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What changed in FIGS, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FIGS, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+441 added−429 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-28)

Top changes in FIGS, Inc.'s 2024 10-K

441 paragraphs added · 429 removed · 356 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

73 edited+10 added−25 removed64 unchanged
Biggest changeThe Industry Has Historically Lacked Innovation and is Fundamentally Changing. Prior to FIGS, the healthcare apparel industry had operated for over 100 years with little change or innovation. Despite attractive market fundamentals, the industry had been held back, and its consumers underserved, by legacy participants with outdated business models. Consumers increasingly embrace the convenience of online and mobile shopping.
Biggest changeDespite attractive market fundamentals, the industry had been held back, and its consumers underserved, by legacy participants with outdated business models. Consumers increasingly embrace the convenience of online and mobile shopping. For healthcare professionals who work long shifts and all hours of the day and night, the convenience of eCommerce is even more necessary.
Marketing campaigns. Most of our creative assets are created in-house, allowing us to launch campaigns at an accelerated pace to celebrate the products we bring to market and the people who will wear them. We launch fully integrated marketing campaigns that feature Awesome Humans in larger-than-life scenarios, bringing the people, their profession and our brand to life.
Most of our creative assets are created in-house, allowing us to launch campaigns at an accelerated pace to celebrate the products we bring to market and the people who will wear them. We launch fully integrated marketing campaigns that feature Awesome Humans in larger-than-life scenarios, bringing the people, their profession and our brand to life.
Our innovative products are designed, sourced and manufactured from the fiber level and our proprietary FIONx fabric technology is made from what we believe to be the best combination of materials, core-spun for maximum durability to withstand the demands of a healthcare professional’s work without sacrificing comfort. FIONx technical features include four-way stretch, anti-odor, anti-wrinkle, and moisture-wicking properties.
Our innovative products are designed, sourced and manufactured from the fiber level and our flagship proprietary FIONx fabric technology is made from what we believe to be the best combination of materials, core-spun for maximum durability to withstand the demands of a healthcare professional’s work without sacrificing comfort. FIONx technical features include four-way stretch, anti-odor, anti-wrinkle and moisture-wicking properties.
In doing so, we have redefined what scrubs are—giving rise to our tag-line: why wear scrubs, when you can #wearFIGS? We have revolutionized the large and fragmented healthcare apparel market. We branded a previously unbranded industry and de-commoditized a previously commoditized product—elevating scrubs and creating premium products for healthcare professionals.
In doing so, we have redefined what scrubs are—giving rise to our tag-line: why wear scrubs, when you can #wearFIGS? By elevating scrubs and creating premium products for healthcare professionals, we revolutionized the large and fragmented healthcare apparel market, branded a previously unbranded industry and de-commoditized a previously commoditized product.
In line with our values, and in addition to having deep long-standing partnerships with our Tier I Suppliers, we also require all of our Tier I Suppliers to be certified through the Worldwide Responsible Accredited Production (“WRAP”) program, which is an organization focused on promoting safe, lawful, humane and ethical manufacturing.
In line with our values, and in addition to having deep long-standing partnerships with our Tier I Suppliers, we also require all of our apparel Tier I Suppliers to be certified through the Worldwide Responsible Accredited Production (“WRAP”) program, which is an organization focused on promoting safe, lawful, humane and ethical manufacturing.
We redefined scrubs, engineering them for function and taking cues from performance sports apparel, to create exceptionally comfortable and technical products to help healthcare professionals look good, feel good and perform at their best. Within the scrubwear category, as of December 31, 2023, we had 15 core styles that are available on our digital platform year-round.
We redefined scrubs, engineering them for function and taking cues from performance sports apparel, to create exceptionally comfortable and technical products to help healthcare professionals look good, feel good and perform at their best. Within the scrubwear category, as of December 31, 2024, we had 15 core styles that are available on our digital platform year-round.
Our Culture Committee programming also provides a way for our employees to give back to the community, driving connections and making an impact on a wide variety of organizations in need. In 2023, we conducted a confidential employee engagement survey to give our employees the opportunity to provide input about their experiences with us.
Our Culture Committee programming also provides a way for our employees to give back to the community, driving connections and making an impact on a wide variety of organizations in need. In 2024, we conducted a confidential employee engagement survey to give our employees the opportunity to provide input about their experiences with us.
In addition, through our digital platform, retail experience and social media presence, we provide venues for our community to engage with each other on common ground. We are proud that our products and digital platform are connecting healthcare professionals and bridging gaps that previously existed across varying disciplines and experience levels.
In addition, through our digital platform, Community Hubs and social media presence, we provide venues for our community to engage with each other on common ground. We are proud that our products and digital platform are connecting healthcare professionals and bridging gaps that previously existed across varying disciplines and experience levels.
As part of this program, we launched the FIGS Advocacy Hub, which is a grassroots platform we created to enable our community to learn about the most important policy developments affecting them, and where they can advocate for real change through FIGS.
As part of this program, we launched the FIGS Advocacy Hub, a grassroots platform we created to enable our community to learn about the most important policy developments affecting them, and where they can advocate for real change through FIGS.
As an additional benefit, our product portfolio has resulted in a return rate of approximately 10% from 2021 through 2023, which is far lower than the broader online apparel return rates that tend to be in the 30% to 40% range.
As an additional benefit, our product portfolio has resulted in a return rate of approximately 10% from 2021 through 2024, which is far lower than the broader online apparel return rates that tend to be in the 30% to 40% range.
Employees also reported feeling connected and supported, with 92% of respondents reporting their manager genuinely cares about their well-being, indicating a positive and supportive team dynamic.
Employees also reported feeling connected and supported, with 90% of respondents reporting their manager genuinely cares about their well-being, indicating a positive and supportive team dynamic.
These core scrubwear styles consisted of four women’s scrub tops, four women’s scrub pants, one women’s scrub jumpsuit, two men’s scrub tops and four men’s scrub pants. We offered these core styles in seven core colors and in limited edition colors.
These core scrubwear styles consisted of four women’s scrub tops, four women’s scrub pants, one women’s scrub jumpsuit, two men’s scrub tops and four men’s scrub pants. We offered these core styles in nine core colors and in limited edition colors.
Our TEAMS Business We have built a differentiated B2B custom platform, known as TEAMS, to revolutionize, consumerize and elevate what had previously been an outdated buying process for institutional customers. Through TEAMS, healthcare administrators and institutions can seamlessly and efficiently solicit individual orders and buy FIGS products for their 10 Table of Contents organizations.
Our TEAMS Business We have built a differentiated B2B custom platform, known as TEAMS, to revolutionize, consumerize, and elevate what had previously been an outdated buying process for institutional customers. Through TEAMS, healthcare administrators and institutions can seamlessly and efficiently solicit individual orders and buy FIGS products for their organizations.
We value the input of our team members and utilize the survey results to better understand the needs of our team members, identify opportunities for improvement and to create action plans based on employee feedback. Safety We are committed to the health and safety of our employees.
We value the input of our team members and utilize the survey results to better understand the needs of our team members, identify opportunities for improvement and to create action plans based on employee feedback. 13 Table of Contents Safety We are committed to the health and safety of our employees.
We also hold ambassador events and other personalized experiences that enable us to connect with our community in unique ways and further drive brand awareness. Brand Collaborations. We seek and establish marketing and branding collaborations with other brands that are leaders in their industries, have similar values to FIGS and complement our own core capabilities.
We also hold ambassador events and other personalized experiences that enable us to connect with our community in unique ways and further drive brand awareness. 10 Table of Contents Brand Collaborations. We seek and establish marketing and branding collaborations with other brands that are leaders in their industries, have similar values to FIGS and complement our own core capabilities.
We compete against wholesalers of healthcare apparel, such as Careismatic Brands, Barco Uniforms, Landau Uniforms and Superior Group of Companies. Additionally, we compete with healthcare apparel aggregated retailers, such as Scrubs & Beyond and Uniform Advantage, as well as DTC brands such as 14 Table of Contents Jaanuu and Mandala.
We compete against wholesalers of healthcare apparel, such as Careismatic Brands, Barco Uniforms, Landau Uniforms, and Superior Group of Companies. Additionally, we compete with healthcare apparel aggregated retailers, such as Scrubs & Beyond and Uniform Advantage, as well as DTC brands such as Jaanuu and Mandala.
Government Regulation In the United States and the other jurisdictions in which we operate, we are subject to labor and employment laws, laws governing advertising, environmental, health, and safety (“EHS”) regulations, product labeling regulations, product safety regulations and other laws, including consumer protection regulations that apply to the promotion and sale of merchandise and the operation of fulfillment centers and privacy, data security and data protection laws and regulations, such as the California Consumer Privacy Act (the “CCPA”), the California Privacy Rights Act (“CPRA”), the General Data Protection Regulation 2016/679 (“GDPR”), the UK Data Protection Act 2018 and the UK General Data Protection Regulation, (together “UK GDPR”), the ePrivacy Directive and national implementing and supplementing laws in the European Economic Area and relevant legislation in the UK.
Government Regulation In the United States and the other jurisdictions in which we operate, we are subject to labor and employment laws, laws governing advertising, environmental, health, and safety (“EHS”) regulations, product labeling regulations, product safety regulations and other laws, including consumer protection regulations that apply to the promotion and sale of merchandise and the operation of fulfillment centers and privacy, data security and data protection laws and regulations, such as the California Consumer Privacy Act (as amended by the California Privacy Rights Act, the “CCPA”), the EU General Data Protection Regulation 2016/679 (“EU GDPR”), the UK Data Protection Act 2018 and the UK General Data Protection Regulation, (together, the “UK GDPR”) (the EU GDPR and UK GDPR together, the “GDPR”), the ePrivacy Directive and national implementing and supplementing laws in the European Economic Area (the “EEA”) and relevant legislation in the UK.
What Sets Us Apart We believe that the following competitive strengths have been key drivers of our success to date and strategically position us for continued success. Deeply Passionate, Loyal Community By December 31, 2023, our deeply loyal community consisted of approximately 2.6 million active customers.
What Sets Us Apart We believe that the following competitive strengths have been key drivers of our success to date and strategically position us for continued success. Deeply Passionate, Loyal Community By December 31, 2024, our deeply loyal community consisted of approximately 2.7 million active customers.
We also partner with New Balance to design and offer shoes that provide greater slip-resistance, cushion and moisture-repellent qualities that our healthcare professionals need. We also offer necessities such as scrub caps, lanyards, badge reels, tote bags, baseball caps and beanies.
We also partner with New Balance to design and offer shoes that provide greater support, traction, cushion and moisture-repellent qualities that our healthcare professionals need. We also offer necessities such as scrub caps, lanyards, badge reels, tote bags, baseball caps, and beanies.
Our differentiated approach to creating authentic and meaningful relationships with our community has allowed us to build a growing base of approximately 2.6 million active customers as of December 31, 2023 who are passionate about and loyal to our brand.
Our differentiated approach to creating authentic and meaningful relationships with our community has allowed us to build a growing base of approximately 2.7 million active customers as of December 31, 2024 who are passionate about and loyal to our brand.
As of December 31, 2023, our workforce predominantly remains in a hybrid work environment, and we have provided resources to enable employees to effectively manage remote work, such as web conferencing and project collaboration solutions and equipment and supplies for at-home offices. We have also supported our team with hybrid-focused learning and development training.
As of February 14, 2025, our workforce predominantly remains in a hybrid work environment, and we have provided resources to enable employees to effectively manage remote work, such as web conferencing, project collaboration solutions, equipment, and supplies for at-home offices. We have also supported our team with hybrid-focused learning and development training.
As of 2022, there were approximately 22 million healthcare and social assistance industry sector workers in the United States, according to the U.S. Census Bureau and U.S. Bureau of Labor Statistics. Furthermore, according to the U.S.
As of 2024, there were approximately 23 million healthcare and social assistance industry sector workers in the United States, according to the U.S. Census Bureau and U.S. Bureau of Labor Statistics. Furthermore, according to the U.S.
As part of our quality assurance procedures, FIGS team members visit all Tier I Suppliers on average two times each month, and they visit our Tier I Suppliers’ direct suppliers (“Tier II Suppliers”), to the extent nominated by FIGS, on average one time each month, to review their operations and our quality requirements.
As part of our quality assurance procedures, FIGS team members visit all Tier I Suppliers on average two times each month, and make periodic visits to our Tier I Suppliers’ direct suppliers (“Tier II Suppliers”), to the extent nominated by FIGS, to review their operations and our quality requirements.
These brands have included New Balance, Eko Health and Everton Football Club. As part of these partnerships, we often produce co-branded content to help further increase our brand awareness. Performance Marketing Our performance marketing aims to offer the right products to the right healthcare professionals at the right times.
These brands have included New Balance, the United States Olympic and Paralympic Committee, Star Wars, Eko Health and Everton Football Club. As part of these partnerships, we often produce co-branded content to help further increase our brand awareness. Performance Marketing Our performance marketing aims to offer the right products to the right healthcare professionals at the right times.
Each of our DTC digital platform and our retail channel also give us access to valuable real-time customer data. We leverage our rich customer data set, bolstered by the inherent benefits of our DTC model, to serve our community more effectively and efficiently.
Each of our DTC digital platform and Community Hubs also give us access to valuable real-time customer data. We leverage our rich customer data set, bolstered by the inherent benefits of our DTC model and close connection to our customers, to serve our community more effectively and efficiently.
Unlike most other categories in the apparel sector, scrubwear, due to its frequent wear as a uniform, is largely non-discretionary, replenishment-driven, recession resistant and less susceptible to fashion or fad risk.
Unlike most other categories in the apparel sector, we believe that scrubwear, due to its frequent wear as a uniform, is largely non-discretionary and resistant to recessionary pressures, replenishment-driven and less susceptible to fashion or fad risk.
As of December 31, 2023, we offered 15 core scrubwear styles in seven core colors. In 2023, our core scrubwear styles represented over 71% of our net revenues. To complement our scrubwear offering, we also offer non-scrubwear products, which together with our scrubwear, are intentionally designed to be worn as a layering system from base layer to outer layer.
As of December 31, 2024, we offered 15 core scrubwear styles in nine core colors. In 2024, our core scrubwear styles represented over 66% of our net revenues. We also offer non-scrubwear products, which together with our scrubwear, are intentionally designed to be worn as a layering system from base layer to outer layer.
Our under underscrubs include several styles of underwear. Outer layer products include footwear, lab coats, and a variety of vests, jackets and fleeces. Our non-scrubwear product offerings also include our FIGSPRO offerings, which is our polished and performance-driven, office-ready collection.
Our under underscrubs include several styles of underwear. Outer layer products include footwear, lab coats, and a variety of vests, jackets and fleeces. Our non-scrubwear product offerings also include our FIGSPRO offerings, which is our polished and performance-driven office-ready collection, as well as loungewear, which is our collection designed for off-shift moments.
We develop proprietary and customized data solutions designed to optimize our product innovation, inventory analytics, marketing efforts and operational efficiency. Our data team works directly with key functional areas of the Company, including apparel design and merchandising, customer acquisition and retention, demand forecasting and inventory optimization.
We also develop proprietary and customized data solutions designed to optimize our product innovation, inventory analytics, marketing efforts, website performance and operational efficiency. Our data team works directly with key functional areas of the Company, including product design and merchandising, customer acquisition and retention, demand forecasting and inventory optimization, engineering, Community Hubs, international and customer experience.
We also recently launched our first physical retail store, which we call a Community Hub, and which represents a first-of-its-kind experience for healthcare professionals. Our offerings include scrubwear and non-scrubwear, such as outerwear, underscrubs, footwear, compression socks, lab coats, loungewear and other apparel.
