10-Q: FIGS, Inc. Reports Slight Revenue Increase but Dips into Net Loss in Q1 2025

FIGS, Inc. saw a modest revenue increase in Q1 2025 but experienced a shift from net income to a net loss compared to the same period last year.

Summary

• FIGS, Inc. reported a 4.7% increase in net revenues for the three months ended March 31, 2025, reaching $124.9 million compared to $119.3 million in 2024.
• The company experienced a decrease in gross margin from 68.9% to 67.6% during the same period.
• FIGS reported a net loss of $(0.1) million for Q1 2025, a decrease from the $1.4 million net income in Q1 2024.
• Adjusted EBITDA decreased from $13.0 million to $9.0 million, with an adjusted EBITDA margin of 7.2%.
• Cash flows from operating activities decreased from $11.6 million to $9.2 million.
• Free cash flow also decreased from $11.1 million to $7.9 million.
• The number of active customers increased by 3.8% to approximately 2.7 million.
• The company repurchased approximately 0.6 million shares of Class A common stock for $2.7 million during the quarter.
• As of March 31, 2025, FIGS had approximately $52.0 million available for future repurchases under its share repurchase program.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While revenue increased, profitability declined, and the company faces several risks related to tariffs, logistics, and competition. The company is taking steps to mitigate these risks, but the overall outlook is uncertain.

Positives

• Net revenues increased by 4.7% year-over-year.
• The active customer base grew by 3.8%.
• The company continues to execute its share repurchase program.
• FIGS is proactively seeking alternative shipping routes and pre-negotiating freight rates to mitigate logistics disruptions.

Negatives

• Gross margin decreased by 1.3 percentage points.
• The company shifted from net income to a net loss.
• Adjusted EBITDA and cash flows from operating activities decreased.
• The company faces potential cost increases due to tariffs and logistics disruptions.

Risks

• Changes in global trade policy, including tariffs, could increase product costs.
• Logistics disruptions in the Middle East could continue to impact shipping times and freight rates.
• The company's reliance on a limited number of third-party suppliers could cause supply chain problems.
• Failure to accurately forecast customer demand could lead to inventory issues.
• Macroeconomic conditions, including inflation and potential recession, could negatively impact consumer spending.
• The company faces intense competition in the healthcare apparel market.
• Cyberattacks and data breaches could compromise customer information and disrupt operations.
• The dual-class structure of the common stock limits stockholders' ability to influence corporate matters.

Future Outlook

The company is exploring various mitigation strategies in response to the recent tariffs enacted by the United States, including adjusting the countries from which it sources its products and renegotiating prices with suppliers, but it cannot be certain whether they will be effective. The company also plans to open additional fulfillment centers in the future to keep pace with the growth of its business.

Management Comments

• The company is committed to helping the growing, global community of healthcare professionals look, feel and perform at their best 24/7, 365 days a year.
• The company is exploring various mitigation strategies in response to the recent tariffs enacted by the United States, including adjusting the countries from which it sources its products and renegotiating prices with suppliers, but cannot be certain whether they will be effective.

Industry Context

The healthcare apparel industry is highly competitive, with FIGS competing against established wholesalers, specialty retailers, and digitally native brands. The company's direct-to-consumer business model offers competitive advantages, but competitors may also increase sales faster by emphasizing different distribution channels.

Comparison to Industry Standards

• Careismatic Brands, Barco Uniforms, Landau Uniforms and Superior Group of Companies are major wholesalers in the healthcare apparel industry.
• Scrubs & Beyond and Uniform Advantage are examples of healthcare apparel specialty retailers.
• Jaanuu and Mandala are digitally native brands competing with FIGS.
• Fabletics is a large, diversified apparel brand that may expand into healthcare apparel.

Legal Proceedings

• A putative class action complaint filed in November 2022 against the Company and certain of its executive officers and directors was dismissed with prejudice by the court in January 2025, but plaintiffs have filed a notice of appeal.
• Related derivative suits against the Company and certain of its executive officers and directors are currently pending.
• The Company intends to vigorously defend against such claims.

Related Party Transactions

• In November 2024, the Company purchased shares of OOG, Inc.'s Series A-1 Preferred Stock, where Heather Hasson, Executive Chair of the Board, is founder and Chief Executive Officer.
• In March 2025, the Company entered into a License Agreement with OOG, pursuant to which FIGS licensed to OOG for nominal consideration approximately 2,200 square feet of unused office space currently leased by the Company.
• In November 2024, the Company entered into a Purchase Order Agreement with Baron Capital Management, Inc., a subsidiary of Baron Capital Group, Inc., where BCG is a beneficial owner of greater than 5% of the Company's outstanding Class A common stock.

Stakeholder Impact

• Shareholders may be concerned about the decrease in profitability and the potential impact of tariffs and logistics disruptions.
• Employees may be affected by potential changes in sourcing and manufacturing strategies.
• Customers may experience changes in product pricing and shipping times.
• Suppliers and manufacturers may be impacted by changes in sourcing strategies and renegotiation of prices.

Next Steps

• The company will continue to monitor changes in policy impacting global trade, including tariffs.
• The company will continue to seek alternative ways to ship raw materials and receive inventory, including selecting new vessel routes and ports, and using increased air freight from time to time.
• The company plans to open additional fulfillment centers in the future to keep pace with the growth of its business.

Key Dates

Keywords

FIGS, financial results, scrubs, healthcare apparel, net revenue, EBITDA, gross margin, active customers, share repurchase, tariffs, logistics, supply chain