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Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

2017 Stock Plan and 2020 Equity Incentive Plan

In July 2017, Hims adopted the 2017 Stock Plan (the “2017 Plan”). Under the 2017 Plan, the Board of Directors could grant 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.

In January 2021, in connection with the Merger, 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 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 the effective date of the 2020 Plan, no further stock awards have been or will be granted under the 2017 Plan. During the period, 1,413,818 shares of Class A common stock subject to awards granted under the 2017 Plan that were outstanding on the Merger date and forfeited after the adoption of the 2020 Plan were added to the 2020 Plan reserve. Therefore, as of December 31, 2021, there were 22,413,818 shares of Class A common stock reserved and 17,795,844 shares of Class A common stock available for the Company to grant under the 2020 Stock Plan. There were no more shares available for grant under the 2017 Plan since the 2017 Plan was replaced by the 2020 Plan.

Under both the 2017 Plan and 2020 Plan, stock options and stock appreciation rights are granted at exercise prices determined by the Board of Directors which cannot be less than 100% of the estimated fair market value of the common stock on the grant date. Incentive stock options granted to any stockholders holding 10% or more of the Company’s equity cannot be granted with an exercise price of less than 110% of the estimated fair market value of the common stock on the grant date and such options are not exercisable after five years from the grant date.

2020 Employee Stock Purchase Plan

In January 2021, the Board of Directors adopted the Company’s ESPP, which became effective immediately prior to the closing date of the Merger. The total shares of Class A common stock initially reserved under the ESPP is limited to 4,000,000 shares.

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 December 31, 2021, $0.4 million has been withheld via employee payroll deductions for employees who have opted to participate in the purchase period ending May 2022.

Stock Options

Options for new employees generally vest over four years, with 25% vesting one year after the vesting commencement date and then 1/48th of the total grant vesting monthly thereafter. Options granted to current employees generally vest 1/48th of the total grant monthly over four years. Options granted are exercisable within a period not exceeding ten 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 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 term as measured using a Monte Carlo simulation model, but only upon achieving the requirements outlined in (i) and (ii) above. 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 subsequent to the Merger and, therefore, the Company recognized all $11.3 million of expense related to the grant during the three months ended March 31, 2021 due to achievement of the market condition. As of December 31, 2021, there was $3.2 million of remaining compensation expense to be recognized for the remaining 1,623,070 stock options over a period of 2.29 years.

In connection with the Merger, each Hims option holder received an equivalent award at an exchange ratio of 0.4530 that vests in accordance with the original terms of the award. The Company determined this to be a Type I modification but did not record any incremental stock-based compensation expense since the fair value of the modified awards immediately after the modification was not greater than the fair value of the original awards immediately before the modification.

The grant date fair value of the Company’s stock options granted was estimated using the following weighted average assumptions:


	Year Ended December 31,
	2021		2020		2019
Expected term (in years)	5.94		5.94		5.98
Expected volatility	58.6	%	62.3	%	59.7	%
Risk-free interest rate	0.9	%	0.5	%	2.2	%
Expected dividend yield	—	%	—	%	—	%

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):


	Shares	Weighted Average Exercise Price		Weighted Average Contractual Period (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2020	26,459	$	1.16	8.50	$	131,770
Recapitalization	(14,474)	1.41
Outstanding at December 31, 2020	11,985	$	2.57	8.50	$	131,770
Granted	1,437	12.12
Exercised (including early exercised options vested during the period)	(1,911)	1.07
Forfeited and expired	(1,110)	4.14
Outstanding at December 31, 2021	10,401	4.01		7.73	37,868
Exercisable as of December 31, 2021	8,974	2.90		7.49	37,303

The weighted average grant date fair value of options granted for the years ended December 31, 2021, 2020, and 2019 was $6.51, $3.49, and $1.10 per share, and the intrinsic value of vested options exercised was $12.6 million, $0.7 million, and $0.3 million.