We also operate physical retail stores, which we call Community Hubs, and which represent a first-of-its-kind retail experience for healthcare professionals. Our offerings include scrubwear and non-scrubwear, such as outerwear, underscrubs, footwear, compression socks, lab coats, loungewear and other apparel.
In addition to base compensation and awards granted pursuant to our equity incentive plan, we offer numerous benefits, including a 401(k) plan with matching, health (medical, dental and vision) insurance, life insurance, paid time off, paid parental leave, a referral bonus program and company-sponsored short term and long term disability.
In addition, we offer numerous benefits, including a 401(k) plan with matching, health (medical, dental and vision) insurance, life insurance, paid time off, paid parental leave, a referral bonus program and company-sponsored short term and long term disability.
Because we can pinpoint specifically who our customers are and where they live and work, we are able to target them with greater efficiency and less expense than other companies whose customers come from a much less defined group.
Because we can pinpoint specifically who our customers are and where they live and work, we are able to target them with greater efficiency and less expense than other companies whose customers come from a much less defined group. Our Data Analytics Data is an essential and embedded capability throughout our organization.
Our employee-led Culture Committee strives to foster an empowering, supportive and healthy experience for all FIGS employees and helps enable all FIGS voices to be represented and heard, by routinely organizing Company-wide events and initiatives focused on diversity and inclusion.
To accomplish this goal, we are intensely focused on our culture, team-building initiatives and well-being. Our employee-led Culture Committee strives to foster an empowering, supportive, and healthy experience for all FIGS employees and helps enable all FIGS voices to be represented and heard, by routinely organizing Company-wide events and initiatives focused on diversity and inclusion.
We also launch campaigns highlighting our product innovation and the story behind FIGS. Campaigns are launched through a holistic, multi-media strategy, where hero messaging and imagery are woven through every platform, including email, digital, display, site, direct-mail, commercials, social media and ambassadors. We believe our campaigns and inspiring messaging contribute to high brand affinity among our community. Social Media.
We also launch campaigns highlighting our product innovation and the story behind FIGS. Campaigns are launched through a holistic, multi-media strategy, where consistent messaging and imagery are woven through every platform and channel, including email, digital, display, site, mobile app, Community Hubs, direct-mail, commercials, social media and ambassadors.
This approach enables us to gather and manage extensive data, and rapidly and directly apply that data to deliver valuable insights that improve our core operating activities and decision-making processes, leading to operational efficiencies throughout our supply chain, inventory management and new product development.
This approach enables us to gather and manage extensive data, and rapidly and directly apply that data to deliver valuable insights that improve our core operating activities and decision-making processes, including with respect to our supply chain, inventory management, new product development, Community Hub experience and international markets.
The 15 core scrubwear styles that we produce year-round represented over 71% of our net revenues in 2023. Similar to our core FIONx fabric, the continuous production of our core scrubwear styles provides us with consistency and scale in our production. As a company devoted to the needs of healthcare professionals, quality is critically important to us.
Similar to our core FIONx fabric, the continuous production of our core scrubwear styles provides us with consistency and scale in our production. As a company devoted to the needs of healthcare professionals, quality is critically important to us.
For example, in 2021, we made a $500,000 multi-year commitment to fund the development of an operating theater and ICU in Kenya, which opened in early 2024.
For example, in 2021, we made a $500,000 multi-year commitment to fund the development of an operating theater and ICU in Kenya, which opened in early 2024. We also have developed an advocacy program, through which we are actively lobbying for the FIGS Advocacy Platform.
We are proud of our engagement index score of 73%, with 78% participation, which is on par with the national average of organizations benchmarked.
We are proud of our engagement index score of 71%, with 89% participation, which is above the national average of organizations benchmarked.
As of December 31, 2023, we had 15 granted U.S. design patents, seven pending U.S. design patent applications, 82 granted foreign design registrations and 22 pending foreign design applications, which relate to our core scrubwear and other apparel designs.
As of December 31, 2024, we had 16 granted U.S. design patents, eight pending U.S. design patent applications, 103 granted foreign design registrations, and one pending foreign design application, which relate to our core scrubwear and other apparel designs.
Additionally, we frequently launch limited edition scrubwear styles in both core and limited edition colors and transition limited edition scrubwear styles and colors to our core collection from time to time, based on customer feedback and sales performance. For example, since December 31, 2023, we have added one additional color to our core colors for 2024. • Non-Scrubwear.
Additionally, we frequently launch limited edition scrubwear styles in both core and limited edition colors and transition limited edition scrubwear styles and colors to our core collection from time to time, based on customer feedback and sales performance. • Non-Scrubwear.
Our TEAMS business is centered around partnering with institutional departments and medical offices that wish to standardize and professionalize their organizations’ uniforms. Our Community Hubs In 2023, we opened our first permanent physical retail store in Los Angeles, California, which we call a Community Hub, and we plan to open additional Community Hubs in the future.
Our TEAMS business is centered around partnering with institutional departments, medical offices and concierge clinics that wish to standardize and professionalize their organizations’ uniforms. Our Community Hubs We currently operate two physical retail stores, which we call Community Hubs, and we plan to open additional Community Hubs in the future.
Our Marketing Strategy We create differentiated brand marketing content and utilize performance marketing to drive customers from awareness to consideration to conversion. 9 Table of Contents Brand Marketing We attract and retain customers in large part through our unique ability to engage with our community, which we do across multiple channels, including marketing campaigns, social media, our Ambassador Program, brand activations and brand collaborations.
Brand Marketing We attract and retain customers in large part through our unique ability to engage with our community, which we do across multiple channels, including marketing campaigns, social media, our Ambassador Program, brand activations and brand collaborations. Marketing campaigns.
We strive to create the most innovative, functional, comfortable and stylish healthcare apparel in the industry designed to specifically address the needs of healthcare professionals—extraordinary people who deserve to look, feel and perform at their best.
As such, we deliver innovation across fabric, function, fit and style, all of which is led by comfort and performance. We strive to create the most innovative, functional, comfortable and stylish healthcare apparel in the industry designed to specifically address the needs of healthcare professionals—extraordinary people who deserve to look, feel and perform at their best.
The 2023 engagement survey revealed that 87% of our team members felt aligned with the FIGS mission and values, taking pride in being a part of FIGS. 94% of our employees reported that they know how their work is contributing to the broader FIGS goals, underscoring their commitment to the Company’s success.
The 2024 engagement survey revealed that 89% of our team members were proud to work at FIGS and 85% felt aligned with the FIGS mission and values. 93% of our team members reported that they know how their work is contributing to the broader FIGS goals, underscoring their commitment to the Company’s success.
While compliance with these laws and regulations often requires the dedication of time and effort of employees, as well as financial resources, for the fiscal year ended December 31, 2023 compliance with these laws and regulations, including any applicable environmental regulations, has not had, and in any material subsequent period is not expected to have, a material effect on our capital expenditures, results of operations or competitive position.
While compliance with these laws and regulations often requires the dedication of time and effort of employees, as well as financial resources, for the fiscal year ended December 31, 2024 compliance with these laws and regulations, including any applicable environmental regulations, has not had, and in any material subsequent period is not expected to have, a material effect on our capital expenditures, results of operations or competitive position. 14 Table of Contents Intellectual Property To establish and protect our proprietary rights, we rely on a combination of trademark, patent, copyright, and trade secret laws, as well as contractual restrictions in license agreements, confidentiality and non-disclosure agreements and other contracts.
Our in-house innovation and design team works closely with our suppliers to develop the materials for our products that meet our exacting standards for comfort, stretch, durability, functionality and performance.
We believe our approach has enabled us to produce premium products through greater control of the end-to-end production process. Our in-house innovation and design team works closely with our suppliers to develop the materials for our products that meet our exacting standards for comfort, stretch, durability, functionality and performance.
To further strengthen our connections with our community, we periodically open temporary physical pop-up shops and host in-person events in local markets across the United States. These brand activations have included mobile pop-up shops near college campuses and in various cities, which increase the number of locations where customers can experience FIGS in person and purchase our products.
These brand activations have included mobile pop-up shops near college campuses and in various cities, which increase the number of locations where customers can experience FIGS in person and purchase our products.
Our Ambassador Program is a microcosm of our FIGS community—they are invaluable to us, they inspire and inform everything we do, and we would not be where we are today without them. Brand Activations .
Our Ambassador Program is a microcosm of our FIGS community—they are invaluable to us, they inspire and inform everything we do and we would not be where we are today without them. Brand Activations . We periodically open temporary physical pop-up shops and host in-person events in local markets across the United States.
To drive further engagement and individual ownership of the Company, we also maintain an employee stock purchase plan, which provides eligible employees an opportunity to purchase additional FIGS stock at a discounted price. Culture, Engagement and Perks We believe that to be successful, each of our employees must feel empowered to show up as their true authentic selves.
To drive further engagement and individual ownership of the Company, we also maintain an employee stock purchase plan, which provides eligible employees an opportunity to purchase additional FIGS stock at a discounted price.
We also have developed an advocacy program, through which we are actively lobbying for our Awesome Humans Bill, a platform we designed to address the biggest challenges facing healthcare professionals today, including the need for equitable compensation, access to mental health services, workplace safety, reduced administrative burdens, and training.
The FIGS Advocacy Platform is designed to address the biggest challenges facing healthcare professionals today, including the need for equitable compensation, access to mental health services, workplace safety, reduced administrative burdens, and training.
As of December 31, 2023, we owned 15 U.S. trademark registrations, 13 pending U.S. trademark applications, 114 foreign trademark registrations and 45 pending foreign trademark applications.
As of December 31, 2024, we owned 18 U.S. trademark registrations, six pending U.S. trademark applications, 134 foreign trademark registrations, and 29 pending foreign trademark applications.
Our products sold outside of the United States may be subject to tariffs, treaties and various trade agreements, as well as laws affecting the importation of consumer goods.
Our products sold outside of the United States may be subject to tariffs, treaties and various trade agreements, as well as laws affecting the importation of consumer goods. For example, President Trump recently imposed new tariffs on products manufactured in China, Mexico and Canada (with the tariffs on imports from Mexico and Canada temporarily paused).
We are also subject to evolving regulations regarding the environmental and social provenance of products, including under the Tariff Act of 1930, Uyghur Forced Labor Prevention Act (“UFLPA”), and other similar laws and regulations. We monitor changes in these laws and believe that we are in material compliance with applicable laws.
China has imposed retaliatory tariffs on the U.S. and additional retaliatory tariffs may be imposed in the future. We are also subject to evolving regulations regarding the environmental and social provenance of products, including under the Tariff Act of 1930, Uyghur Forced Labor Prevention Act (“UFLPA”), and other similar laws and regulations.
Our Supply Chain We have built a supply chain that is optimized for our business and through which we control the design, development and fulfillment of our products. Sourcing and Manufacturing We have a diversified and flexible supply chain that leverages global third-party suppliers and manufacturers spread across multiple continents to produce our product components and finished products.
Sourcing and Manufacturing We have a diversified and flexible supply chain that leverages global third-party suppliers and manufacturers spread across multiple continents to produce our raw materials, product components and finished products. We directly and actively coordinate with our suppliers and manufacturers on every step of our product development and production process.
Bureau of Labor Statistics, as of September 2023, healthcare and social assistance jobs are projected to be the fastest growing of any sector, and are estimated to create about 45% of all projected job gains from 2022 to 2032.
Bureau of Labor Statistics, as of August 2024, healthcare and social assistance jobs are projected to have the largest growth and be the fastest growing of any sector from 2023 to 2033.
We were the first healthcare apparel company to have a significant presence on social media. We use social media to foster a dialogue with our community and grow an enthusiastic, highly engaged fan base. Today, we have over one million followers on Instagram, which is over twice the number of followers of our nearest DTC competitor.
We believe our campaigns and inspiring messaging contribute to high brand affinity among our community. Social Media. We were the first healthcare apparel company to have a significant presence on social media. We use social media to foster a dialogue with our community and grow an enthusiastic, highly engaged fan base.
FIGS is the first company to have brand ambassadors in the healthcare apparel industry, providing a platform for healthcare professionals to tell their stories. Our Ambassador Program consists of Awesome Humans from around the world, representing a diverse array of specialties and levels of experience across various professions and geographies.
Our Ambassador Program consists of Awesome Humans from around the world, representing a diverse array of specialties and levels of experience across various professions and geographies.
Our Community Hubs are intentionally designed to host events to celebrate healthcare professionals, provide programming on important issues that impact them, and create opportunities to network and share their stories.
Our Community Hubs are intentionally designed to host events to celebrate healthcare professionals, provide programming on important issues that impact them, and create opportunities to network and share their stories. Our International Strategy We currently ship to 32 countries outside of the United States, across North America, Central America, South America, Europe, the Asia Pacific region and the Middle East.
We collaborate with other highly regarded brands to further extend our brand reach and enhance our appeal with customers. Through our Ambassador Program, we have formed meaningful relationships with hundreds of Awesome 7 Table of Contents Humans who help us reach millions of healthcare professionals around the world in an intimate, authentic and personalized way.
Through our Ambassador Program, we have formed meaningful relationships with hundreds of Awesome Humans who help us reach millions of healthcare professionals around the world in an intimate, authentic and personalized way. 7 Table of Contents Industry-Leading Product Innovation with Purpose Our design philosophy is rooted in Technical Comfort— the conviction that design, comfort and function are non-negotiable.
As of December 31, 2023, we employed 354 team members in the United States across our Santa Monica, California headquarters, our City of Industry, California fulfillment center location, our Los Angeles, California Community Hub and remote locations. As of December 31, 2023, 98% of our team members were permanent employees and 97% were full-time.
As of February 14, 2025, we employed 316 team total members, including 313 in the United States across our Santa Monica, California headquarters, our Goodyear, Arizona fulfillment center location, our Community Hubs, and remote locations and 3 in international locations. As of February 14, 2025, 96% of our team members were permanent employees and 96% were full-time.
The information contained on, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this Annual Report on Form 10-K.
Our principal executive offices are located at 2834 Colorado Avenue, Suite 100, Santa Monica, California 90404 and our telephone number is (424) 300-8330. Our website address is www.wearfigs.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this Annual Report on Form 10-K.
Our 2021 Equity Incentive Award Plan additionally provides for grants of equity awards to employees. We are proud that we grant all full-time permanent new hires equity as part of their total compensation package, which we believe fosters a stronger sense of ownership and aligns our employees’ interests with the interests and growth of the Company.
Compensation and Benefits We aim to offer highly competitive compensation and benefits designed to enable us to attract, retain, and motivate exceptional talent. Our 2021 Equity Incentive Award Plan additionally provides for grants of equity awards to employees, which we believe fosters a stronger sense of ownership and aligns our employees’ interests with the interests and growth of the Company.
We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective. 15 Table of Contents Seasonality For information regarding the seasonality of our business, please refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
Seasonality For information regarding the seasonality of our business, please refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K. Corporate and Available Information We were formed in 2013 as FIGS, Inc., a Delaware corporation.
We also have a dynamic merchandising model—due to the largely non-discretionary, replenishment-driven nature of scrubwear, we maintain lessened inventory risk driven by a relatively high volume of repeat purchases and a focus on our core scrubs offerings.
We directly and actively coordinate with our suppliers on every step of our product development and production process to ensure that our extremely high quality standards are met. We also have a dynamic merchandising model with lessened inventory risk, as a result of the largely non-discretionary, replenishment-driven nature of scrubwear and a focus on our core scrubs offerings.
The vast majority of our production utilizes our main scrubwear fabric technology FIONx, which enables us to achieve consistency and scale. 11 Table of Contents Our in-house production team selects our fabric and trim suppliers, directly manages the relationships between these suppliers and our finished product manufacturers, and drives our production allocation strategy and production schedules.
