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FIGS Releases First Quarter 2022 Financial Results

05/12/2022

Updates Full Year Outlook

FIGS, Inc. (NYSE: FIGS) (the “Company”), the direct-to-consumer healthcare apparel and lifestyle brand, today released its first quarter 2022 financial results and published a financial highlights presentation on its investor relations website at ir.wearfigs.com/financials/quarterly-results.

“Our performance in Q1 reflected our continued ability to pair high revenue growth with strong profitability. Our results, while below our expectations, are a testament to the powerful combination of our unique business model and the largely non-discretionary and replenishment nature of our workwear products,” said Co-CEO and Co-Founder, Trina Spear. “Looking ahead, we are well positioned to fuel profitable growth for the years to come due to our strong foundation, recession resistant industry and deep understanding of the healthcare community.”

First Quarter 2022 Financial Highlights

  • Net revenues were $110.1 million, an increase of 26.4% year over year, driven by higher average order values and strength in lifestyle products.
  • Gross margin was 71.2%, a decrease of 40 basis points year over year, driven by higher air freight spend as well as increased ocean and air freight rates, partially offset by improvements in product costing.
  • Operating expenses were $64.7 million, an increase of 39.7% year over year. As a percentage of net revenues, operating expenses increased to 58.8% from 53.2% in the prior year period, primarily driven by higher selling expense, stock-based compensation and incremental costs associated with being a public company.
  • Net income was $8.9 million and diluted earnings per share was $0.05.
  • Net income, as adjusted(1)was $10.5 million and diluted earnings per share, as adjusted(1) was $0.05.
  • Adjusted EBITDA(1) was $25.0 million, an increase of $0.7 million year over year.
  • Adjusted EBITDA margin(1) was 22.7%, a decrease of 530 basis points year over year.

Key Operating Metrics

  • Active customers(2)as of March 31, 2022 increased 31.1% to 2.0 million.
  • Net revenues per active customer(2) was $226, an increase of 6.1% year over year.
  • Average Order Value (“AOV”)(2)was $116, an increase of 16.0% year over year primarily driven by a higher mix of lifestyle products, which result in higher units per transaction and generally have a higher price point.

Updated 2022 Financial Outlook

  • Net revenues are expected to be in the range of $510 to $530 million, representing year over year growth of approximately 22% to 26%, compared to the previous outlook of $550 to $560 million, reflecting supply chain challenges and broader macroeconomic factors, including high inflation and shifts in consumer spending patterns.
  • Gross margin is expected to be in the range of 67% to 68%, compared to the Company’s previous outlook of 70%+, primarily due to a significant increase in the Company’s use of air freight to help mitigate supply chain challenges.
  • Adjusted EBITDA margin(3) is expected to be in the range of 16% to 18%, compared to the Company’s previous outlook of 20%+, as the Company balances continued investment with the near-term impact on gross margin.

(1) “Net income, as adjusted,” “diluted earnings per share, as adjusted,” “adjusted EBITDA” and “adjusted EBITDA margin” are non-GAAP financial measures. Please see the sections titled “Non-GAAP Financial Measures and Key Operating Metrics” and “Reconciliations of GAAP to Non-GAAP Measures” below for more information regarding the Company’s use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by net revenues.

(2) “Active customers,” “net revenues per active customer” and “average order value” are key operational and business metrics that are important to understanding Company performance. For information regarding how the Company calculates its key operational and business metrics, please see the section titled “Non-GAAP Financial Measures and Key Operating Metrics.”

(3) The Company has not provided a quantitative reconciliation of its adjusted EBITDA margin outlook to a GAAP net income margin outlook because it is unable, without making unreasonable efforts, to project certain reconciling items. These items include, but are not limited to, future stock-based compensation expense, income taxes, expenses related to non-ordinary course disputes, and transaction costs. These items are inherently variable and uncertain and depend on various factors, some of which are outside of the Company’s control or ability to predict. For more information regarding the Company’s use of non-GAAP financial measures, please see the section titled “Non-GAAP Financial Measures and Key Operating Metrics.”

Conference Call Details

FIGS management will host a conference call and webcast today at 2:00 p.m. PT / 5:00 p.m. ET to discuss the Company’s financial and business results and outlook. To participate, please dial 1-844-200-6205 (US) or 1-929-526-1599 (International) and the conference ID 136573. The call is also accessible via webcast at ir.wearfigs.com. A recording will be available shortly after the conclusion of the call until 11:59 p.m. ET on May 19, 2022. To access the replay, please dial 1-866-813-9403 (US) or +44-204-525-0658 (International). An archive of the webcast will be available on FIGS’ investor relations website at ir.wearfigs.com.

