Hims Hers Health Inc

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization

Hims & Hers Health, Inc. (the “Company” or “Hims & Hers”), incorporated in Delaware, is a consumer-first platform transforming the way customers fulfill their health and wellness needs. The Company’s mission is to help the world feel great through the power of better health. The Hims & Hers platform includes access to a highly-qualified and technologically-capable provider network, a clinically-focused electronic medical records system, digital prescriptions, and cloud-enabled pharmacy fulfillment. The Company’s digital platform enables access to treatments for a broad range of conditions, including five core specialties: sexual health, men’s and women’s dermatology, mental health, and weight loss. Hims & Hers connects patients to licensed healthcare professionals who can prescribe medications when appropriate. Prescriptions are fulfilled online through licensed pharmacies on a subscription basis, making accessing treatments simple, affordable, and straightforward. Through the Hims & Hers mobile applications, consumers can access a range of educational programs, wellness content, community support, and other services that promote lifelong health and wellness.

In addition, the Company offers access to a range of health and wellness products designed to meet individual needs, which can include curated prescription and non-prescription products. The Company’s products and services are available for purchase directly by customers on the Company’s 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.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The condensed consolidated financial statements as of September 30, 2024 are unaudited. The condensed consolidated balance sheet as of December 31, 2023 included herein was derived from the audited consolidated financial statements as of that date. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. As such, the information included herein should be read in conjunction with the consolidated financial statements and accompanying notes as of and for the year ended December 31, 2023 (the “audited consolidated financial statements”).

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in management’s opinion, all adjustments of a normal, recurring nature that are necessary for the fair statement of the Company’s balance sheet, results of operations, and cash flows for the periods presented, but are not necessarily indicative of the results expected for the full fiscal year or any other period.

The unaudited condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and variable interest entities in which it is the primary beneficiary. All intercompany transactions and balances have been eliminated in these condensed consolidated financial statements.

There have been no changes to the Company’s significant accounting policies described in the audited consolidated financial statements for the year ended December 31, 2023 that have had a material impact on these condensed consolidated financial statements and related notes.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the financial statements and accompanying notes. The more significant estimates, judgments, and assumptions by management include, among others, 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 development and internal-use software costs, valuation of deferred tax assets, and judgments relating to impairment triggering events for long-lived assets. Management believes that the estimates, judgments, and assumptions upon which it relies are reasonable based upon information available to it at the time that these estimates, judgments, and assumptions were made. Actual results experienced by the Company may differ from management’s estimates. To the extent that there are material differences between these estimates and actual results, the Company’s condensed consolidated financial statements will be affected.

Business Combinations

The Company accounts for its business combinations using the acquisition method of accounting. The purchase price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition.

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

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

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

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized but is tested for impairment annually in the fourth quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company operates asone reporting unit. When testing goodwill for impairment, the Company may first perform an optional qualitative assessment. If the Company determines it is not more likely than not the reporting unit’s fair value is less than its carrying value, then no further analysis is necessary. If the Company determines that it is more likely than not that the fair value of its reporting unit is less than its carrying amount, then the quantitative impairment test will be performed. Under the quantitative impairment test, if the carrying amount of the Company’s reporting unit exceeds its fair value, the Company will recognize an impairment loss in an amount equal to that excess but limited to the total amount of goodwill. Goodwill of $1.8 million was acquired in 2024. No goodwill impairment was recorded for the three and nine months ended September 30, 2024 and 2023.

Impairment of Long-Lived Assets

Long-lived assets include property, equipment, and software and intangible assets subject to amortization. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, recoverability of assets to be held and used is assessed by comparing the carrying amount of assets with their future underlying net undiscounted cash flows without interest charges. If such assets are considered to be impaired, an impairment is recognized as the amount by which the carrying amount of the assets exceeds the estimated fair values of the assets. No impairment of long-lived assets was recorded for each of the three months ended September 30, 2024 and 2023. The Company recognized $0.1 million and $0.4 million of impairment charges on long-lived assets during the nine months ended

September 30, 2024 and 2023, respectively, in general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

Revenue Recognition

The Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services.

The Company’s consolidated revenue primarily comprises online sales of health and wellness products and services through the Company’s 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 (defined below). Additionally, the Company offers a range of health and wellness products through wholesale partners.

