Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022, is as follows (in thousands):

	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	30,525	$	—	$	—	$	30,525
Government bonds	—		14,328		—		14,328
Short-term investments:
Corporate bonds	—		120,701		—		120,701
Government bonds	—		19,726		—		19,726
Restricted cash:
Money market funds	856		—		—		856
Total assets	$	31,381	$	154,755	$	—	$	186,136
Liabilities
Earn-out liabilities	$	—	$	—	$	739	$	739
Total liabilities	$	—	$	—	$	739	$	739

The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021, is as follows (in thousands):

	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	59,761	$	—	$	—	$	59,761
Government bonds	—		7,664		—		7,664
Short-term investments:
Corporate bonds	—		146,002		—		146,002
Asset-backed bonds	—		29,488		—		29,488
Restricted cash:
Money market funds	856		—		—		856
Total assets	$	60,617	$	183,154	$	—	$	243,771
Liabilities
Earn-out liabilities	$	—	$	—	$	1,999	$	1,999
Total liabilities	$	—	$	—	$	1,999	$	1,999

The fair values of cash, accounts receivable, accounts payable, accrued liabilities, and earn-out payable approximated their carrying values as of September 30, 2022 and December 31, 2021, due to their short-term nature. All other financial instruments, except for earn-out liabilities, 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, 2022 and 2021, the Company had no transfers between levels of the fair value hierarchy of its assets or liabilities measured at fair value.

As of September 30, 2022 and December 31, 2021, the long-term earn-out liability, which is solely related to the acquisition of Honest Health Limited, which is now Hims & Hers UK Limited (“HHL”), is classified as a Level 3 fair value measurement containing significant unobservable inputs including estimates of achieving certain revenue targets. At inception, the fair value of the earn-out liabilities associated with the HHL acquisition was determined based on revenue projections and probability of

achievement of revenue targets as evaluated using a Monte Carlo simulation. The following assumptions were used to determine the fair value at inception:

	HHL
Revenue risk-adjusted discount rate	9.1	%
Revenue volatility	50.0	%
Counterparty discount rate	5.0	%

The fair value of the earn-out liabilities is remeasured at each reporting period. This change in fair value is related to contingent consideration and compensation costs (see Note 12 – Stockholders’ Equity) and is recognized in other income and general and administrative expenses, respectively, on the condensed consolidated statements of operations and comprehensive loss. The change in the fair value of earn-out liabilities is as follows (in thousands):

Balance at December 31, 2021	$	1,999
Change in fair value due to revaluation and service-based vesting	(1,260)
Balance at September 30, 2022	$	739