As of December 31, 2021, there was $17.8 million of unrecognized stock-based compensation related to unvested stock options, excluding the CEO stock options, which is expected to be recognized over a weighted average period of 2.90 years.

The options outstanding and exercisable as of December 31, 2021 (excluding CEO stock options) have been aggregated into ranges for additional disclosure as follows (in thousands, except weighted average remaining contractual life and exercise price):


	Options Outstanding		Options Exercisable
Exercise Price	Shares	Weighted Average Remaining Contractual Life (in Years)	Shares	Weighted Average Remaining Contractual Life (in Years)
$0.06 – 0.40	2,309	5.64	2,308	5.64
1.55 – 1.75	2,120	7.34	2,006	7.34
2.43	3,242	8.42	3,241	8.42
8.13 – 9.41	1,756	8.82	1,291	8.54
12.21 – 15.17	974	9.28	128	9.02
	10,401		8,974

The options outstanding and exercisable as of December 31, 2020 (excluding CEO stock options) have been aggregated into ranges for additional disclosure as follows (in thousands, except weighted average remaining contractual life and exercise price):


	Options Outstanding		Options Exercisable
Exercise Price	Shares	Weighted Average Remaining Contractual Life (in Years)	Shares	Weighted Average Remaining Contractual Life (in Years)
$0.06 – 0.40	3,454	7.17	3,214	7.17
1.55 – 1.75	3,564	8.36	3,351	8.36
2.43	3,324	9.36	3,320	9.36
8.90 – 9.41	1,643	9.97	1,508	9.98
	11,985		11,393

RSUs

All RSUs granted prior to the Merger were subject to achievement of a liquidity event which included (i) an initial public offering, (ii) a business combination transaction, or (iii) a sale event as defined by the 2017 Plan. On January 20, 2021, the liquidity event was achieved with the closing of the Merger.

RSUs for new employees generally vest over four years, with 25% vesting one 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.

In connection with the Merger, each Hims RSU holder received an equivalent award at an exchange ratio of 0.4530 that vests in accordance with the original terms of the award. The Company determined this to be a Type I modification but did not record any incremental stock-based compensation expense since the fair value of the modified awards immediately after the modification was not greater than the fair value of the original awards immediately before the modification.

In addition, all Hims RSU and option holders received (i) earn-out RSUs that would vest in equal thirds if the trading price of the Company’s Class A common stock was greater than or equal to $15.00, $17.50, and $20.00 for any 10 trading days within any 20-trading day period, or a Company sale (as defined in the Merger Agreement) occurs and the thresholds are met on or prior to the date that is five years following the Closing Date; and (ii) an allocation of Parent Warrant RSUs. All of these RSUs vest in accordance with the terms of the initial RSU and option award, in addition to any of the aforementioned requirements.

The earn-out thresholds for earn-out RSUs were all met in February 2021. The earn-out awards are equity classified since they do not meet the liability classification criteria outlined in ASC 480, Distinguishing Liabilities from Equity and are both (i) indexed to the Company’s own shares and (ii) meet criteria for equity classification. The Company determined the fair value of the earn-out RSUs using a Monte Carlo simulation model. The following assumptions were used in this valuation:


Expected term (in years)	5.00
Expected volatility	60.0	%
Risk-free interest rate	0.5	%
Expected dividend yield	—	%

The value of the Company’s equity was also an input into the model and was determined based on the closing trading price of the Company’s Class A common stock on the Closing Date of $16.38.

RSU activity including RSUs outstanding prior to the Merger, earn-out RSUs, and Parent Warrant RSUs is as follows (in thousands, except for weighted average grant date fair value):


	Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2020	3,480	$	5.30
Recapitalization	(1,904)	5.99
Unvested at December 31, 2020	1,576	11.29
Granted	4,882	11.81
Vested	(1,852)	11.80
Forfeited and expired	(624)	12.09
Unvested at December 31, 2021	3,982	$	11.55

Included in the above activity are 476,308 earn-out RSUs and 9,478 Parent Warrant RSUs issued to the CEO as part of the Merger that vest in accordance with the same market conditions as the CEO stock options, of which 317,539 earn-out RSUs and 6,319 Parent Warrant RSUs vested in the period. In addition, the Company granted 45,297 RSUs in 2020 and 4,431 earn-out RSUs and 88 Parent Warrant RSUs as part of the Merger in January 2021 to a non-executive officer that vest upon meeting certain revenue targets from the sale of specific products. None of the awards vested in the period. These grants are also included in the above activity.

