FIGS, Inc. Q4 FY2024 earnings call

Wildfires Impact: Trina mentioned the wildfires in January in LA affected the FIGS community deeply, and FIGS responded by setting up a dedicated email alias to assist healthcare workers affected, responding to over 1,500 messages, donating over 9,200 FIGS, and delivering over 2,500 meals. ### 2024 Results: Revenues grew 5% YOY in Q4, with Scrubwear positive for the third straight quarter and non-Scrubwear snapping back to strong growth. International business was a standout growing 45% in Q4. Gross margins were at the high-end of outlook despite mix impact. Adjusted EBITDA margins were above expectations. Ended the year with strong financial position. ### 2025 Calibrations: - Promotional positioning: More selective in promotional cadence, which will have a negative impact on top line this year but aligns with long-term brand health. - Fit: Standardizing fit continues, with full execution and marketing of fit story expected in back half of 2025. - Canadian DC: Pausing planned work to open Canadian DC to reduce complexity and focus on domestic network efficiency. ### 2025 Investments: - Innovation: Advancing fabric story with new FORMx fabrication, expanding category expansion including outerwear, underscrubs, etc. - Marketing: Evolving marketing approach to focus on everyday moments, personalization, and localization. - Reach: Accelerating investment in international expansion, teams business, and retail store test. - Leadership: Bringing in new COO and CPO to fortify leadership.

Net revenues increased 5% to $151.8 million in Q4. Scrubwear increased 2%, representing 76% of net revenues. Non-scrubwear increased 13%, representing 24% of net revenues. International business grew 45% for the quarter, representing 16% of net revenues. For the full year, net revenue reached a record $555.6 million, an increase of 2% year-over-year. Scrubwear was 76% of net revenues for the full year, and non-scrubwear was 24%.

Net Revenues: Expected to be down in low single-digit range YOY in 2025, reflecting headwinds from less promotions and potential decline in active customers. ### Promotions: Expecting meaningful reduction in promotional composition, curtailing site-wide promos not aligned with long-term brand positioning. ### Gross Margin: Expected to be approximately flat from 2024's 67.6% level in 2025, with Q1 gross margins expected to be down approximately 100 basis points YOY. ### Adjusted EBITDA Margin: Expected to be between 9% to 9.5% for full year 2025, with Q1 adjusted EBITDA margins between 5.5% to 6%. ### Capital Allocation: Authorized additional $50 million share repurchase program. Capital expenditures expected to be modest at ~$5 million in 2025.

Promotional Impact: The shift to a more selective promotional cadence could negatively impact top line performance in the near term. ### Inventory Management: Still have pockets of inventory to work through, and inventory growth is expected to modestly outpace revenue growth in 2025. ### Supply Chain: Pausing Canadian DC investment may impact initial expectations of supply chain being a bigger source of margin expansion, but focusing on optimizing current distribution facility for improvement.

Q: Brooke Roach asked about plans to maintain and reengage lapsed customers and marketing to reaccelerate acquisition trend, and about supply chain investments including pausing Canadian DC.

A: Sarah Oughtred said they are making investments into existing brand efforts and upper funnel to increase awareness and consideration, and pausing Canadian DC as the new COO reassessed the road map for best opportunities.

Q: Brian Nagel asked about the dynamic between Q4 beat and 2025 guidance, and building blocks to get FIGS back to normalized growth algorithm.

A: Sarah Oughtred said Q4 beat was due to factors like color launches and December promo outperformance, and Trina Spear said reinvigorating growth in US business, active customer base, and building out retail, international, and teams channels are key building blocks.

Q: John Kernan asked about selling and G&A, and profitability of international and non-scrubwear.

A: Sarah Oughtred said transitory selling costs related to DC transition should normalize, but there are added costs for new facility and international; marketing rate will recover from Olympics, and G&A has people costs and stock-based comp reduction. International is profitable, and non-scrubwear proportion is increasing ~1 point annually.

Q: Dana Telsey asked about product reactivation, new product category opportunities in 2025, and tariffs.

A: Trina Spear said seeing good signs in repeat frequency and product launches, focusing on fabric platforms and category expansion; Sarah Oughtred said minimal direct exposure to China on finished goods, immaterial exposure to current tariff plans.

Q: Lorraine Hutchinson asked about marketing cadence after lapping Olympics marketing.

A: Trina Spear said expect rate leverage but will reinvest in growth plans, investing in top of funnel, customer funnel, personalization, and localization.

Q: Matt Koranda asked about change in promotional strategy, why now, and new promotional posture.

A: Trina Spear said shifting from transactional to strategic promos to align with long-term brand health, still having promos for healthcare events but more selective.

Q: Ashley Owens asked about non-scrubs mix and sizing initiatives.

A: Trina Spear said non-scrubs proportion increases ~1 point annually and will continue, and fit initiatives are being recalibrated with full transition and messaging in back half of 2025.

Q: Angus Kelleher asked about non-scrubwear drivers and footwear in-stock levels.

A: Trina Spear said non-scrubwear in Q4 was due to footwear return and loungewear success, and footwear had success with 3447 with Zipper and partnership with New Balance.

Q: Nathan Feather asked about consumer health and inventory.

A: Trina Spear said AOV and revenue per customer down slightly, but seeing favorability in frequency; inventory down 3% YOY, down 35% from highs, with inventory growth expected to modestly exceed revenue growth.