FIGS(FIGS) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information FIGS, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025, detailing its filing status and outstanding common stock - FIGS, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2025, as a large accelerated filer and not a shell company[2][4][5] Class of Stock Information | Class of Stock | Trading Symbol | Exchange Registered | | :--------------- | :------------- | :------------------ | | Class A common stock, $0.0001 par value per share | FIGS | New York Stock Exchange | - As of July 31, 2025, 154,989,563 shares of Class A common stock and 8,283,641 shares of Class B common stock were outstanding[5] Table of Contents This section provides a comprehensive listing of all chapters and sections within the report Forward-Looking Statements This section outlines forward-looking statements regarding future financial results and industry trends, subject to inherent risks and uncertainties - This report contains forward-looking statements covered by safe harbor provisions, encompassing future financial results, industry trends, and macroeconomic factors[10] - These predictions are based on current expectations and projections, subject to known and unknown risks and uncertainties detailed in the 'Risk Factors' section[11] Summary Risk Factors This section summarizes key risks related to business growth, brand reputation, operational challenges, supply chain, and external factors - Key risks include the unsustainability of historical growth, challenges in managing business expansion, potential unprofitability, and dependence on brand reputation and customer retention[15] - Operational risks encompass marketing effectiveness, community maintenance, continuous product innovation, intense competition, and reliance on key employees[15] - Supply chain and external factors present risks including international expansion challenges, shipping disruptions, inaccurate demand forecasting, and global trade policy impacts[15] - Additional risks include the inability to execute B2B and retail growth strategies, cybersecurity threats, quarterly result fluctuations, and implications of the dual-class stock structure[15][16] PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for FIGS, Inc., including the balance sheets, statements of operations and comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, financial instrument fair values, and other financial details Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | $50,849 | $85,645 | | Short-term investments | $187,991 | $159,469 | | Inventory, net | $135,528 | $115,759 | | Total current assets | $393,612 | $382,766 | | Total assets | $517,124 | $509,787 | | Liabilities and Stockholders' Equity | | | | Accounts payable | $19,023 | $9,401 | | Total current liabilities | $78,363 | $90,142 | | Total liabilities | $120,593 | $132,655 | | Total stockholders' equity | $396,531 | $377,132 | | Total liabilities and stockholders' equity | $517,124 | $509,787 | - Cash and cash equivalents decreased by $34.8 million from December 31, 2024, to June 30, 2025, while short-term investments increased by $28.5 million[18] - Total current assets increased by $10.8 million, and total assets increased by $7.3 million over the six-month period[18] - Total liabilities decreased by $12.1 million, primarily due to reduced accrued expenses and inventory, while total stockholders' equity increased by $19.4 million[18] Condensed Consolidated Statements of Operations and Comprehensive Income This section details the company's financial performance, including net revenues, gross profit, operating expenses, and net income for the reported periods Condensed Consolidated Statements of Operations and Comprehensive Income (In thousands, except per share data) | (In thousands, except per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $152,640 | $144,225 | $277,541 | $263,518 | | Cost of goods sold | $50,394 | $46,961 | $90,836 | $84,118 | | Gross profit | $102,246 | $97,264 | $186,705 | $179,400 | | Total operating expenses | $92,331 | $95,711 | $177,001 | $177,404 | | Net income from operations | $9,915 | $1,553 | $9,704 | $1,996 | | Net income | $7,099 | $1,100 | $6,997 | $2,535 | | Basic earnings per share | $0.04 | $0.01 | $0.04 | $0.01 | | Diluted earnings per share | $0.04 | $0.01 | $0.04 | $0.01 | - Net revenues increased by 5.8% for the three months and 5.3% for the six months ended June 30, 2025, compared to prior year periods[22] - Net income significantly increased to $7.1 million for the three months and $7.0 million for the six months ended June 30, 2025[22] Total Comprehensive Income (In thousands) | (In thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $7,099 | $1,100 | $6,997 | $2,535 | | Total other comprehensive income (loss), net of tax | $94 | $(21) | $49 | $(52) | | Total comprehensive income | $7,193 | $1,079 | $7,046 | $2,483 | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including common stock, additional paid-in capital, and retained earnings for the reported period Condensed Consolidated Statements of Stockholders' Equity (In thousands, except share data) | (In thousands, except share data) | December 31, 2024 | June 30, 2025 | | :-------------------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $377,132 | $396,531 | | Class A Common Stock Shares Outstanding | 154,003,352 | 154,836,829 | | Additional Paid-in Capital | $312,622 | $324,975 | | Retained Earnings | $64,474 | $71,471 | - Total stockholders' equity increased by $19.4 million from December 31, 2024, to June 30, 2025, driven by net income and stock-based compensation[28] - Stock-based compensation contributed $7.6 million for the three months and $14.9 million for the six months ended June 30, 2025, to additional paid-in capital[28] - The company repurchased 567,607 shares of Class A Common Stock for approximately $2.7 million during the six months ended June 30, 