FIGS(FIGS) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net revenue growth of 25% year-over-year, reaching $129 million compared to $103 million in Q3 2021 [39] - Gross margin was 70.6%, down from 72.7% in Q3 2021, primarily due to increased freight costs and a higher mix of promotions [42] - Adjusted EBITDA margin was 16.4%, compared to 21.6% in Q3 2021, with adjusted net income of $4.1 million [48] Business Line Data and Key Metrics Changes - Active customers increased by 24% to 2.2 million, with a record level of customer reactivation [8][39] - Average order value (AOV) grew by 10% year-over-year, driven by higher units per transaction (UPT) and an increase in average unit retail (AUR) [40] - Lifestyle offerings generated a sales growth of 65% in the quarter, accounting for 17% of net revenue [9][117] Market Data and Key Metrics Changes - The international business saw a strong performance with a 49% increase in net revenue, particularly in Canada, the U.K., and European markets [35] - The company has penetrated approximately 10% of U.S. healthcare professionals, indicating significant growth potential [24] Company Strategy and Development Direction - The company is focusing on product innovation, particularly in scrubs and lifestyle offerings, to enhance customer engagement and meet healthcare professionals' needs [14][20] - Strategic investments will continue to advance the company's leadership position in the healthcare apparel industry while managing costs [13][38] - The company plans to expand its international presence and enhance customer experience through localized marketing campaigns [36][37] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic trends, including inflation, are impacting customer purchasing behavior, leading to a decrease in purchase frequency [11][41] - The company expects fourth-quarter net revenue growth to be in the mid-single-digit range, reflecting ongoing challenges in the macro environment [54] - Management remains committed to long-term growth strategies, including product innovation and international expansion, despite short-term challenges [62] Other Important Information - The company plans to soft launch extended sizes (3XL to 6XL) to address an underserved segment of the healthcare community [23] - A new mobile app has been launched to enhance customer engagement and provide relevant educational content [31] Q&A Session Summary Question: Updated guidance for Q4 and current business trends - Management indicated that the forecast for Q4 reflects trends observed at the end of September, with a decrease in frequency and slightly lower AOV year-over-year [66][67] Question: Response to color launches and customer behavior - Management acknowledged that while color launches still drive sales, they are adjusting their strategy to align with demand trends and focusing on product innovation [70][74] Question: Change in accounting for charitable contributions - The company updated its accrual methodology for charitable contributions, impacting the P&L by about 190 basis points, which is not expected to repeat [78] Question: $1 billion revenue target by 2025 - Management remains focused on the $1 billion target but acknowledges macro volatility may affect timing, while highlighting opportunities in product innovation and international expansion [79][84] Question: Inventory management and future sales expectations - Management expects to improve inventory positioning by mid-2023 through shallow buys and enhanced supply chain strategies [95][96] Question: Growth opportunities in the Teams business - The Teams business is seen as a significant growth opportunity, especially with the introduction of extended sizes [102][103]