What Happened? Shares of healthcare apparel company Figs (NYSE:FIGS) jumped 13.2% in the afternoon session after the company reported strong third-quarter financial results that significantly beat Wall Street's expectations. The healthcare apparel company's revenue grew 8.2% year-over-year to $151.7 million, exceeding analyst forecasts. This growth was complemented by a significant earnings beat, with adjusted earnings per share of $0.05, more than double the consensus estimate of $0.02. A key driver for ...

Core Insights - Healthcare apparel company Figs reported Q3 CY2025 revenue of $151.7 million, an 8.2% year-on-year increase, exceeding analyst estimates of $142.5 million [1][5] - The company achieved a non-GAAP profit of $0.05 per share, significantly above the consensus estimate of $0.02 [1][5] - Adjusted EBITDA reached $18.85 million, with a margin of 12.4%, surpassing analyst expectations of $12.38 million [5] Management Commentary - Management attributed the strong performance to consistent execution across core products and disciplined promotional strategies, leading to higher average order values and customer engagement [3][4] - CEO Trina Spear highlighted broad-based growth in scrubwear and the U.S. market, along with improvements in product fit and returns processing [3] - The company plans to maintain momentum through increased inventory investments, new product introductions, and targeted international growth, including the launch of FIBERx fabric at the 2026 Winter Olympics [3] Financial Performance - Operating margin improved to 6.4%, up from -6.2% in the same quarter last year [5] - Active customers increased to 2.78 million, representing a year-on-year growth of 108,000 [5] - Market capitalization stands at $1.23 billion [5] Strategic Initiatives - The deliberate reduction in promotional activity led to higher average order values and improved profitability, with more sales occurring at full price [6] - Growth was primarily driven by the core scrubwear category, with new silhouettes and improved fits reducing return rates [6] - Figs expanded its international presence from 33 to nearly 60 markets, with recent launches in Japan and South Korea, and an upcoming debut in China [6] Product Development - Non-scrubwear categories, including underscrubs, compression socks, and footwear, saw renewed momentum due to targeted product launches [6] - Operational efficiency gains were achieved through supply chain optimization and reduced marketing expenses, despite facing higher tariffs on imports [6]

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Core Insights - Figs (FIGS) reported a revenue of $151.66 million for the quarter ended September 2025, marking an 8.2% year-over-year increase and exceeding the Zacks Consensus Estimate of $142.17 million by 6.67% [1] - The company achieved an EPS of $0.05, a significant improvement from -$0.01 a year ago, resulting in a 150% EPS surprise compared to the consensus estimate of $0.02 [1] Financial Performance Metrics - Active customers reached 2,781, surpassing the average estimate of 2,738 based on five analysts [4] - The average order value was $114.00, slightly above the five-analyst average estimate of $112.06 [4] - Net revenues per active customer were reported at $209.00, closely aligning with the average estimate of $209.04 from two analysts [4] Geographic Revenue Breakdown - Revenue from the Rest of the World was $24.32 million, slightly below the estimated $25.14 million, but reflecting an 11.7% increase year-over-year [4] - U.S. revenues totaled $127.34 million, exceeding the average estimate of $117.18 million, with a year-over-year growth of 7.5% [4] Product Revenue Insights - Non-Scrubwear revenues were reported at $24.65 million, marginally above the average estimate of $24.61 million, showing a year-over-year increase of 7.2% [4] - Scrubwear revenues reached $127.02 million, significantly higher than the average estimate of $117.36 million, with an 8.4% year-over-year growth [4] Stock Performance - Figs shares have returned +9.9% over the past month, outperforming the Zacks S&P 500 composite's +1.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Figs reported quarterly earnings of $0.05 per share, exceeding the Zacks Consensus Estimate of $0.02 per share, and compared to a loss of $0.01 per share a year ago, resulting in an earnings surprise of +150.00% [1] - The company achieved revenues of $151.66 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 6.67% and showing an increase from $140.21 million year-over-year [2] - Figs has outperformed the S&P 500 with a 22.5% gain since the beginning of the year, compared to the S&P 500's gain of 15.6% [3] Earnings Outlook - The future performance of Figs' stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is breakeven on revenues of $150.13 million, while for the current fiscal year, it is $0.06 on revenues of $569.84 million [7] Industry Context - The Retail - Apparel and Shoes industry, to which Figs belongs, is currently ranked in the top 22% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Figs' stock performance [5][6]

