Figs releases first quarter 2022 financial results
Santa monica, calif.--(business wire)--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 164,406,142 154,501,660 193,379,275 168,012,364 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
