kristen Bell, is enabling us to engage with consumers on more platforms and reach them at earlier stages in their health and wellness journeys.
Strong subscriber growth is a signal that the combination of our omnichannel strategy, seamless onboarding and account management features are working as intended. We look forward to continued innovation across each of these areas.
Online revenue growth also benefited from higher monthly online revenue per average subscriber. Monthly online revenue per average subscriber in the first quarter was $55, up 6% relative to the first quarter of last year. Higher revenue per subscriber demonstrates that we are able to continue to expand our subscriber base while also maintaining high subscriber quality. We are pleased to see our user base continue to express interest in establishing long-term relationships with us. The share of multi-month subscribers increased to an all-time high of 75% in the first quarter.
Wholesale revenue was $6.6 million, representing a modest decline of 9% relative to the first quarter of 2022. Efficiency across the organization is at an all-time high. We surpassed 60% of orders fulfilled through our affiliated pharmacies in the first quarter of 2023 and expect over 80% of our orders to be fulfilled via affiliated pharmacies by year-end. The combination of longer duration subscriptions and an ability to capture increased benefits from economies of scale resulted in more than a 1 percentage point quarter-over-quarter increase in our gross margin to 80% in the first quarter.
We are pleased by the strong execution of our operations team and expect there is more opportunity to unlock in the future. However, we have actively started to test ways to strategically redeploy a portion of these gains into improving the overall customer experience. As those efforts scale, we expect gross margins to normalize in the mid-70s.
Shifting gears toward other elements of our cost structure. Marketing as a percentage of revenue, excluding stock-based compensation, in the first quarter was 50%, stable with the fourth quarter. Increased investment was made in the first quarter toward educating users earlier in the life cycle around the offerings across Hims & Hers as well as in our partnership with Kristen Bell. Many of these investments are longer term in nature, but we are pleased by the recent success of our efforts. As such, we'll be investing opportunistically to expand awareness of our newer products and offerings as well as ensuring our voice is heard across the most culturally relevant moments in society. No change will be made to adherence to our capital allocation model, which calls for a payback period of less than 1 year on our collective marketing investments.
Operations and support costs as a percentage of revenue, excluding stock-based compensation, in the first quarter came in at 13%, stable with the fourth quarter. Moving forward, we expect to see efficiency gains as a result of greater fulfillment via our affiliated pharmacies, benefits from economies of scale and leverage on overhead.
Technology and product development costs as a percentage of revenue, excluding stock-based compensation, came in at 5% in the first quarter, stable to the fourth quarter. We expect investment in this area to expand as we launch new technologies on our platform to provide improved customer experiences and enable us to better incorporate feedback to improve our product and services.
General and administrative costs as a percentage of revenue was 16% in the first quarter, representing a 6-point improvement relative to the first quarter of 2022 and flat with the fourth quarter as we ramped up headcount growth. Excluding the impact of stock-based compensation, G&A costs were 10% of revenue in the first quarter, representing a 5-point year-over-year improvement from 2022. Given the growth of our platform, the reality is that our organization will also need to grow. However, we will continue to grow in a disciplined and thoughtful way. As such, we see further opportunity for leverage on our G&A expenses in the future.
Solid execution and disciplined expense management enabled us to increase adjusted EBITDA $2.2 million quarter-over-quarter to $6.1 million in the first quarter. Adjusted EBITDA margins were 3% in the first quarter, representing an improvement of 1 point relative to the prior quarter, a 9-point improvement to the first quarter of 2022.
Our adjusted EBITDA performance enabled us to drive cash flow from operations in excess of our capital expenditures. This resulted in a $4.8 million quarter-over-quarter increase in our cash and short-term investments to $184 million.
As previously mentioned, 2023 is off to an incredible start. The strength of our flywheel only continues to increase. More consumers than ever are choosing Hims & Hers as a result of our trusted brand. Our technology enables us to provide them with access to personalized solutions and treatments in direct response to their feedback, which we feel will result in increased adherence and better outcomes.
At a time when others are pulling back, the resilience of our consumer base and durable recurring revenue model enable us to lean in. Strong efficiency across the organization has allowed us to efficiently reinvest, unlocking an ability to establish a leadership position in a market that we feel has substantial opportunity. We see consumers increasingly seeking personalized products and services on our platform and are energized by the pipeline of what is to come.
Given the strong performance in the first quarter, the recurring nature of our business model and all of the aforementioned dynamics, our perspective on the trajectory of our business in 2023 has meaningfully changed relative to the last quarter. We've made substantial changes to our 2023 outlook to reflect these dynamics, which I will now walk through.
In the second quarter, we are anticipating revenue in the range of $200 million to $205 million, representing a year-over-year increase of 76% to 81%. On the bottom line, we expect adjusted EBITDA to be between $4 million to $7 million, representing an adjusted EBITDA margin of 3% at the midpoint of both ranges.