Financial Data and Key Metrics Changes - Net revenues increased by 8% year-over-year to $151.7 million, exceeding the outlook of flat to up 2% [22][24] - Adjusted EBITDA margin improved by 900 basis points to 12.4% compared to 3.4% last year [5][29] - Gross margin expanded by 280 basis points to 69.9%, driven by lower discounts and improved return rates [27][29] Business Line Data and Key Metrics Changes - Scrubwear grew by 8%, representing 84% of net revenues, supported by effective merchandising and marketing [24][25] - Non-scrubwear increased by 7%, accounting for 16% of net revenues, with strong growth in underscrubs and shoes [24][25] - Average order value rose by 6% to $114, primarily due to a higher rate of full-price sales [23] Market Data and Key Metrics Changes - U.S. sales increased by 8% to $127.3 million, marking the strongest performance in nine quarters [25] - International net revenues grew by 12%, with notable strength in acquiring new customers [25][26] - Active customer count reached nearly 2.8 million, reflecting a 4% increase year-over-year [23] Company Strategy and Development Direction - The company is focusing on expanding its international presence, planning to increase from 33 to nearly 60 markets by year-end [15][17] - Investments are being made in product innovation, including new fabric solutions like FIBREX, aimed at enhancing product offerings [8][58] - The company is committed to maintaining a strong connection with healthcare professionals, emphasizing community engagement and brand authenticity [21][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing momentum into Q4, expecting it to be the strongest net revenue growth quarter of the year [5][31] - The company anticipates a full-year revenue growth of approximately 7%, up from previous low single-digit expectations [31] - Management acknowledged challenges from tariffs but highlighted successful mitigation strategies and operational efficiencies [36][37] Other Important Information - Inventory increased by 23% year-over-year to $151.2 million, attributed to deeper investments in key styles and earlier timing of in-transit inventory [29][30] - The company has $52 million available for future share repurchases under its current program [30] Q&A Session Summary Question: Can you discuss the gross margin performance this quarter? - Management noted a gross margin of 69.9%, higher than historical rates, driven by improved discount rates and returns processing [39][40] Question: What drove the demand during business-as-usual days without promotions? - Management reported acceleration in business-as-usual days, with broad-based performance across U.S. and international markets [41][42] Question: How do you see AOV contributing to revenue growth in 2026? - AOV increased by 6%, with expectations for continued growth driven by product mix and customer engagement [44][45] Question: What are the growth drivers for community hubs? - The company plans to open three new community hubs in key healthcare locations, leveraging learnings from existing stores [51][52] Question: How is the international market expected to grow? - Management expressed confidence in sustaining double-digit growth in international markets, supported by a two-pronged strategy of broad and deep market penetration [61][62]

Financial Performance - Net revenues reached $1517 million, reflecting an 8% year-over-year growth[32,34] - Gross margin stood at 699%[32] - Adjusted EBITDA margin was 124%, exceeding expectations[32,34] - International net revenues grew by 12%[34] Key Operating Metrics - Average order value (AOV) increased by 6% to $114[34] - Active customers grew by 4% to 28 million[34] - Net revenues per active customer increased 2%[41] Strategic Initiatives - Expanding to nearly 60 countries outside the U S by the end of 2025[51,75] - FIGS donated $100000 to The Bluebird Center for Healthcare Education and Access[71] - FIGS donated $50000 to F Cancer[71] Updated Outlook for 2025 - Net revenues are expected to increase approximately 70% compared to 2024[125] - Adjusted EBITDA margin is expected to be around 103%[126]

Company Overview - Figs is a healthcare apparel company founded in 2013 by Heather Hasson and Trina Spear, gaining popularity through TikTok for its stylish medical attire and uniforms [3]. Q3 CY2025 Financial Performance - Figs reported Q3 CY2025 revenue of $151.7 million, exceeding analyst estimates of $142.5 million, representing an 8.2% year-on-year growth [6]. - The non-GAAP profit was $0.05 per share, significantly above the consensus estimate of $0.02 [6]. - Adjusted EBITDA was $18.85 million, surpassing analyst expectations of $12.38 million, with a margin of 12.4% [6]. - Operating margin improved to 6.4%, up from -6.2% in the same quarter last year [6]. - Free cash flow margin decreased to 0.4%, down from 13.1% in the same quarter last year [6]. - Active customers reached 2.78 million, an increase of 108,000 year-on-year [6]. Revenue Growth Analysis - Figs has demonstrated impressive annualized revenue growth of 23.7% over the last five years, outperforming the average consumer discretionary company [4]. - However, the annualized revenue growth over the last two years has slowed to 3.2%, indicating a decline compared to the five-year trend [5]. - The number of active customers has shown an average year-on-year growth of 5.8% over the last two years, but this growth is not translating into revenue growth, suggesting a decline in monetization [7]. Future Outlook - Analysts project that Figs's revenue will remain flat over the next 12 months, indicating a slight deceleration in growth compared to the previous two years [8].

