figs-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number: 001-40448

FIGS, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware			46-2005653
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
2834 Colorado Avenue, Suite 100 Santa Monica, CA			90404
(Address of principal executive offices)			(Zip Code)

(424) 300-8330

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

FIGS

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 31, 2023, there were 161,118,558 shares of the registrant’s Class A common stock, par value $0.0001 per share, outstanding and 8,016,338 shares of the registrant’s Class B common stock, $0.0001 par value per share, outstanding.

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TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Balance Sheets	6
	Condensed Statements of Operations	7
	Condensed Statements of Comprehensive Income	8
	Condensed Statements of Stockholders’ Equity	9
	Condensed Statements of Cash Flows	11
	Notes to Condensed Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	69
Item 3.	Defaults Upon Senior Securities	70
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	72
Item 6.	Exhibits	73
Signatures		74

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1955, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “forecast,” “predict,” “potential,” “strategy,” “strive” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, without limitation, statements regarding our future results of operations and financial position, industry, business, and macroeconomic trends, the long-term impact of the COVID-19 pandemic and macroeconomic pressures, our use of ocean and air freight, the fact that we may continue to contend with global supply chain challenges, demand for our products, our plans for addressing increased inventory on hand, our expectations regarding the opening and success of retail stores, our plans for strategically refining our manufacturing base and enhancing fulfillment, equity compensation, our marketing strategy, competition, market growth and our business strategy, plans and objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

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SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our Class A common stock. The principal risks and uncertainties affecting our business include the following:

•Our recent rapid growth may not be sustainable or indicative of future growth, and we expect our growth rate to ultimately slow over time.

•If we fail to manage our growth effectively, our business, financial condition and results of operations may be adversely affected.

•We have not always been profitable and may not be profitable in the future.

•Our success depends on our ability to maintain the value and reputation of our brand.

•If we fail to attract new customers, retain existing customers, or fail to maintain or increase sales to those customers, our business, financial condition, results of operations and growth prospects will be harmed.

•If our marketing efforts are not successful, our business, financial condition and results of operations could be harmed.

•Our business depends on our ability to maintain a strong community of engaged customers and ambassadors, including through the use of social media. We may not be able to maintain and enhance our brand if we experience negative publicity related to our marketing efforts or use of social media, fail to maintain and grow our network of ambassadors or otherwise fail to meet our customers’ expectations.

•If we do not continue to successfully develop and introduce new, innovative and updated products, we may not be able to maintain or increase our sales and profitability.

•The market for healthcare apparel is highly competitive.

•Our future success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled team members.

•We plan to expand into additional international markets over time, which will expose us to new and significant risks.

•Shipping is a critical part of our business and changes in, or disruptions to, our shipping arrangements have in the past and may in the future adversely affect our business, financial condition and results of operations.

•If we experience problems with our distribution and warehouse management systems, our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies could be harmed.

•If we are unable to accurately forecast customer demand, manage our inventory and plan for future expenses, our results of operations could be adversely affected.

•Consumer confidence, shopping behavior and spending have been and may continue to be negatively impacted by factors beyond our control, including the COVID-19 pandemic and related economic impacts, supply chain disruptions, inflation, rising interest rates, fear of recession or entry into a recession and geopolitical events, which may adversely affect our business, financial condition and results of operations.

•Our reliance on a limited number of third-party suppliers to provide materials for and produce our products could cause problems in our supply chain and subject us to additional risks.

•The dual-class structure of our common stock and voting agreement among us and our co-founders, Heather Hasson and Trina Spear, Tulco, LLC and Thomas Tull and certain related persons and trusts have the effect of concentrating voting control with Ms. Hasson, Ms. Spear and Mr. Tull, who together hold the majority of the voting power of our outstanding capital stock, which may limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.

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•We are a “controlled company” within the meaning of the rules of the New York Stock Exchange and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements.

•Our quarterly results of operations have from time to time, and may in the future fluctuate, and if our operating and financial performance in any given period does not meet the guidance that we have provided to the public or the expectations of our investors and securities analysts, the trading price of our Class A common stock may decline.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FIGS, INC.

CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)


	As of
	September 30, 2023		December 31, 2022
Assets	(Unaudited)
Current assets
Cash and cash equivalents	$	182,951	$	159,775
Short-term investments	49,148		—
Accounts receivable	6,316		6,866
Inventory, net	143,183		177,976
Prepaid expenses and other current assets	13,446		11,883
Total current assets	395,044		356,500
Non-current assets
Property and equipment, net	16,306		11,024
Operating lease right-of-use assets	16,380		15,312
Deferred tax assets	12,812		10,971
Other assets	1,239		1,257
Total non-current assets	46,737		38,564
Total assets	$	441,781	$	395,064
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	15,014	$	20,906
Operating lease liabilities	3,997		3,408
Accrued expenses	16,145		26,164
Accrued compensation and benefits	6,681		3,415
Sales tax payable	4,048		3,374
Gift card liability	8,689		7,882
Deferred revenue	3,337		2,786
Returns reserve	2,640		3,458
Income tax payable	9,670		—
Total current liabilities	70,221		71,393
Non-current liabilities
Operating lease liabilities, non-current	16,190		15,756
Other non-current liabilities	176		176
Total liabilities	$	86,587	$	87,325
Commitments and contingencies (Note 9)
Stockholders’ equity
Class A Common stock — par value $0.0001 per share, 1,000,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 161,020,834 and 159,351,307 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	16		16
Class B Common stock — par value $0.0001 per share, 150,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 8,016,338 and 7,210,795 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	—		—
Preferred stock — par value $0.0001 per share, 100,000,000 shares authorized as of September 30, 2023 and December 31, 2022; zero shares issued and outstanding as of September 30, 2023 and December 31, 2022	—		—
Additional paid-in capital	303,428		268,606
Accumulated other comprehensive loss	(4)		—
Retained earnings	51,754		39,117
Total stockholders’ equity	355,194		307,739
Total liabilities and stockholders’ equity	$	441,781	$	395,064

The accompanying notes are an integral part of these unaudited condensed financial statements.

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FIGS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net revenues	$	142,364	$	128,589	$	400,728	$	360,937
Cost of goods sold	44,971		37,756		121,625		105,325
Gross profit	97,393		90,833		279,103		255,612
Operating expenses
Selling	32,195		31,940		97,092		80,801
Marketing	19,012		20,031		56,965		56,263
General and administrative	36,232		27,652		105,229		84,142
Total operating expenses	87,439		79,623		259,286		221,206
Net income from operations	9,954		11,210		19,817		34,406
Other income, net
Interest income	1,901		604		4,494		683
Other income (expense)	(6)		1		(11)		—
Total other income, net	1,895		605		4,483		683
Net income before provision for income taxes	11,849		11,815		24,300		35,089
Provision for income taxes	5,703		7,771		11,663		17,294
Net income	$	6,146	$	4,044	$	12,637	$	17,795
Earnings attributable to Class A and Class B common stockholders
Basic earnings per share	$	0.04	$	0.02	$	0.08	$	0.11
Diluted earnings per share	$	0.03	$	0.02	$	0.07	$	0.09
Weighted-average shares outstanding—basic	168,668,844

SEC Form 10-Q filed by FIGS Inc.