For the full year, we are anticipating revenue of between $810 million to $830 million, representing a year-over-year growth rate of 54% to 58%. The midpoint of our updated range is $75 million higher than our prior range, reflecting the previously mentioned dynamics.
We have narrowed our 2023 adjusted EBITDA range to $25 million to $30 million, reflecting higher top line and increased efficiency balanced by increased investment to take advantage of market opportunities and improvements to our customer experience. These adjusted EBITDA and revenue ranges resulted in an adjusted EBITDA margin of 3% at the midpoint of both ranges.
The assumptions behind our full year outlook remain unchanged. As a reminder, these are: we are able to maintain long-term retention rates above 85%, we continue to achieve payback periods under 1 year on our marketing investments, and we start to see traction with an expanded portfolio of personalized products and services that we expect will continue to launch throughout 2023.
We are pleased to kick off the year with such powerful momentum. Our ability to drive strong and profitable growth is a clear signal that our capital allocation strategies and flywheel are forming a magical combination. As the year progresses, we look forward to updating you on our performance and continued progress across our strategic pillars.
Our ability to drive strong results is powered by those that support us. I'd like to thank our customers, partners and employees for helping us deliver these outstanding results, and we look forward to continuing to update you on our progress.
As a reminder, I will be hosting the Q&A this quarter as Andrew is currently on paternity leave. With that, I'll now turn it over to the operator to open the call to questions.
Question and Answer Session
Operator
(Operator Instructions) Your first question is from the line of Jack Wallace with Guggenheim Securities.
Jack Dawson Wallace
Congrats on a great quarter, and congrats to Andrew and his family. That's amazing news. Yemi, I just wonder if you could give us some color on how the yields on your tax spend have trended over the last, say, 4 to 6 quarters. I'm thinking about the mix shift from -- away from the targeted digital ads towards more brand awareness, TV campaigns and some of the ambassador that you brought online, including Kristen Bell. Any color there would be very helpful.
Yemi Okupe
Yes. Jack, thanks for the question. I think it's natural for CAC to fluctuate from quarter-to-quarter. Throughout late last year as well as through the early part of this year, we did see CAC become quite favorable.
As a result of that, we talked about how we leaned in, in the back half of last year. We continue to do that in the first quarter of this year. But really, what we're starting to do is now to diversify the number of channels that we're in. And so what you can expect for us to do increasingly over time is to continue to lean more into the ambassadors as well as the brand awareness campaigns.
Our belief is that those are going to generally take a longer time to pay back. They're more long-term investments. That said, I think collectively, we're still confident in our ability to maintain the 1-year payback period.
And so with respect to the environment that we've seen thus far in 2023, it has been quite favorable, but we're proactively leaning into some of the other channels just to bring people earlier in their life cycle, and we expect to continue to do that throughout the year while also maintaining the 1-year payback period.
Jack Dawson Wallace
Excellent. That's helpful. And then can you give us an idea for the uptake on the proprietary -- your products versus, say, some of the legacy -- your products, if you're thinking about existing customers switching where appropriate as well as the mix of products that are being prescribed to new -- to customers?
Yemi Okupe
Yes. It's a great question. I think for some of the longer tenured categories where proprietary products have been present, we do see actually the majority of users opting in for those products. And so many of those would be in the dermatology space.
In Q1, this was the first quarter that we rolled out the proprietary products in our sexual health category. And for new users, we saw the adoption was substantially more faster than we expected. And I think we continue to believe that we'll see the same success not only in sexual health but in some of the newer offerings that we expect to launch throughout the year. Shortly, we do expect this quarter to launch offerings across our Hers hair business as well.
Operator
Your next question is from the line of Michael Cherny with Bank of America.
Daniel Clark
This is Dan Clark on for Mike. Just wanted to get a sense, we've seen a lot of color from some other folks who are turning season around and increasing utilization across health care. Is there any way that you can parse out, like, if you saw a benefit from utilization in the quarter, would you say your core products sort of exist like outside of that?
Yemi Okupe
Yes. I think what we've seen is across multiple different environments, user demand for our products continue to increase. And so I think our conviction is agnostic to the broader environment, just given how early we are on in the life cycle. Users are continuing to adopt our product. And so I think that our belief is it really has more to do with the execution across the strategic pillars that we talk about: building a trusted brand, continuing to enable technology and both access from providers and users to thrive at that technology, offering personalized products and clinical excellence. Our belief is that relates to the execution across those elements that are driving the strong growth in users as well as the revenue that we've seen on the platform thus far.
Daniel Clark
Got it. And then just on taking up the 2023 guidance or the change -- the meaningful change in trajectory, how should we think about the 2025 targets just with the new 2023 guide here?
