FIGS(FIGS) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net revenues for Q1 2023 grew by 9.2% to $120.2 million compared to $110.1 million in Q1 2022, driven by an increase in orders despite a modest decline in average order value (AOV) [9][12] - Gross margin for Q1 was 71.3%, slightly up from 71.2% in Q1 2022, primarily due to lower airfreight utilization [10] - Net income for Q1 was $1.9 million, or $0.01 in diluted EPS, compared to adjusted net income of $10.5 million and adjusted diluted EPS of $0.05 in Q1 2022 [12][14] - Adjusted EBITDA margin for Q1 was 13.4%, down from 22.7% in Q1 2022 [144] Business Line Data and Key Metrics Changes - Active customers increased by 22%, indicating strong customer acquisition and loyalty [9][115] - AOV declined by 1.7% to $114, influenced by a higher mix of promotional sales [121] - The company is focused on expanding its layering system with new product launches, which are expected to drive customer engagement and sales [110][111] Market Data and Key Metrics Changes - International revenue grew by 45%, reflecting strong brand awareness and engagement in global markets [3] - The company is seeing a significant opportunity in the healthcare apparel market, with nearly 120 million healthcare professionals outside the U.S. [138] Company Strategy and Development Direction - The company is committed to innovation, focusing on product development that meets the specific needs of healthcare professionals [110][136] - Plans to open its first retail store in the fall, aiming to enhance customer experience and community engagement [8][61] - The company is diversifying its supply chain and enhancing fulfillment capabilities to improve efficiency and customer experience [118][139] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging macro environment but remains optimistic about long-term growth potential as macro pressures subside [3][140] - The company expects net revenue growth for Q2 to be between 8% and 10%, with gross margin slightly below 68% due to promotional sales [13][15] - Management emphasizes the importance of maintaining customer loyalty and connections to drive future growth [140] Other Important Information - The company is focused on maintaining a strong balance sheet with $156 million in cash and cash equivalents and aims to generate positive free cash flow for the remainder of the year [122][120] - The fulfillment enhancement project is expected to incur costs of $16 million to $18 million, primarily in 2024, impacting selling expenses [147][90] Q&A Session Summary Question: What are the drivers of the record reactivation rates seen in the quarter? - Management noted that reactivations are driven by targeted marketing strategies and personalized communication to engage lapsed customers [91][92] Question: Can you elaborate on the upcoming retail presence and omnichannel approach? - The company is excited about opening its first store and plans to evaluate additional locations in the future, emphasizing the importance of in-person customer experiences [103][80] Question: How is the company managing inventory levels and promotional activities? - Management is focused on normalizing inventory levels and maintaining disciplined promotional activity to protect brand health [150][127]