Revenue consists of the following (in thousands):

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

The Company’s contracts that contain prescription products issued as the result of a consultation primarily include the following performance obligations: access to (i) products, as well as medication adjustments, as applicable, and (ii) consultation services, as well as post-consultation service support, as applicable. The Company’s contracts that do not contain prescription products have a single performance obligation. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product to the customer and, in contracts that contain services, by the provision of consultation services to the customer. The Company satisfies its performance obligation for products at a point in time, which is upon delivery of the products to a third-party carrier or wholesale customer warehouse. The Company satisfies its performance obligation for consultation services typically within one day and for post-consultation service support over the contract term. The customer obtains control of the products and services upon the Company’s completion of its performance obligations.

For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation on a relative stand-alone selling price basis. The stand-alone selling price is based on the prices at which the Company separately sells the products and services, as well as market and cost plus estimates. For each of the three and nine months ended September 30, 2024 and 2023, service revenue represented less than 10% of consolidated revenues.

To fulfill its promise to customers for contracts that include professional medical consultations, the Company maintains relationships with various “Affiliated Medical Groups,” which are professional corporations or other professional entities owned by licensed physicians and that engage licensed healthcare professionals (physicians, physician assistants, nurse practitioners, and mental health providers; collectively referred to as “Providers” or individually, a “Provider”) to provide consultation services. Refer to Note 11 – Variable Interest Entities. The Company accounts for service revenue as a principal in the arrangement with its customers. This conclusion is reached because (i) the Company determines which Affiliated Medical Group and Provider provides the consultation to the customer; (ii) the Company is primarily responsible for the satisfactory fulfillment and acceptability of the services; (iii) the Company incurs costs for consultation services even for visits that do not result in a prescription and the sale of products; and (iv) the Company, in its sole discretion, sets all listed prices charged on its websites and mobile applications for products and services.

Additionally, to fulfill its promise to customers for contracts that include sale of prescription products, the Company maintains relationships with (i) certain third-party pharmacies (“Partner Pharmacies” or individually, a “Partner Pharmacy”), (ii) XeCare, LLC (“XeCare”) and Apostrophe Pharmacy LLC (“Apostrophe Pharmacy”, and together with XeCare, the “Affiliated Pharmacies”), which are licensed mail order pharmacies providing prescription fulfillment solely to the Company’s customers; and (iii) Seaview Enterprises LLC (d/b/a MedisourceRx) (“MedisourceRx”), which is a licensed 503B compounding outsourcing facility. MedisourceRx manufactures products primarily for the Company’s customers, and the pharmacies, as licensed, fill prescription orders for customers who have received a prescription from a prescribing Provider through the Company’s websites and mobile applications. The Company accounts for prescription product revenue as a principal in the arrangement with its customers. This conclusion is reached because (i) the Company has sole discretion in determining which pharmacy fills a customer’s prescription; (ii) the pharmacies fill the prescription based on fulfillment instructions provided by the Company, including using the Company’s branded packaging for generic products; (iii) the Company is primarily responsible to the customer for the satisfactory fulfillment and acceptability of the order; (iv) the Company is responsible for refunds of the prescription medication after transfer of control to the customer; and (v) the Company, in its sole discretion, sets all listed prices charged on its websites and mobile applications for products and services.

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

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

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

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update expand reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for all public entities for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will begin including expanded segment disclosures related to operating expenses within its Form 10-K for the year ended December 31, 2024, but does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update expand income tax disclosure requirements, primarily through enhanced disclosures related to income taxes paid and the rate reconciliation. ASU 2023-09 is effective for all public entities for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis and retrospective application is permitted. The Company is evaluating the method of adoption and the impact of this guidance on its consolidated financial statements and related disclosures.

3. Acquisitions

In September 2024, the Company satisfied all closing conditions of the executed purchase agreement to acquire all of the membership interests of MedisourceRx, a 503B compounding outsourcing facility registered with the Food and Drug Administration and located in the United States. The purchase price for accounting purposes was $31.0 million, including cash payments of $15.5 million and 976,341 shares of Class A common stock valued at $15.5 million. The Class A common stock is not subject to any vesting terms. The final purchase price is subject to a post-closing purchase price adjustment within 90 days of the closing date of the purchase agreement.