2025[28] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods Condensed Consolidated Statements of Cash Flows (In thousands) | (In thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(3,195) | $28,158 | | Net cash used in investing activities | $(29,098) | $(40,784) | | Net cash (used in) provided by financing activities | $(2,503) | $264 | | Net change in cash and cash equivalents | $(34,796) | $(12,362) | | Cash and cash equivalents end of period | $50,849 | $131,811 | - Net cash used in operating activities was $(3.2) million for the six months ended June 30, 2025, a significant decrease from $28.2 million provided in the prior year, primarily due to payment timing and higher inventory purchases[32][164] - Net cash used in investing activities decreased to $(29.1) million for the six months ended June 30, 2025, from $(40.8) million in the prior year, mainly due to lower property and equipment purchases and increased maturities of available-for-sale securities[32][166] - Net cash used in financing activities was $(2.5) million, primarily due to Class A common stock repurchases in the current year[32][169] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of significant accounting policies, financial instrument fair values, and other financial details supporting the consolidated financial statements 1. Description of Business This note describes FIGS, Inc. as a founder-led, direct-to-consumer healthcare apparel and lifestyle brand operating primarily in the United States - FIGS, Inc. is a founder-led, direct-to-consumer healthcare apparel and lifestyle brand, founded in 2013, primarily selling scrubwear and non-scrubwear products through digital platforms in the United States[35] 2. Summary of Significant Accounting Policies This note outlines the significant accounting policies used in preparing the condensed consolidated financial statements, including revenue recognition and recent ASU adoptions - The condensed consolidated financial statements are prepared in accordance with GAAP, including FIGS, Inc. and its wholly-owned subsidiaries, with intercompany transactions eliminated[36] - Revenue is recognized upon shipment, net of estimated returns and discounts, with a returns reserve recorded based on historical patterns[52][53][54] - The company adopted ASU 2023-07 (Segment Reporting) effective January 1, 2024, and is evaluating the impact of other recent ASUs[58][59][60] 3. Fair Value of Financial Assets and Liabilities This note details the fair value measurements of financial assets and liabilities, primarily cash equivalents and short-term investments, categorized by hierarchy levels - Cash equivalents and short-term investments are classified within Level 1 or Level 2 of the fair value hierarchy[61] Fair Value of Financial Assets (In thousands) | (In thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :--------------- | :----------------------- | :--------------------------- | | Money market funds (Level 1) | $35,051 | $34,267 | | U.S. government securities (Level 1) | $116,196 | $98,795 | | Corporate paper (Level 2) | $76,773 | $60,674 | | Total | $228,020 | $193,736 | 4. Investment in Equity Securities This note describes the company's $27.7 million investment in equity securities of a privately held company, classified as a Level 3 financial instrument - The company holds a $27.7 million investment in equity securities of a privately held company (OOG, Inc.) without readily determinable fair values, classified as a Level 3 financial instrument[63][64][92] 5. Accounts Receivable This note provides a breakdown of accounts receivable, including trade and other receivables, as of June 30, 2025, and December 31, 2024 Accounts Receivable (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Trade | $7,921 | $6,636 | | Other | $1,204 | $1,989 | | Total | $9,125 | $8,625 | 6. Prepaid Expenses and Other Current Assets This note details the components of prepaid expenses and other current assets, such as inventory deposits, prepaid expenses, and prepaid taxes Prepaid Expenses and Other Current Assets (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Inventory deposits | $2,169 | $670 | | Prepaid expenses | $4,009 | $5,724 | | Prepaid taxes | $3,135 | $5,874 | | Other | $806 | $1,000 | | Total | $10,119 | $13,268 | 7. Property and Equipment, Net This note presents the net book value of property and equipment, including accumulated depreciation and amortization, and related expenses Property and Equipment, Net (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Total property and equipment | $50,083 | $48,096 | | Less: accumulated depreciation and amortization | $(16,974) | $(12,822) | | Property and equipment, net | $33,109 | $35,274 | - Depreciation and amortization expense for the six months ended June 30, 2025, was $4.2 million, compared to $2.0 million in the prior year[67] 8. Accrued Expenses This note provides a breakdown of accrued expenses, including accrued inventory, shipping, and marketing expenses Accrued Expenses (In thousands) | (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Accrued inventory | $9,054 | $27,697 | | Accrued shipping | $5,051 | $6,087 | | Accrued marketing expenses | $4,948 | $4,081 | | Other accrued expenses | $2,991 | $3,651 | | Total | $22,236 | $42,316 | 9. Financing Arrangements This note describes the company's $100.0 million revolving credit facility, its maturity, and available capacity as of June 30, 2025 - The company has a $100.0 million revolving credit facility with Bank of America, N.A., maturing September 7, 2026, with $95.1 million available as of June 30, 2025[69] - The 2021 Facility was amended in February 2023 to replace LIBOR with SOFR as the base rate for borrowings[70] 10. Commitments and Contingencies This note outlines the company's commitments, including inventory purchase obligations, and contingent liabilities such as sales tax and legal proceedings - The company