As of December 31, 2021, there was unrecognized stock-based compensation related to unvested RSUs of $32.9 million, which is expected to be recognized over a weighted average period of 3.07 years.

Vendor Warrants

Included in stock-based compensation expense is expense for issuance of Class A common stock warrants to nonemployees in connection with vendor service arrangements.

In connection with the Merger, warrant holders received (i) an equivalent warrant at an exchange ratio of 0.4530 (which was determined not to result in incremental stock-based compensation expense similar to the evaluations for stock options and RSUs above); (ii) the right to receive, upon exercise, earn-out shares that vest in equal thirds if the trading price of the Company’s Class A common stock was greater than or equal to $15.00, $17.50, and $20.00 for any 10 trading days within any 20-trading day period, or a Company sale (as defined in the Merger Agreement) occurs and the thresholds are met on or prior to the date that is five years following the Closing Date; and (iii) the right to receive, upon exercise, an allocation of Parent Warrants. All of these instruments vest in accordance with the terms of the initial warrant in addition to any of the aforementioned requirements. The earn-out thresholds were all met in February 2021. Refer to Note 17 – Common Stock for additional detail.

Vendor warrant activity, excluding any right to receive Merger consideration, is as follows (in thousands, except for weighted average exercise price and weighted average contractual term in years):


	Shares	Weighted Average Exercise Price		Weighted Average Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2020	1,861	$	0.79	7.01	$	9,957
Recapitalization	(1,018)	0.96
Outstanding at December 31, 2020	843	$	1.75	7.01	$	9,957
Exercised	(381)	1.75
Outstanding at December 31, 2021	462	1.75		7.01	2,219
Vested as of December 31, 2021	462	1.75		7.01	2,219
Exercisable as of December 31, 2021	462	1.75		7.01	2,219

Upon the exercise of outstanding warrants above, vendors also have the right to receive 45,225 shares of Merger consideration, consisting of the holders’ allocation of earn-out consideration.

As of December 31, 2021, all stock-based compensation expense related to vendor warrants, including associated Merger consideration has been recognized.

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 HHL. As part of the acquisition of HHL, the Company also recognized an earn-out liability based on the achievement of certain revenue targets. A portion of the earn-out liability is expected to be settled in shares of Class A common stock. 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 year ended December 31, 2021. The expense will be recognized over a four-year vesting period with 25% vesting one year after the acquisition date and the remaining vesting quarterly thereafter. Unrecognized stock-based compensation expense of $5.2 million will be recognized over a weighted average period of 3.32 years.

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 Apostrophe. Vesting of the restricted shares is contingent on each recipient’s continued employment. Accordingly, the Company has recognized stock-based compensation expense related to these awards for the year ended December 31, 2021. The expense will be recognized over a three-year vesting period with 17% vesting 6 months after the acquisition date and the remaining vesting quarterly thereafter. Unrecognized stock-based compensation expense of $20.2 million will be recognized over a weighted average period of 2.50 years.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense for employees and nonemployees, by category, on the consolidated statements of operations and comprehensive loss for the years ended December 31, 2021, 2020, and 2019 (in thousands):


	Year Ended December 31,
	2021		2020		2019
Marketing	$	9,664	$	1,172	$	571
Selling, general, and administrative	57,547		4,659		7,457
Total stock-based compensation expense	$	67,211	$	5,831	$	8,028

The Company capitalized $0.7 million of stock-based compensation as internal-use software for the year ended December 31, 2021 and none for the years ended December 31, 2020 and 2019.