Our in-house production team selects our fabric and trim suppliers, directly manages the relationships between these suppliers and our finished product manufacturers, and drives our production allocation strategy and production schedules. 11 Table of Contents The 15 core scrubwear styles that we produce year-round represented over 66% of our net revenues in 2024.
By pairing our own in-house technology with cloud software, we have been able to create a truly differentiated user experience that we can adjust as necessary while also leveraging engineering talent from some of the best SAAS companies in the world to scale rapidly and efficiently.
By pairing our own in-house technology with cloud software, we have been able to create a truly differentiated user experience that we can adjust as necessary. Our Supply Chain We have built a supply chain that is optimized for our business and through which we control the design, development and fulfillment of our products.
For healthcare professionals who work long shifts and all hours of the day and night, the convenience of eCommerce is even more necessary. Lastly, consumers are increasingly attracted to, and interested in engaging with, purpose-driven brands using social media channels.
Lastly, consumers are increasingly attracted to, and interested in engaging with, purpose-driven brands using social media channels.
From time to time, we also rely on additional third-party storage locations to house inventory and we regularly evaluate our distribution infrastructure and capacity to ensure that we are able to meet our anticipated needs and support our continued growth and operations.
Our embroidery workshop is staffed by FIGS team members, who complete the application and quality control of our embroidery and heat press products. 12 Table of Contents From time to time, we have also relied, and may in the future again rely, on additional third-party locations for inventory and other logistics purposes, and we regularly evaluate our distribution infrastructure and capacity to ensure that we are able to meet our anticipated needs and support our continued growth and operations.
We purchase our finished product from our manufacturers on a purchase order basis and do not have any long-term agreements requiring us to use any supplier or manufacturer. We generally have long-standing relationships with our vendors, which are strengthened by the consistency and longevity of our core fabric and core style profile.
We purchase our finished product from our manufacturers on a purchase order basis, and while we currently utilize certain sourcing agent services to identify potential suppliers and manufacturers and to help manage such relationships, we do not have any long-term agreements requiring us to use any particular supplier or manufacturer.
As we continue to grow, we are proactive in enabling every single person at FIGS to have a platform to be seen, heard and celebrated. To accomplish this goal, we are intensely focused on our culture, team-building initiatives and well-being.
Culture, Engagement and Perks We believe that to be successful, each of our employees must feel empowered to show up as their true authentic selves. As we continue to grow, we are proactive in enabling every single person at FIGS to have a platform to be seen, heard and celebrated.
Some of our issued U.S. design patents will expire in 2036, while others will expire in 2037 or 2038.
Some of our issued U.S. design patents will expire in 2036, while others will expire between 2037 and 2039. We intend to pursue additional intellectual property protection to the extent we believe it would be beneficial and cost-effective.
Warehouse and Embroidery We distribute our products from our fulfillment center located in City of Industry, California, which is owned and operated by a third-party logistics provider.
Warehouse and Embroidery We distribute our products from a fulfillment center that we lease in Goodyear, Arizona. Our fulfillment center is operated by a third-party logistics provider, with FIGS team members overseeing key operational functions. Within this space, we also operate a technology-enabled embroidery workshop, through which we offer embroidery and heat press on a variety of products.
We also source new suppliers and manufacturers to support our ongoing innovation and growth, particularly in our non-scrubwear categories, and are continuing to evolve our sourcing capabilities to strengthen our supply chain, which includes diversifying certain manufacturing operations geographically.
We generally have long-standing relationships with our vendors, which are strengthened by the consistency and longevity of our core fabric and core style profile. We also source new suppliers and manufacturers to support our ongoing innovation and growth, particularly in our non-scrubwear categories.
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We directly and actively coordinate and supervise every step of our product development and production process to ensure that our extremely high quality standards are met.
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Finally, we believe the healthcare apparel industry will be supported by the long-term secular growth of the healthcare sector. The Industry Has Historically Lacked Innovation and Has Fundamentally Changed Prior to FIGS, the healthcare apparel industry had operated for over 100 years with little change or innovation.
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Finally, we believe the healthcare apparel industry will be supported by the long-term secular growth of the healthcare sector. In 2020, the total addressable market of the healthcare apparel industry was an estimated $12.0 billion in the United States alone and $79.0 billion globally, according to an April 2021 Frost & Sullivan study that we commissioned.
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We collaborate with other highly regarded brands to further extend our brand reach and enhance our appeal with customers.
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Our strong brand affinity is demonstrated by our high Net Promoter Score (“NPS”) of +79 through December 31, 2023. Industry-Leading Product Innovation Our design philosophy is rooted in Technical Comfort— the conviction that design, comfort and function are non-negotiable. As such, we deliver innovation across fabric, function, fit and style, all of which is led by comfort and performance.
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As part of our global expansion, we work to localize our site 9 Table of Contents experience as well as build out organic and paid marketing channels via our ambassador network and digital marketing. Disrupting global healthcare apparel through continued international expansion is a key component of our overall business strategy.
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We are proud of our robust following and above-average engagement rate. Social media is the primary place for our community to congregate, share stories, follow product launches and interact with our brand, and in turn, our community shares feedback that informs our product and content decisions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

188 edited+47 added−24 removed385 unchanged
Biggest changeSubstantially all of our suppliers and manufacturers are located outside of the United States, and as a result, we are subject to risks associated with doing business abroad, including: • the imposition of new laws and regulations, including those relating to our due diligence of our supply chain as well as labor conditions, quality and safety standards, imports, duties, taxes and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; • political unrest, conflict or war, such as Russia’s invasion of Ukraine and violence in the Middle East, terrorism, labor disputes and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured, and geopolitical tensions or conflicts affecting global trade or resulting in trade barriers or disputes among countries; • reduced protection for intellectual property rights, including trademark protection, in some countries, particularly in China; • disruptions or delays in shipments across our supply chain, whether due to port congestion, labor disputes, product regulations and/or inspections or other factors, natural disasters, including in connection with climate change, or health pandemics, or other transportation disruptions; and • the impact of health conditions, such as COVID-19, and related government and private sector responsive actions, and other changes in local economic conditions in countries where our manufacturers, suppliers or customers are located. 26 Table of Contents These and other factors beyond our control could interrupt our suppliers’ production in offshore facilities, influence the ability of our suppliers to export our products cost-effectively or at all and inhibit our suppliers’ ability to procure certain materials, any of which could harm our business, financial condition and results of operations.
Biggest changeSubstantially all of our suppliers and manufacturers are located outside of the United States, and as a result, we are subject to risks associated with doing business abroad, including: • the imposition of new laws, regulations and executive orders, including those relating to our due diligence and disclosure of our supply chain as well as sustainability, labor conditions, quality and safety standards, imports, duties, tariffs, taxes and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; • political unrest, conflict or war, such as Russia’s invasion of Ukraine and conflict in the Middle East, terrorism, labor disputes and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured, and geopolitical tensions or conflicts affecting global trade or resulting in trade barriers or disputes among countries; • reduced protection for intellectual property rights, including trademark protection, in some countries, particularly in China; • disruptions or delays in shipments across our supply chain, whether due to port congestion, labor disputes, product regulations and/or inspections or other factors, natural disasters, including in connection with climate change, or health pandemics, or other transportation disruptions; and • the impact of health conditions and related government and private sector responsive actions, and other changes in local economic conditions in countries where our manufacturers, suppliers or customers are located.
As a replenishment-driven healthcare apparel brand, demand for our products may be impacted by healthcare workforce-related stress, including if the number of employed healthcare workers were to decline.
As a replenishment-driven healthcare apparel brand, demand for our products may be impacted by healthcare workforce-related stress, including if the number of employed healthcare workers were to decline.
In addition, in the event that it is more difficult for our customers to buy products from us on their mobile devices, or if our customers choose not to buy products from us on their mobile devices or to use mobile products that do not offer access to our website or mobile app, 33 Table of Contents our customer growth could be harmed and our business, financial condition and results of operations may be adversely affected.
In addition, in the event that it 33 Table of Contents is more difficult for our customers to buy products from us on their mobile devices, or if our customers choose not to buy products from us on their mobile devices or to use mobile products that do not offer access to our website or mobile app, our customer growth could be harmed and our business, financial condition and results of operations may be adversely affected.
Among others, these provisions include that: • provide for a dual-class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, even if they own significantly less than a majority of the outstanding shares of our common stock; • restrict the forum for certain litigation against us to Delaware or the federal courts, as applicable; • our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • our stockholders may act by written consent until such time as holders of our Class B common stock beneficially own less than a majority of the voting power, at which time our stockholders will no longer be able to act by written consent and instead must take action at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by the chair of the board of directors, the chief executive officer, or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • our board of directors may alter our amended and restated bylaws without obtaining stockholder approval; • the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and • our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
Among others, these provisions include that: • provide for a dual-class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, including the election 46 Table of Contents of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, even if they own significantly less than a majority of the outstanding shares of our common stock; • restrict the forum for certain litigation against us to Delaware or the federal courts, as applicable; • our board of directors has the exclusive right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • our stockholders may act by written consent until such time as holders of our Class B common stock beneficially own less than a majority of the voting power, at which time our stockholders will no longer be able to act by written consent and instead must take action at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by the chair of the board of directors, the chief executive officer, or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • our board of directors may alter our amended and restated bylaws without obtaining stockholder approval; • the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and • our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.
Our website, portions of which are run through Shopify and IT Systems, including those integral to our warehousing and order fulfillment operations and some of which are managed by third parties, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors or catastrophic events.
Our website, portions of which are run through Shopify and other IT Systems, including those integral to our warehousing and order fulfillment operations and some of which are managed by third parties, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors or catastrophic events.
Even if our net revenues continue to increase, we expect that our growth rate could be negatively impacted due to a number of other reasons, including if there is a slowdown in the growth of demand for our products, increased competition, a decrease in the growth or reduction in the size of our overall market or if we cannot capitalize on growth opportunities.
Even if our net revenues increase, we expect that our growth rate could be negatively impacted due to a number of other reasons, including if there is a slowdown in the growth of demand for our products, increased competition, a decrease in the growth or reduction in the size of our overall market or if we cannot capitalize on growth opportunities.
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. We currently rely on third-party global logistics and shipping providers to ship raw materials, receive inbound inventory and deliver our products.
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. We currently rely on third-party global logistics and shipping providers to ship raw materials, receive inbound inventory and deliver our products to our customers.
We will need to operate additional fulfillment centers in the future to keep pace with the growth of our business, and we cannot assure you that we will be able to locate suitable facilities on commercially acceptable terms in accordance with our expansion plans, nor can we assure you that we will be able to recruit qualified managerial and operational personnel to support our expansion plans.
We will need, and intend, to operate additional fulfillment centers in the future to keep pace with the growth of our business, and we cannot assure you that we will be able to locate suitable facilities on commercially acceptable terms in accordance with our expansion plans, nor can we assure you that we will be able to recruit qualified managerial and operational personnel to support our expansion plans.
Failure to manage our employee base and hiring needs effectively, including successfully integrating our new hires, may adversely affect our business, financial condition and results of operations. In addition, we are required to manage relationships with a growing number of customers, suppliers, manufacturers, distributors and other third parties.
Failure to manage our employee base and hiring needs effectively, including successfully integrating our new hires, may adversely affect our business, financial condition and results of operations. In addition, we are required to manage relationships with a growing number of customers, suppliers, manufacturers and other third parties.
In addition, our future success depends in part on our ability to increase sales to our existing customers over time, as a significant portion of our net revenues are generated from sales to existing customers, particularly those existing customers who are highly engaged and make frequent and/or large purchases of the products we offer.
In addition, our future success depends in part on our ability to increase sales to our existing customers over time. A significant portion of our net revenues are generated from sales to existing customers, particularly those existing customers who are highly engaged and make frequent and/or large purchases of the products we offer.
Any violation of data or security laws, including the GDPR or UK GDPR, by our third-party processors, or their acts or omissions that cause us to violate our legal obligations, could have an adverse effect on our business and result in substantial fines and penalties.
Any violation of data or security laws, including the EU GDPR or UK GDPR, by our third-party processors, or their acts or omissions that cause us to violate our legal obligations, could have an adverse effect on our business and result in substantial fines and penalties.
In addition, customer complaints or negative publicity related to our website, mobile app, products, product delivery times, customer data handling, marketing efforts, security practices or customer support, especially on blogs and social media websites, could diminish customer loyalty and community engagement.
In addition, customer complaints or negative publicity related to our website, mobile app, Community Hubs, products, product delivery times, customer data handling, marketing efforts, security practices or customer support, especially on blogs and social media websites, could diminish customer loyalty and community engagement.
Simultaneously, there are efforts by some parties to reduce companies’ efforts on certain ESG-related matters, including by some state policymakers. Both advocates and opponents to certain ESG matters are increasingly resorting to a range of activism forms, including media campaigns and litigation, to advance their perspectives.
Simultaneously, there are efforts by some parties to reduce companies’ efforts on certain ESG-related matters, including by some state and federal policymakers. Both advocates and opponents to certain ESG matters are increasingly resorting to a range of activism forms, including media campaigns and litigation, to advance their perspectives.
We rely on information technology networks and systems, our website and mobile app (collectively, “IT Systems”) to market and sell our products, manage a variety of internal and external business processes and activities and to comply with regulatory, legal and tax requirements.
We rely on information technology networks, systems and services, and our website and mobile app (collectively, “IT Systems”) to market and sell our products, manage a variety of internal and external business processes and activities and to comply with regulatory, legal and tax requirements.
Failure to continue to grow our net revenues or improve or maintain margins would adversely affect our business, financial condition and results of operations. You should not rely on our historical rate of growth as an indication of our future performance.
Failure to grow our net revenues or improve or maintain margins would adversely affect our business, financial condition and results of operations. You should not rely on our historical rate of growth as an indication of our future performance.
Our amended and restated certificate of incorporation provides that, unless we otherwise consent in writing, (A) (1) any derivative action or proceeding brought on behalf of the Company, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended or restated) or as to which the Delaware General Corporation Law confers exclusive jurisdiction on the Court of Chancery of the State of Delaware or (4) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware; and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Our amended and restated certificate of incorporation provides that, unless we otherwise consent in writing, (A) (1) any derivative action or proceeding brought on behalf of the Company, (2) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the Company to the Company or the Company’s stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended or restated) or as to which the Delaware General Corporation Law confers exclusive jurisdiction on the Court of Chancery of the State of Delaware or (4) any action asserting a claim governed by the internal affairs doctrine of the law of the State of Delaware shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, the 47 Table of Contents federal district court of the State of Delaware; and (B) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
For example, the EEA and the UK have adopted the GDPR or the UK GDPR respectively, which may apply to our collection, control, use, sharing, disclosure and other processing of data relating to an identified or identifiable living individual (personal data).
For example, the EEA and the UK have adopted the EU GDPR or the UK GDPR respectively, which may apply to our collection, control, use, sharing, disclosure and other processing of data relating to an identified or identifiable living individual (personal data).
There are also other risks and costs inherent in doing business in international markets, including: • the need to adapt and localize products for specific countries to account for, among other things, different cultural tastes, size and fit preferences or regulatory requirements; • difficulty establishing and managing international operations and the increased operations, travel, infrastructure, including establishment of local delivery service and customer service operations, and legal compliance costs associated with locations in different countries or regions; • increased shipping times to and from international markets; • the need to vary pricing and margins to effectively compete in international markets; • increased competition from local providers of similar products; • the ability to protect and enforce intellectual property rights abroad; • the need to offer customer support in various languages; • difficulties in understanding and complying with local laws, regulations and customs in other jurisdictions; • compliance with anti-bribery laws, such as the U.S.