recorded $1.5 million in sales tax payable as an estimate of contingent sales tax liability as of June 30, 2025[71] - Inventory purchase obligations totaled approximately $53.8 million as of June 30, 2025[72] - A putative securities class action lawsuit was dismissed in January 2025, but plaintiffs have filed a notice of appeal, with related derivative suits pending[74][75] 11. Leases This note details the company's operating lease agreements for office space, retail stores, and equipment, including lease terms and expenses - The company has operating lease agreements for office space, retail stores, a fulfillment center, and equipment, with initial terms expiring between 2028 and 2035[76] - Operating lease expense for the six months ended June 30, 2025, was $5.8 million, up from $5.4 million in the prior year[79] Lease Metrics | Lease Metric | Value | | :------------- | :---- | | Weighted-average remaining lease term | 5.0 years | | Weighted-average discount rate | 6.5 % | | Total lease payments (undiscounted) | $60,926 thousand | | Total lease liabilities | $51,695 thousand | 12. Income Taxes This note discusses the company's effective tax rates, income tax expense, and the assessment of new tax legislation impacts - The effective tax rate for the three months ended June 30, 2025, was 41.0% (down from 74.9% in 2024), and for the six months was 49.6% (down from 66.9% in 2024)[81][82] - Income tax expense for the six months ended June 30, 2025, was $6.9 million, an increase from $5.1 million in the prior year, primarily due to higher pre-tax income[83][146] - The company is assessing the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its financial statements, including tax cut extensions and international tax framework modifications[84][136] 13. Earnings Per Share This note presents basic and diluted earnings per share for Class A and Class B common stock for the reported periods - Basic and diluted EPS for both Class A and Class B common stock were $0.04 for the three and six months ended June 30, 2025, up from $0.01 in the prior year periods[22][88] Earnings Per Share (In thousands, except per share amounts) | (In thousands, except per share amounts) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $7,099 | $1,100 | $6,997 | $2,535 | | Weighted-average shares outstanding—basic | 162,683,329 | 170,393,480 | 162,575,259 | 170,158,479 | | Weighted-average shares outstanding—diluted | 172,929,960 | 179,688,524 | 173,517,269 | 180,195,183 | | Basic earnings per share | $0.04 | $0.01 | $0.04 | $0.01 | | Diluted earnings per share | $0.04 | $0.01 | $0.04 | $0.01 | 14. Segment Reporting This note clarifies that the company operates as a single reportable segment, with the CEO acting as the Chief Operating Decision Maker - The company operates as a single reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM) who assesses performance based on consolidated financial data[89][90] 15. Related Party Transactions This note discloses transactions with related parties, including an investment in OOG, Inc., product sales to Baron Capital Management, and office space licensing - In November 2024, the company purchased $25.0 million of Series A-1 Preferred Stock in OOG, Inc., a privately held company where FIGS' Executive Chair is founder and CEO[92] - In November 2024, the company sold $1.0 million of products to Baron Capital Management, Inc. (BCM), a beneficial owner of over 5% of FIGS' Class A common stock, with an additional $0.2 million in sales in the six months ended June 30, 2025[93] - In March 2025, FIGS licensed approximately 2,200 square feet of unused office space to OOG for nominal consideration[94] 16. Share Repurchase Program This note details the Board-authorized share repurchase program, its total amount, and the remaining availability for future repurchases - 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[95][96] - During the six months ended June 30, 2025, the company repurchased 567,607 shares for approximately $2.7 million, with $52.0 million remaining available[97] 17. Subsequent Events This note discloses subsequent events, including the repricing of stock options and an RSU award for executive officers, effective August 12, 2025 - On July 31, 2025, the Board approved a repricing of fully vested stock options for CEO Catherine Spear and Executive Chair Heather Hasson to fair market value, with new vesting schedules[98][100] - Additionally, Ms. Hasson was granted a restricted stock unit (RSU) award with a $6.0 million value, vesting quarterly over four years, effective August 12, 2025[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on FIGS, Inc.'s financial condition and results of operations, highlighting key performance drivers, recent developments, and a detailed analysis of revenue, expenses, and profitability for the three and six months ended June 30, 2025, compared to the prior year Overview This overview describes FIGS as a direct-to-consumer healthcare apparel brand, its sales channels, active customer base, and key financial highlights - FIGS is a founder-led, direct-to-consumer healthcare apparel and lifestyle brand, selling products through its digital platform and Community Hubs retail stores[103][104][105] - As of June 30, 2025, the company had approximately 2.7 million active customers, an increase of 4.1% year-over-year[106] Key Financial Metrics | Financial Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net Revenues | $152.6 million (5.8% increase) | $144.2 million | $277.5 million (5.3% increase) | $263.5 million | | Gross Margin | 67.0% (0.4 ppt decrease) | 67.4% | 67.3% (0.8 ppt decrease) | 68.1% | | Net Income | $7.1 million | $1.1 million | $7.0 million | $2.5 million | | Net Income Margin | 4.7% | 0.8% | 2.5% | 1.0% | | Adjusted EBITDA | $19.7 million | $12.9 million | $28.9 million | $25.9 million | | Adjusted EBITDA Margin | 12.9% | 9.0% | 10.4% | 9.8% | | Cash Flows from Operating