figs-20230630

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 June 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 July 31, 2023, there were 160,717,541 shares of the registrant’s Class A common stock, par value $0.0001 per share, outstanding and 7,748,952 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 P roceeds, and Issuer P ur chases of Equity Securities	68
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 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, 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, 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.

•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.

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•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
	June 30, 2023		December 31, 2022
Assets	(Unaudited)
Current assets
Cash and cash equivalents	$	146,730	$	159,775
Short-term investments	38,595		—
Accounts receivable	6,269		6,866
Inventory, net	167,806		177,976
Prepaid expenses and other current assets	9,849		11,883
Total current assets	369,249		356,500
Non-current assets
Property and equipment, net	11,399		11,024
Operating lease right-of-use assets	17,154		15,312
Deferred tax assets	11,955		10,971
Other assets	1,258		1,257
Total non-current assets	41,766		38,564
Total assets	$	411,015	$	395,064
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	11,933	$	20,906
Operating lease liabilities	3,818		3,408
Accrued expenses	17,990		26,164
Accrued compensation and benefits	4,366		3,415
Sales tax payable	2,953		3,374
Gift card liability	8,390		7,882
Deferred revenue	777		2,786
Returns reserve	3,314		3,458
Income tax payable	3,290		—
Total current liabilities	56,831		71,393
Non-current liabilities
Operating lease liabilities, non-current	17,086		15,756
Other non-current liabilities	176		176
Total liabilities	$	74,093	$	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 June 30, 2023 and December 31, 2022; 160,504,522 and 159,351,307 shares issued and outstanding as of June 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 June 30, 2023 and December 31, 2022; 7,748,952 and 7,210,795 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	—		—
Preferred stock — par value $0.0001 per share, 100,000,000 shares authorized as of June 30, 2023 and December 31, 2022; zero shares issued and outstanding as of June 30, 2023 and December 31, 2022	—		—
Additional paid-in capital	291,306		268,606
Accumulated other comprehensive loss	(8)		—
Retained earnings	45,608		39,117
Total stockholders’ equity	336,922		307,739
Total liabilities and stockholders’ equity	$	411,015	$	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 June 30,				Six months ended June 30,
	2023		2022		2023		2022
Net revenues	$	138,132	$	122,247	$	258,364	$	232,348
Cost of goods sold	42,098		35,899		76,654		67,569
Gross profit	96,034		86,348		181,710		164,779
Operating expenses
Selling	33,739		26,803		64,896		48,861
Marketing	20,889		20,824		37,953		36,232
General and administrative	34,840		29,270		68,997		56,490
Total operating expenses	89,468		76,897		171,846		141,583
Net income from operations	6,566		9,451		9,864		23,196
Other income, net
Interest income	1,521		70		2,593		79
Other expense	(4)		—		(5)		(1)
Total other income, net	1,517		70		2,588		78
Net income before provision for income taxes	8,083		9,521		12,452		23,274
Provision for income taxes	3,501		4,669		5,961		9,523
Net income	$	4,582	$	4,852	$	6,491	$	13,751
Earnings attributable to Class A and Class B common stockholders
Basic earnings per share	$	0.03	$	0.03	$	0.04	$	0.08
Diluted earnings per share	$	0.02	$	0.03	$	0.04	$	0.07
Weighted-average shares outstanding—basic	167,423,656		164,919,979		167,100,292		164,664,480
Weighted-average shares outstanding—diluted	183,332,560		188,903,553		183,094,950		191,142,834

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

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FIGS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Net income	$	4,582	$	4,852	$	6,491	$	13,751
Other comprehensive loss, net of tax
Unrealized loss on short-term investments, net of tax	(8)		—		(8)		—
Total other comprehensive loss, net of tax	(8)		—		(8)		—
Total comprehensive income	$	4,574	$	4,852	$	6,483	$	13,751

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

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FIGS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)


	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
December 31, 2022	159,351,307	$	16	7,210,795	$	—	$	268,606	$	39,117	$	—	$	307,739
Issuance of Class A Common Stock upon vesting of Restricted Stock	494,487	—		—	—		—		—		—		—
Issuance of Class B Common Stock upon exchange of Class A Common Stock	(271,219)	—		271,219	—		—		—		—		—
Restricted Stock surrendered for employee's tax liability	—	—		—	—		(246)		—		—		(246)
Stock-based compensation	—	—		—	—		10,790		—		—		10,790
Stock option exercises	2,250	—		—	—		1		—		—		1
Net income	—	—		—	—		—		1,909		—		1,909
March 31, 2023	159,576,825	$	16	7,482,014	$	—	$	279,151	$	41,026	$	—	$

SEC Form 10-Q filed by FIGS Inc.