Non-GAAP Financial Measures and Key Operating Metrics

In addition to the GAAP financial measures set forth in this press release, the Company has included non-GAAP financial measures within the meaning of Regulation G and Item 10(e) of Regulation S-K. The Company has also included “active customers,” “net revenues per active customer” and “average order value,” which are key operational and business metrics that are important to understanding Company performance. The Company calculates “active customers” as unique customer accounts that have made at least one purchase in the preceding 12-month period. The Company calculates “net revenues per active customer” as the sum of the total net revenues in the preceding 12-month period divided by the current period “active customers.” The Company calculates “average order value” as the sum of the total net revenues in a given period divided by the total orders placed in that period. Total orders are the summation of all completed individual purchase transactions in a given period.

The Company uses “net income, as adjusted,” “diluted earnings per share, as adjusted,” “adjusted EBITDA” and “adjusted EBITDA margin” to provide useful supplemental measures that assist in evaluating its ability to generate earnings, provide consistency and comparability with its past financial performance and facilitate period-to-period comparisons of its core operating results as well as the results of its peer companies. The Company calculates “net income, as adjusted,” as net income adjusted to exclude transaction costs, expenses related to non-ordinary course disputes, stock-based compensation, including expense related to award modifications, accelerated performance awards and ambassador grants in connection with the IPO, and expense resulting from the retirement of the Company's previous CFO, and the income tax impact of these adjustments. The Company calculates “diluted earnings per share, as adjusted” as net income, as adjusted divided by diluted shares outstanding. The Company calculates “adjusted EBITDA” as net income adjusted to exclude: other income (loss), net; gain/loss on disposal of assets; provision for income taxes; depreciation and amortization expense; stock-based compensation and related expense; transaction costs; and expenses related to non-ordinary course disputes. The Company calculates “adjusted EBITDA margin” by dividing adjusted EBITDA by net revenues.

Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included below under the heading “Reconciliations of GAAP to Non-GAAP Measures.”

About FIGS

FIGS is a founder-led, direct-to-consumer healthcare apparel and lifestyle brand that seeks to celebrate, empower, and serve current and future generations of healthcare professionals. We create technically advanced apparel and products for healthcare professionals that feature an unmatched combination of comfort, durability, function, and style. We market and sell our products directly through our digital platform to provide a seamless experience for healthcare professionals.

Forward Looking Statements

This press release contains various forward-looking statements about the Company within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that are based on current management expectations, and which involve substantial risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, such forward-looking statements. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking. These forward-looking statements generally are identified by the words “anticipate”, “believe”, “contemplate”, “continue”, “could”, “estimate”, “expect”, “forecast”, “future”, “intend”, “may”, “might”, “opportunity”, “outlook”, “plan”, “possible”, “potential”, “predict”, “project,” “should”, “strategy”, “strive”, “target”, “will” or “would”, the negative of these words or other similar terms or expressions. The absence of these words does not mean that a statement is not forward-looking. These forward-looking statements address various matters, including the Company’s ability to fuel profitable growth for the years to come and the Company’s outlook as to net revenues, gross margin and adjusted EBITDA margin for the full year ending December 31, 2022; all of which reflect the Company’s expectations based upon currently available information and data. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected and you are cautioned not to place undue reliance on these forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the impact of COVID-19 on the Company’s operations; the Company’s ability to maintain its recent rapid growth; the Company’s ability to maintain profitability; the Company’s ability to maintain the value and reputation of its brand; the Company’s ability to attract new customers, retain existing customers, and to maintain or increase sales to those customers; the success of the Company’s marketing efforts; the Company’s ability to maintain a strong community of engaged customers and Ambassadors; negative publicity related to the Company’s marketing efforts or use of social media; the Company’s ability to successfully develop and introduce new, innovative, and updated products; the competitiveness of the market for healthcare apparel; the Company’s ability to attract and retain highly skilled personnel and senior management; risks associated with expansion into, and conducting business in, international markets; changes in, or disruptions to, the Company’s shipping arrangements; the Company’s ability to accurately forecast customer demand, manage its inventory, and plan for future expenses; the Company’s reliance on a limited number of third-party suppliers; the fluctuating costs of raw materials; the Company’s failure to protect its intellectual property rights; the fact that the operations of many of the Company’s suppliers and vendors are subject to additional risks that are beyond its control; and other risks, uncertainties, and factors discussed in the “Risk Factors” section of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 to be filed with the Securities and Exchange Commission (“SEC”), the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 10, 2022, and the Company’s other periodic filings with the SEC. The forward-looking statements in this press release speak only as of the time made and the Company does not undertake to update or revise them to reflect future events or circumstances.

FIGS, INC.

BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

As of

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Assets

 

(Unaudited)

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

189,401

 

 

$

195,374

 

Restricted cash

 

 

 

 

 

2,056

 

Accounts receivable

 

 

2,910

 

 

 

2,441

 

Inventory, net

 

 

102,765

 

 

 

86,068

 

Prepaid expenses and other current assets

 

 

11,257

 

 

 

7,400

 

Total current assets

 

 

306,333

 

 

 

293,339

 

Non-current assets

 

 

 

 

 

 

Property and equipment, net

 

 

7,719

 

 

 

7,613

 

Operating lease right-of-use assets

 

 

17,248

 

 

 

 

Deferred tax assets

 

 

10,645

 

 

 

10,239

 

Other assets

 

 

745

 

 

 

560

 

Total non-current assets

 

 

36,357

 

 

 

18,412

 

Total assets

 

$

342,690

 

 

$

311,751

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

17,010

 

 

$

14,604

 

Operating lease liabilities

 

 

2,806

 

 

 

 

Accrued expenses

 

 

24,200

 

 

 

24,677

 

Accrued compensation and benefits

 

 

4,093

 

 

 

6,464

 

Sales tax payable

 

 

4,335

 

 

 

3,728

 

Gift card liability

 

 

5,275

 

 

 

5,590

 

Deferred revenue

 

 

605

 

 

 

596

 

Returns reserve

 

 

2,528

 

 

 

2,761

 

Income tax payable

 

 

325

 

 

 

3,973

 

Total current liabilities

 

 

61,177

 

 

 

62,393

 

Non-current liabilities

 

 

 

 

 

 

Operating lease liabilities, non-current

 

 

17,969

 

 

 

 

Deferred rent and lease incentive

 

 

 

 

 

3,542

 

Other non-current liabilities

 

 

243

 

 

 

243

 

Total liabilities

 

 

79,389

 

 

 

66,178

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Class A Common stock — par value $0.0001 per share, 1,000,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 158,530,688 and 152,098,257 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

15

 

 

 

15

 

Class B Common stock — par value $0.0001 per share, 150,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 6,196,339 and 12,158,187 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

1

 

 

 

1

 

Preferred stock — par value $0.0001 per share, 100,000,000 shares authorized as of March 31, 2022 and December 31, 2021; zero shares issued and outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Additional paid-in capital

 

 

236,455

 

 

 

227,626

 

Retained earnings

 

 

26,830

 

 

 

17,931

 

Total stockholders’ equity

 

 

263,301

 

 

 

245,573

 

Total liabilities and stockholders’ equity

 

$

342,690

 

 

$

311,751

 

FIGS, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three months ended March 31,

 

 

2022

 

 

2021

 

Net revenues

 

$

110,100

 

 

$

87,079

 

Cost of goods sold

 

 

31,670

 

 

 

24,719

 

Gross profit

 

 

78,430

 

 

 

62,360

 

Operating expenses

 

 

 

 

Selling

 

 

22,058

 

 

 

17,114

 

Marketing

 

 

15,408

 

 

 

10,840

 

General and administrative

 

 

27,219

 

 

 

18,346

 

Total operating expenses

 

 

64,685

 

 

 

46,300

 

Net income from operations

 

 

13,745

 

 

 

16,060

 

Other income (loss), net

 

 

 

 

Interest income (expense)

 

 

9

 

 

 

(36

)

Other expense

 

 

(1

)

 

 

(2

)

Total other income (loss), net

 

 

8

 

 

 

(38

)

Net income before provision for income taxes

 

 

13,753

 

 

 

16,022

 

Provision for income taxes

 

 

4,854

 

 

 

4,582

 

Net income and comprehensive income

 

$

8,899

 

 

$

11,440

 

Earnings attributable to Class A and Class B common stockholders

 

 

 

 

Basic earnings per share

 

$

0.05

 

 

$

0.07

 

Diluted earnings per share

 

$

0.05

 

 

$

0.07

 

Weighted-average shares outstanding—basic

 

 

164,406,142

 

 

 

154,501,660

 

Weighted-average shares outstanding—diluted

193,379,275

 

168,012,364

 

FIGS, INC.

STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three months ended
March 31,

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

8,899

 

 

$

11,440

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

Depreciation and amortization expense

 

 

375

 

 

 

318

 

Deferred income taxes

 

 

(406

)

 

 

453

 

Non-cash operating lease cost

 

 

374

 

 

 

 

Stock-based compensation

 

 

8,477

 

 

 

5,015

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(469

)

 

 

2,231

 

Inventory

 

 

(16,697

)

 

 

(15,435

)

Prepaid expenses and other current assets

 

 

(3,857

)

 

 

2,902

 

Other assets

 

 

(185

)

 

 

(1,785

)

Accounts payable

 

 

2,372

 

 

 

4,249

 

Accrued expenses

 

 

(560

)

 

 

8,054

 

Deferred revenue

 

 

9

 

 

 

(1,503

)

Accrued compensation and benefits

 

 

(2,371

)

 

 

(2,128

)

Returns reserve

 

 

(233

)

 

 

296

 

Sales tax payable

 

 

607

 

 

 

935

 

Income tax payable

 

 

(3,648

)

 

 

1,235

 

Gift card liability

 

 

(315

)

 

 

(142

)

Deferred rent and lease incentive

 

 

 

 

 

(26

)

Operating lease liabilities

 

 

(389

)

 

 

 

Net cash (used in) provided by operating activities

 

 

(8,017

)

 

 

16,109

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(364

)

 

 

(528

)

Net cash used in investing activities

 

 

(364

)

 

 

(528

)

Cash flows from financing activities:

 

 

 

 

Proceeds from stock option exercises

 

 

352

 

 

 

123

 

Net cash provided by financing activities

 

 

352

 

 

 

123

 

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(8,029

)

 

 

15,704

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

197,430

 

 

 

58,133

 

Cash, cash equivalents, and restricted cash, end of period

 

$

189,401

 

 

$

73,837

 

Supplemental disclosures:

 

 

 

 

Property and equipment included in accounts payable and accrued expenses

 

$

149

 

 

$

73

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

 

 

$

1,796

 

FIGS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES

(Unaudited)

The following table presents a reconciliation of diluted earnings per share, as adjusted and net income, as adjusted to net income, which is the most directly comparable financial measure calculated in accordance with GAAP:

 

 

 

Three months ended
March 31,

 

 

 

 

2022

 

 

 

2021

 

 

 

 

(in thousands, except per share data)

Net income

 

$

8,899

 

 

$

11,440

 

 

Add (deduct):

 

 

 

 

 

Transaction costs

 

 

 

 

 

525

 

 

Expenses related to non-ordinary course disputes(1)

 

 

2,417

 

 

 

2,436

 

 

Income tax impacts of items above

 

 

(853

)

 

 

(847

)

 

Net income, as adjusted

 

$

10,463

 

 

$

13,554

 

 

Diluted EPS, as adjusted

 

$

0.05

 

 

$

0.08

 

 

Weighted-average shares used to compute Diluted EPS, as adjusted

 

 

193,379,275

 

 

 

168,012,364

 

 

(1) Represents certain legal fees incurred in connection with the litigation claims described in the section titled “Legal Proceedings” appearing in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

The following table presents a reconciliation of adjusted EBITDA to net income, which is the most directly comparable financial measure calculated in accordance with GAAP:

 

 

 

Three months ended
March 31,

 

 

 

2022

 

 

2021

 

 

 

 

(in thousands, except margin)

Net income

 

$

8,899

 

 

$

11,440

 

 

Add (deduct):

 

 

 

 

 

Other income (loss), net

 

 

(8

)

 

 

38

 

 

Provision for income taxes

 

 

4,854

 

 

 

4,582

 

 

Depreciation and amortization expense(1)

 

 

375

 

 

 

313

 

 

Stock-based compensation and related expense(2)

 

 

8,447

 

 

 

5,015

 

 

Transaction costs

 

 

 

 

 

525

 

 

Expenses related to non-ordinary course disputes(3)

 

 

2,417

 

 

 

2,436

 

 

Adjusted EBITDA

 

$

24,984

 

 

$

24,349

 

 

Adjusted EBITDA Margin

 

 

22.7

%

 

 

28.0

%

 

(1) Excludes amortization of debt issuance costs included in “Other income (loss), net.”

(2) Includes stock-based compensation expense and payroll taxes related to equity award activity.

(3) Represents certain legal fees incurred in connection with the litigation claims described in the section titled “Legal Proceedings” appearing in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

 

FIGS, INC.

KEY OPERATING METRICS

(Unaudited)

Active customers as of March 31, 2022 and 2021, respectively, and average order value and net revenues per active customer for the three months ended March 31, 2022 and 2021, respectively, are presented in the following tables:

 

 

 

As of March 31,

 

 

 

 

2022

 

 

2021

 

 

 

 

(in thousands)

 

 

Active customers

 

 

1,962

 

 

 

1,497

 

 

 

 

Three months ended
March 31,

 

 

 

2022

 

 

2021

 

Average order value

 

$

116

 

 

$

100

 

 

 

Three months ended
March 31,

 

 

 

2022

 

 

2021

 

Net revenues per active customer

 

$

226

 

 

$

213

 

 

Investors:
Carrie Gillard
IR@wearfigs.com

Media:
Todd Maron
press@wearfigs.com

Source: FIGS, Inc.

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