Activities (6 months) | $(3.2) million | $28.2 million | | | | Free Cash Flow (6 months) | $(5.6) million | $18.7 million | | | Recent Developments This section highlights recent developments, including global trade policy changes and logistics disruptions, and their potential impact on the company Global Trade Policy This section discusses new U.S. tariffs on imports, including country-specific tariffs, and the company's mitigation strategies - The U.S. announced a new 10% universal baseline tariff on all imports, plus additional country-specific tariffs for Vietnam (20%) and Jordan (15%), expected to significantly increase product costs[108][109][243] - FIGS is implementing mitigation strategies, including adjusting sourcing countries and renegotiating supplier terms, but cannot guarantee their effectiveness[109] Logistics This section addresses commercial shipping disruptions due to global conflicts and trade policy, and the company's proactive measures to mitigate impacts - Ongoing conflict in the Middle East and shifts in global trade policy have caused commercial shipping disruptions, leading to potential delays and volatility in freight costs and transit times[111] - The company is proactively seeking alternative shipping methods, pre-negotiating rates, and adjusting product launch schedules to mitigate potential impacts[111] Key Factors Affecting Our Performance This section refers to the 2024 Annual Report on Form 10-K for key performance factors, noting no material changes in this report - The company's performance and future success depend on factors outlined in its 2024 Annual Report on Form 10-K, with no material changes noted in this report[113] Components of Our Results of Operations This section defines and explains the key components of the company's results of operations, including revenues, cost of goods sold, and operating expenses Net Revenues Net revenues are primarily driven by sales of healthcare apparel and other products through digital platforms, influenced by active customers and average order value - Net revenues are primarily driven by sales of healthcare apparel, footwear, and other products through digital platforms, recognized upon shipment, net of returns and discounts[114] - Key drivers include the number of active customers, purchase frequency, and average order value (AOV)[114] Cost of Goods Sold Cost of goods sold includes merchandise, duties, freight-in, and inventory adjustments, subject to fluctuations in raw material and freight costs - Cost of goods sold includes purchased merchandise, import duties, tariffs, freight-in, defective merchandise, and inventory write-offs, subject to fluctuations in raw material and freight costs[115] Gross Profit and Gross Margin Gross profit is net revenues less cost of goods sold, with gross margin representing the percentage of net revenues, influenced by product mix and cost reductions - Gross profit is net revenues less cost of goods sold, with gross margin being the percentage of net revenues, fluctuating based on product mix, cost reductions, and timing of offerings[116] Operating Expenses Operating expenses comprise selling, marketing, and general and administrative costs, all expected to increase with business growth Selling Selling expenses cover fulfillment, selling, and distribution costs, including third-party operations, shipping, and merchant processing fees - Selling expenses cover fulfillment, selling, and distribution costs, including third-party fulfillment center operations, shipping, merchant processing fees, and packaging, expected to increase with net revenues[118] Marketing Marketing expenses include online performance marketing and brand marketing efforts, both anticipated to increase with business growth - Marketing expenses include online performance marketing (retargeting, paid search, social media ads, SEO, email) and brand marketing (billboards, podcasts, commercials, Ambassador Program), expected to increase with business growth[119] General and Administrative General and administrative expenses primarily consist of employee-related costs, consulting, facilities, and legal fees, also expected to increase with business growth - General and administrative expenses primarily consist of employee-related costs (salaries, bonuses, benefits, stock-based compensation), third-party consulting, facilities, software, legal, and recruiting fees, expected to increase with business growth[120][121] Other Income, Net Other income, net, includes interest income, interest expense, debt issuance cost amortization, and foreign currency gains or losses - Other income, net, includes interest income, interest expense, debt issuance cost amortization, and foreign currency gains or losses[122] Provision for Income Taxes The provision for income taxes is an estimate of federal, state, and foreign income taxes, adjusted for credits, deductions, and uncertain tax positions - The provision for income taxes is an estimate of federal, state, and foreign income taxes, adjusted for credits, deductions, and uncertain tax positions[123] Seasonality While healthcare apparel is generally not seasonal, FIGS historically generates higher net revenues and expenses in the fourth quarter due to growth and holiday promotions - While the healthcare apparel industry is generally not seasonal, FIGS historically generates a higher proportion of net revenues and incurs higher selling and marketing expenses in the fourth quarter due to sequential growth and holiday promotions[124] Results of Operations (Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024) This section analyzes the company's financial performance for the three months ended June 30, 2025, compared to the same period in the prior year Net Revenues Net revenues increased by $8.4 million, or 5.8%, driven by higher orders from new and existing customers and an increased Average Order Value Net Revenues (In thousands) | (In