FIGS(US:FIGS)2023-11-03 15:41Financial Data and Key Metrics Changes - Net revenues grew 11% year-over-year, reaching $142.4 million compared to $128.6 million in Q3 2022, driven by a nearly 20% increase in active customers [5][29] - Adjusted net income was $6.3 million, with diluted EPS as adjusted at $0.03, compared to $4.1 million and $0.02 in Q3 2022 [15][52] - Adjusted EBITDA for Q3 was $24.4 million, resulting in an adjusted EBITDA margin of 17.2%, up from 16.4% in Q3 2022 [15][54] - Gross margin for Q3 was 68.4%, down from 70.6% in Q3 2022, primarily due to product mix shift [13][54] - Free cash flow was $46 million for the quarter, reflecting strong cash generation capabilities [16][18] Business Line Data and Key Metrics Changes - The B2B business saw strong performance with increasing orders from institutions, contributing to overall revenue growth [5][27] - Non-scrub wear categories, including footwear, grew 26.4%, representing 19.3% of net revenues compared to 16.9% in the same period last year [51] - Average order value (AOV) increased nearly 2% year-over-year, driven by higher units per transaction [29] Market Data and Key Metrics Changes - International revenues grew by a record 81%, with strong performance in established markets like Canada, the UK, and Australia [5][10] - The company added seven new countries to its market presence, including Poland, Kuwait, and Singapore, indicating strong grassroots demand [27] Company Strategy and Development Direction - The company is focused on product innovation to solve real-world problems for healthcare professionals, emphasizing functionality, comfort, and style [6][32] - A new permanent retail store, referred to as a community hub, is set to open, aimed at enhancing customer engagement and providing a space dedicated to healthcare professionals [11][28] - The company is diversifying its sourcing strategy to improve lead times and mitigate risks, while also investing in technology to enhance the B2B platform [32][57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential despite current macroeconomic uncertainties, highlighting a healthy balance sheet with no debt [18][56] - The company anticipates continued challenges in consumer spending due to macroeconomic factors, but expects to offset this with new customer acquisitions [42][53] - Management raised full-year guidance for net revenue growth to approximately 8.5% and adjusted EBITDA margin to about 14% [54] Other Important Information - The company is committed to maintaining a disciplined promotional strategy to protect brand integrity while responding to customer demand [106] - The fulfillment enhancement project is expected to incur approximately $2 million in initial start-up costs, impacting selling expenses in the near term [39][87] Q&A Session Summary Question: Changes in consumer behavior trends - Management noted a hangover effect from pandemic stocking, leading to lower repeat purchase frequency, but expects normalization over time [42] Question: Inventory rationalization and future cadence - The company is on track to deliver approximately 25 weeks of supply by year-end, with plans to return to a normalized level of 16 to 20 weeks in 2024 [65][73] Question: Community hub intentions and metrics - The community hub is designed as a fully stocked retail space for healthcare professionals, not just a showroom, with plans for community engagement [79][93] Question: International business performance and future plans - Management highlighted successful localization strategies and plans to continue opportunistic expansion into new markets while investing in existing ones [105] Question: Outlook for promotional events - The company plans to maintain discipline around promotional events, adjusting strategies based on inventory and customer spending [106]