8-K: FIGS Exceeds Q3 Expectations, Raises Full-Year Outlook

FIGS, Inc. reported strong third-quarter 2025 financial results, surpassing expectations with 8.2% revenue growth and a significant improvement in profitability, leading to an increased full-year outlook.

Summary

• Net revenues for the third quarter of 2025 increased by 8.2% year over year to $151.7 million, driven by higher orders from new and existing customers and an increased average order value.
• Gross margin improved by 280 basis points year over year to 69.9%, primarily due to a lower mix of promotional sales, improved return rates, lower duty rates, and reduced freight expenses.
• Operating expenses decreased by 6.1% year over year to $96.4 million, representing 63.6% of net revenues, down from 73.2% in the prior year.
• The company achieved net income of $8.7 million, or $0.05 in diluted earnings per share, a significant improvement from a net loss of $(1.7) million, or $(0.01) diluted loss per share, in the same period last year.
• Adjusted EBITDA surged to $18.9 million, an increase of $14.1 million year over year, with an Adjusted EBITDA margin of 12.4% compared to 3.4% in the prior year.
• Active customers grew by 4.0% year over year to 2.8 million as of September 30, 2025.
• Average Order Value (AOV) increased by 5.6% year over year to $114, primarily due to product mix and a higher rate of full-priced sales.
• The full-year 2025 financial outlook has been increased, with net revenues now expected to grow approximately 7.0% versus 2024, and Adjusted EBITDA margin anticipated to be around 10.3%.

Sentiment

Score: 8

Explanation: The company delivered strong top and bottom-line growth, exceeding expectations and significantly improving profitability. The increased full-year outlook reflects management's confidence. However, the substantial decrease in net cash from operating activities and negative free cash flow for the nine-month period warrant attention, despite the strong quarterly performance.

Positives

• Net revenues increased by 8.2% year over year to $151.7 million, exceeding expectations and marking the strongest quarterly growth rate in two years.
• Gross margin expanded by 280 basis points to 69.9%, driven by favorable sales mix, improved returns processing, lower duty rates, and reduced freight expenses.
• Operating expenses decreased by 6.1% year over year, leading to a significant reduction as a percentage of net revenues (from 73.2% to 63.6%).
• The company returned to strong profitability with net income of $8.7 million and diluted EPS of $0.05, compared to a net loss in the prior year.
• Adjusted EBITDA increased substantially by $14.1 million to $18.9 million, with the Adjusted EBITDA margin improving to 12.4% from 3.4%.
• Active customer base grew by 4.0% to 2.8 million, indicating continued brand reach and customer acquisition.
• Average Order Value (AOV) increased by 5.6% to $114, reflecting higher average unit retail and full-priced sales.
• Full-year 2025 financial outlook for both net revenues and Adjusted EBITDA margin has been increased, signaling management's confidence in continued strong performance.

Negatives

• Cash and cash equivalents decreased from $85.6 million as of December 31, 2024, to $46.5 million as of September 30, 2025.
• Net cash provided by operating activities for the nine months ended September 30, 2025, was $242k, a significant decrease from $50.7 million in the prior year period.
• Free cash flow for the nine months ended September 30, 2025, was negative $(5.1) million, compared to positive $37.1 million in the prior year period.
• Higher tariffs partially offset improvements in gross margin.

Risks

• Ability to maintain historical growth rates and profitability.
• Maintaining the value and reputation of the brand.
• Attracting new customers, retaining existing customers, and increasing sales to those customers.
• Success of marketing efforts and potential negative publicity related to marketing or social media.
• Ability to successfully develop and introduce new, innovative, and updated products.
• Competitiveness of the market for healthcare apparel.
• Ability to maintain key employees and attract highly skilled team members.
• Risks associated with expansion into, and conducting business in, international markets.
• Changes in, or disruptions to, shipping arrangements and the successful operation of fulfillment operations.
• Ability to accurately forecast customer demand, manage inventory, and plan for future expenses.
• Impact of changes in consumer confidence, shopping behavior, consumer spending, and macroeconomic trends.
• Reliance on a limited number of third-party suppliers and the impact of global trade policy on sourcing and distribution.
• Fluctuating costs of raw materials.
• Ability to execute on B2B and retail growth strategies.
• Failure to protect proprietary, confidential, or sensitive information or personal customer data, or risks of cyberattacks.
• Failure to protect intellectual property rights.
• Operations of many suppliers and vendors are subject to additional risks beyond the company's control.

Future Outlook

The company has increased its full-year 2025 financial outlook, now expecting net revenues to grow approximately 7.0% versus 2024 and Adjusted EBITDA margin to be around 10.3%. This reflects growing confidence in fourth-quarter positioning and improved consistency across the business, despite tariff headwinds.

Management Comments

• Trina Spear, CEO and Co-Founder: "FIGS' third quarter was highlighted by top and bottom line results that exceeded our internal expectations, including the strongest revenue growth over the past two years."
• Trina Spear, CEO and Co-Founder: "Our diligent work this year to support our community with a great product assortment and impactful brand moments has been instrumental in driving momentum across scrubwear, our U.S. business, and our business-as-usual selling days."
• Trina Spear, CEO and Co-Founder: "We are the clear leaders in the space and believe our actions will compound the fundamental drivers of this healthy business over the long term."
• Sarah Oughtred, CFO: "Our year-to-date performance shows we are executing strongly against plan and driving improved consistency across the business."
• Sarah Oughtred, CFO: "Along with growing confidence in our fourth quarter positioning, we are meaningfully increasing our expectations with full year net revenues now expected to increase approximately 7.0% and adjusted EBITDA margin now expected above the high end of our original outlook despite tariff headwinds."
• Sarah Oughtred, CFO: "With improving profitability and ample balance sheet flexibility, we believe we are positioned to remain on offense and drive the sustainable growth story we see ahead."

Industry Context

FIGS, as a founder-led, direct-to-consumer healthcare apparel brand, continues to demonstrate strong market leadership and brand health within its specialized niche. The robust growth in net revenues, active customers, and average order value, coupled with significant profitability improvements, suggests that the company is effectively capitalizing on demand within the healthcare professional community, outperforming broader industry trends or maintaining a dominant position.

Stakeholder Impact

• Shareholders: Likely positive impact due to strong financial performance, significant profitability improvement, and an increased full-year outlook, which could lead to increased share price.
• Employees: Implied positive impact through continued business growth and stability, potentially leading to job security and opportunities.
• Customers: Continued focus on product assortment and brand engagement suggests ongoing efforts to serve and retain the healthcare professional community.
• Suppliers/Creditors: Stable or improved financial health of the company generally benefits suppliers and creditors, though the decline in operating cash flow and negative free cash flow for the nine months could be a point of monitoring.

Next Steps

• Host a conference call and webcast on November 6, 2025, to discuss financial and business results and outlook.
• File the Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, with the SEC.

Key Dates

Recommendation

The company demonstrated robust financial performance in Q3 2025, with strong revenue growth, significant margin expansion, and a return to net profitability. The increased full-year guidance signals positive momentum and management confidence. While the nine-month free cash flow is negative, the quarterly results show strong operational execution and market leadership in a specialized niche, making it an attractive investment for growth-oriented portfolios.

Keywords

Healthcare apparel, Scrubs, Direct-to-consumer, Financial results, Q3 2025, Earnings, FIGS, Revenue growth, Profitability, Adjusted EBITDA, Customer growth, Outlook