Yemi Okupe
Yes. I think that's a really good question, Dan. I think at this time, like, we set the 2025 targets as more -- as long-term targets. I think that we were pretty explicit for both the revenue target as well as the EBITDA target. The way to think about that is it's more of a floor versus a ceiling. And so I think with continued quarters like we've seen in Q1, the conviction that we probably have in exceeding those targets and increases, at least continue to see the performance that we've seen thus far in Q1.
Operator
Your next question comes from the line of Glen Santangelo with Jefferies.
Glen Joseph Santangelo
Yemi, I think there's a lot -- going to be a lot of focus on the margin that you reported and guided for. If you look at your revised fiscal '23 guidance, right, you raised the midpoint of revenues by $75 million, but yet you raised the EBITDA range at the midpoint by only $2.5 million, right? So I think people are going to question, where is the incremental leverage? And I think you sort of touched on it a little bit talking about incremental operating expenses in the quarter, some marketing, improving customer experience.
And so what I'm really trying to get a better sense of is for the remaining 3 quarters in the year, how should we think about the cadence of gross margins throughout the year versus incremental operating expenses that may be onetime or sort of built into the base now to try to sustain the current level of revenue growth? Sort of any commentary around that would be helpful.
Yemi Okupe
Yes. Great question, Glen. I think at this time, like we really do want to maintain flexibility. Like, we're pretty early on in the year, and we just see an immense amount of opportunity ahead for us. And so really, I think as we take more of a longer-term orientation to our investments, we just see so many different facets and opportunities to continue to drive growth across the platform.
And so I think our focus right now is primarily on getting greater scale. That comes both in the form of incremental users on the platform as well as the scope of offerings. And we just see so many different opportunities where we have room to deploy capital while still abiding by our capital allocation framework, whether that's in the consumer experience, whether that's marketing, whether it's promoting the pipeline of our newer products or even laying the foundation for new categories. There's a lot of different areas that we would actively look to explore throughout the year.
That said, I think one of the reasons why we've given the longer-term targets through 2025 is that also provides clarity for where the platform is going. And so I think while we'll make those investments through 2023, the confidence in our ability to meet or exceed the $100 million EBITDA target in 2025 still remains unchanged.
Glen Joseph Santangelo
Okay. Perfect. And maybe if I could just ask one follow-up on -- so you added mental health here more recently, and I think the company's goal is to add 1 to 2 therapeutic categories a year. We've probably gotten a disproportionate amount of questions on sort of weight management. I think in the prepared remarks, I think Andrew mentioned that you added experts in the medical board and weight management, menopause and cardiometabolic health. Is that sort of like a precursor to ultimately moving in into those categories? And obviously, weight management is the one that people are sort of focused on. But given the high price of those drugs, doesn't seem consistent with sort of your cash pay model. So I was wondering if you could just provide some clarity around those comments, that would be helpful.
Yemi Okupe
Yes. Sure. I think we said there are several categories that we do view as exciting, whether that's expanding the offering across men's health or mental health. Weight management is a category that we do see as exciting, and it carries many of the characteristics of the conditions on our platform: chronic in nature and then it's also very emotionally resonant with users on the platform. And so we do see ourselves eventually entering that category.
Again, I think it's pretty early innings, and we're going to do so in a very disciplined and thoughtful way that adheres to the standards of our platform. The recruitment of the experts will enable us to, at some point, enter that category effectively. And we'll continue to update you as we get more clarity there.
Operator
Your next question is from the line of Korinne Wolfmeyer with Piper Sandler.
Korinne N. Wolfmeyer
First, I'd like to just touch on, as we think about the outlook for the top line for the rest of the year, can you just kind of expand on the different drivers behind that? How much should we expect that growth to come from that subscriber base versus the monthly revenue per subscriber? That seems to be increasing pretty nicely.
And then as we think about, like, the cadence of sequential growth of subscribers throughout the year, can you just touch on how we should be thinking about cadence and if we should expect some sort of deceleration in that sequential growth as we progress?
Yemi Okupe
Yes. So I think on the first element of the equation, I think that we started the year off very strong. And so I think as a result of the momentum that we see in Q1, given the fact that the vast majority, 90-plus percent of the revenue is recurring in nature, that will naturally cascade into subsequent quarters throughout the year. And so some of the momentum, we're going to get just inherently from the strong foundation that we've built in Q1.
As we also just look at some of the dynamics that we've seen across many of the categories that we're already in with respect to proprietary products, we've seen an uptick in overall user adoption on that front. And this is with some of the newer offerings coming across some of the categories that we talked around earlier, such as Hers hair. We're confident that we can see continued subscriber growth throughout the year. And so that gave us the conviction to elevate the guidance expectations.