The Company also incurred acquisition costs of $1.3 million directly related to the acquisition which were recorded within general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

The acquisition was accounted for as a business combination under the acquisition method with the purchase price being allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. The fair value of the 503B pharmacy license was determined using the income approach. The purchase price allocation was prepared on a preliminary basis and may be subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed. The following table summarizes the preliminary acquisition date fair values of assets acquired and liabilities assumed (in thousands):

Amortization expense related to the 503B pharmacy license is recognized on a straight-line basis over the useful life often years, within operations and support expense on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

The excess of the consideration paid over the fair value of the net assets acquired is recorded as goodwill. The acquired goodwill of $1.8 million represents future economic benefits expected to arise from synergies from combining operations resulting in increased market presence of compounding capabilities and advanced expertise of compounding operations. The $1.8 million of goodwill recognized upon acquisition is expected to be deductible for U.S. income tax purposes.

The pro forma financial information, assuming the acquisition had occurred as of the beginning of the fiscal year prior to the fiscal year of the acquisition, as well as the revenue and earnings generated during the period after the acquisition date, were not material and accordingly have not been presented.

4. Investments

Short-term investments as of September 30, 2024, consist of the following (in thousands):

Short-term investments as of December 31, 2023, consist of the following (in thousands):

5. Inventory

Inventory consists of the following (in thousands):

6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

7. Property, Equipment, and Software, Net

Property, equipment, and software, net consist of the following (in thousands):

Depreciation and amortization expense for property, equipment, and software was $3.5 million and $1.6 million for the three months ended September 30, 2024 and 2023, respectively, and $8.6 million and $4.1 million for the nine months ended September 30, 2024 and 2023, respectively.

There wereno impairment charges for property, equipment, and software for each of the three months ended September 30, 2024 and 2023. Impairment charges on property, equipment, and software were $0.1 million and $0.4 million for the nine months ended September 30, 2024 and 2023, respectively.

8. Intangible Assets, Net

Intangible assets as of September 30, 2024 consist of the following (in thousands):

Intangible assets as of December 31, 2023 consist of the following (in thousands):

Amortization expense for intangible assets was $0.9 million and $0.8 million for the three months ended September 30, 2024 and 2023, respectively, and $2.4 million and $2.8 million for the nine months ended September 30, 2024 and 2023, respectively.

There wereno impairment charges on intangible assets for the three and nine months ended September 30, 2024 and 2023.

Amortization that will be charged to expense over the remaining life of the intangible assets subsequent to September 30, 2024 is as follows (in thousands):

9. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

10. Operating Leases

The Company has various operating leases for manufacturing, fulfillment, and corporate facilities with lease periods expiring between fiscal years 2025 and 2027, not including renewal options the Company is reasonably certain to exercise. The operating lease agreements provide for rental payments on a graduated basis and for options to renew, which could increase future minimum lease payments, if exercised. The Company utilizes the reasonably certain threshold criteria in determining which options it will exercise. In the first quarter of 2024, a reassessment was triggered due to signing a lease for a new facility which is in close proximity to and also acts as an operational expansion of an existing facility, as well as investment in leasehold improvements in the existing facility. This resulted in the remeasurement of the lease liability and an adjustment of $0.9 million to the carrying amount of the corresponding right-of-use (“ROU”) asset for the existing facility. In the fourth quarter of 2023, a reassessment of another of the Company’s leased facilities was triggered due to significant leasehold improvements. This resulted in the remeasurement of the lease liability and an adjustment of $5.7 million to the carrying amount of the corresponding ROU asset.

For the three months ended September 30, 2024 and 2023, the Company recorded operating lease costs of $0.8 million and $0.6 million, respectively, including variable operating lease costs of $0.2 million and $0.1 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded operating lease costs of $2.2 million and $1.7 million, respectively, including variable operating lease costs of $0.4 million and $0.3 million, respectively.

For the nine months ended September 30, 2024 and 2023, operating cash flows used for operating leases were $1.8 million and $1.4 million, respectively. As of September 30, 2024, the weighted average remaining lease term and weighted average discount rate, including for renewal options the Company is reasonably certain to exercise, was 5.8 years and 8.8%, respectively.