There are also other risks and costs inherent in doing business in international markets, including: • the need to adapt and localize products for specific countries to account for, among other things, different cultural tastes, size and fit preferences or regulatory requirements; 20 Table of Contents • difficulty establishing and managing international operations and the increased operations, travel, infrastructure, including establishment of local delivery service and customer service operations, and legal compliance costs associated with locations in different countries or regions; • increased shipping times to and from international markets; • the need to vary pricing and margins to effectively compete in international markets; • increased competition from local providers of similar products; • the ability to protect and enforce intellectual property rights abroad; • the need to offer customer support in various languages; • difficulties in understanding and complying with local laws, regulations and customs in other jurisdictions; • compliance with anti-bribery laws, such as the U.S.
We also have limited experience with regulatory environments and market practices outside of the United States and cannot guarantee that we will be able to penetrate or successfully operate in any market outside of the United States.
We also have relatively limited experience with regulatory environments and market practices outside of the United States and cannot guarantee that we will be able to penetrate or successfully operate in any market outside of the United States.
For example, various policymakers, including the SEC and the State of California, have adopted or are considering adopting rules that would require companies to provide significantly expanded climate-related disclosures, which may require us to incur significant additional costs to comply with, including the implementation of significant additional internal controls regarding matters that have not been subject to such controls in the past, and which may impose increased oversight obligations on our management and board of directors.
For example, various policymakers, such as the State of California, have adopted or are considering adopting rules that would require companies to provide significantly expanded climate-related disclosures, which may require us to incur significant additional costs to comply with, including the implementation of significant additional internal controls regarding matters that have not been subject to such controls in the past, and which may impose increased oversight obligations on our management and board of directors.
Furthermore, changes to the terms of our shipping arrangements or the imposition of surcharges or surge pricing have in the past and may in the future adversely impact our margins and profitability.
Furthermore, changes to the terms of our shipping arrangements or the imposition of surcharges, surge pricing or accessorials have in the past and may in the future adversely impact our margins and profitability.
If competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline and could adversely affect our business, financial condition and results of operations. In addition, the job market in Southern California, where our principal offices, fulfillment center and the majority of our employees are located, is very competitive.
If competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline and could adversely affect our business, financial condition and results of operations. In addition, the job market in Southern California, where our principal offices and the majority of our employees are located, is very competitive.
In addition, our ability to expand in any of our target markets depends on a number of factors, including the cost, performance and perceived value associated with our products and traditional medical apparel. Even if the markets in which we compete meet the size estimates and growth forecasted, our business could fail to grow at similar rates, or at all.
In addition, our ability to expand in any of our target markets depends on a number of factors, including the cost, performance and perceived value associated with our products and traditional medical apparel. Even if the markets in which we compete meet size estimates and growth forecasts, our business could fail to grow at similar rates, or at all.
We and our third-party vendors have from time to time been subject to cyber, phishing, social engineering and business email compromise attacks in the past, none of which individually or in the aggregate has led to costs or consequences that have materially impacted our business, however, we and our third-party vendors may continue to be subject to such attacks and other cybersecurity incidents in the future.
We and our third-party vendors have from time to time been subject to cyber, phishing, social engineering, business email compromise and credential stuffing attacks in the past, none of which individually or in the aggregate has led to costs or consequences that have materially impacted our business; however, we and our third-party vendors may continue to be subject to such attacks and other cybersecurity incidents in the future.
Our ability to operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations, including those related to taxation, import and export tariffs and restrictions, economic sanctions and export controls, environmental regulations, land use rights, intellectual property, currency controls, network security, employee benefits, hygiene supervision and other matters.
Our ability to operate in China may be adversely affected by changes in U.S. and Chinese laws, regulations and executive orders, including those related to taxation, import and export tariffs and restrictions, economic sanctions and export controls, environmental regulations, land use rights, intellectual property, currency controls, network security, employee benefits, hygiene supervision and other matters.
To the extent ESG matters negatively impact our reputation, it may also impede our ability to compete effectively to attract and retain employees or customers, which may adversely impact our operations. In addition, we expect there will be increasing levels of regulation, disclosure-related and otherwise in the U.S. and abroad, with respect to ESG matters.
To the extent ESG matters negatively impact our reputation, it may also impede our ability to compete effectively to attract and retain employees or customers, which may adversely impact our operations. In addition, we expect there will be varying levels of regulation, disclosure-related and otherwise in the U.S. and abroad, with respect to ESG matters.
However, due to our historical pattern of sequential growth, as well as our decision to conduct select promotions during the holiday season, we historically have generated a higher proportion of net revenues, and incurred higher selling and marketing expenses, during the fourth quarter of the year compared to other quarters, and we expect these trends to continue.
However, due to our historical pattern of sequential growth, as well as our decision to conduct select promotions during the holiday season, we historically have generated a higher proportion of net revenues, and incurred higher selling and marketing expenses, during the fourth quarter of the year compared to other quarters, and these trends could continue.
It is possible that general business regulations and laws, or those specifically governing the internet or eCommerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices comply fully with all such laws and regulations.
It is possible that general business regulations, laws and executive orders, or those specifically governing the internet or eCommerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices comply fully with all such laws and regulations.
Existing and future regulations and laws could impede the growth of the internet, eCommerce or mobile commerce, which could in turn adversely affect our growth. These regulations and laws may involve taxes, tariffs, data privacy and data security, anti-spam, content protection, electronic contracts and communications, customer protection and internet neutrality.
Existing and future regulations, laws and executive orders could impede the growth of the internet, eCommerce or mobile commerce, which could in turn adversely affect our growth. These regulations and laws may involve taxes, tariffs, data privacy and data security, anti-spam, content protection, electronic contracts and communications, customer protection and internet neutrality.
These reasons include those described in these risk factors as well as the following: • fluctuations in product mix; • our ability to effectively launch and manage new products; • fluctuations in the levels or quality of inventory; • fluctuations in capacity as we expand our operations; • our success in engaging existing customers and attracting new customers; • the amount and timing of our operating expenses; • the timing and success of new products launches; • the impact of competitive developments and our response to those developments; 43 Table of Contents • our ability to manage our existing business and future growth; and • economic and market conditions, particularly those affecting our industry.
These reasons include those described in these risk factors as well as the following: • fluctuations in product mix; • our ability to effectively launch and manage new products; • fluctuations in the levels or quality of inventory; • fluctuations in capacity as we expand our operations; • our success in engaging existing customers and attracting new customers; • the amount and timing of our operating expenses; • the timing and success of new products launches; • the impact of competitive developments and our response to those developments; • our ability to manage our existing business and future growth; and • economic and market conditions, particularly those affecting our industry.
For example, the U.S. government has in recent years imposed increased tariffs on imports from certain foreign countries, and any imposition of additional tariffs by the United States could result in the adoption of tariffs by other countries, leading to a global trade war.
The U.S. government has in recent years imposed increased tariffs on imports from certain foreign countries, and any imposition of additional tariffs by the United States could result in the adoption of tariffs by other countries, leading to a global trade war.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the 46 Table of Contents person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
For example, hourly wages for employees of our third-party logistics provider have from time to time increased as a result of inflationary pressures, and may in the future increase further, which could adversely impact our fulfillment costs.
For example, hourly wages for employees of third-party logistics providers have from time to time increased as a result of inflationary pressures, and may in the future increase further, which could adversely impact our fulfillment costs.
The actual or perceived failure to comply with federal, state or foreign laws and regulations or our contractual obligations relating to data privacy, data protection, cybersecurity and customer protection, or the expansion of current or the enactment of new laws and regulations relating to data privacy, data protection, cybersecurity and customer protection, could adversely affect our business and our financial condition.
The actual or perceived failure to comply with federal, state or foreign laws and regulations or our contractual obligations relating to data privacy, data protection, cybersecurity and consumer protection, or the expansion of current or the enactment of new laws and regulations relating to data privacy, data protection, cybersecurity and consumer protection, could adversely affect our business and our financial condition.
Weather, fires, floods, power loss, earthquakes, or other events specifically impacting our or other shipping partners, such as labor disputes or shortages, financial difficulties, system failures and other disruptions to the operations of the shipping companies on which we rely, may also negatively our ability to ship raw materials, receive inbound inventory and ship merchandise to customers efficiently and cost-effectively.
For example, weather, fires, floods, power loss, earthquakes, or other events specifically impacting our or other shipping partners, such as labor disputes or shortages, financial difficulties, system failures and other disruptions to the operations of the shipping companies on which we rely, may negatively our ability to ship raw materials, receive inbound inventory and ship merchandise to customers efficiently and cost-effectively.
Product safety, labeling and licensing concerns may require us to voluntarily remove selected merchandise from our inventory. Such recalls or voluntary removal of merchandise can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs and legal expenses, which could adversely affect our results of operations.
Product safety, labeling and licensing 26 Table of Contents concerns may require us to voluntarily remove selected merchandise from our inventory. Such recalls or voluntary removal of merchandise can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs and legal expenses, which could adversely affect our results of operations.
If our performance metrics are not, or are not perceived to be, accurate representations of our business, if we discover material inaccuracies in our metrics or the data on which such metrics are based, or if we can no longer calculate any of our key performance metrics with a sufficient 30 Table of Contents degree of accuracy, investors could lose confidence in the accuracy and completeness of such metrics, which could cause the price of our Class A common stock to decline.
If our performance metrics are not, or are not perceived to be, accurate representations of our business, if we discover material inaccuracies in our metrics or the data on which such metrics are based, or if we can no longer calculate any of our key performance metrics with a sufficient degree of accuracy, investors could lose confidence in the accuracy and completeness of such metrics, which could cause the price of our Class A common stock to decline.
If we or our third-party service providers experience, or are believed to have experienced, security breaches 34 Table of Contents that result in marketplace performance or availability problems or the loss or corruption of, or unauthorized access to or disclosure of, personal data or confidential information, people may become unwilling to provide us the information necessary to make purchases on our website or mobile app.
If we or our third-party service providers experience, or are believed to have experienced, security breaches that result in marketplace performance or availability problems or the loss or corruption of, or unauthorized access to or disclosure of, personal data or confidential information, people may become unwilling to provide us the information necessary to make purchases on our website or mobile app.
In addition, the imposition of additional sales tax collection obligations, whether for prior years or prospectively, could create additional administrative burdens for us, put us at a competitive disadvantage if similar obligations are not imposed on our competitors and decrease our future sales, which could have an adverse impact on our business, financial condition and results of operations.
In addition, the imposition of additional sales tax collection obligations, whether for prior years or prospectively, could create additional administrative burdens for us, put us at a competitive disadvantage if similar 42 Table of Contents obligations are not imposed on our competitors and decrease our future sales, which could have an adverse impact on our business, financial condition and results of operations.
Any delays, interruption or increased costs in the supply of fabric or the manufacture of our products, or extended period of global supply chain disruption, could have an adverse effect on our ability to meet customer demand for our products and result in lower net revenues, increased cost of goods sold and lower net income from operations, both in the short and long term.
Any delays, 25 Table of Contents interruption or increased costs in the supply of fabric or the manufacture of our products, or extended period of global supply chain disruption, could have an adverse effect on our ability to meet customer demand for our products and result in lower net revenues, increased cost of goods sold and lower net income from operations, both in the short and long term.
Further, any such claim, proceeding or action could harm our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and suppliers or an inability to process credit card payments and may result in the 35 Table of Contents imposition of monetary penalties.
Further, any such claim, proceeding or action could harm our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and suppliers or an inability to process credit card payments and may result in the imposition of monetary penalties.
Also, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of “normal trade relations” status with, any country in which our products are manufactured, could significantly increase our cost of products and harm our business. 28 Table of Contents Our sales and profitability may decline if product costs increase or selling prices decrease.
Also, the imposition of trade sanctions or other regulations against products imported by us from, or the loss of “normal trade relations” status with, any country in which our products are manufactured, could significantly increase our cost of products and harm our business. Our sales and profitability may decline if product costs increase or selling prices decrease.
However, due to our limited operating history, we have not experienced a sustained recessionary period and therefore cannot predict the effect on our sales and profitability of a prolonged downturn in the economy. Our customers are not immune to macroeconomic pressures and we believe such pressures, including high inflation, impacts the demand for our products.
However, due to our limited operating history, we have not experienced a sustained recessionary period and therefore cannot predict the effect on our sales and profitability of a prolonged downturn in the economy. Our customers are not immune to macroeconomic pressures and we believe such pressures, including high inflation, impacts the 29 Table of Contents demand for our products.
We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations. Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products.
We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations. Successful infringement claims against us could 39 Table of Contents result in significant monetary liability or prevent us from selling some of our products.
In particular, 36 Table of Contents much of this scrutiny has focused on the use of cookies and other tracking technologies that collect or aggregate information about consumers’ online browsing and mobile app usage activity. In the EEA and UK, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem.
In particular, much of this scrutiny has focused on the use of cookies and other tracking technologies that collect or aggregate information about consumers’ online browsing and mobile app usage activity. In the EEA and UK, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem.
We incur significant costs associated with corporate governance requirements that are applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform 48 Table of Contents and Customer Protection Act of 2010, the Securities Act and the Exchange Act, as well as the rules of the NYSE.
We incur significant costs associated with corporate governance requirements that are applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010, the Securities Act and the Exchange Act, as well as the rules of the NYSE.
Even if we are able to expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products, 25 Table of Contents and quality control standards.
Even if we are able to expand existing or find new manufacturing or fabric sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products, and quality control standards.
If we were to increase prices in response to increased costs, we may experience reduced sales. Any of the forgoing could cause our operating margin to decline if we are unable to offset these factors with reductions in operating costs and could adversely affect our business, financial condition and results of operations.
If we were to increase prices in response to increased costs, we may experience reduced sales. Any of the forgoing could cause 28 Table of Contents our operating margin to decline if we are unable to offset these factors with reductions in operating costs and could adversely affect our business, financial condition and results of operations.
There is also a risk of potential claims related to discrimination and harassment, health and safety, wage and hour laws, criminal activity, personal 31 Table of Contents injury, and other claims, any of which could have an adverse effect on our business, financial condition and results of operations.
There is also a risk of potential claims related to discrimination and harassment, health and safety, wage and hour laws, criminal activity, personal injury, and other claims, any of which could have an adverse effect on our business, financial condition and results of operations.
Our net revenues depend on the number of visitors who shop on our website and mobile app and the volume of orders we can handle. Unavailability of our website or mobile app or reduced order fulfillment performance would reduce the volume of goods sold and could also adversely affect customer perception of our brand.
Our net revenues depend on the number of visitors who shop on our website and mobile app and the volume of orders we can handle. Unavailability of our website or mobile app or reduced order 32 Table of Contents fulfillment performance would reduce the volume of goods sold and could also adversely affect customer perception of our brand.
Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our employees, our third-party service providers, or their personnel. In addition, we and our third-party service providers may experience cyberattacks aimed at disrupting our and their services.
Security breaches can also 34 Table of Contents occur as a result of non-technical issues, including intentional or inadvertent actions by our employees, our third-party service providers, or their personnel. In addition, we and our third-party service providers may experience cyberattacks aimed at disrupting our and their services.
We estimate our liability for product returns based on historical return trends and an evaluation of current economic and market conditions. We record the expected customer refund liability as a reduction to revenue, and the 24 Table of Contents expected inventory right of recovery as a reduction of cost of goods sold.
We estimate our liability for product returns based on historical return trends and an evaluation of current economic and market conditions. We record the expected customer refund liability as a reduction to revenue, and the expected inventory right of recovery as a reduction of cost of goods sold.
Finally, changes in the scope of 41 Table of Contents our operations, including expansion to new U.S. and non-U.S. jurisdictions, could increase the amount of taxes to which we are subject (including as a result of the implementation of the global minimum tax rate under BEPS) and our effective tax rate.
