Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ___________________ Commission File Number: 001-40448 FIGS, Inc. (Exact Name of Registrant as Specified in its Charter) Dela ...

Thomas Barwick/DigitalVision via Getty Images FIGS (NYSE:FIGS) 2Q24 results were not spectacular, with the company posting moderate growth and improved guidance, but at the expense of lower margins. The company is spending more on product and marketing to drive the top line. My view on the company and the stock has not changed. FIGS has a good product, but its lack of cost management financed by a high gross margin makes it vulnerable to competition from below. The stock discounts a significant improvement ...

Financial Data and Key Metrics Changes - Net revenues increased by 4.4% to $144.2 million compared to Q2 last year, reflecting higher orders from existing customers despite a lower average order value (AOV) [24][25] - Adjusted EBITDA for Q2 was $12.9 million, with an adjusted EBITDA margin of 9%, down from 13.7% in Q2 of 2023 [25][26] - Gross margin for Q2 was 67.4%, compared to 69.5% in Q2 of 2023, primarily due to a shift in product category mix and reclassification of duty subsidies [24][25] Business Line Data and Key Metrics Changes - Non-scrubwear categories grew by 13%, reaching 18% of net revenues, indicating a successful expansion beyond core scrubwear [11][24] - The U.S. growth returned to positive territory, driven by improved repeat frequency trends, while international growth accelerated to 32% year-on-year [13][24] Market Data and Key Metrics Changes - International revenue growth accelerated to 32% from 29% in the first quarter of 2024, despite a negative impact of 12 percentage points from duty subsidies [13][24] - The company reported that branded search for FIGS is now equal to that for scrubs, indicating strong brand recognition [12] Company Strategy and Development Direction - The company is focusing on product innovation and broadening brand reach, particularly through its partnership with Team USA for the Olympics, which is seen as a key strategic driver [5][10] - The company aims to evolve into a lifestyle brand, with new product categories and collaborations expected to enhance long-term growth [11][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth opportunity, despite current macroeconomic uncertainties affecting consumer purchasing behavior [35][36] - The full-year revenue growth outlook has been raised to a range of flat to positive 2%, reflecting strong Q2 performance and visibility into the second half of the year [20][27] Other Important Information - The company has a strong balance sheet with over $268 million in cash and no debt, allowing for strategic investments and a $50 million share repurchase program [22][27] - A new Chief Financial Officer, Sarah Oughtred, has been appointed, bringing extensive experience from lululemon [18] Q&A Session Summary Question: Consumer engagement metrics and trends - Management noted positive trends in repeat frequency driven by product innovation and marketing, but highlighted ongoing uncertainty in the macro environment affecting overall purchasing levels [34][35] Question: Margin levels between core business and new innovations - Management indicated that new products currently have lower margins but expect them to improve as they scale, with core products benefiting from the success of new innovations [36][37] Question: Insights from the Olympic marketing campaign - The campaign has generated significant impressions and engagement, shaping future marketing strategies to focus on top-of-funnel brand building [40][41] Question: Future marketing opportunities and pricing strategy - The Olympic campaign is expected to open doors for future collaborations, and pricing for new products will be strategic to ensure accessibility while capitalizing on demand [46][47] Question: Trends in international markets - International growth was reported at 44%, with strong performance in established markets and significant opportunities in newer markets [56][57]

Core Viewpoint - Figs, a healthcare apparel company, reported disappointing second-quarter earnings, leading to a significant drop in its stock price, indicating ongoing challenges in achieving growth and profitability [1][4]. Financial Performance - Revenue increased by 4.4% to $144.2 million, aligning with estimates [2]. - Gross margin decreased by 210 basis points to 67.4% due to a shift in product mix towards limited-edition items [2]. - Operating expenses rose by 7% to $95 million, driven by higher selling and marketing costs and a transition to a new fulfillment center [2]. - Adjusted EBITDA fell from $18.9 million to $12.9 million, with earnings per share at $0.01, down from $0.04 a year ago and below breakeven estimates [3]. Future Projections - For 2024, Figs projects flat to 2% revenue growth and modest adjusted EBITDA margins of 9.5% to 10% [5]. - The outlook of flat growth while operating at breakeven raises concerns about potential further declines in stock price [5]. Strategic Actions - Figs announced a $50 million share repurchase authorization, indicating a move to support its stock price amidst challenges [3].

