FIGS(FIGS) - 2025 Q1 - Quarterly Report

FORM 10-Q Filing Information Registrant Information This section provides key identification details for FIGS, Inc's Form 10-Q filing for the quarterly period ended March 31, 2025 - FIGS, Inc is filing its Quarterly Report on Form 10-Q for the period ended March 31, 2025[2] - The company's Class A common stock is traded on the New York Stock Exchange under the symbol FIGS[4] - FIGS, Inc is classified as a 'large accelerated filer' and is not an 'emerging growth company' or a 'shell company'[4][5] Outstanding Common Stock as of May 1, 2025 | Class of Stock | Shares Outstanding | | :--------------- | :----------------- | | Class A common stock | 154,267,492 | | Class B common stock | 8,283,641 | Table of Contents PART I – FINANCIAL INFORMATION This part outlines the unaudited financial statements, management's discussion and analysis, market risk, and controls PART II – OTHER INFORMATION This part covers legal proceedings, risk factors, unregistered sales of equity securities, and other disclosures Forward-Looking Statements Forward-Looking Statements Disclosure The report contains forward-looking statements subject to known and unknown risks and uncertainties - The report contains forward-looking statements covered by safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934[10] - Forward-looking statements include those regarding future results, industry trends, macroeconomic pressures, supply chain, product demand, retail expansion, international growth, sourcing, product innovation, fulfillment center transitions, AI use, share repurchase programs, and market competition[10] - Actual results may differ materially due to known and unknown risks, uncertainties, and other important factors, particularly those discussed in 'Part II, Item 1A Risk Factors'[11] Summary Risk Factors Principal Risks and Uncertainties The company faces key risks in business growth, brand reputation, competition, supply chain, and macroeconomic factors - Historical growth may not be sustainable, and the company may not be profitable in the future[15] - Success depends on maintaining brand value, attracting new customers, retaining existing ones, and successfully introducing new products[15] - Risks include intense competition in the healthcare apparel market, dependence on key employees, challenges with international expansion, and disruptions to shipping and distribution center operations[15] - Macroeconomic factors (supply chain disruptions, inflation, tariffs, high interest rates, geopolitical tensions) and healthcare workforce-related stress could negatively impact consumer confidence and spending[15] - Reliance on a limited number of third-party suppliers and global trade policy changes pose supply chain risks[15] - Data breaches or cyberattacks could harm reputation and expose the company to liability[15] - The dual-class stock structure and 'controlled company' status may limit stockholders' influence on corporate matters[16][17] PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2025 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change (vs. Dec 31, 2024) | | :---------------------------------- | :------------- | :---------------- | :------------------------ | | Cash and cash equivalents | $90,008 | $85,645 | +$4,363 | | Short-term investments | $161,203 | $159,469 | +$1,734 | | Accounts receivable | $6,554 | $8,625 | -$2,071 | | Inventory, net | $131,577 | $115,759 | +$15,818 | | Total current assets | $399,711 | $382,766 | +$16,945 | | Total non-current assets | $122,603 | $127,021 | -$4,418 | | Total assets | $522,314 | $509,787 | +$12,527 | | Total current liabilities | $100,969 | $90,142 | +$10,827 | | Total liabilities | $140,778 | $132,655 | +$8,123 | | Total stockholders' equity | $381,536 | $377,132 | +$4,404 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | Change (%) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Net revenues | $124,901 | $119,293 | +$5,608 | +4.7% | | Cost of goods sold | $40,442 | $37,156 | +$3,286 | +8.8% | | Gross profit | $84,459 | $82,137 | +$2,322 | +2.8% | | Total operating expenses | $84,670 | $81,694 | +$2,976 | +3.6% | | Net income (loss) from operations | $(211) | $443 | -$654 | -147.6% | | Total other income, net | $2,075 | $2,837 | -$762 | -26.9% | | Net income before provision for income taxes | $1,864 | $3,280 | -$1,416 | -43.2% | | Provision for income taxes | $1,966 | $1,845 | +$121 | +6.6% | | Net income (loss) | $(102) | $1,435 | -$1,537| -107.1%| | Basic earnings (loss) per