Finally, changes in the scope of our operations, including expansion to new U.S. and non-U.S. jurisdictions, could increase the amount of taxes to which we are subject (including as a result of the implementation of the global minimum tax rate under BEPS) and our effective tax rate.
Our supply of raw materials and ability to receive inbound inventory efficiently and ship merchandise to customers, including at costs to which we are accustomed, may also be negatively affected by military conflicts, political or social instability, or terrorism.
Our supply of raw materials and ability to receive inbound inventory efficiently and ship merchandise to customers, including at costs to which we are accustomed, may also be negatively affected by military conflicts, political or 21 Table of Contents social instability, or terrorism.
In addition to the factors discussed in Item 7 of Part II of this Annual Report on Form 10-K and in the risk factors below, global economic and geopolitical conditions and additional or unforeseen circumstances, developments or events may amplify the risks discussed below.
In addition to the factors discussed in Item 7 of Part II of this Annual Report on Form 10-K and in the risk factors below, global economic and geopolitical conditions and additional or unforeseen circumstances, developments or 15 Table of Contents events may amplify the risks discussed below.
The FIGS brand is integral to our business strategy and our ability to attract and engage customers. Maintaining, promoting and positioning our brand will depend largely on the success of our marketing and branding efforts and our ability to provide a consistent, high quality product and customer experience.
The FIGS brand is integral to our business strategy and our ability to attract and engage customers. Maintaining, promoting and positioning our brand will depend largely on the success of our marketing and branding efforts and our 16 Table of Contents ability to provide a consistent, high quality product and customer experience.
We have made significant investments in enhancing our brand and attracting new customers, and we expect to continue to make significant investments to promote our products, including marketing campaigns that can be expensive and may not always result in new customers or increased sales of our 17 Table of Contents products.
We have made significant investments in enhancing our brand and attracting new customers, and we expect to continue to make significant investments to promote our products, including marketing campaigns that can be expensive and may not always result in new customers or increased sales of our products.
If we are unable to successfully deliver emails to our customers or if our customers do not engage with 18 Table of Contents our emails, whether out of choice, because those emails are marked as low priority or spam or for other reasons, our business could be adversely affected.
If we are unable to successfully deliver emails to our customers or if our customers do not engage with our emails, whether out of choice, because those emails are marked as low priority or spam or for other reasons, our business could be adversely affected.
In addition, an increase in the use of social media for product promotion and marketing may cause an increase in the burden on us to monitor compliance of such materials, and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.
In addition, an increase in 18 Table of Contents the use of social media for product promotion and marketing may cause an increase in the burden on us to monitor compliance of such materials, and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.
Moreover, the terms of our existing credit agreement restrict our ability to pay dividends, and any additional debt we may incur in the future may include similar restrictions. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of 45 Table of Contents our common stock.
Moreover, the terms of our existing credit agreement restrict our ability to pay dividends, and any additional debt we may incur in the future may include similar restrictions. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock.
Negative commentary regarding us, our products or ambassadors and other third parties who are affiliated with us, whether accurate or not, may be posted on social media platforms at any time and may adversely affect our reputation, brand and business.
Negative commentary regarding us, our products or ambassadors and other third parties who are affiliated with us, whether accurate or not, may be publicized, including on social media platforms, at any time and may adversely affect our reputation, brand and business.
There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest when due under our credit facility. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will 29 Table of Contents be available to repay or refinance any such debt.
There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest when due under our credit facility. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any such debt.
In addition, some of our agreements with our suppliers may not indemnify us from product liability for a particular supplier’s merchandise or our suppliers may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.
In addition, some of our agreements with our suppliers may not indemnify us from product liability for a particular 49 Table of Contents supplier’s merchandise or our suppliers may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.
Our distribution capacity is also dependent on the timely performance of services by third parties, including the shipping of our products to and from our distribution facility.
Our distribution capacity is also dependent on the timely performance of services by third parties, including the shipping of our products to and from our facilities.
Our marketing strategy includes brand marketing campaigns across platforms, including email, digital, display, site, direct-mail, commercials, social media, out-of-home campaigns and ambassadors, as well as performance marketing efforts, including retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization, personalized email and mobile push notifications through our mobile app.
Our marketing strategy includes brand marketing campaigns across platforms, including email, digital, display, site, direct-mail, commercials, social media, out-of-home campaigns, and ambassadors, as well as performance marketing efforts, including retargeting, paid search and 17 Table of Contents product listing advertisements, paid social media advertisements, search engine optimization, personalized emails and mobile push notifications through our mobile app.
Our business is subject to pressure on costs and pricing caused by many factors. For example, from time to time, our gross margin has been impacted by higher freight costs, which we believe was as a result of inflation due, in part, to global supply chain disruptions and the COVID-19 pandemic.
Our business is subject to pressure on costs and pricing caused by many factors. For example, from time to time, our gross margin has been impacted by higher freight costs, which we believe was as a result of inflation due, in part, to global supply chain disruptions.
We may experience periodic system interruptions from time to time. In addition, continued growth in our 32 Table of Contents transaction volume, as well as surges in online traffic and orders associated with promotional activities or seasonal trends in our business, place additional demands on our technology platform and could cause or exacerbate slowdowns or interruptions.
We may experience periodic system interruptions from time to time. In addition, continued growth in our transaction volume, as well as surges in online traffic and orders associated with promotional activities or seasonal trends in our business, place additional demands on our technology platform and could cause or exacerbate slowdowns or interruptions.
Our fulfillment center and storage locations include computer-controlled and automated equipment and rely on warehouse management systems to manage supply chain fulfillment operations, which means our operations are complicated, require coordination between our fulfillment, storage and retail operations, and are subject to a number of risks related to cybersecurity, the proper operation of software and hardware, including connections between software and/or hardware, electronic or power interruptions or other system failures.
Our fulfillment center and storage locations include computer-controlled and automated equipment and rely on warehouse management systems to manage supply chain fulfillment operations, which means our operations are complicated, require coordination between our fulfillment, storage and retail operations, and are subject to a number of risks related to cybersecurity, the proper operation of software and hardware, including connections between software and/or hardware, electronic or power interruptions or other system failures, some of which have occurred from time to time.
However, the presumptive ban on virtually all imports from that region could affect the global sourcing and availability of raw materials, such as rayon, used in the manufacturing of certain of our products and/or lead to our products being held for inspection by CBP and delayed or rejected for entry into the United States, which could unexpectedly affect our inventory levels, result in other supply chain disruptions, or cause us to be subject to penalties, fines or sanctions.
However, the presumptive ban on virtually all imports from that region has from time to time affected and could in the future affect the global sourcing and availability of raw materials, such as cotton and rayon, used in the manufacturing of certain of our products and/or lead to our products being held for inspection by CBP and delayed, which has occurred from time to time, or rejected for entry into the United States, which could unexpectedly affect our inventory levels, result in other supply chain disruptions, or cause us to be subject to penalties, fines or sanctions.
Additionally, we have occasionally in the past been, and may in the future be, subject to fraudulent purchases by individuals or organizations purchasing our products in bulk with the intention of unlawfully reselling such products at a premium.
Additionally, we have occasionally in the past been, and may in the future be, subject to fraudulent purchases by individuals or organizations purchasing our products in bulk with the intention of unlawfully reselling such products.
It is not clear how existing laws governing issues such as property ownership, sales and other taxes and customer data privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or eCommerce.
It is not clear how existing and changing laws governing issues such as property ownership, sales and other taxes and customer data 37 Table of Contents privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or eCommerce.
While we currently ship to certain countries in North America, Europe, the Asia Pacific region and the Middle East, we have a limited number of customers and experience operating outside of the United States.
While we currently ship to certain countries in North America, Central America, South America, Europe, the Asia Pacific region and the Middle East, we have a relatively limited number of customers and experience operating outside of the United States.
We must continue to expand and scale our IT Systems, and our failure to do so could adversely affect our business, financial condition and results of operations. We will need to continue to expand and scale our IT Systems and personnel to support recent and future growth.
We must continue to expand and scale our IT Systems, including our security systems, and our failure to do so could adversely affect our business, financial condition and results of operations. We will need to continue to expand and scale our IT Systems, personnel, security systems and practices to support recent and future growth.
Section 49 Table of Contents 404 also requires that we provide a management report on the effectiveness of our internal control over financial reporting, including disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
Section 404 also requires that we provide a management report on the effectiveness of our internal control over financial reporting, including disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
If we do not continue to introduce new products or innovations on existing products in a timely manner or our existing or new 19 Table of Contents products or innovations are not accepted by our customers, or if our competitors introduce similar products in a more timely fashion, our brand or our position as a leader in healthcare apparel could be harmed.
If we do not continue to introduce new products or innovations on existing products in a timely manner or our existing or new products or innovations are not accepted by our customers, or if our competitors introduce similar products in a more timely fashion, our brand or our position as a leader in healthcare apparel could be harmed.
For example, certain foreign countries do not protect intellectual property rights as fully as they are protected in the United States, and accordingly, intellectual property protection may be limited, or in 38 Table of Contents some circumstances unavailable, in some foreign countries where we choose to do business.
For example, certain foreign countries do not protect intellectual property rights as fully as they are protected in the United States, and accordingly, intellectual property protection may be limited, or in some circumstances unavailable, in some foreign countries where we choose to do business.
Our ability to use our net operating loss carryforwards may be limited. As of December 31, 2023, we had U.S. federal and state net operating loss carryforwards of approximately $1.2 million and $1.1 million, respectively.
Our ability to use our net operating loss carryforwards may be limited. As of December 31, 2024, we had U.S. federal and state net operating loss carryforwards of approximately $1.1 million and $1.1 million, respectively.
Bribery Act”), by us, our employees and our business partners; • complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to medical apparel, customer advertising protection, customer product safety and data privacy and security frameworks, such as the EU General Data Protection Regulation 2016/679 (the “GDPR”) and the UK GDPR; • the potential need to utilize new suppliers or comply with additional regulations regarding our suppliers, supply chain or value chain; • varying business practices and customs related to the sale of medical apparel; • varying levels of internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs; 21 Table of Contents • tariffs and other non-tariff barriers, such as quotas and local content rules, as well as tax consequences; • fluctuations in inflationary conditions, which could increase our costs of doing business in certain countries; • fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; and • political or social unrest, economic instability or armed conflict in a specific country or region in which we operate, including, for example, Russia’s invasion of Ukraine and violence in the Middle East.
Bribery Act”), by us, our employees and our business partners; • complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to medical apparel, customer advertising protection, customer product safety, sustainability disclosure, artificial intelligence and data privacy and security frameworks, such as the EU GDPR and the UK GDPR; • the potential need to utilize new suppliers or comply with additional regulations regarding our suppliers, supply chain or value chain; • varying business practices and customs related to the sale of medical apparel; • varying levels of internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs; • tariffs and other non-tariff barriers, such as quotas, local content rules and local import regulations, as well as tax consequences; • fluctuations in inflationary conditions, which could increase our costs of doing business in certain countries; • fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; and • political or social unrest, economic instability or armed conflict in a specific country or region in which we operate, including, for example, Russia’s invasion of Ukraine and conflict in the Middle East.
If we are unable to expand supply, manufacturing and distribution capabilities when required, or our information technology systems and our other processes are inadequate to support the future growth of these relationships, we could experience delays in customer service and order response and shipping times, which would adversely impact our reputation and brand.
If we are unable to expand supply, manufacturing and distribution capabilities when required, or our information technology systems and our other processes are inadequate to support the future growth of these relationships, we could experience, and from time to time have experienced, delays in customer service and order response and shipping times, which could adversely impact our reputation and brand.
For example, volatility in the global oil markets, including as a result of Russia’s invasion of Ukraine, other wars or armed conflicts, or changes in global supply generally, has from time to time resulted in higher fuel prices, which shipping companies have from time to time passed on to their customers by way of increased fuel surcharges.
For example, volatility in the global oil markets, including as a result of Russia’s invasion of Ukraine, conflict in the Middle East and other wars or armed conflicts, and changes in global supply generally, have from time to time resulted in higher fuel prices, which shipping companies have from time to time passed on to their customers by way of increased fuel surcharges.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. 52 Table of Contents Our cybersecurity risk management program is integrated into our overall strategic risk management program, and shares common methodologies, reporting channels and governance processes that apply across the strategic risk management program to other legal, compliance, strategic, operational and financial risk areas.
“Risk Factors—Risks Related To Information Technology, Cybersecurity and Data Privacy— System interruptions that impair customer access to our website or other performance failures in our or our third-party vendors’ technology infrastructure could damage our business, reputation and brand and substantially harm our business, financial condition and results of operations. ” Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity risks.
“Risk Factors—Risks Related To Information Technology, Cybersecurity and Data Privacy— System interruptions that impair customer access to our website or other performance failures in our or our third-party vendors’ technology infrastructure could damage our business, reputation and brand and substantially harm our business, financial condition and results of operations. ” Cybersecurity Governance Our board of directors considers cybersecurity risk as part of its risk oversight function and has delegated to the audit committee of the board of directors oversight of cybersecurity risks.
Our management team, including our CTO and Director of Information Security, also supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in the IT environment.
Our management team, including our CTO and Senior Director of Information Security, also supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in the IT environment.
The Audit Committee oversees management’s implementation of our cybersecurity risk management program. The Audit Committee receives regular reports from management, including our Chief Technology Officer (“CTO”) and Director of Information Security. These reports encompass a broad range of topics, such as our cybersecurity risks, the current cybersecurity landscape and the status of ongoing cybersecurity initiatives.
The audit committee oversees management’s implementation of our cybersecurity risk management program. The audit committee receives regular reports from management, including our Chief Technology Officer (“CTO”) and Senior Director of Information Security. These reports encompass a broad range of topics, such as our cybersecurity risks, the current cybersecurity landscape and the status of ongoing cybersecurity initiatives.
The Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. Our management team, including our CTO and Director of Information Security, is responsible for assessing and managing our material risks from cybersecurity threats.
The audit committee reports to the full board of directors regarding its activities, including those related to cybersecurity. Our management team, including our CTO and Senior Director of Information Security, is responsible for assessing and managing our material risks from cybersecurity threats.
Our CTO’s background includes 13 years of experience leading technology at several eCommerce companies and our Director of Information Security has 15 years of experience in the field of cybersecurity, including extensive experience as head of information security at public and private companies.
Our CTO’s background includes 14 years of experience leading technology at several eCommerce companies and our Senior Director of Information Security has 16 years of experience in the field of cybersecurity, including extensive experience as head of information security at public and private companies.
Their combined in-depth knowledge and experience are instrumental in developing and executing our cybersecurity risk management program. 52 Table of Contents
Their combined in-depth knowledge and experience are instrumental in developing and executing our cybersecurity risk management program.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information.
Item 1C. Cybersecurity Cybersecurity Risk Management and Strategy We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program includes a written information security program, cybersecurity policy, cyber incident response policy and cyber incident response plan.
Our cybersecurity risk management program includes a written information security program, cybersecurity policy, cyber incident response policy and cyber incident response plan. 51 Table of Contents We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”).
We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”).
Removed
Our cybersecurity risk management program is integrated into our overall strategic risk management program, and shares common methodologies, reporting channels and governance processes that apply across the strategic risk management program to other legal, compliance, strategic, operational and financial risk areas.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe new facility is leased by us under a lease agreement that expires in 2030 and will be operated by a third-party logistics provider. We also maintain warehouse space with other third-party logistics providers pursuant to service agreements or leases.
Biggest changeWe also from time to time maintain warehouse space with other third-party logistics providers pursuant to service agreements or leases. We currently operate one retail store in Los Angeles, California and one retail store in Philadelphia, Pennsylvania, each of which is leased by us under lease agreements that expire in 2028 and 2030, respectively.