Core Insights - Figs (FIGS) reported revenue of $144.23 million for the quarter ended June 2024, marking a year-over-year increase of 4.4% [1] - The earnings per share (EPS) for the same period was $0.01, a decrease from $0.02 a year ago [1] Financial Performance - Revenue: $144.23 million, up 4.4% year-over-year [1] - EPS: $0.01 compared to $0.02 a year ago [1]

Financial Performance - Net revenues for Q2 2024 were $144.2 million, a 4.4% increase year over year[2] - Net revenues for Q2 2024 reached $144.225 million, a 4% increase from $138.132 million in Q2 2023[14] - Net income was $1.1 million, a decrease of $3.5 million year over year, resulting in a net income margin of 0.8%[2] - Net income for Q2 2024 was $1.100 million, down from $4.582 million in Q2 2023, showing a decline of 76%[14] - Net income for the three months ended June 30, 2024, was $1,100,000, compared to $4,581,000 for the same period in 2023, representing a decrease of approximately 76.0%[16] - Adjusted EBITDA was $12.9 million, down $6.0 million year over year, with an adjusted EBITDA margin of 9.0%[2] - Adjusted EBITDA for the six months ended June 30, 2024, was $25,922,000, compared to $34,973,000 for the same period in 2023, reflecting a decline of about 25.9%[17] - Adjusted EBITDA margin for the three months ended June 30, 2024, was 9.0%, down from 13.7% for the same period in 2023, reflecting a decrease of 4.7 percentage points[17] Operating Expenses - Operating expenses rose to $95.7 million, a 7.0% increase year over year, with operating expenses as a percentage of net revenues increasing to 66.4%[2] - Operating expenses for Q2 2024 totaled $95.711 million, up from $89.468 million in Q2 2023, marking a 7.5% increase[14] Customer Metrics - Active customers increased by 6.1% year over year to 2.6 million[2] - Active customers increased to 2,628 as of June 30, 2024, up from 2,476 as of June 30, 2023, indicating a growth of approximately 6.1%[20] Revenue Per Customer - Net revenues per active customer were $210, a decrease of 2.3% year over year[2] - Net revenues per active customer for the three months ended June 30, 2024, were $210, slightly down from $215 for the same period in 2023[21] Average Order Value - Average order value (AOV) was $113, a decrease of 1.7% year over year[2] - Average order value for the three months ended June 30, 2024, was $113, consistent with $115 for the same period in 2023[22] Balance Sheet - Total current assets increased to $417.240 million as of June 30, 2024, up from $385.659 million at the end of 2023, representing an 8.5% growth[13] - Total liabilities rose to $124.318 million as of June 30, 2024, compared to $96.359 million at the end of 2023, indicating a 29% increase[13] - Cash and cash equivalents decreased to $131.811 million as of June 30, 2024, from $144.173 million at the end of 2023, a decline of 8.6%[15] Shareholder Actions - A share repurchase program for up to $50 million of Class A common stock has been authorized by the Board of Directors[3] Future Outlook - The company expects full-year 2024 net revenues to be flat to 2% growth compared to 2023[5]

Core Insights - Figs (FIGS) is expected to report break-even quarterly earnings per share, indicating a 100% decline year-over-year [1] - Revenue is projected to be $142.71 million, reflecting a year-over-year increase of 3.3% [1] - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [1] Earnings Estimates and Market Reactions - Changes in earnings estimates are crucial for predicting investor reactions to stock performance [2] - Empirical research shows a strong correlation between earnings estimate revisions and short-term stock price performance [2] Key Metrics Projections - Analysts forecast 'Active customers' to reach 2,640, up from 2,500 in the same quarter last year [4] - The 'Average order value' is expected to be $116.44, slightly higher than the previous year's figure of $115 [4] - 'Net revenues per active customer' are projected to be $206.77, down from $215 year-over-year [4] Stock Performance - Over the past month, shares of Figs have returned +8.4%, contrasting with the Zacks S&P 500 composite's -5.9% change [4] - Figs currently holds a Zacks Rank 3 (Hold), suggesting performance may align with the overall market in the near future [4]