thousands) | June 30, 2025 | June 30, 2024 | Change % | | :--------------- | :------------ | :------------ | :------- | | Net revenues | $152,640 | $144,225 | 5.8 % | - Net revenues increased by $8.4 million, or 5.8%, primarily due to an increase in orders from new and existing customers and a higher Average Order Value (AOV)[127] Cost of Goods Sold Gross margin decreased by 0.4 percentage points due to higher inventory reserves and tariffs, partially offset by duty drawback and lower return rates Cost of Goods Sold and Gross Margin (In thousands, except margin) | (In thousands, except margin) | June 30, 2025 | June 30, 2024 | Change % | | :---------------------------- | :------------ | :------------ | :------- | | Cost of goods sold | $50,394 | $46,961 | 7.3 % | | Gross profit | $102,246 | $97,264 | 5.1 % | | Gross margin | 67.0 % | 67.4 % | (0.4)% | - Gross margin decreased by 0.4 percentage points, driven by higher inventory reserves and tariffs, partially offset by higher duty drawback and a lower return rate[128] Operating Expenses Total operating expenses decreased by $3.4 million, or 3.5%, primarily due to improved efficiency in selling, general and administrative, and marketing expenses Operating Expenses (In thousands) | (In thousands) | June 30, 2025 | June 30, 2024 | Change % | | :--------------- | :------------ | :------------ | :------- | | Selling | $34,433 | $36,934 | (6.8)% | | Marketing | $23,151 | $23,003 | 0.6 % | | General and administrative | $34,747 | $35,774 | (2.9)% | | Total operating expenses | $92,331 | $95,711 | (3.5)% | - Total operating expenses decreased by $3.4 million, or 3.5%, and by 5.9 percentage points as a percentage of net revenues, primarily due to decreases in selling, general and administrative, and marketing expenses as a percentage of net revenues[129] - Selling expense decreased by 6.8% due to lower fulfillment and shipping expenses; marketing expense increased slightly by 0.6% but decreased as a percentage of net revenues due to greater efficiency[130][131] - General and administrative expense decreased by 2.9%, primarily due to lower stock-based compensation expense, partially offset by higher depreciation and increased investment in people[132][133] Other Income, Net Other income, net, decreased by 25.2% primarily due to lower interest income resulting from reduced interest rates Other Income, Net (In thousands) | (In thousands) | June 30, 2025 | June 30, 2024 | Change % | | :--------------- | :------------ | :------------ | :------- | | Other income, net | $2,116 | $2,830 | (25.2)% | - Other income, net, decreased by 25.2% primarily due to lower interest income from reduced interest rates[134] Provision for Income Taxes Provision for income taxes increased by 50.2% due to an increase in pre-tax income for the three months ended June 30, 2025 Provision for Income Taxes (In thousands) | (In thousands) | June 30, 2025 | June 30, 2024 | Change % | | :--------------- | :------------ | :------------ | :------- | | Provision for income taxes | $4,932 | $3,283 | 50.2 % | - Provision for income taxes increased by 50.2% due to an increase in pre-tax income[135] Results of Operations (Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024) This section analyzes the company's financial performance for the six months ended June 30, 2025, compared to the same period in the prior year Net Revenues Net revenues increased by $14.0 million, or 5.3%, driven by increased orders from new and existing customers and a higher Average Order Value Net Revenues (In thousands) | (In thousands) | June 30, 2025 | June 30, 2024 | Change % | | :--------------- | :------------ | :------------ | :------- | | Net revenues | $277,541 | $263,518 | 5.3 % | - Net revenues increased by $14.0 million, or 5.3%, driven by increased orders from new and existing customers and a higher Average Order Value (AOV)[139] Cost of Goods Sold Gross margin decreased by 0.8 percentage points, primarily due to higher inventory reserves and increased freight expense Cost of Goods Sold and Gross Margin (In thousands, except margin) | (In thousands, except margin) | June 30, 2025 | June 30, 2024 | Change % | | :---------------------------- | :------------ | :------------ | :------- | | Cost of goods sold | $90,836 | $84,118 | 8.0 % | | Gross profit | $186,705 | $179,400 | 4.1 % | | Gross margin | 67.3 % | 68.1 % | (0.8)% | - Gross margin decreased by 0.8 percentage points, primarily due to higher inventory reserves and increased freight expense[140] Operating Expenses Total operating expenses decreased by $0.4 million, or 0.2%, reflecting improved efficiency across selling, marketing, and general and administrative expenses Operating Expenses (In thousands) | (In thousands) | June 30, 2025 | June 30, 2024 | Change % | | :--------------- | :------------ | :------------ | :------- | | Selling | $67,111 | $65,393 | 2.6 % | | Marketing | $41,307 | $40,248 | 2.6 % | | General and administrative | $68,583 | $71,763 | (4.4)% | | Total operating expenses | $177,001 | $177,404 | (0.2)% | - Total operating expenses decreased by $0.4 million, or 0.2%, and by 3.5 percentage points as a percentage of net revenues, driven by improved efficiency across selling, marketing, and general and administrative expenses[141] - Selling expense increased by 2.6% but decreased as a percentage of net revenues due to higher prior year fulfillment expenses; marketing expense increased by 2.6% but decreased as a percentage of net revenues due to greater digital marketing efficiency[142][143] - General and administrative expense decreased by 4.4%, primarily due to lower stock-based compensation expense, partially offset by higher depreciation and increased investment in personnel[144] Other Income, Net Other income, net, decreased by 26.0% due to lower interest income resulting from reduced interest rates Other Income, Net (In thousands) | (In thousands) | June 30, 2025 | June 30, 2024 | Change % | | :--------------- | :------------ | :------------ | :------- | | Other income, net | $4,191 | $5,667 | (26.0)% | - Other income, net, decreased by 26.0% due to lower interest income resulting from reduced interest rates[145] Provision for Income Taxes Provision for income taxes increased by 34.5% due to an increase in pre-tax income for the six months ended June 30, 2025 Provision for Income Taxes (In thousands) | (In thousands) | June 30, 2025 | June 30, 2024 | Change % | | :--------------- | :------------ | :------------ | :------- | | Provision for income taxes | $6,898 | $5,128 | 34.5 % | - Provision for income taxes increased by 34.5% due to an increase in pre-tax income[146] Key Operating Metrics and Non-GAAP Financial Measures This section presents key operating metrics and non-GAAP financial measures, including active customers, average order value, Adjusted EBITDA, and Free Cash Flow Active Customers, Net Revenues per Active Customer, and Average Order Value This section provides data on active customers, net revenues per active customer, and average order value, reflecting brand reach and product appeal Active Customers and Net Revenues per Active Customer | Metric | As of June 30, 2025 | As of June 30, 2024 | | :--------------- | :------------------ | :------------------ | | Active customers (in thousands) | 2,736 | 2,628 | | Net revenues per active customer | $208 | $210 | - Active customers increased by 4.1% to 2.7 million as of June 30, 2025, reflecting brand reach and value proposition[106][148] Average Order Value | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Average order value | $117 | $113 | $118 | $115 | - Average Order Value (AOV) increased to $117 for the three months and $118 for the six months ended June 30, 2025, indicating the premium nature of products[148] Adjusted EBITDA and Adjusted EBITDA Margin This section defines Adjusted EBITDA as a non-GAAP performance measure and presents its values and margins for the reported periods - Adjusted EBITDA is a non-GAAP measure used to evaluate performance, excluding items like other income, taxes, depreciation, amortization, and stock-based compensation[149][150] Adjusted EBITDA and Margin (In thousands, except margin) | (In thousands, except margin) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Net income | $7,099 | $1,100 | $6,997 | $2,535 | | Adjusted EBITDA | $19,727 | $12,932 | $28,902 | $25,922 | | Net income margin | 4.7 % | 0.8 % | 2.5 % | 1.0 % | | Adjusted EBITDA Margin | 12.9 % | 9.0 % | 10.4 % | 9.8 % | - Adjusted EBITDA increased to $19.7 million (12.9% margin) for the three months and $28.9 million (10.4% margin) for the six months ended June 30, 2025[151] Free Cash Flow This section defines Free Cash Flow as a non-GAAP liquidity measure and presents its values for the reported periods - Free cash flow is a non-GAAP liquidity measure, calculated as net cash from operating activities minus capital expenditures[152] Free Cash Flow (In thousands) | (In thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(3,195) | $28,158 | | Less: capital expenditures | $(2,399) | $(9,489) | | Free cash flow | $(5,594) | $18,669 | - Free cash flow decreased to $(5.6) million for the six months ended June 30, 2025, from $18.7 million in the prior year, reflecting reduced operating cash flows and capital expenditures[155] Liquidity and Capital Resources This section discusses the company's cash position, revolving credit facility, and management's assessment of future liquidity needs - As of June 30, 2025, cash and cash equivalents were $50.8 million, down from $85.6 million at December 31, 2024[156] - The company has a $100.0 million revolving credit facility, with $95.1 million available as of June 30, 2025, and no outstanding borrowings[157] - Management believes existing cash, operating cash flows, and the credit facility will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[160] - The company's share repurchase program has $52.0 million available for future repurchases of Class A common stock[159] Historical Cash Flows This section provides a historical analysis of cash flows from operating, investing, and financing activities for the reported periods Operating Activities Cash flows from operating activities resulted in a net outflow of $(3.2) million for the six months ended June 30, 2025, a decrease of $31.4 million from the prior year - Cash flows from operating activities decreased by $31.4 million for the six months ended June 30, 2025, resulting in a net cash outflow of $(3.2) million, primarily due to payment timing and higher inventory purchases[164] Investing Activities Cash flows from investing activities increased by $11.7 million to $(29.1) million, mainly due to decreased property and equipment purchases and increased maturities of available-for-sale securities - Cash flows from investing activities increased by $11.7 million for the six months ended June 30, 2025, to $(29.1) million, mainly due to decreased purchases of property and equipment and increased maturities of available-for-sale securities[166] - Capital expenditures were primarily for capitalized software development costs and computer equipment[167] Financing Activities Cash flows from financing activities were $(2.5) million, a decrease of $2.8 million compared to the prior year, primarily due to Class A common stock repurchases - Cash flows from financing activities were $(2.5) million for the six months ended June 30, 2025, a decrease of $2.8 million compared to the prior year, primarily due to Class A common stock repurchases[169] Contractual Obligations and Commitments This section states that there have been no material changes to contractual obligations since the 2024 Annual Report on Form 10-K - There have been no material changes to contractual obligations from those described in the 2024 Annual Report on Form 10-K[170] Critical Accounting Policies and Estimates