We believe that these facilities are sufficient to meet our current and anticipated future needs and that suitable additional space will be available as needed to accommodate expansion of our operations.
We believe that these facilities are sufficient to meet our current needs and that suitable additional space will be available to accommodate expansion of our operations if needed.
Item 2. Properties. We are headquartered in Santa Monica, California, where we lease office space under lease and sublease agreements that expire in 2030 and 2026, respectively. We designed, built and use this location for product innovation and design, content creation, technology, customer experience and for general office use. We also maintain dedicated photo studio space at this location.
Item 2. Properties. We are headquartered in Santa Monica, California, where we lease office space under lease and sublease agreements that expire in 2030 and 2026, respectively. We designed, built and use this location for product innovation and 53 Table of Contents design, content creation, technology, customer experience and for general office use.
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We operate an embroidery workshop within our dedicated warehouse space at a third-party logistics provider’s location in City of Industry, California, which we lease pursuant to a services agreement.
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We also maintain dedicated photo studio space at this location. Our sole fulfillment center is located in Goodyear, Arizona. The facility is leased by us under a lease agreement that expires in 2031 and is operated by a third-party logistics provider.
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As part of our fulfillment enhancement project, we intend to transition all fulfillment and embroidery operations from our City of Industry location to a new fulfillment center, where we expect to commence distribution operations by Q3 2024.
Removed
We currently operate one retail store in Los Angeles, California, which is leased by us under a lease agreement that expires in 2028. We also lease space in Philadelphia, Pennsylvania, which we intend to use for a future retail store.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn February 6, 2024, the parties to the Kimmen Action and Carter Action filed a stipulation to consolidate those actions and any future actions that may be filed based on the same claims and factual allegations (collectively, the “Consolidated Delaware Court Derivative Action”) and to voluntarily stay the Consolidated Delaware Court Derivative Action on terms similar to the stay entered in the Consolidated Federal Court Derivative Action.
Biggest changeThe parties to the Kimmen Action and Carter Action have stipulated, and the court has entered an order, to consolidate those actions and any future actions that may be filed based on the same claims and factual allegations (collectively, the “Consolidated Delaware Court Derivative Action”) and to voluntarily stay the Consolidated Delaware Court Derivative Action on terms similar to the stay entered in the Consolidated Federal Court Derivative Action.
The results of any current or future claims or proceedings cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and litigation costs, diversion of management resources, reputational harm and other factors. Item 4. Mine Safety Disclosures. Not applicable. 54 Table of Contents PART II
The results of any current or future claims or proceedings cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and litigation costs, diversion of management resources, reputational harm and other factors. Item 4. Mine Safety Disclosures. Not applicable. 55 Table of Contents PART II
The Lawani Action was then dismissed, re-filed in the United States District Court for the District of Delaware, and consolidated it into the Consolidated Federal Court Derivative Action. 53 Table of Contents On January 5, 2024, a putative stockholder, Lloyd Kimmen, filed a derivative lawsuit against us and certain of our current and former executive officers, directors, and stockholders in the Delaware Court of Chancery (the “Kimmen Action”).
The Lawani Action was then dismissed, re-filed in the United States District Court for the District of Delaware, and consolidated into the Consolidated Federal Court Derivative Action. 54 Table of Contents On January 5, 2024, a putative stockholder, Lloyd Kimmen, filed a derivative lawsuit against us and certain of our current and former executive officers, directors, and stockholders in the Delaware Court of Chancery (the “Kimmen Action”).
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On March 19, 2024, plaintiffs filed an amended complaint alleging violations of the Securities Act and Exchange Act similar to those alleged in the previously dismissed amended complaint. On May 3, 2024, defendants filed a motion to dismiss the amended complaint.
Added
On January 10, 2025, the court granted the motion in its entirety as to FIGS and the executive officer and director defendants, dismissed certain claims with prejudice and granted plaintiffs leave to amend the complaint further as to the remaining claims.
Added
Thereafter, plaintiffs declined to file an amended complaint and the court entered judgment against the plaintiffs on February 13, 2025. Plaintiffs have filed a notice of appeal from the dismissal with the United States Court of Appeals for the Ninth Circuit.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere has been no material change in the expected use of the net proceeds from our IPO as described in our Registration Statement. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 56 Table of Contents
Biggest changeThere has been no material change in the expected use of the net proceeds from our IPO as described in our Registration Statement. Recent Sales of Unregistered Securities None.
The graph assumes an initial investment of $100 at the market close on May 27, 2021, which was our initial trading day, in each of our Class A common stock, the NYSE Composite Index and the S&P 500 Apparel, Accessories & Luxury Goods Index, and the reinvestment of dividends, if any. 55 Table of Contents The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock.
The graph assumes an initial investment of $100 at the market close on May 27, 2021, which was our initial trading day, in each of our Class A common stock, the NYSE Composite Index and the S&P 500 Apparel, Accessories & Luxury Goods Index, and the reinvestment of dividends, if any. 56 Table of Contents The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock.
Holders of Record As of February 16, 2024, there were 13 registered holders of our Class A common stock and 7 registered holders of our Class B common stock.
Holders of Record As of February 14, 2025, there were 12 registered holders of our Class A common stock and 7 registered holders of our Class B common stock.
Added
Issuer Purchases of Equity Securities The following table presents information with respect to our repurchases of our Class A common stock during the three months ended December 31, 2024: 57 Table of Contents Period Total Number of Shares Repurchased (1) Average Price Paid per Share (2) Total Number of Shares Repurchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Program (2) (in thousands) October 1-October 31, 2024 — $ — — $ — November 1-November 30, 2024 7,807,841 $ 4.87 7,807,841 $ 4,681 December 1-December 31, 2024 8,237 $ 5.00 8,237.00 $ 4,640 Total 7,816,078 $ 4.87 7,816,078 $ 4,640 (1) The repurchases may be executed from time to time through, without limitation, open market purchases or through privately negotiated transactions and/or structured repurchase agreements with third parties, block purchases or derivative contracts, and/or pursuant to Rule 10b5-1 trading plans, subject to market conditions, applicable securities laws and other legal requirements and relevant factors.
Added
See Note 17 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information related to our share repurchase program with no expiration date, which was publicly announced on August 8, 2024, and the subsequent increase in our share repurchase program to allow for purchases of up to $100.0 million of our outstanding Class A common stock, which was publicly announced on February 27, 2025.
Added
Following our board of directors’ authorization of the increase, as of the date hereof, we have approximately $54.6 million available for future repurchases under the share repurchase program. (2) Average price paid per share and approximate dollar value of shares that may yet be repurchased exclude broker commissions and estimated excise taxes associated with the repurchases.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThere are several limitations related to the use of Adjusted EBITDA and Adjusted EBITDA Margin as analytical tools, including: • other companies may calculate Adjusted EBITDA and Adjusted EBITDA Margin differently, which reduces their usefulness as a comparative measure; • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect other income (loss), net; • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect any gain or loss on disposal of assets; • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect our tax provision, which reduces cash available to us; • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect recurring, non-cash expenses of depreciation and amortization of property and equipment and, although these are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future; • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect the impact of stock-based compensation expense; • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect transaction costs; and • Adjusted EBITDA and Adjusted EBITDA Margin do not reflect expenses related to non-ordinary course disputes. 64 Table of Contents The following table reflects a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure prepared in accordance with GAAP and presents Adjusted EBITDA Margin with net income margin, the most directly comparable financial measure prepared in accordance with GAAP: Year ended December 31, 2023 2022 (in thousands, except margin) Net income $ 22,637 $ 21,186 Add (deduct): Other income, net (6,762) (1,061) Provision for income taxes 18,170 17,541 Depreciation and amortization expense (1) 2,942 1,924 Stock-based compensation and related expense (2) 47,757 37,533 Expenses related to non-ordinary course disputes (3) 1,256 10,128 Adjusted EBITDA $ 86,000 $ 87,251 Net Revenues $ 545,646 $ 505,835 Net income margin (4) 4.1 % 4.2 % Adjusted EBITDA Margin 15.8 % 17.2 % (1) Excludes amortization of debt issuance costs included in “Other income, net.” (2) Includes stock-based compensation expense, payroll taxes and costs related to equity award activity.
Biggest changeThe following table reflects a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared in accordance with GAAP and presents adjusted EBITDA margin with net income margin, the most directly comparable financial measure prepared in accordance with GAAP: Year ended December 31, 2024 2023 (in thousands, except margin) Net income $ 2,720 $ 22,637 Add (deduct): Other income, net (12,075) (6,762) Provision for income taxes 11,620 18,170 Depreciation and amortization expense (1) 6,694 2,942 Stock-based compensation and related expense (2) 42,837 47,757 Expenses related to non-ordinary course disputes (3) — 1,256 Adjusted EBITDA $ 51,796 $ 86,000 Net Revenues $ 555,558 $ 545,646 Net income margin (4) 0.5 % 4.1 % Adjusted EBITDA Margin 9.3 % 15.8 % (1) Excludes amortization of debt issuance costs included in “Other income, net.” (2) Includes stock-based compensation expense, payroll taxes and costs related to equity award activity.
Provision for Income Taxes Our provision for income taxes consists of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for allowable credits, deductions and uncertain tax positions. Seasonality Unlike the traditional apparel industry, the healthcare apparel industry is generally not seasonal in nature.
Provision for Income Taxes Our provision for income taxes consists of an estimate of federal, state and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions and uncertain tax positions. Seasonality Unlike the traditional apparel industry, the healthcare apparel industry is generally not seasonal in nature.
Recent Accounting Pronouncements Refer to Note 2 to our financial statements appearing elsewhere in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our financial statements.
Recent Accounting Pronouncements Refer to Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our consolidated financial statements.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Key Operating Metrics and Non-GAAP Financial Measures We report our financial results in accordance with GAAP. In addition to the measures presented in our financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions.
Key Operating Metrics and Non-GAAP Financial Measures We report our financial results in accordance with GAAP. In addition to the measures presented in our consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions.
A discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021 has been reported previously in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview Our mission is to celebrate, empower and serve those who serve others.
A discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022 has been reported previously in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview Our mission is to celebrate, empower and serve those who serve others.
These factors also pose risks and challenges, including those discussed in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K for the year ended December 31, 2023. Brand Awareness and Loyalty Our ability to promote and maintain brand awareness and loyalty is critical to our success.
These factors also pose risks and challenges, including those discussed in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K for the year ended December 31, 2024. Brand Awareness and Loyalty Our ability to promote and maintain brand awareness and loyalty is critical to our success.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of our operations. See Note 2 to our audited financial statements appearing elsewhere in this Annual Report on Form 10-K for a description of our other significant accounting policies.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of our operations. See Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a description of our other significant accounting policies.
See Note 2 to our audited financial statements appearing elsewhere in this Annual Report on Form 10-K for further discussion. Stock-Based Compensation We have granted stock-based awards consisting primarily of stock options and restricted stock units (“RSUs”) to employees, non-employee directors, and consultants.
See Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further discussion. Stock-Based Compensation We have granted stock-based awards consisting primarily of stock options and restricted stock units (“RSUs”) to employees, non-employee directors, and consultants.
Management believes that excluding certain non-cash items and items that may vary substantially in frequency and magnitude period-to-period from net income provides useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past financial performance and facilitate period-to-period comparisons of our core operating results as well as the results of our peer companies.
Management believes that excluding certain non-cash items and items that may vary substantially in frequency and magnitude period-to-period from net income provides useful supplemental measures that assist in evaluating our ability 66 Table of Contents to generate earnings, provide consistency and comparability with our past financial performance and facilitate period-to-period comparisons of our core operating results as well as the results of our peer companies.
The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital when needed or on terms acceptable to us.
The incurrence of additional debt financing would result in debt service obligations and the instruments 68 Table of Contents governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital when needed or on terms acceptable to us.
Our customers are also affected by other macroeconomic pressures, such as high interest rates, wages, levels of 59 Table of Contents employment, inflation, fears of recession or depression or entry into a recession or depression, housing costs, energy costs, income tax rates, financial market fluctuations and consumer confidence in future economic conditions.
Our customers are also affected by other macroeconomic pressures, such as high interest rates, wages, levels of employment, inflation, fears of recession or depression or entry into a recession or depression, housing costs, energy costs, income tax rates, financial market fluctuations and consumer confidence in future economic conditions.
We expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded stock price. Expected dividend yield—we have not paid, and do not currently anticipate paying, cash dividends on our common stock; therefore, the expected dividend yield is assumed to be zero.
We expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded stock price. 70 Table of Contents Expected dividend yield—we have not paid, and do not currently anticipate paying, cash dividends on our common stock; therefore, the expected dividend yield is assumed to be zero.
A hypothetical 10% change in our recorded tax liabilities as of December 31, 2023 would not result in a material impact on our financial statements. To the extent that our view as to the outcome of these matters changes, we will adjust income tax expense in the period in which such determination is made.
A hypothetical 10% change in our recorded tax liabilities as of December 31, 2024 would not result in a material impact on our consolidated financial statements. To the extent that our view as to the outcome of these matters changes, we will adjust income tax expense in the period in which such determination is made.
We have made significant investments to strengthen the FIGS brand through our marketing strategy, which includes brand marketing campaigns across platforms, including email, digital, display, site, direct-mail, commercials, social media and ambassadors, as well as performance marketing efforts, including retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization, personalized email and 58 Table of Contents mobile push notifications through our app.
We have made significant investments to strengthen the FIGS brand through our marketing strategy, which includes brand marketing campaigns across platforms, including email, digital, display, site, direct-mail, commercials, social media and ambassadors, as well as performance marketing efforts, including retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization, personalized email and mobile push notifications through our app.
Selling and distribution expenses consist primarily of shipping and other transportation costs incurred in delivering merchandise to customers and from customers returning merchandise, merchant processing fees and packaging. We expect fulfillment, selling and distribution costs to increase in absolute dollars as we increase our net revenues.
Selling and distribution expenses consist primarily of shipping and other transportation costs incurred in delivering merchandise to customers and 62 Table of Contents from customers returning merchandise, merchant processing fees and packaging. We expect fulfillment, selling and distribution costs to increase in absolute dollars as we increase our net revenues.
Total orders are the summation of all completed individual purchase transactions in a given period. We believe our relatively high average order value demonstrates the premium nature of our product. As we expand into and increase our presence in additional product categories and price points as well as expand internationally, AOV may fluctuate.
Total orders are the summation of all completed individual purchase transactions in a given period. We believe our relatively high average order value demonstrates the premium nature of our product. As we expand into and increase our presence in additional product categories, price points and international markets, AOV may fluctuate.
A hypothetical 10% change in our inventory reserves estimate as of December 31, 2023 would not result in a material impact on our financial statements. Income Taxes We are subject to income taxes in the United States.
A hypothetical 10% change in our inventory reserves estimate as of December 31, 2024 would not result in a material impact on our consolidated financial statements. Income Taxes We are subject to income taxes in the United States.
We account for forfeitures as they occur. We measure the fair value of restricted stock units (“RSUs”) granted to employees and non-employees based on the fair value of our Class A common stock on the grant date. Our RSU grants vest upon the satisfaction of either a service condition or both a service condition and a performance condition.
We account for forfeitures as they occur. We measure the fair value of RSUs granted to employees and non-employees based on the fair value of our Class A common stock on the grant date. Our RSU grants vest upon the satisfaction of either a service condition or both a service condition and a performance condition.
Net revenues per active customer as of December 31, 2023 and 2022, respectively, are presented in the following table: As of December 31, 2023 2022 Net revenues per active customer $ 210 $ 221 We define AOV as the sum of the total net revenues in a given period divided by the total orders placed in that period.