Future minimum lease payments, including for renewal options the Company is reasonably certain to exercise, under the Company's non-cancelable operating leases subsequent to September 30, 2024 are as follows (in thousands):

11. Variable Interest Entities

The variable interest entities (“VIEs”) are: (i) the Affiliated Medical Groups; and (ii) the Affiliated Pharmacies. The Company determined that it is the primary beneficiary of these entities for accounting purposes because it has the ability to direct the activities that most significantly affect the entities’ economic performance and has the obligation to absorb the losses. Under the VIE model, the Company presents the results of operations, cash flows, and the financial position of the VIEs as part of the consolidated financial statements of the Company as if the consolidated group were a single economic entity. The assets of the VIEs can only be used to settle the obligations of the VIEs. There is no noncontrolling interest upon consolidation of the entities. The results of operations and cash flows of the VIEs are also included in the Company’s condensed consolidated financial statements.

As of September 30, 2024 and December 31, 2023, the Company’s condensed consolidated balance sheets included current and total assets of $35.7 million and $24.1 million, respectively, for the VIEs. As of September 30, 2024 and December 31, 2023, current and total liabilities were $20.8 million and $6.0 million, respectively. All amounts are after elimination of intercompany transactions, balances, and non-cash impact of operating leases.

For the three months ended September 30, 2024 and 2023, the VIEs charged $57.8 million and $25.1 million, respectively, for services rendered. For the nine months ended September 30, 2024 and 2023, the VIEs charged $129.9 million and $71.5 million, respectively, for services rendered. For the three months ended September 30, 2024 and 2023, operations of the VIEs generated a net loss of $11.5 million and net income of $0.7 million, respectively, inclusive of administrative expenses. For the nine months ended September 30, 2024 and 2023, operations of the VIEs generated a net loss of $16.9 million and net income of $6.2 million, respectively, inclusive of administrative expenses.

12. Fair Value Measurements

The Company’s fair value hierarchy for its financial assets that are measured at fair value on a recurring basis as of September 30, 2024, is as follows (in thousands):

The Company’s fair value hierarchy for its financial assets that are measured at fair value on a recurring basis as of December 31, 2023, is as follows (in thousands):

The fair values of cash, accounts receivable, accounts payable, and accrued liabilities approximated their carrying values as of September 30, 2024 and December 31, 2023, due to their short-term nature. All other financial instruments are valued either based on recent trades of securities in active markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. During the nine months ended September 30, 2024 and 2023, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

13. Commitments and Contingencies

Purchase Obligations

The Company has non-cancelable contractual obligations to make future purchases, primarily related to cloud-based software contracts used in operations. As of September 30, 2024, purchase obligations were $23.5 million, with $2.4 million payable in 2024, $8.8 million payable in 2025, $7.0 million payable in 2026, and $5.3 million payable in 2027.

Lease Commitments

Refer to Note 10– Operating Leases for discussion of the Company’s future lease commitments.

Legal Proceedings

From time to time, the Company is a party to litigation, various claims, and other legal and administrative proceedings arising in the ordinary course of business. Some of these claims, lawsuits, and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions, or relief. Management is not currently aware of any matters that are reasonably likely to have a material adverse impact on the Company’s business, financial position, results of operations, or cash flows.

14. Stockholders’ Equity

Common Stock

The Company hastwo classes of common stock, Class A and Class V common stock. The rights are identical, including liquidation and dividend rights, except Class V common stock has additional voting rights.

Share Repurchase Programs

On October 26, 2023, the Board of Directors authorized and approved a share repurchase program (the “2023 Share Repurchase Program”) pursuant to which the Company was authorized to repurchase up to $50.0 million of the Company’s Class A common stock. During the nine months ended September 30, 2024, the Company repurchased and retired 3,632,123 shares of Class A common stock under the 2023 Share Repurchase Program for $48.0 million. As of September 30, 2024, the entire $50.0 million originally available under the 2023 Share Repurchase Program has been utilized.

On July 24, 2024, the Board of Directors authorized and approved a new share repurchase program (the “2024 Share Repurchase Program”) pursuant to which the Company may repurchase up to $100.0 million of the Company’s Class A common stock. The 2024 Share Repurchase Program expires on August 31, 2027. The Company intends to use the 2024 Share Repurchase Program to repurchase shares on a discretionary basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. The 2024 Share Repurchase Program may be suspended or discontinued at any time.