share | $0.00 | $0.01 | -$0.01 | -100.0% | | Diluted earnings (loss) per share | $0.00 | $0.01 | -$0.01 | -100.0% | Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Net income (loss) | $(102) | $1,435 | -$1,537 | | Unrealized loss on short-term investments, net of tax | $(52) | $(31) | -$21 | | Foreign currency translation adjustment | $7 | $0 | +$7 | | Total other comprehensive loss, net of tax | $(45) | $(31) | -$14 | | Total comprehensive income (loss) | $(147) | $1,404 | -$1,551| Condensed Consolidated Statements of Stockholders' Equity Key Stockholders' Equity Changes (in thousands) | Item | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Additional paid-in capital (increase) | $4,551 | $11,621 | | Retained earnings (change) | -$102 | +$1,435 | | Accumulated other comprehensive income (loss) | -$45 | -$31 | | Total stockholders' equity (change) | +$4,404 | +$13,004 | - Repurchases of Class A Common Stock totaled $2.688 million for 567,607 shares during the three months ended March 31, 2025[29] - Stock-based compensation expense was $7.239 million for the three months ended March 31, 2025, a decrease from $11.611 million in the prior year period[29] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Operating activities | $9,235 | $11,619 | -$2,384 | | Investing activities | $(2,184) | $(474) | -$1,710 | | Financing activities | $(2,688) | $10 | -$2,698 | | Net increase in cash and cash equivalents | $4,363 | $11,155 | -$6,792 | | Cash and cash equivalents end of period | $90,008 | $155,328 | -$65,320 | - Operating cash flows decreased primarily due to lower net income, timing of accounts payable, higher inventory purchases, and deferred revenue, partially offset by accrued expenses and prepaid assets[145] - Investing cash flows decreased due to increased purchases of available-for-sale securities and capital expenditures, partially offset by higher maturities of available-for-sale securities[147] - Financing cash flows decreased significantly due to repurchases of Class A common stock[149] Notes to Condensed Consolidated Financial Statements 1. Description of Business - FIGS, Inc is a founder-led, direct-to-consumer healthcare apparel and lifestyle brand, founded in 2013[37] - The company designs and sells scrubwear and non-scrubwear products, primarily in the United States through digital platforms[37] 2. Summary of Significant Accounting Policies - The financial statements are prepared in accordance with GAAP and include FIGS, Inc and its wholly-owned subsidiary, FIGS Canada, Inc[38] - Revenue is recognized when control of products is transferred to the customer (at shipment), net of estimated returns and discounts[53][54] Net Revenues Disaggregation (in thousands) | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------- | :-------------------------------- | :-------------------------------- | | By geography: | | | | United States | $106,019 | $103,070 | | Rest of the world | $18,882 | $16,223 | | Total | $124,901 | $119,293 | | By product: | | | | Scrubwear | $99,569 | $94,896 | | Non-Scrubwear | $25,332 | $24,397 | | Total | $124,901 | $119,293 | - The company adopted ASU 2023-07 (Segment Reporting) effective January 1, 2024, and is evaluating ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Income Statement Expenses)[59][60][61] 3. Fair Value of Financial Assets and Liabilities Cash Equivalents and Short-term Investments Fair Value (in thousands) | Category | March 31, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------- | :------------------------ | :--------------------------- | | Money market funds | $34,630 | $34,267 | | U.S. government securities | $100,023 | $98,795 | | Corporate paper | $61,180 | $60,674 | | Total | $195,833 | $193,736 | - Cash equivalents and short-term investments are classified within Level 1 or Level 2 of the fair value hierarchy[62] 4. Investment in Equity Securities - The company holds a $27.7 million investment in equity securities of a privately held company (OOG, Inc), accounted for using the measurement alternative[64][65] - This investment is considered a Variable Interest Entity (VIE) where the company is not the primary beneficiary, and is classified as a Level 3 financial instrument[64] 5. Accounts Receivable Accounts Receivable (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--------- | :------------- | :---------------- | | Trade | $5,310 | $6,636 | | Other | $1,244 | $1,989 | | Total | $6,554 | $8,625 | 6. Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--------------- | :------------- | :---------------- | | Inventory deposits | $346 | $670 | | Prepaid expenses | $4,184 | $5,724 | | Prepaid taxes | $4,903 | $5,874 | | Other | $936 | $1,000 | | Total | $10,369 | $13,268 | 7. Property and Equipment, Net Property and Equipment, Net (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Total property and equipment | $48,940 | $48,096 | | Less: accumulated depreciation and amortization | $(14,821) | $(12,822) | | Property and equipment, net | $34,119 | $35,274 | - Depreciation and amortization expense increased to $2.0 million for the three months ended March 31, 2025, from $0.9 million in the prior year[68] 8. Accrued Expenses Accrued Expenses (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Accrued inventory | $37,046 | $27,697 | | Accrued shipping | $8,740 | $6,087 | | Accrued marketing expenses | $5,495 | $4,081 | | Other accrued expenses | $2,427 | $3,651 | | Total | $54,224 | $42,316 | 9. Financing Arrangements - The company has a $100.0 million revolving credit facility (2021 Facility) with Bank of America, N.A, maturing September 7, 2026[70] - As of March 31, 2025, there were no outstanding borrowings under the 2021 Facility, but $4.9 million in letters of credit were outstanding, leaving $95.1 million available[70] - The 2021 Facility was amended in February 2023 to replace LIBOR with SOFR as the base rate for interest calculations[71] 10. Commitments and Contingencies - The company recorded $1.5 million in sales tax payable as an estimate of contingent sales tax payable related to taxes on remote sellers[72] - Inventory purchase obligations as of March 31, 2025, were approximately $52.7 million[73] - A putative securities class action lawsuit was dismissed with prejudice in January 2025, but plaintiffs have filed a notice of appeal. Related derivative suits are pending[75][76] 11. Income Taxes Income Tax Provision and Effective Tax Rate | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Income tax expense | $2.0 million | $1.8 million | | Effective tax rate | 105.5% | 56.3% | - The effective tax rate differed from the U.S. statutory rate primarily due to state taxes and limitations on the deductibility of officer compensation[77] 12. Earnings (Loss) Per Share Earnings (Loss) Per Share (in thousands, except per share amounts) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $(102) | $1,435 | | Weighted-average shares—basic | 162,465,988 | 169,923,479 | | Weighted-average shares—diluted | 162,465,988 | 180,701,844 | | Basic earnings (loss) per share | $0.00 | $0.01 | | Diluted earnings (loss) per share | $0.00 | $0.01 | - Stock options and restricted stock units were excluded from diluted EPS computation for Q1 2025 due to their anti-dilutive effect, totaling 17.8 million stock options and 1.8 million restricted stock units[83] 13. Segment Reporting - The company operates as a single reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM)[84] - The CODM assesses performance and allocates resources based on net income (loss) and total assets, evaluating return on assets[85] 14. Related Party Transactions - In November 2024, FIGS invested $25.0 million in OOG, Inc, a privately held company where FIGS' Executive Chair, Heather Hasson, is founder and CEO[87] - In March 2025, FIGS licensed approximately 2,200 square feet of unused office space to OOG for nominal consideration[88] - In November 2024, Baron Capital Management, Inc (a beneficial owner of >5% of FIGS' Class A common stock) purchased $1.0 million of FIGS products[89] 15. Share Repurchase Program - The Board authorized a share repurchase program for up to $50.0 million of Class A common stock in August 2024, increased by an additional $50.0 million in February 2025, totaling $100.0 million[90][91] - During Q1 2025, the company repurchased approximately 0.6 million shares of Class A common stock for $2.7 million[92] - As of March 31, 2025, approximately $52.0 million remained available for future repurchases under the program[92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results of operations for Q1 2025 Overview - FIGS is a founder-led, direct-to-consumer healthcare apparel and lifestyle brand, primarily selling scrubwear and non-scrubwear through its digital platforms and Community Hubs[95][96][97] - The company had approximately 2.7 million active customers as of March 31, 2025, an increase of 3.8% year-over-year[98][99] Key Financial and Operational Highlights (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :-------------------------- | :------ | :------ | :--------- | :--------- | | Net revenues | $124.9M | $119.3M | +$5.6M | +4.7% | | Gross margin | 67.6% | 68.9% | -1.3 pp | -1.9% | | Net income (loss) | $(0.1)M | $1.4M | -$1.5M | -107.1% | | Net income (loss) margin | (0.1)% | 1.2% | -1.3 pp | -108.3% | | Adjusted EBITDA | $9.0M | $13.0M | -$4.0M | -30.8% | | Adjusted EBITDA margin | 7.2% | 10.9% | -3.7 pp | -33.9% | | Cash flows from operating activities | $9.2M | $11.6M | -$2.4M | -20.7% | | Free cash flow | $7.9M | $11.1M | -$3.2M | -28.8% | Recent Developments - The U.S announced a new 10% universal baseline tariff on all imports, with additional country-specific tariffs for China and Vietnam, effective April 2, 2025[101] - The majority of finished products are sourced from Jordan and Vietnam; the new tariffs are expected to significantly increase product costs, with mitigation strategies being explored[102] - Ongoing conflict in the Middle East has caused disruptions in commercial shipping, leading to delays in raw material and finished goods delivery, and elevated ocean freight rates[104] - The company has proactively sought alternative shipping routes, increased air freight usage, and adjusted product launch schedules to mitigate logistics impacts[104] Key Factors Affecting Our Performance - No material changes to key performance factors from those described in the 2024 Annual Report on Form 10-K[105] Components of Our Results of Operations - Net revenues are driven by active customers, purchase frequency, and average order value (AOV), recognized upon shipment[107] - Cost of goods sold includes merchandise cost, import duties, tariffs, freight-in, and inventory write-offs, and is subject to fluctuations in raw material and freight costs[108] - Operating expenses comprise selling (fulfillment, shipping, merchant fees), marketing (online performance, brand campaigns, ambassador programs), and general and administrative (employee costs, overhead, legal, software)[110][111][112][113] - Other income, net, includes interest income and foreign currency gains/losses[114] - The healthcare apparel industry is generally not seasonal, but the company historically sees higher net revenues and expenses in Q4 due to sequential growth and holiday promotions[116] Results of Operations (Three Months Ended March 31, 2025 vs. 2024) Consolidated Results of Operations (in thousands, except percentages) | Metric | Q1 2025 | Q1 2024 | Change ($) | Change (%) | Q1 2025 (% of Net Rev) | Q1 2024 (% of Net Rev) | | :---------------------------------- | :------ | :------ | :--------- | :--------- | :--------------------- | :--------------------- | | Net revenues | $124,901| $119,293| +$5,608 | +4.7% | 100.0% | 100.0% | | Cost of goods sold | $40,442 | $37,156 | +$3,286 | +8.8% | 32.4% | 31.1% | | Gross profit | $84,459 | $82,137 | +$2,322 | +2.8% | 67.6% | 68.9% | | Selling expenses | $32,678 | $28,459 | +$4,219 | +14.8% | 26.2% | 23.9% | | Marketing expenses | $18,156 | $17,246 | +$910 | +5.3% | 14.5% | 14.5% | | General and administrative expenses | $33,836 | $35,989 | -$2,153 | -6.0% | 27.1% | 30.2% | | Total operating expenses | $84,670 | $81,694 | +$2,976 | +3.6% | 67.8% | 68.5% | | Net income (loss) from operations | $(211) | $443 | -$654 | -147.6% | (0.2)% | 0.4% | | Other income, net | $2,075 | $2,837 | -$762 | -26.9% | 1.7% | 2.4% | | Net income (loss) | $(102) | $1,435 | -$1,537 | -107.1% | (0.1)% | 1.2% | - Net revenues increased by 4.7% to $124.9 million, driven by increased orders from existing customers and higher AOV[119] - Gross margin decreased by 1.3 percentage points to 67.6%, primarily due to product mix shift and higher freight expense, partially offset by fewer promotional sales[120] - Selling expense increased by 14.8% due to higher fulfillment center expenses (post-2024 transition) and increased shipping costs[122] - General and administrative expense decreased by 6.0%, mainly due to lower stock-based compensation, partially offset by higher depreciation related to the fulfillment center[124] - Other income, net, decreased by 26.9% due to lower interest income from reduced interest rates[125] - Provision for income taxes increased by 6.6% due to a decrease in tax benefits related to stock-based compensation[126] Key Operating Metrics and Non-GAAP Financial Measures Key Operating Metrics | Metric | As of March 31, 2025 | As of March 31, 2024 | Change (%) | | :-------------------------- | :------------------- | :------------------- | :--------- | | Active customers (in thousands) | 2,696 | 2,597 | +3.8% | | Net revenues