Customer Metrics - Active customers increased by 4.0% from approximately 2.7 million at September 30, 2024, to approximately 2.8 million at September 30, 2025[111] - Active customers grew to 2,781 thousand as of September 30, 2025, up from 2,673 thousand in the prior year[152] - Net revenues per active customer increased to $209 for the nine months ended September 30, 2025, compared to $205 in the previous year[153] Financial Performance - Net revenues rose from $140.2 million to $151.7 million, representing an increase of 8.2% for the three months ended September 30, 2025, and from $403.7 million to $429.2 million, or 6.3%, for the nine months ended September 30, 2025[111] - Net income increased from $(1.7) million to $8.7 million for the three months ended September 30, 2025, and from $0.8 million to $15.7 million for the nine months ended September 30, 2025[117] - Adjusted EBITDA increased from $4.8 million to $18.9 million for the three months ended September 30, 2025, and from $30.7 million to $47.8 million for the nine months ended September 30, 2025[117] - Net revenues for the nine months ended September 30, 2025, reached $429.202 million, compared to $403.726 million in 2024, indicating a year-over-year growth of approximately 6.3%[157] - Adjusted EBITDA for the nine months ended September 30, 2025, was $47.752 million, up from $30.719 million in 2024, reflecting a significant increase in operational performance[157] - The adjusted EBITDA margin improved to 11.1% for the nine months ended September 30, 2025, compared to 7.6% in the same period of 2024[157] Cost and Margin Analysis - Gross margin improved by 2.8 percentage points from 67.1% to 69.9% for the three months ended September 30, 2025[111] - Gross margin increased by 0.5 percentage points to 68.2% for the nine months ended September 30, 2025, due to fewer discounts and improved return rates[143] - Tariffs have increased product costs, negatively impacting gross margin by 120 basis points for the three months ended September 30, 2025[114] - Estimated negative impact on gross margin due to current tariff regime is approximately 110 basis points for 2025 and 440 basis points for 2026[114] Operating Expenses - Total operating expenses decreased from 73.2% to 63.6% of net revenues for the three months ended September 30, 2025[129] - Operating expenses decreased by $6.2 million, or 6.1%, for the three months ended September 30, 2025, compared to the same period last year[132] - Total operating expenses for the nine months ended September 30, 2025, decreased by $6.6 million, or 2.4%, compared to the same period last year[144] - General and administrative expenses decreased by $1.6 million, or 1.5%, for the nine months ended September 30, 2025, compared to the same period last year[147] Cash Flow and Liquidity - Cash flows from operating activities decreased from $50.7 million to $0.2 million for the nine months ended September 30, 2025[117] - Free cash flow decreased from $37.1 million to $(5.1) million for the nine months ended September 30, 2025[117] - Cash flows from operating activities decreased by $50.5 million for the nine months ended September 30, 2025, compared to the same period last year, primarily due to higher inventory purchases and timing of payments[170] - Cash flows from investing activities increased by $25.7 million for the nine months ended September 30, 2025, mainly due to an increase in maturities of available-for-sale securities[173] - As of September 30, 2025, the company had $46.5 million in cash and cash equivalents, down from $85.6 million at the end of 2024[161] - The company has a revolving credit facility of up to $100.0 million, with $95.1 million available for borrowings as of September 30, 2025[163] Shareholder Actions - The company authorized a share repurchase program totaling $100.0 million, with approximately $52.0 million available for future repurchases as of September 30, 2025[165] Taxation - Provision for income taxes increased by $7.2 million, or 180.3%, for the three months ended September 30, 2025, primarily due to an increase in pre-tax income[138] Other Income - Other income, net decreased by 20.6% for the three months ended September 30, 2025, primarily due to lower interest income[136] Average Order Value - Average order value (AOV) for the three months ended September 30, 2025, was $114, up from $108 in the same period last year[153]