During the three and nine months ended September 30, 2024, the Company repurchased and retired 1,897,183 shares of Class A common stock under the 2024 Share Repurchase Program for $30.0 million. As of September 30, 2024, $70.0 million remains available under the 2024 Share Repurchase Program.

RSU Releases

During the three and nine months ended September 30, 2024, the Company released 1,784,494 and 5,068,997 gross shares of Class A common stock upon vesting of restricted stock units (“RSUs”). In connection with the releases,651,605 and 1,780,064 shares of Class A common stock were withheld for the payment of employee taxes. During the three and nine months ended September 30, 2023, the Company released 1,205,067 and 3,805,078 gross shares of Class A common stock upon vesting of RSUs. In connection with the releases,425,570 and 1,256,966 shares of Class A common stock were withheld for the payment of employee taxes.

2017 Stock Plan and 2020 Equity Incentive Plan

In July 2017, Hims, Inc. (“Hims”) adopted the 2017 Stock Plan (the “2017 Plan”). Under the 2017 Plan, the board of directors of Hims granted awards, including incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, RSU awards, and other stock awards to employees, directors, and consultants of Hims.

In January 2021, the Board of Directors adopted the 2020 Equity Incentive Plan (the “2020 Plan”) and reserved 21,000,000 authorized shares of Class A common stock the Company could issue. In addition, up to 19,000,000 shares of Hims Class A common stock subject to awards granted under the 2017 Plan that were forfeited, expired, or lapsed unexercised or unsettled could be added to the 2020 Plan reserve. Beginning on January 1, 2022 and ending on January 1, 2031, the number of authorized shares of common stock under the 2020 Plan will automatically increase each fiscal year by 5% of the total number of Class A and Class V common stock issued and outstanding on the last day of the preceding fiscal year unless the Board of Directors approves a lesser number. As of December 31, 2023, there were 43,612,952 and 12,577,863 shares of Class A common stock reserved and available for issuance, respectively, under the 2020 Plan. For the nine months ended September 30, 2024,73,238 shares of Class A common stock subject to awards granted under the 2017 Plan that were forfeited after the adoption of the 2020 Plan were added to the 2020 Plan reserve. Additionally, on January 1, 2024,10,674,087 sharesof Class A common stock were automatically added to the 2020 Plan reserve. Therefore, as of September 30, 2024, there were 54,360,277 shares of Class A common stock reserved and 15,131,669 shares of Class A common stock available for grant under the 2020 Stock Plan. There wereno more shares available for grant under the 2017 Plan since the 2017 Plan was replaced by the 2020 Plan.

2020 Employee Stock Purchase Plan

In January 2021, the Board of Directors adopted the Company’s Employee Stock Purchase Plan (“ESPP”). The total shares of Class A common stock initially reserved under the ESPP is limited to 4,000,000 shares of Class A common stock. Beginning on January 1, 2022 and ending on January 1, 2041 (unless extended by the Board of Directors and approved by the Company’s shareholders), the number of authorized shares of common stock under the ESPP will automatically increase each fiscal year by the lesser of (i)1% of the total number of Class A and Class V common stock issued and outstanding on the last day of the preceding fiscal year, (ii)12,000,000 shares of Class A common stock, or (iii) a number of shares of Class A common stock determined by the Board of Directors. As of December 31, 2023, there were 6,047,919 and 5,059,506 shares of Class A common stock reserved and available for issuance, respectively, under the ESPP. There wereno shares added to the ESPP reserve on January 1, 2024. Therefore, as of September 30, 2024, there were 6,047,919 shares of Class A common stock reserved for issuance under the ESPP. During the nine months ended September 30, 2024 and 2023, the Company issued 366,524 and 256,946, respectively, shares of Class A common stock under the ESPP. No shares were issued under the ESPP during the three months ended September 30, 2024 and 2023. As of September 30, 2024, there were 4,692,982 shares of Class A common stock available for issuance under the ESPP.