per active customer | $208 | $210 | -1.0% | | Average order value (AOV) (Q1) | $119 | $116 | +2.6% | Adjusted EBITDA Reconciliation (in thousands, except margin) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $(102) | $1,435 | | Other income, net | $(2,075) | $(2,837) | | Provision for income taxes | $1,966 | $1,845 | | Depreciation and amortization expense | $1,999 | $850 | | Stock-based compensation and related expense | $7,216 | $11,697 | | Adjusted EBITDA | $9,004 | $12,990 | | Net revenues | $124,901 | $119,293 | | Net income (loss) margin | (0.1)% | 1.2% | | Adjusted EBITDA Margin | 7.2% | 10.9% | Free Cash Flow Reconciliation (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $9,235 | $11,619 | | Less: capital expenditures | $(1,310) | $(496) | | Free cash flow | $7,925 | $11,123 | Liquidity and Capital Resources Cash and Cash Equivalents (in millions) | Date | Amount | | :----------- | :----- | | March 31, 2025 | $90.0 | | December 31, 2024 | $85.6 | - The company has a $100.0 million revolving credit facility, with $95.1 million available as of March 31, 2025 (after $4.9 million in outstanding letters of credit)[137] - The share repurchase program was increased to $100.0 million, with approximately $52.0 million remaining available as of March 31, 2025[139] - Management believes existing cash, operating cash flows, and available credit will be sufficient for working capital and capital expenditures for at least the next 12 months[140] Historical Cash Flows Summary of Cash Flows (in thousands) | Cash Flow Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Operating activities | $9,235 | $11,619 | | Investing activities | $(2,184) | $(474) | | Financing activities | $(2,688) | $10 | | Net change in cash and cash equivalents | $4,363 | $11,155 | - Operating cash flows decreased by $2.4 million, primarily due to lower net income and changes in working capital[145] - Investing cash flows decreased by $1.7 million, mainly due to increased purchases of available-for-sale securities and capital expenditures[147] - Financing cash flows decreased by $2.7 million, driven by Class A common stock repurchases[149] Contractual Obligations and Commitments - No material changes to contractual obligations from those described in the 2024 Annual Report on Form 10-K[150] Critical Accounting Policies and Estimates - No material changes to critical accounting policies since December 31, 2024[152] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states there have been no material changes to the company's market risk disclosures since its 2024 Annual Report - No material changes to market risk disclosures from the 2024 Annual Report on Form 10-K[153] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025[155] - There were no material changes in internal control over financial reporting during the three months ended March 31, 2025[156] PART II – OTHER INFORMATION Item 1. Legal Proceedings This section outlines ongoing legal proceedings, including a dismissed securities class action now under appeal - A consolidated securities class action lawsuit alleging violations of the Securities Act and Exchange Act was dismissed in January 2025, but plaintiffs have filed a notice of appeal[158] - Related derivative lawsuits (McMurtrie Action, Wubben Action, Lawani Action, Kimmen Action, Carter Action) have been consolidated and are currently stayed pending the outcome of the class action appeal[159][160] - The company intends to vigorously defend against these claims, but cannot be certain of the outcome, which could adversely affect its business and financial condition[161] Item 1A. Risk Factors This section details significant risks that could adversely affect the company's business, financial condition, and growth Risks Related to Our Business - Historical growth may not be sustainable, and the company may not achieve future profitability due to increasing operating expenses and potential slowdown in revenue growth[165][169] - Failure to effectively manage business expansion, maintain brand value, attract/retain customers, or successfully introduce new products could harm the business[166][170][172][186] - The healthcare apparel market is highly competitive, and the company faces risks from competitors with greater resources and different distribution models[189][192] - Dependence on key employees and the ability to attract/retain skilled team members is crucial for future success[193][195] - International expansion exposes the company to new risks, including cultural