FIGS, Inc. Q2 FY2025 earnings call

Product Merchandising: Strengthened through clear assortment architecture, strategic newness, and continued improvements in fit and function. ### Marketing: Created impactful marketing resonating across the health care community and driving deeper engagement. ### Promotional Repositioning: More deliberate with promotions, driving more productivity and intentionality. ### Q2 Performance: Net revenues outpaced expectations with 6% growth. Scrubwear had 8% growth, the highest in 7 quarters. AOV gained 4%, active customers increased, and U.S. business was positive. Margins were better than planned with adjusted EBITDA margin improving 390 basis points year-over-year to 12.9%. ### International Strategy: Drove gains across Mexico, Europe, Latin America, and the Middle East. Debuted in Japan, planned launch in South Korea. Utilizing technology for regional expansion. Investing in market across business functions. ### Community Hubs: About 40% of customers new to the brand, 30% of acquired customers purchase through e-commerce. Exciting to open new hubs in Houston, New York City, and Chicago.

In Q2, net revenues grew 6%. Scrubwear posted an 8% gain, representing 83% of net revenues. Non-scrubwear decreased 3%, making up 17% of net revenues. U.S. business was positive for the second straight quarter, and international net revenues increased 20%. AOV gained 4% to come in just below the record level achieved last quarter. Active customers increased 4% year-over-year to 2.7 million, with net revenues per active customer easing less than 1% to $208.

Net Revenues: Full year 2025 net revenues now expected to grow low single digits year-over-year, improving from prior outlook of down low single digits. Q3 net revenues expected in a range of flat to up 2% growth year-over-year. ### Gross Margins: Expect approximately 150 basis points of total pressure for the year, corresponding with expected tariff headwind. ### Adjusted EBITDA Margin: Now expect a range of 8.5% to 9% for full year 2025, ahead of prior outlook of 7.5% to 8.5%. Q3 adjusted EBITDA margin expected to be 9% to 9.5%.

Tariff Uncertainty: Ongoing tariff uncertainty with different tariff rates in Vietnam, Jordan, and China. The weighted average impact of tariff assumptions results in a larger annualized headwind than previously expected, though net incremental impact to 2025 is minimal. ### Macro Consumer Behavior: Uncertainty around macro consumer behavior, particularly as trade policies unfold and consumer faces potential pricing impacts across purchase decisions. ### Promotional Changes Impact: Greater headwind from ongoing promotional changes with more aggressive reductions of promotional days planned in Q3 and Q4.

Q: How to rank order the drivers of AOV recovery in terms of promotional strategy, product mix or new product launches? And outlook for AOV progression for rest of 2025?

A: Catherine Eva Spear said AOV increase was due to product innovation, product mix, and returns. Sarah Oughtred added most favorable impact came from product mix shift. Outlook for rest of 2025 involves considering promotional changes and macro factors.

Q: How to think about pricing go forward given tariffs and normalization of health care professionals' buying habits?

A: Catherine Eva Spear said it's a result of product and marketing execution. Sarah Oughtred mentioned pricing is a last resort, and they're using other tools to mitigate costs like optimizing sourcing mix, negotiating with suppliers, etc.

Q: Can you quantify the annualized impact from tariffs on a mitigated and unmitigated basis? And about global vs local price increase and implementation timing?

A: Sarah Oughtred said tariff impact for 2025 is 150 basis points based on current rates. Pricing will be strategic, and guidance for 2025 doesn't reflect pricing impact yet.

Q: How should we model active customers in back half of year? And leverage on selling expenses into back half?

A: Sarah Oughtred said second half will have larger impact from promo pullback, so active customer and selling expense leverage will be affected. Revenue growth slower in back half implies less leverage on selling line.

Q: Expand on softness in non-scrubwear and rebound from apparel or lifestyle launches in 3Q?

A: Catherine Eva Spear said some noise in non-scrubwear due to less launches in Q2, but non-scrubs is a healthy business with growth potential. Excited to build out portfolio in various areas.

Q: Balancing share repurchases vs growth initiatives?

A: Sarah Oughtred said focusing on deploying capital towards growing the business, preserving balance sheet for now, but will be opportunistic.

Q: Sales progression in second quarter and July into second half guide?

A: Sarah Oughtred said guide was based on comping strong period last year, but overcame headwinds. Q3 will have larger impact from promo pullback, so guide is flat to up 2%.

Q: Pullback in promos in second half: how does it show up?

A: Sarah Oughtred said it's all of the above, including more specific promos for health care professional events, less generic site-wide promos, etc.

Q: Inventory details and international growth rate with FX?

A: Catherine Eva Spear said inventory up 14% dollar basis, 8% unit basis, due to mix shift and pull forward. Sarah Oughtred said FX impact on international was not material, international growth strong from various regions.

Q: Macro headwinds in full year guide and recent factors?

A: Sarah Oughtred said majority of pullback in growth rates in 2H is due to promo pullback. Catherine Eva Spear added health care jobs growing faster than overall market and easing COVID overhang is positive.