This section highlights critical accounting policies and estimates, noting no material changes since December 31, 2024 - The preparation of financial statements requires management to make estimates and judgments that affect reported amounts, with key estimates relating primarily to stock-based compensation valuation[38] - There have been no material changes to the critical accounting policies since December 31, 2024, as described in the 2024 Annual Report on Form 10-K[172] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the quantitative and qualitative disclosures about market risk since the 2024 Annual Report on Form 10-K - No material changes to market risk disclosures have occurred since the 2024 Annual Report on Form 10-K[173] Item 4. Controls and Procedures This section discusses the effectiveness of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Limitations on Effectiveness of Controls and Procedures This section acknowledges that controls and procedures provide only reasonable assurance due to inherent limitations, resource constraints, and the need for judgment - Management acknowledges that controls and procedures can only provide reasonable assurance of achieving desired objectives due to inherent limitations, resource constraints, and the need for judgment[174] Evaluation of Disclosure Controls and Procedures As of June 30, 2025, the principal executive and financial officers concluded that the company's disclosure controls and procedures were effective - As of June 30, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[175] Changes in Internal Control over Financial Reporting This section reports no material changes in internal control over financial reporting during the three months ended June 30, 2025 - There were no changes in internal control over financial reporting during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[176] PART II. OTHER INFORMATION This part includes information on legal proceedings, risk factors, equity sales, defaults, and other disclosures not covered in the financial information section Item 1. Legal Proceedings This section details ongoing legal proceedings, including a putative securities class action and related derivative lawsuits, and the company's intent to vigorously defend against these claims - A consolidated securities class action lawsuit, alleging false and misleading statements, was dismissed in January 2025, but plaintiffs have filed a notice of appeal[178] - Several derivative lawsuits, making similar allegations, have been consolidated and voluntarily stayed pending the outcome of the class action appeal[179][180][181] - The company intends to vigorously defend against all claims, but cannot be certain of the outcome, which could adversely affect its business and financial condition[181] Item 1A. Risk Factors This section outlines significant risks and uncertainties that could materially affect FIGS, Inc.'s business, financial condition, results of operations, and future prospects, updating and superseding previously disclosed risks Risks Related to Our Business This section details business-specific risks, including growth sustainability, brand reputation, competition, supply chain, demand forecasting, and macroeconomic impacts - Historical growth may not be sustainable, and failure to effectively manage business expansion, attract/retain customers, or introduce new products could harm financial results[185][186][192][206] - The company's success depends on maintaining brand value and reputation, which can be harmed by unsuccessful marketing efforts, negative publicity, or failure to meet customer expectations[190][197][204] - Competition in the healthcare apparel market is high, with risks from established wholesalers, specialty retailers, and diversified apparel brands[209][210][211] - Reliance on limited third-party suppliers, global trade policies (e.g., tariffs), and shipping disruptions (e.g., Middle East conflict, port strikes) can cause supply chain problems and increased costs[237][243][221][223] - Inability to accurately forecast customer demand, manage inventory, or execute B2B and retail growth strategies could lead to excess inventory, lower margins, or missed opportunities[229][264][267] - Macroeconomic factors like inflation, high interest rates, and geopolitical tensions, along with healthcare workforce stress, can negatively impact consumer confidence and spending[233][234] Risks Related to Information Technology, Cybersecurity and Data Privacy This section covers risks related to system interruptions, cybersecurity threats, data privacy compliance, mobile platform dependence, and the use of artificial intelligence - System interruptions, cybersecurity attacks (hacking, malware, ransomware), and data breaches could damage the business, reputation, and financial results by impairing customer access or causing data loss[287][298][299] - Failure to comply with evolving data privacy laws (e.g., CCPA, GDPR) and industry standards could result in enforcement actions, litigation, fines, and reputational harm[303][305][310] - Dependence on mobile operating systems and platforms, and the need to adapt to rapid technological changes, poses risks to customer engagement and sales[295][296][297] - The use of artificial intelligence tools introduces risks such as operational disruptions, reputational harm, legal liability, and potential disclosure of proprietary information due to biases, errors, or misuse[323] Risks Related to Intellectual Property This section addresses risks concerning the protection and enforcement of intellectual property rights, potential imitation, and infringement claims - Inability to protect or enforce intellectual property rights (trademarks, design patents, domain names) could diminish brand value, weaken competitive position, and lead to imitation or counterfeiting of products[325][326][327][328] - The company's proprietary fabric blends