differences, regulatory environments, and increased shipping times and costs[196][197] - Shipping disruptions (e.g, Red Sea conflict, port strikes, increased freight costs) and problems with the sole fulfillment center in Goodyear, Arizona, could adversely affect operations and customer satisfaction[199][200][202][205] - Inaccurate forecasting of customer demand, inventory management issues, and reliance on a limited number of third-party suppliers (especially from Jordan, Vietnam, China, Peru) pose significant supply chain risks[208][215][217] - Global trade policies, including new U.S tariffs (e.g, 10% baseline tariff), could increase product costs and impact demand, with mitigation strategies uncertain[222][223][224] - Fluctuating raw material costs (e.g, synthetic fabric, cotton) and labor costs (including minimum wage increases) could negatively impact gross margins and profitability[229][230][243][247] - Risks associated with doing business in China include increased labor costs, political/legal/economic instability, and trade regulations[236][237][240] - Failure to execute B2B (TEAMS) and retail growth strategies, including opening new Community Hubs, could harm business expansion[261][262][264] Risks Related to Information Technology, Cybersecurity and Data Privacy - System interruptions, cybersecurity incidents (hacking, malware, ransomware), or other performance failures in IT Systems (website, mobile app, fulfillment center systems) could damage business, reputation, and financial results[267][268][270][279] - Failure to expand and scale IT Systems and security, or adapt to rapid changes in mobile technology and operating systems (Android, iOS), could adversely affect customer experience and growth[272][274][275][276] - Actual or perceived failure to comply with data privacy laws (CCPA, GDPR, TCPA) and industry standards (PCI-DSS) could lead to enforcement actions, litigation, fines, and reputational harm[282][285][287][289][295][296] - Evolving government regulation of the internet and eCommerce, including taxes, tariffs, and data privacy, could harm business operations and financial performance[297] - Use of open source software in IT Systems may pose risks related to licensing terms, undetected errors, and security vulnerabilities[298][299][300] - Increasing reliance on artificial intelligence tools introduces risks such as operational disruptions, reputational harm, biases, discriminatory outcomes, and unintended disclosure of proprietary information[301] Risks Related to Intellectual Property - Failure to protect or enforce intellectual property rights (copyright, trademark, trade dress, design patent) could diminish brand value, weaken competitive position, and harm business[303][304][306] - Proprietary fabric blends and manufacturing technology may be imitated by competitors, potentially at lower prices, impacting business[307] - The company may incur costs to defend against or face liability for intellectual property infringement claims brought by third parties[308] - Inability to acquire, use, or maintain marks and domain names for websites could substantially harm business, especially with international expansion[309][310] Risks Related to Other Legal, Regulatory and Tax Matters - Exposure to foreign currency exchange rate fluctuations could affect net revenues and results of operations, especially with international expansion[312] - Failure to comply with trade, anti-corruption (FCPA, U.K Bribery Act), and other regulations could lead to government investigations, penalties, and negative publicity[314][315][317] - Changes in tax laws (e.g, Inflation Reduction Act, OECD BEPS Pillar Two) or interpretations could adversely impact financial position and effective income tax rate[318][319] - Requirement to collect additional sales taxes (post-Wayfair decision) could increase customer costs and adversely affect sales[320] - The ability to use net operating loss carryforwards may be limited by Section 382 of the Internal Revenue Code due to potential ownership changes[321][322] Risks Related to the Ownership of Our Class A Common Stock - The stock price has been volatile and may continue to decline due to various factors, including financial performance, analyst coverage, market conditions, and sales by large stockholders[324][325] - Quarterly results of operations may fluctuate, and failure to meet guidance or expectations could cause the stock price to decline[328][329] - Sales of a substantial amount of Class A common stock by existing security holders could