Under the ESPP, eligible employees may purchase the Company’s Class A common stock during pre-specified offering periods at a discount established by the Company’s compensation committee. The purchase price is 85% of the lower of the fair market value of the Company’s Class A common stock on the first trading day of the offering period or the fair market value on the purchase date. Under the ESPP, the Company may specify offering periods with durations of not more than 27 months, and may specify shorter purchase periods within each offering period.

Employees participating in the ESPP commence payroll withholdings that accumulate through the end of the respective offering period. As of September 30, 2024, $1.8 million has been withheld via employee payroll deductions for employees who have opted to participate in the purchase periods ending November 2024.

As of September 30, 2024, there was $2.7 million of unrecognized stock-based compensation related to the ESPP which is expected to be recognized over a weighted average period of 1.40 years.

Stock Options

The Company has historically granted stock options prior to 2024, which for new employees generally vest over four years, with 25% vestingone year after the vesting commencement date and then 1/48th of the total grant vesting monthly thereafter. Options granted to existing employees generally vest 1/48th of the total grant monthly over four years. Options granted are exercisable within a period not exceedingten years from the grant date.

On June 17, 2020, the board of directors of Hims granted 3,246,139 and 1,623,070 stock options to the Chief Executive Officer (“CEO”) with an exercise price of $2.43 to vest upon either (i) an acquisition of the Company with per share consideration equal to at least $22.99 and $38.31, respectively, or (ii) a per share price on a public stock exchange that is at least equal to $22.99 and $38.31, respectively. The CEO is required to be employed at the time the per share consideration/price is achieved in order to receive the awards, but the awards are not subject to any other service condition. The Company recognizes expense related to these awards based on the fair value and derived service period as measured using a Monte Carlo simulation model, and the expense is accelerated if the requirements outlined in (i) and (ii) above are achieved. The grant date fair value was $16.6 million for these awards. The $22.99 per share price threshold related to awards for the 3,246,139 stock options was achieved in February 2021. As of September 30, 2024,2,664,347 of these stock options have been exercised at a weighted average exercise price of $2.43. As of September 30, 2024, all stock-based compensation expense for the awards has been recognized.

On February 24, 2022, the Board of Directors granted 2,085,640 stock options to the CEO with an exercise price of $5.01 that vest infour equal tranches. On each anniversary date after February 24, 2022,25% of the shares subject to the options will vest provided that (i) the CEO is employed on the anniversary date and (ii) the closing price of the Company’s Class A common stock is more than $10 per share in 20 of the 30 trading days prior to the anniversary date. The award is not subject to any other service condition. Vesting is cumulative in subsequent years if the market condition was not previously met. The Company recognizes expense related to this award for each tranche individually based on the fair value and requisite service period, which is the greater of the derived service period and the explicit service period. The fair value and the derived service term of the market condition were both measured using a Monte Carlo simulation model. The total grant date fair value was $3.8 million for this award. As of September 30, 2024, no shares have vested and there was $0.5 million of remaining compensation expense to be recognized over a period of 1.40 years.

Option activity (excluding the stock options granted to the CEO outlined above) is as follows (in thousands, except for weighted average exercise price and weighted average contractual term in years):

The intrinsic value of vested options exercised was $33.6 million.

As of September 30, 2024, there was $8.6 million of unrecognized stock-based compensation expense related to unvested stock options (excluding the stock options granted to the CEO outlined above) which is expected to be recognized over a weighted average period of 1.54 years.

The options outstanding and exercisable as of September 30, 2024 (excluding the stock options granted to the CEO outlined above) have been aggregated into ranges for additional disclosure as follows (in thousands, except weighted average remaining contractual life and exercise price):

RSUs

RSUs for new employees generally vest over four years, with 25% vestingone year after the vesting commencement date on the first Company Quarterly Vesting Date (defined below) and the remaining grant vesting quarterly thereafter on the specified vesting dates of March 15, June 15, September 15, and December 15 (each, a “Company Quarterly Vesting Date” or collectively, “Company Quarterly Vesting Dates”). Additional RSUs granted to current employees generally vest quarterly on Company Quarterly Vesting Dates over four years.

RSU activity (excluding the performance RSUs outlined below) is as follows (in thousands, except for weighted average grant date fair value):

Included in the above activity are 476,308 earn-out RSUs and 9,478 Parent Warrant RSUs issued to the CEO in January 2021 that vest in accordance with the same market conditions as the CEO stock options issued in June 2020, of which 317,539 earn-out RSUs and 6,319 Parent Warrant RSUs have vested as of September 30, 2024.