With respect to subscriber -- kind of subscriber count, we don't explicitly guide to that. I think that number will move. But the way to think about it is inherently, the primary driver of revenue growth throughout the year is going to be primarily on the subscriber growth.
Korinne N. Wolfmeyer
Very helpful. And then if I could just touch on the gross margin. I know we touched on this a little bit earlier, but I'd like to dive a bit deeper. You're talking -- you've been talking about adding more innovation in the products. And as you do that, that could pressure gross margin a little bit, head into the kind of like the mid-70s range.
Can you just touch on when we should start seeing kind of a heavier impact from that? I mean 80% this quarter is really good. And I mean are we going to start to see some sort of pressure in -- later in the year? Or is that really going to be a '24, '25 event?
Yemi Okupe
Yes. I think that's a great question. Thanks for the question, Korinne. I think what you can expect to see is the same dynamic that we had throughout last year where there's a whole host of factors that were actually pressuring gross margins. But as the operation got more and more efficient, not only did we maintain gross margins, but year-over-year gross margins have expanded 6 points.
We do see that there is still significant opportunity on our operations to continue to get efficient. And so from time to time, the margins will probably -- it's not going to (inaudible) just a straight line down to 75%. It will take us time to proactively identify what are the opportunities that are most accretive to the platform. And so this is not something that's necessarily going to happen in a quarter or 2. I think it will take place over several quarters.
I think also just the framework that we use as we think around certainly our long-term targets is we definitely do want to pass value back to our consumers in a way that's thoughtful and accretive to the platform. And while doing that, effectively, that will take some time to do and then the margins will start to come down as we identify those opportunities.
Operator
(Operator Instructions) Your next question is from the line of Luismario Higuera with Citi.
Luismario Higuera
Luis on for Daniel Grosslight. I just wanted to ask what levers you've been playing to drive additional engagement on your current more tenured subscribers.
Yemi Okupe
I'm sorry, Luis, I don't think I caught the question. You cut out for a minute to me.
Luismario Higuera
Yes. Sorry about that. My question is like what levers are you going to be pulling to drive additional engagement among your current more tenured subscribers?
Yemi Okupe
Yes. Thanks for the question. I think at this point in time, the current focus is really around how do we bring more subscribers to the platform. I think over time, what you can expect is that we start to enable more offerings, particularly that are more personalized in nature across the platform. That's why we've seen many subscribers organically start to adopt those.
As users get more tenured, I think that there are creative things that we can do, whether it's bundling offerings or identifying other ways that might basically pair certain offerings. Again, I think that we're probably a little bit of a ways off from doing any of those types of dynamics. Right now, the focus is primarily on driving additional subscribers to the platform as well as just enable them a broader base of, like, choices. I think as we do that, then naturally, upsell opportunities will start to emerge.
Operator
Your next question comes from the line of Jailendra Singh with Truist Securities.
Jenny Cao
This is Jenny on for Jailendra. I wanted to follow up on your weight management category. What will make you change company's approach considering some of your competitors have been more aggressive there? And can you help us understand how does the economics sort of work considering these new line of drugs? Is it all about getting more consumers and subscribers on the platform? Some color on that.
Yemi Okupe
Yes. So I think that the elements that would make us actively go into the category would be, number one, I think just if we have the advisers. We're looking for ways to do it in both a way that's safe and effective and also ways where we can add value to the overall category. Like, what we're not after is just to be a me-too just because the competitive set is offering it. We really want to bring the distinct capabilities of the Hims & Hers platform to enable something that's differentiated and ultimately, we feel it will drive more consumers to it.
I think at this point in time, it's a little bit too early to speak around how the economics specifically would work. It's something that we're researching in diligence, but there are a multitude of ways to do it. I think we're very much in the early innings of that story. And so we feel that we do have the time to ensure that when we do launch it, it lands with consumers, it adheres to our strategy and framework. And ultimately, we view that, that will probably be a more successful path over a longer duration.
Operator
Your next question comes from the line of George Hill with Deutsche Bank.
Maxi Ma
It's Maxi on for George. Can you give us an update on your conversation with payers? Are you still planning to incorporate insurance reimbursement into your system? And what's the time line for it?
Yemi Okupe
Yes. Thanks, Maxi, for the question. I think that payers and insurance is something that we continue to explore. I think it goes alongside all of the different avenues that also we could invest in. So I think at this point in time, we've opted to pursue other avenues of investment, whether that's in the form of some of the branded campaigns, whether that's in the form of exploration of categories or in the form of offering personalized products. I think it's something that we'll continue to assess quarter-to-quarter, but there's no specific time line. I think that really what it's going to depend on is how the business case will stack up relative to the other opportunities that we feel that we have in the coming quarters to invest in.
Operator
Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.