cause the stock price to decline[331] - The dual-class common stock structure and voting agreements (with co-founders and Baron Capital Management) limit stockholders' ability to influence corporate matters, including director elections and change of control transactions[334][336][337] - The dual-class structure may adversely affect the trading market for Class A common stock, potentially leading to exclusion from certain indices[338] - As a 'controlled company' under NYSE rules, FIGS may rely on exemptions from certain corporate governance requirements, reducing protections for stockholders[339][340] - The company does not intend to pay dividends for the foreseeable future, requiring stockholders to rely on stock price appreciation for returns[342] - Delaware law and provisions in the company's organizational documents could make mergers, tender offers, or proxy contests more difficult[343][344] - The share repurchase program may not be fully consummated or enhance long-term stockholder value, and could increase stock volatility or diminish cash reserves[349] General Risk Factors - Estimates of market opportunity and forecasts of market growth may be inaccurate, and the business may not grow at similar rates even if markets expand[351][353] - Natural disasters, public health crises (e.g, pandemics), political crises, or other catastrophic events could adversely affect operations, supply chain, and customer spending[354][356][357] - Periodic disputes, claims, and litigation could result in unexpected expenses and unfavorable outcomes, potentially exceeding insurance coverage[358][359] - Significant additional costs are incurred as a public company due to compliance with SEC and NYSE regulations, diverting management time and resources[360][361] - If estimates or judgments related to critical accounting policies prove incorrect, results of operations could fall below expectations, impacting stock price[363] - Changes in GAAP principles or interpretations could negatively impact reported financial results[364] - Failure to maintain effective internal control over financial reporting could lead to loss of investor confidence and a decline in stock price[365][369] - Disclosure controls and procedures may not prevent or detect all errors or acts of fraud due to inherent limitations[370] - The company may require additional capital for business growth, which might not be available or could dilute existing stockholders[371] - Failure to effectively address environmental, sustainability, social, and governance (ESG) matters could lead to increased costs, negative investor sentiment, and reputational harm[372][374][375] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the use of IPO proceeds and Class A common stock repurchases during Q1 2025 - No recent unregistered sales of equity securities[376] - Net proceeds from the IPO (June 1, 2021) have been invested in investment-grade, interest-bearing instruments, with no material change in expected use[377] Issuer Repurchases of Class A Common Stock (Q1 2025) | Period | Total Number of Shares Repurchased | Average Price Paid per Share | | :------------------------ | :------------------------------- | :--------------------------- | | March 1-March 31, 2025 | 567,607 | $4.73 | | Total (Q1 2025) | 567,607 | $4.73 | - As of March 31, 2025, approximately $52.0 million remained available for future repurchases under the $100.0 million share repurchase program[379] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities[379] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[380] Item 5. Other Information This section confirms no disclosure in lieu of a Form 8-K and no changes to certain corporate procedures - No disclosure in lieu of reporting on a Current Report on Form 8-K[381][382] - No material changes to procedures for security holders to recommend nominees to the board of directors[383][384] - No insider trading arrangements and policies[385][386] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL-related documents - The report includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[387] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are filed as exhibits[387] Signatures Report Signatures This section contains the official signatures of the CEO and CFO, certifying the filing of the Form 10-Q report - The report is signed by Catherine Spear, Chief Executive Officer and Director (Principal Executive Officer), and Sarah Oughtred, Chief Financial Officer (Principal Financial and Accounting Officer) on May 8, 2025[392]