Net revenues per active customer as of December 31, 2024 and 2023, respectively, are presented in the following table: As of December 31, 2024 2023 Net revenues per active customer $ 208 $ 210 We define AOV as the sum of the total net revenues in a given period divided by the total orders placed in that period.
Our goal is to attract and convert visitors into active customers and foster relationships that drive repeat purchases. As of December 31, 2023, we had approximately 2.6 million active customers, up from approximately 2.3 million active customers as of December 31, 2022.
Our goal is to attract and convert visitors into active customers and foster relationships that drive repeat purchases. As of December 31, 2024, we had approximately 2.7 million active customers, up from approximately 2.6 million active customers as of December 31, 2023.
See Note 9 to our audited financial statements appearing elsewhere in this Annual Report on Form 10-K for a description of our contractual obligations and commitments. Critical Accounting Policies and Estimates The preparation of our financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and accompanying notes.
See Note 10 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a description of our contractual obligations and commitments. 69 Table of Contents Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the amounts reported in those consolidated financial statements and accompanying notes.
Our revenue is reported net of sales returns and discounts. We estimate our liability for product returns based on historical return trends and an evaluation of current economic and market conditions. We record the expected customer refund liability as a reduction to revenue, and the expected inventory right of recovery as a reduction of cost of goods sold.
We estimate our liability for product returns based on historical return trends and an evaluation of current economic and market conditions. We record the expected customer refund liability as a reduction to revenue, and the expected inventory right of recovery as a reduction of cost of goods sold.
For example, we have seen year-over- year sales growth impacted by moderation of frequency trends, which we believe were due in part to adverse macroeconomic factors such as sustained inflationary pressures on consumer spending and we expect to continue to see the impact of inflation on our customers’ purchasing activity in the near term.
For example, we have seen sales growth impacted by variations in frequency trends from time to time, which we believe were due in part to adverse macroeconomic factors such as sustained inflationary pressures on consumer spending and we expect to continue to see the impact of inflation on our customers’ purchasing activity in the near term.
We branded a previously unbranded industry and de-commoditized a previously commoditized product—elevating scrubs and creating premium products for healthcare professionals. Most importantly, we built a community and lifestyle around a profession. As a result, we have become the industry’s category-defining healthcare apparel and lifestyle brand.
By elevating scrubs and creating premium products for healthcare professionals, we revolutionized the large and fragmented healthcare apparel market, branded a previously unbranded industry and de-commoditized a previously commoditized product. Most importantly, we built a community and lifestyle around a profession. As a result, we have become the industry’s category-defining healthcare apparel and lifestyle brand.
We create technically advanced apparel and products that feature an unmatched combination of comfort, durability, function and style, all at an affordable price. In doing so, we have redefined what scrubs are—giving rise to our tag-line: why wear scrubs, when you can #wearFIGS? We have revolutionized the large and fragmented healthcare apparel market.
We create technically advanced apparel and products that feature an unmatched combination of comfort, durability, function and style, all at an affordable price. In doing so, we have redefined what scrubs are—giving rise to our tag-line: why wear scrubs, when you can #wearFIGS?
Macroeconomic Environment Our business and results of operations are subject to domestic and global economic conditions and their impact on consumer confidence.
Macroeconomic Environment 61 Table of Contents Our business and results of operations are subject to domestic and global economic conditions and their impact on consumer confidence.
The following range of assumptions was used to estimate the fair value of options granted during the year ended December 31, 2023: Risk free interest rate 3.39 - 4.65 % Expected volatility 40 - 41 % Expected dividend yield 0 % Expected term (in years) 6.2 - 6.25 Risk-free interest rate—determined by reference to the U.S.
The following range of assumptions was used to estimate the fair value of options granted during the year ended December 31, 2024: Risk free interest rate 4.0 - 4.2 % Expected volatility 41 % Expected dividend yield 0 % Expected term (in years) 6.25 Risk-free interest rate—determined by reference to the U.S.
Active customers as of December 31, 2023 and 2022, respectively, are presented in the following table: As of December 31, 2023 2022 (in thousands) Active customers 2,593 2,294 63 Table of Contents We believe measuring net revenues per active customer is important to understanding our engagement and retention of customers, and as such, our value proposition for our customer base.
Active customers as of December 31, 2024 and 2023, respectively, are presented in the following table: As of December 31, 2024 2023 (in thousands) Active customers 2,670 2,593 We believe measuring net revenues per active customer is important to understanding our engagement and retention of customers, and as such, our value proposition for our customer base.
If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability.
If the reasonable estimate of the loss is a range and no amount within the 71 Table of Contents range is a better estimate, the minimum amount of the range is recorded as a liability.
AOV for the years ended December 31, 2023 and 2022, respectively, are presented in the following table: Year ended December 31, 2023 2022 Average order value $ 115 $ 112 Adjusted EBITDA and Adjusted EBITDA Margin We calculate Adjusted EBITDA as net income (loss) 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.
AOV for the years ended December 31, 2024 and 2023, respectively, are presented in the following table: Year ended December 31, 2024 2023 Average order value $ 113 $ 115 Adjusted EBITDA and Adjusted EBITDA Margin We calculate adjusted EBITDA as net income (loss) 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. adjusted EBITDA margin is calculated by dividing adjusted EBITDA by net revenues.
General and Administrative General and administrative expenses consist primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs and other general overhead, including certain third-party consulting 60 Table of Contents and contractor expenses, certain facilities costs, software expenses, legal expenses and recruiting fees.
General and Administrative General and administrative expenses consist primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs and other general overhead, including certain third-party consulting and contractor expenses, certain facilities costs, software expenses, legal expenses, recruiting fees and in-kind donations.
We sell products purposefully designed to serve the particular needs of healthcare professionals primarily through our DTC digital platform, consisting of our website, mobile app and TEAMS business. We also recently launched our first physical retail store, which we call a Community Hub, and which represents a first-of-its-kind retail experience for healthcare professionals.
We sell products purposefully designed to serve the particular needs of healthcare professionals primarily through our DTC digital platform, consisting of our website, mobile app and TEAMS business. We also operate physical retail stores, which we call Community Hubs, and which represent a first-of-its-kind retail experience for healthcare professionals.
Our customers come to us through word of mouth referrals, as well as through our data-driven brand and performance marketing efforts. See the section titled “Key Operating Metrics and Non-GAAP Financial Measures” for a definition of active customers.
At December 31, 2024, we had approximately 2.7 million active customers. Our customers come to us through word of mouth referrals, as well as through our data-driven brand and performance marketing efforts. See the section titled “Key Operating Metrics and Non-GAAP Financial Measures” for a definition of active customers.
In the year ended December 31, 2023, we had the following results compared to the comparable periods in 2022: ◦ Expanded our community of active customers by 13.0% from approximately 2.3 million at December 31, 2022 to approximately 2.6 million at December 31, 2023; ◦ Net revenues increased from $505.8 million to $545.6 million in the year ended December 31, 2023 representing 7.9% year-over-year growth; ◦ Gross margin decreased 1.0 percentage point from 70.1% to 69.1% in the year ended December 31, 2023; ◦ Net income increased from $21.2 million to $22.6 million in the year ended December 31, 2023; ◦ Net income margin decreased from 4.2% to 4.1% in the year ended December 31, 2023; ◦ Adjusted EBITDA decreased from $87.3 million to $86.0 million in the year ended December 31, 2023, representing an Adjusted EBITDA Margin of 15.8%; 57 Table of Contents ◦ Cash flows from operating activities increased from $(35.3) million to $100.9 million in the year ended December 31, 2023; and ◦ Free cash flow increased from $(40.7) million to $84.6 million in the year ended December 31, 2023.
In the year ended December 31, 2024, we had the following results compared to the comparable periods in 2023: ◦ Expanded our community of active customers by 3.0% from approximately 2.6 million at December 31, 2023 to approximately 2.7 million at December 31, 2024; ◦ Net revenues increased from $545.6 million to $555.6 million in the year ended December 31, 2024 representing 1.8% year-over-year growth; ◦ Gross margin decreased 1.5 percentage points from 69.1% to 67.6% in the year ended December 31, 2024; ◦ Net income decreased from $22.6 million to $2.7 million in the year ended December 31, 2024; ◦ Net income margin decreased from 4.1% to 0.5% in the year ended December 31, 2024; 59 Table of Contents ◦ Adjusted EBITDA decreased from $86.0 million to $51.8 million in the year ended December 31, 2024, representing an adjusted EBITDA margin of 9.3%; ◦ Cash flows from operating activities decreased from $100.9 million to $81.2 million in the year ended December 31, 2024; and ◦ Free cash flow decreased from $84.6 million to $64.1 million in the year ended December 31, 2024.
Historical Cash Flows The following table summarizes our cash flows for the periods presented: Year ended December 31, 2023 2022 (in thousands) Cash flows from operating activities $ 100,915 $ (35,329) Cash flows from investing activities (117,187) (5,848) Cash flows from financing activities 670 3,522 Net change in cash, cash equivalents, and restricted cash $ (15,602) $ (37,655) Operating Activities Cash flows from operating activities consist primarily of net income adjusted for certain items including depreciation and amortization, stock-based compensation expense and the effect of changes in operating assets and liabilities.
Historical Cash Flows The following table summarizes our cash flows for the periods presented: Year ended December 31, 2024 2023 (in thousands) Cash flows from operating activities $ 81,162 $ 100,915 Cash flows from investing activities (94,924) (117,187) Cash flows from financing activities (44,766) 670 Net change in cash, cash equivalents, and restricted cash $ (58,528) $ (15,602) Operating Activities Cash flows from operating activities consist primarily of net income adjusted for certain items including depreciation and amortization, stock-based compensation expense and the effect of changes in operating assets and liabilities.
“Risk Factors—Risks Related To Our Business— 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 ” and “— 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. ” Key Factors Affecting Our Performance We believe that our performance and future success depend on a number of factors that present significant opportunities for us.
“Risk Factors—Risks Related To Our Business— 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” and “—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 .” Supplier Transition We have a third party supplier in Jordan that currently accounts for a majority of our production.
We are also subject to macroeconomic pressures, such as inflation, which can impact the price of raw materials, labor, freight, and other costs of doing business.
We are also subject to macroeconomic pressures, such as inflation, which can impact the price of raw materials, labor, freight, and other costs of doing business. In addition, we are subject to the prevailing trade policies of the U.S. and other countries in which we do business.
(3) Exclusively represents attorney’s fees, costs and expenses incurred by the Company in connection with the Company’s now-concluded litigation against Strategic Partners, Inc. (4) Net income margin represents net income as a percentage of net revenues.
(3) Exclusively represents attorney’s fees, costs and expenses incurred by the Company in connection with the Company’s now-concluded litigation against Strategic Partners, Inc.
Cost of Goods Sold Year ended December 31, Change 2023 2022 (in thousands, except margin) Cost of goods sold $ 168,683 $ 151,375 11.4 % Gross profit 376,963 354,460 6.3 % Gross margin 69.1 % 70.1 % (100) bps Cost of goods sold increased by $17.3 million, or 11.4%, for the year ended December 31, 2023, compared to the prior year.
Cost of Goods Sold Year ended December 31, Change 2024 2023 % (in thousands, except margin) Cost of goods sold $ 179,935 $ 168,683 6.7 % Gross profit 375,623 376,963 (0.4) % Gross margin 67.6 % 69.1 % 1.5 % Cost of goods sold increased by $11.3 million, or 6.7%, for the year ended December 31, 2024, compared to the prior year.
Cash flows from operating activities increased by $136.2 million for the year ended December 31, 2023, compared to the same period last year.
Cash flows from investing activities increased by $22.3 million for the year ended December 31, 2024, compared to the same period last year.
Selling expense increased by $6.7 million, or 5.7%, for the year ended December 31, 2023, compared to the prior year and, as a percentage of net revenues, decreased by 0.5 percentage points.
Selling expense increased by $16.8 million, or 13.4%, for the year ended December 31, 2024, compared to the prior year and, as a percentage of net revenues, increased by 2.6 percentage points.
Such attacks have also affected global ocean freight traffic generally, caused shipping delays and increased freight costs. As a result, during and since the quarter ended December 31, 2023, we have experienced delays in the delivery of raw materials to, and finished goods from, our manufacturers in Jordan and elsewhere, as well as rising ocean freight rates.
Global ocean freight traffic has also generally been impacted, resulting in shipping delays and increased freight costs. As a result, during the three months and year ended December 31, 2024, we experienced delays in the delivery of raw materials to, and finished goods from, our manufacturers in Jordan and elsewhere, as well as elevated ocean freight rates and shipping costs.
Other Income, Net Other income, net consists of interest income or expense associated with debt financing arrangements, amortization of debt issuance costs and interest income earned on investments, as well as gain or loss on foreign currency, primarily driven by payment to vendors for amounts not denominated in U.S. dollars.
We expect our general and administrative expenses to increase in absolute dollars as we continue to grow our business. Other Income, Net Other income, net consists of interest income, interest expense, amortization of debt issuance costs, as well as gain or loss on foreign currency, primarily driven by payment to vendors for amounts not denominated in U.S. dollars.
The increase in net revenues was primarily driven by an increase in orders from existing and new customers and, to a lesser extent, an increase in AOV.
The increase in net revenues was primarily driven by an increase in orders from existing customers, partially offset by a decrease in AOV.
Year ended December 31, 2023 2022 (in thousands) Net cash (used in) provided by operating activities $ 100,915 $ (35,329) Less: capital expenditures (16,348) (5,348) Free cash flow $ 84,567 $ (40,677) Liquidity and Capital Resources As of December 31, 2023 and 2022, we had $144.2 million and $159.8 million of cash and cash equivalents, respectively.
Year ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 81,162 $ 100,915 Less: capital expenditures (17,021) (16,348) Free cash flow $ 64,141 $ 84,567 Liquidity and Capital Resources As of December 31, 2024 and 2023, we had $85.6 million and $144.2 million of cash and cash equivalents, respectively.
However, due to our historical pattern of sequential growth, as well as our decision to conduct select promotions during the holiday season, we historically have generated a higher proportion of net revenues, and incurred higher selling and marketing expenses, during the fourth quarter of the year compared to other quarters, and we expect these trends to continue.
However, due to our historical pattern of sequential growth, as well as our decision to conduct select promotions during the holiday season, we historically have generated a higher proportion of net revenues, and incurred higher selling and marketing expenses, during the fourth quarter of the year compared to other quarters, and these trends could continue. 63 Table of Contents Results of Operations Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 The following table sets forth information comparing the components of our results of operations for the periods indicated and our results of operations as a percentage of net revenues for the periods presented.
Capital expenditures during the year ended December 31, 2022 were primarily related to capitalized software development costs, purchases of machinery and equipment, and purchases of computer equipment. Financing Activities Cash flows from financing activities consists primarily of proceeds and payments related to transactions involving our common stock, borrowings, and fees associated with our existing line of credit.
Financing Activities Cash flows from financing activities consists primarily of proceeds and payments related to transactions involving our common stock, borrowings, and fees associated with our existing line of credit. Cash flows from financing activities were $(44.8) million for the year ended December 31, 2024.
Other Income, Net Year ended December 31, Change 2023 2022 % (in thousands) Other income, net $ 6,762 $ 1,061 537.3 % Other income, net increased for the year ended December 31, 2023, compared to the prior year, primarily due to an increase in interest income driven by higher interest rates.
Other Income, Net Year ended December 31, Change 2024 2023 % (in thousands) Other income, net $ 12,075 $ 6,762 79.0 % Other income, net increased for the year ended December 31, 2024, compared to the prior year, primarily due to an increase in interest income driven by higher short-term investment balances.