and treatments may be imitated by competitors, as it does not own the underlying intellectual property rights for the fabric technology[329] - The company may incur costs to defend against or face liability for intellectual property infringement claims brought by third parties, potentially leading to significant monetary liability or product redesigns[330] Risks Related to Other Legal, Regulatory and Tax Matters This section covers risks from foreign currency fluctuations, non-compliance with regulations, changes in tax laws, sales tax collection, and limitations on net operating loss carryforwards - Exposure to foreign currency exchange rate fluctuations can affect net revenues and results of operations, especially with international expansion and pricing in local currencies[335] - Failure to comply with trade, anti-corruption (e.g., FCPA, U.K. Bribery Act), and other regulations could lead to investigations, significant penalties, and negative publicity[337][339] - Changes in tax laws (e.g., Inflation Reduction Act, OBBBA, OECD Pillar Two) or their interpretation could adversely impact future financial position, effective tax rate, and cash flows[342][343][344] - The company may be required to collect additional sales taxes due to evolving state laws, increasing costs for customers and administrative burdens[345] - The ability to use net operating loss carryforwards may be limited by Section 382 of the Internal Revenue Code or similar state laws, potentially increasing future tax liabilities[346] Risks Related to the Ownership of Our Class A Common Stock This section addresses risks related to Class A common stock ownership, including market price volatility, quarterly result fluctuations, insider sales, and the dual-class stock structure - The market price of Class A common stock has been volatile and may continue to fluctuate due to various factors, including financial performance, analyst coverage, macroeconomic conditions, and short seller reports[348][349][350] - Fluctuations in quarterly results may cause performance to fall below guidance or expectations, leading to a decline in stock price[352][355] - Sales of substantial amounts of Class A common stock by existing security holders, particularly directors and executive officers, could cause the stock price to decline[357] - The dual-class common stock structure, voting agreement, and stockholders agreement concentrate voting power with co-founders and Baron, limiting other stockholders' ability to influence corporate matters[358][360][361] - As a 'controlled company' under NYSE rules, FIGS may rely on exemptions from certain corporate governance requirements, reducing protections for stockholders[363][364] - The company does not intend to pay dividends in the foreseeable future, requiring stockholders to rely on stock price appreciation for returns[366] General Risk Factors This section outlines general risks, including inaccurate market estimates, catastrophic events, litigation, public company costs, and ESG matters - 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[375][377] - Natural disasters, public health crises, political crises, or other catastrophic events could adversely affect operations, supply chain, and customer spending[378][379][380] - Periodic disputes, claims, and litigation could result in unexpected expenses, divert management resources, and negatively impact brand equity and reputation[381][382] - Being a public company incurs significant additional costs and requires substantial management time for compliance, potentially diverting attention from day-to-day business[384] - Failure to effectively and efficiently address environmental, sustainability, social, and governance (ESG) matters could lead to increased costs, negative investor sentiment, and reputational harm[394][396][397] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no recent unregistered sales of equity securities and details the use of proceeds from the IPO, which have been invested in investment-grade instruments - There have been no recent unregistered sales of equity securities[398] - Net proceeds from the June 2021 IPO have been invested in investment grade, interest-bearing instruments, with no material change in expected use[399] Item 3. Defaults Upon Senior Securities This section states that there have been no defaults upon senior securities - No defaults upon senior securities have occurred[401] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[402] Item 5. Other Information This section provides disclosure regarding a repricing of stock options and an RSU award for executive officers, and details an insider trading arrangement - On July 31, 2025, the Board approved a repricing of fully vested stock options for CEO Catherine Spear and Executive Chair Heather Hasson, with new vesting schedules, effective August 12, 2025[404] - Ms. Hasson also received a $6.0 million RSU award, vesting quarterly over four years, effective August 12, 2025[405] - These approvals followed recommendations from the compensation committee, considering an analysis by Pay Governance LLC, Ms. Hasson's expanded role, and Ms. Spear's intention to forego future equity compensation[406] - On May 13, 2025, CEO Catherine Spear entered into a Rule 10b5-1 trading arrangement for sell-to-cover sales to satisfy tax withholding obligations from RSU vesting[410] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, certifications, and XBRL data files - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, Form of Certificate of Common Stock, Stockholders' Agreement, CEO and CFO certifications, and Inline XBRL documents[413] Signatures This section confirms the official signing of the report by the Chief Executive Officer and Chief Financial Officer on August 7, 2025 - The report was signed on August 7, 2025, by Catherine Spear, Chief Executive Officer and Director, and Sarah Oughtred, Chief Financial Officer[418]