As of September 30, 2024, there was $167.8 million of unrecognized stock-based compensation expense related to unvested RSUs (excluding the performance RSUs outlined below) which is expected to be recognized over a weighted average period of 2.94 years.

Performance RSUs

On March 1, 2023, the Board of Directors granted awards of 1,115,709 target shares of performance RSUs (“PRSUs”) to certain executive officers. As of September 30, 2024,11,408 shares subject to PRSUs have been forfeited. The PRSUs vest at the end of athree-year period, with the number of shares earned ranging from 0% to 200% of the target, provided that (i) the recipient remains employed at the end of the period and (ii) the Company achieves certain revenue and Adjusted EBITDA performance metrics related to the 2025 fiscal year. The total grant date fair value of the awards was $12.9 million, which is based on the probable achievement of 100% of the target.

On February 28, 2024, the Board of Directors granted awards of 1,218,467 target shares of PRSUs to certain executive officers and senior leadership. The PRSUs vest at the end of athree-year period, with the number of shares earned ranging from 0% to

200% of the target, provided that (i) the recipient remains employed at the end of the period and (ii) the Company achieves certain revenue and Adjusted EBITDA performance metrics related to the 2026 fiscal year. The total grant date fair value of the awards was $16.2 million, which is based on the probable achievement of 100% of the target.

As of September 30, 2024, there was unrecognized stock-based compensation expense related to unvested PRSUs of $25.3 million, which is expected to be recognized over a weighted average period of 1.98 years. The Company will continue to evaluate the likelihood of achieving the performance metrics on a quarterly basis.

Warrants

As of September 30, 2024, there were 462,335 Class A common stock warrants outstanding and exercisable issued to nonemployees in connection with vendor service arrangements, with a weighted average exercise price of $1.75, a weighted average contractual term of 7.01 years, and an aggregate intrinsic value of $7.7 million. Upon the exercise of outstanding warrants, vendors also have the right to receive 45,225 additional shares of Class A common stock. As of September 30, 2024, all stock-based compensation expense related to vendor warrants and associated earn-out shares has been recognized.

During the nine months ended September 30, 2024, all of the 98,723 outstanding Class A common stock warrants issued in connection with a historical debt arrangement, with a weighted average exercise price of $6.96, were net exercised for 52,639 shares of Class A common stock. Upon the exercise of these warrants, the holders received an additional 9,657 shares of Class A common stock based on the terms of the earn-out arrangement. These debt warrants were previously settled in additional paid-in capital as a result of their conversion to equity-classified Class A common stock warrants.

Stock Subject to Vesting and Earn-out Share Liability

In June 2021, the Company granted 447,553 restricted shares of Class A common stock subject to vesting with an aggregate grant date fair value of $5.5 million in connection with the acquisition of Honest Health Limited, which is now Hims & Hers UK Limited (“HHL”). As part of the acquisition of HHL, the Company also recognized an earn-out liability based on the achievement of certain revenue targets. Vesting of the restricted shares and a portion of total earn-out payable to specific individuals are contingent on each recipient’s continued employment. Accordingly, the Company has recognized stock-based compensation expense related to these awards for the three and nine months ended September 30, 2024 and 2023. The expense is being recognized over afour-year vesting period with 25% vestingone year after the acquisition date and the remaining vesting quarterly thereafter. As of September 30, 2024, there was unrecognized stock-based compensation expense of $1.0 million, which will be recognized over a weighted average period of 0.69 years. During the nine months ended September 30, 2024, the Company settled its earn-out payable, a portion of which was settled through the issuance of 119,344 shares of Class A common stock.