Core Viewpoint - FIGS (NYSE:FIGS) is facing challenges with low operating margins, decelerating growth, and increasing competition, leading to a Hold rating despite a recent stock price increase of 20% following earnings release [1][2][10]. Financial Performance - In 1Q24, FIGS reported a revenue decline of 0.8%, marking the second consecutive quarter of low or no growth, despite a 9% increase in customer count [3][12]. - Gross margins decreased due to a shift in product and geographic mix, with international sales and non-scrub products contributing to lower margins [5][12]. - Operating margins were close to breakeven, exacerbated by higher investments, particularly in growth initiatives [12][16]. Cost Structure - Selling expenses decreased due to accounting changes but are expected to rise in the next quarter due to a fulfillment center transition [6]. - General and administrative (G&A) expenses grew by 5% year-over-year, raising concerns about excess costs, particularly in management compensation [8]. - Marketing expenses remained flat, with ongoing investments in brand marketing, including campaigns for Nurses Week [7]. Cash Flow and Valuation - The company generated $12 million in free cash flow in 1Q24, but $11.6 million was attributed to stock-based compensation, indicating a lack of robust cash flow generation [9]. - The adjusted enterprise value (EV) is estimated at $970 million when accounting for potential share dilution from stock options [11]. - To achieve a reasonable valuation, FIGS would need to significantly increase revenues or improve operating margins, which appears unlikely under current conditions [14][16]. Future Outlook - International sales present a key opportunity for growth, as FIGS has yet to penetrate markets outside the US effectively [18]. - Increased competition in the US market from direct-to-consumer brands could pressure FIGS' pricing and margins, necessitating close monitoring of promotional activities and margin changes [19].

Financial Data and Key Metrics Changes - Net revenues for the first quarter decreased by 0.8% to $119.3 million compared to the same period last year, reflecting $1.4 million in contra revenue associated with duty subsidies [30][32] - Adjusted EBITDA margin for Q1 was 10.9%, down from 13.4% in Q1 2023, with adjusted EBITDA totaling $13 million [31][133] - Gross margin for Q1 was 68.9%, compared to 71.3% in Q1 2023, primarily due to a product mix shift [10][133] - General and administrative expenses for Q1 were $36 million, representing 30.2% of net revenues, up from 28.4% in Q1 2023 [11] Business Line Data and Key Metrics Changes - Non-scrubs product category grew by 9%, reaching 20.5% of net revenues [10] - Active customers increased by 8.6% on a trailing 12-month basis compared to the previous year [30] - Average order value (AOV) increased by 1.8% to $116, driven by higher average unit retail (AUR) and units per transaction (UPT) [30][140] Market Data and Key Metrics Changes - International net revenues grew by 29% in the first quarter compared to last year, despite a negative impact of 11 percentage points from duty subsidies [6] - The company is seeing strong engagement and repeat frequency trends in both the U.S. and international markets [68][112] Company Strategy and Development Direction - The company is focused on enhancing product innovation and expanding its product categories beyond scrubs, with a goal to diversify its offerings [77][138] - A new fulfillment center is expected to improve operational efficiency and support global distribution, with a focus on enhancing customer experience [31][96] - The company plans to increase investments in brand marketing to capitalize on recent positive trends and drive long-term growth [32][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving trends in repeat frequency and customer engagement, attributing this to successful product launches and marketing campaigns [47][68] - The long-term growth outlook for the healthcare industry remains favorable, supported by a strong balance sheet and cash flow generation [8][133] - The company anticipates a challenging comparison in Q3 due to last year's successful sample sale but remains committed to its growth strategy [32] Other Important Information - The company is committed to maintaining a disciplined promotional cadence, particularly during significant events like Nurses Week [60] - The transition to the new fulfillment center is expected to be largely complete by the end of Q3, with anticipated cost savings in the future [33][108] Q&A Session Summary Question: Can you elaborate on the adjustments to guidance and the nature of the investments? - Management indicated that the increase in brand marketing spend is a short-term dynamic aimed at capitalizing on improving trends, while the EBITDA margin guidance was adjusted down due to these investments [35][137] Question: What is the outlook for gross margin and how does it relate to marketing spend? - Management confirmed that gross margin is expected to remain flat year-over-year, with the EBITDA margin adjustment primarily reflecting increased marketing investments [70][138] Question: How is the company addressing the replacement cycle and customer engagement? - Management noted that repeat rates have bottomed and are now rising, indicating a positive shift in customer engagement and demand [82] Question: What are the growth expectations between international and U.S. markets? - Management highlighted strong growth in international markets, with a focus on localizing strategies to engage new healthcare professionals [112][118]

For the quarter ended March 2024, Figs (FIGS) reported revenue of $119.29 million, down 0.8% over the same period last year. EPS came in at $0.01, compared to $0.01 in the year-ago quarter.The reported revenue compares to the Zacks Consensus Estimate of $117.4 million, representing a surprise of +1.61%. The company delivered an EPS surprise of +200.00%, with the consensus EPS estimate being -$0.01.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how the ...