In July 2021, the Company granted 2,332,557 restricted shares of Class A common stock subject to vesting with an aggregate grant date fair value of $24.2 million in connection with the acquisition of YoDerm, Inc. (“Apostrophe”). Vesting of the restricted shares was contingent on each recipient’s continued employment. Accordingly, the Company has recognized stock-based compensation expense related to these awards for the nine months ended September 30, 2024 and for the three and nine months ended September 30, 2023. There was no expense recognized for the three months ended September 30, 2024. The expense was recognized over athree-year vesting period with 17% vesting 6 months after the acquisition date and the remaining vesting quarterly thereafter. As of September 30, 2024, all stock-based compensation expense for these restricted shares has been recognized.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense for employees and nonemployees, by category, on the unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023 (in thousands):

The Company capitalized $0.5 million and $0.6 million of stock-based compensation as internal-use software for the three months ended September 30, 2024 and 2023, respectively, and $1.8 million and $1.3 million for the nine months ended September 30, 2024 and 2023, respectively.

15. Related-Party Transactions

For the three months ended September 30, 2024 and 2023, the Company recorded $1.1 million and $1.0 million, respectively, within operating expenses on the unaudited condensed consolidated statements of operations and comprehensive income (loss) for payments made to Woolly Labs, Inc. (d/b/a Vouched) (“Vouched”), a related-party company that provides identity verification services. For the nine months ended September 30, 2024 and 2023, the Company recorded $2.6 million and $2.0 million, respectively, for payments made to Vouched.

In addition, for the three and nine months ended September 30, 2023, the Company recorded $1.1 million and $3.3 million, respectively, within operating expenses on the unaudited condensed consolidated statements of operations and comprehensive income (loss) for payments made to Terminal, Inc., a former related-party company that provides professional services to the Company, primarily to support engineering and operations functions. As of January 1, 2024, Terminal, Inc. was no longer considered a related party.

16. Basic and Diluted Net Income (Loss) per Share

The Company uses the two-class method to calculate net income (loss) per share. No dividends were declared or paid for the three and nine months ended September 30, 2024 and 2023. Undistributed earnings for each period are allocated equally to participating securities based on the contractual participation rights of the security to share in the current earnings as if all current period earnings had been distributed. The Company’s basic net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average shares of common stock outstanding during the period. The Company’s diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average shares of common stock outstanding and, when dilutive, potential common shares outstanding during the period. The dilutive effect of potential common shares is reflected in diluted net income (loss) per share by application of the treasury stock method.

The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share attributable to common stockholders for the three and nine months ended September 30 (in thousands, except share and per share amounts):

Basic net loss per share is the same as diluted net loss per share attributable to common stockholders for the three and nine months ended September 30, 2023, because the inclusion of potential shares of common stock would have been anti-dilutive for the periods presented.

The following table discloses weighted-average Class A securities that were not included in the computation of diluted net income (loss) per share as their inclusion would have been anti-dilutive:

There wereno Class V securities that were excluded in the computation of diluted net income (loss) per share for the periods presented.

17. Income Tax

The effective income tax rate was (220.4)% and (9.4)%, respectively, for the three months ended September 30, 2024 and 2023 and (102.4)% and (4.3)%, respectively, for the nine months ended September 30, 2024 and 2023. The effective tax rate differs from the U.S. federal rate primarily due to the impacts of the valuation allowance placed on the Company’s deferred tax assets in prior periods, the release of the domestic valuation allowance in the current period, the windfall tax benefit on stock compensation activity, and the executive compensation addback under Internal Revenue Code Section 162(m).

Prior to September 30, 2024, the Company concluded that a valuation allowance was required against its deferred tax assets. The Company considers all available positive and negative evidence in its assessment of the recoverability of its deferred tax assets each reporting period. As of September 30, 2024, the Company determined that a valuation allowance against its domestic deferred tax assets was no longer required, primarily due to sustained tax profitability (pre-tax earnings or loss adjusted by permanent book to tax differences) beginning in the fourth quarter of 2023 through the first nine months of 2024, which is objective and verifiable evidence, as well as anticipated future earnings. The Company believes it is now more likely than not that it will realize its domestic deferred tax assets.

When a change in valuation allowance is recognized during an interim period, the change in valuation allowance resulting from current year ordinary income is included in the annual effective tax rate and the release of valuation allowance supported by projections of future taxable income is recorded as a discrete tax benefit in the interim period. The Company recognized a one-time income tax benefit of$60.8 million during the three months ended September 30, 2024 related to a release of its domestic valuation allowance. The Company’s judgment regarding the need for a valuation allowance may reasonably change in future reporting periods due to many factors, including changes in the level of tax profitability that the Company achieves and changes in tax laws or regulations.