See the section titled “Key Operating Metrics and Non-GAAP Financial Measures” for information regarding Adjusted EBITDA, Adjusted EBITDA Margin and free cash flow, including a reconciliation to the most directly comparable financial measures prepared in accordance with GAAP. Recent Developments During the quarter and year ended December 31, 2023, we continued to execute on our previously announced fulfillment enhancement project.
See the section titled “Key Operating Metrics and Non-GAAP Financial Measures” for information regarding adjusted EBITDA, adjusted EBITDA margin and free cash flow, including a reconciliation to the most directly comparable financial measures prepared in accordance with GAAP.
Operating Expenses Year ended December 31, Change 2023 2022 % (in thousands) Operating expenses: Selling $ 125,149 $ 118,449 5.7 % Marketing 77,094 77,692 (0.8) % General and administrative 140,675 120,653 16.6 % Total operating expenses 342,918 316,794 8.2 % Operating expenses increased by $26.1 million, or 8.2%, for the year ended December 31, 2023, compared to the prior year and, as a percentage of net revenues, increased by 0.2 percentage points, primarily driven by an increase in general and administrative expenses, offset by lower marketing and selling expenses.
Operating Expenses Year ended December 31, Change 2024 2023 % (in thousands) Operating expenses: Selling $ 141,909 $ 125,149 13.4 % Marketing 88,566 77,094 14.9 % General and administrative 142,883 140,675 1.6 % Total operating expenses 373,358 342,918 8.9 % Operating expenses increased by $30.4 million, or 8.9%, for the year ended December 31, 2024, compared to the prior year and, as a percentage of net revenues, increased by 4.4 percentage points, primarily driven by an increase in selling expenses and marketing expenses.
This increase was primarily due to a higher total number of orders in 2023 as compared to 2022. Gross profit increased by $22.5 million, or 6.3%, for the year ended December 31, 2023, compared to the prior year, primarily due to an increase in the total number of orders.
This increase was primarily due to a higher total number of orders in 2024 as compared to 2023 and unfavorable product mix shift. 64 Table of Contents Gross profit decreased by $1.3 million, or 0.4%, for the year ended December 31, 2024, compared to the prior year, primarily due to unfavorable product mix shift.
The decrease in marketing expense as a percentage of net revenues was primarily due to reduced brand marketing spend. General and administrative expense increased by $20.0 million, or 16.6%, for the year ended December 31, 2023, compared to the prior year and, as a percentage of net revenues, increased by 1.9 percentage points.
General and administrative expense increased by $2.2 million, or 1.6%, for the year ended December 31, 2024, compared to the prior year and, as a percentage of net revenues.
Provision for Income Taxes Year ended December 31, Change 2023 2022 % (in thousands) Provision for income taxes $ 18,170 $ 17,541 3.6 % Provision for income taxes increased by $0.6 million, or 3.6%, for the year ended December 31, 2023, compared to the prior year, primarily due to an increase in pretax income.
Provision for Income Taxes Year ended December 31, Change 2024 2023 % (in thousands) Provision for income taxes $ 11,620 $ 18,170 (36.0) % 65 Table of Contents Provision for income taxes decreased by $6.6 million, or 36.0%, for the year ended December 31, 2024, compared to the prior year, primarily due to a decrease in pretax income.
Year ended December 31, Year ended December 31, 2023 2022 2023 2022 (in thousands) (as a percentage of net revenues) Net revenues $ 545,646 $ 505,835 100.0 % 100.0 % Cost of goods sold 168,683 151,375 30.9 29.9 Gross profit 376,963 354,460 69.1 70.1 Operating expenses Selling 125,149 118,449 22.9 23.4 Marketing 77,094 77,692 14.1 15.4 General and administrative (1) 140,675 120,653 25.8 23.9 Total operating expenses 342,918 316,794 62.8 62.6 Net income from operations 34,045 37,666 6.2 7.4 Other income, net 6,762 1,061 1.2 0.2 Net income before provision for income taxes 40,807 38,727 7.5 7.7 Provision for income taxes 18,170 17,541 3.3 3.5 Net income $ 22,637 $ 21,186 4.1 % 4.2 % (1) Includes stock-based compensation expense of $45.8 million and $37.5 million for the years ended December 31, 2023 and 2022, respectively. 61 Table of Contents Net Revenues Year ended December 31, Change 2023 2022 % (in thousands) Net revenues $ 545,646 $ 505,835 7.9 % Net revenues increased by $39.8 million, or 7.9%, for the year ended December 31, 2023, compared to the prior year.
Year ended December 31, Year ended December 31, 2024 2023 2024 2023 (in thousands) (as a percentage of net revenues) Net revenues $ 555,558 $ 545,646 100.0 % 100.0 % Cost of goods sold 179,935 168,683 32.4 30.9 Gross profit 375,623 376,963 67.6 69.1 Operating expenses Selling 141,909 125,149 25.5 22.9 Marketing 88,566 77,094 15.9 14.1 General and administrative (1) 142,883 140,675 25.7 25.8 Total operating expenses 373,358 342,918 67.2 62.8 Net income from operations 2,265 34,045 0.4 6.2 Other income, net 12,075 6,762 2.2 1.2 Net income before provision for income taxes 14,340 40,807 2.6 7.5 Provision for income taxes 11,620 18,170 2.1 3.3 Net income $ 2,720 $ 22,637 0.5 % 4.1 % (1) Includes stock-based compensation expense of $42.7 million and $45.8 million for the years ended December 31, 2024 and 2023, respectively.
Although we have not yet experienced a material disruption to our supply chain and have sought alternative ways to ship raw materials and receive inventory, such as selecting new vessel routes, alternative ports and using air freight from time to time, we expect that if there are continued or increased hostilities in the Middle East, there could be continued increases in shipping times and ocean and air freight rates, as well as impacts to our supply chain, which could adversely affect our financial condition and results of operations.
Although we have not experienced a material disruption to our supply chain or a material increase in costs as a result of Middle East conflict, we have proactively sought alternative ways to ship raw materials and receive inventory, such as selecting new vessel routes and alternative ports, and using increased air freight from time to time.
We write down inventory where it appears that the carrying cost of the inventory may not be recovered through subsequent sale of the inventory.
Cost is determined using an average cost method. Cost of inventory includes import duties and other taxes and transport and handling costs. We write down inventory where it appears that the carrying cost of the inventory may not be recovered through subsequent sale of the inventory.
The increase in operating cash flows was due to a net change in operating assets and liabilities of $133.2 million primarily driven by lower inventory purchases of $150.8 million, the timing of payments against accrued compensation and benefits of $7.0 million, and the timing of income tax payments of $6.5 million.
In addition, cash provided by operating activities decreased due to lower inventory purchases of $55.7 million, increased cash payments of operating lease liabilities of $5.6 million, the timing of cash payments of accrued compensation and benefits of $5.5 million, timing of income tax payments of $4.8 million, and timing of cash payments of prepaid expenses and other current assets of $2.0 million.
During the fiscal year ending December 31, 2024, we expect to incur transitory operational expenditures of approximately $14 million and an additional $13 million to $14 million in capital expenditures in connection with the project and transition.
In connection with the project and transition, during the year ended December 31, 2024, we incurred approximately $14.1 million in capital expenditures, approximately $0.4 million of which was incurred during the three months ended December 31, 2024. We do not expect to incur additional material capital expenditure costs in connection with the project and transition.
Free Cash Flow We calculate free cash flow as net cash (used in) provided by operating activities reduced by capital expenditures, including purchases of property and equipment and capitalized software development costs. We believe free cash flow is a useful supplemental measure of liquidity and an additional basis for assessing our ability to generate cash.
(4) Net income margin represents net income as a percentage of net revenues. 67 Table of Contents Free Cash Flow We calculate free cash flow as net cash (used in) provided by operating activities reduced by capital expenditures, including purchases of property and equipment and capitalized software development costs.
We believe the investments we are making in our fulfillment capabilities will enable us to more optimally serve our customers, drive efficiency and support us as we increase scale over the long term.
We believe these investments in our fulfillment capabilities will enable us to more optimally serve our customers, drive efficiency and support us as we scale over the long term. Logistics As a result of ongoing conflict in the Middle East, there have been disruptions in commercial shipping transiting the Red Sea and surrounding waterways.
We determine revenue recognition through the following steps in accordance with Topic 606, which we adopted effective January 1, 2018: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, we satisfy a performance obligation. 67 Table of Contents Revenue is recognized upon shipment when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps in accordance with Topic 606: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, we satisfy a performance obligation.
See Note 2 to our audited financial statements appearing elsewhere in this Annual Report on Form 10-K for further discussion. 68 Table of Contents Inventory Inventories are stated at the lower of cost and net realizable value. Cost is determined using an average cost method. Cost of inventory includes import duties and other taxes and transport and handling costs.
The service condition is generally satisfied ratably over four years. The performance condition related to our outstanding performance-based awards was satisfied in connection with the IPO. See Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further discussion. Inventory Inventories are stated at the lower of cost and net realizable value.
As of December 31, 2023, we had no outstanding borrowings under the 2021 Facility (other than $4.9 million of outstanding letters of credit) and available borrowings of $95.1 million. See Note 8 to our audited financial statements included elsewhere in this Annual Report on Form 10-K for more information regarding the 2021 Facility.
The 2021 Facility will mature in September 2026. As of December 31, 2024, we had no outstanding borrowings under the 2021 Facility (other than $4.9 million of outstanding letters of credit) and available borrowings of $95.1 million.
Gross margin decreased 1.0 percentage point for the year ended December 31, 2023, compared to the prior year. The decrease in gross margin was primarily related to product mix shift and, to a lesser extent, higher duties and a higher mix of promotional sales, partially offset by lower air freight utilization and ocean freight rates.
Gross margin decreased 1.5 percentage points for the year ended December 31, 2024, compared to the prior year. The decrease in gross margin was primarily related to product mix shift.
The Company incurred a total of $8.7 million of expenses, before reimbursements, in connection with the IPO. In September 2021, we entered into a credit agreement with Bank of America, N.A. providing for a revolving credit facility in an amount of up to $100.0 million (as amended, the “2021 Facility”). The 2021 Facility will mature in September 2026.
Since inception, we have financed operations primarily through cash flows from operating activities, the sale of our capital stock and borrowings under credit facilities. In September 2021, we entered into a credit agreement with Bank of America, N.A. providing for a revolving credit facility in an amount of up to $100.0 million (as amended, the “2021 Facility”).
Cash flows from financing activities of $3.5 million for the year ended December 31, 2022, were primarily attributable to proceeds from stock option exercises. Contractual Obligations and Commitments Our most significant contractual obligations relate to purchase commitments on inventory and operating lease obligations on our facilities.
Cash flow from financing activities decreased by $45.4 million as compared to the same period last year. The decrease in financing cash flows was primarily due to repurchases of Class A common stock of $45.4 million. Contractual Obligations and Commitments Our most significant contractual obligations relate to purchase commitments on inventory and operating lease obligations on our facilities.
The decrease in selling expense as a percentage of net revenues was primarily driven by leverage within shipping expense due to higher AOV, partially offset by a higher mix of promotional sales. 62 Table of Contents Marketing expense decreased by $0.6 million, or 0.8%, for the year ended December 31, 2023, compared to the prior year and, as a percentage of net revenues, decreased by 1.3 percentage points.
Marketing expense increased by $11.5 million, or 14.9%, for the year ended December 31, 2024, compared to the prior year and, as a percentage of net revenues, increased by 1.8 percentage points. The increase in marketing expense as a percentage of net revenues was primarily due to higher digital and brand marketing expenses related to our 2024 Olympics campaign.
We directly and actively coordinate and supervise every step of our product development and production process to ensure that our extremely high quality standards are met.
We directly and actively coordinate with our suppliers on every step of our product development and production process to ensure that our extremely high quality standards are met. We also have a dynamic merchandising model with lessened inventory risk, as a result of the largely non-discretionary, replenishment-driven nature of scrubwear and a focus on our core scrubs offerings.
Investing Activities Cash flows from investing activities consists of capital expenditures and purchases of investments. 66 Table of Contents Cash flows from investing activities were $(117.2) million for the year ended December 31, 2023. Cash flows from investing activities decreased by $111.3 million as compared to the same period last year.
Cash flows from operating activities decreased by $19.8 million for the year ended December 31, 2024, compared to the same period last year. We saw a decrease in cash provided from operating activities as a result of a decrease in our net income, excluding the impact of non-cash adjustments, of $3.8 million.
Removed
We also have a dynamic merchandising model—due to the largely non-discretionary, replenishment-driven nature of scrubwear, we maintain lessened inventory risk driven by a relatively high volume of repeat purchases and a focus on our core scrubs offerings. At December 31, 2023, we had approximately 2.6 million active customers.
Added
Recent Developments Fulfillment Enhancement During the year ended December 31, 2024, we completed our previously announced fulfillment enhancement project and transitioned all fulfillment operations from our previous City of Industry, California facility to a new facility we have leased in Goodyear, Arizona, which is operated by a third-party logistics provider.
Removed
As part of the project, we intend to transition all fulfillment operations from our current City of Industry facility to a new facility we have leased.
Added
We also pre-negotiated ocean freight shipping rates and adjusted our product launch schedule to account for delays.
Removed
In connection with the project and transition, during the year ended December 31, 2023, we incurred $1.2 million in transitory operational expenditures related to implementation costs, nearly all of which was incurred in Q4 2023, and $12.2 million in capital expenditures, $8.8 million of which was incurred in Q4 2023.
Added
If there are continued or increased hostilities in the Middle East, there could be continued increases in shipping times and ocean and air freight rates, as well as other impacts to our supply chain, which could adversely affect our financial condition and results of operations. See Item 1A.
Removed
Supply Chain In the quarter ended December 31, 2023, we continued to evolve our sourcing capabilities to strengthen our supply chain, which includes diversifying certain manufacturing operations geographically and strategically refining our manufacturing base into fewer high-quality partners. In so doing, we recently reallocated a material amount of manufacturing geographically, including to Jordan.
Added
Following allegations of labor conditions at this supplier that do not meet our high standards, we are in the process of transitioning away from this supplier, which includes identifying new suppliers.
Removed
Following the recent outbreak of conflict and violence in the Middle East, there has been an increase in attacks on commercial vessels transiting the Red Sea, causing disruptions in an important route for global trade, which our manufacturing partners, including those based in Jordan, utilize.
Added
We plan to conduct this transition over time, in a responsible manner that takes into consideration the needs of our suppliers’ workers and without impacting our sourcing capacity and quality. However, this transition could subject us to additional costs and challenges, which could adversely affect our financial condition and results of operations. See Item 1A.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+0 added−2 removed5 unchanged
Biggest changeWe continue to monitor the impact of inflation on raw materials, freight, labor, rent and other costs in order to minimize its effects.
Biggest changeWe continue to monitor the impact of inflation on raw materials, freight, labor, rent and other costs in order to minimize its effects. In addition, shifts in global trade policy, such as the recent U.S. tariffs on products manufactured in China and elsewhere, as well as retaliatory tariffs, could cause future increases in inflation, which we are actively monitoring.
Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our results of operations. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions.
Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our results of operations. To date, foreign currency transaction gains and losses have not been material to our consolidated financial statements, and we have not engaged in any foreign currency hedging transactions.
A high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general, and administrative expenses as a percentage of net revenue if we are unable, or choose not to, increase the selling prices of our products in proportion with these increased costs. 70 Table of Contents
A high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general, and administrative expenses as a percentage of net revenue if we are unable, or choose not to, increase the selling prices of our products in proportion with these increased costs. 72 Table of Contents
Because the 2021 Facility bears interest at a variable rate, we will be exposed to market risks relating to changes in interest rates if we have a meaningful outstanding balance. At December 31, 2023, there were no outstanding borrowings under the 2021 Facility.
Because the 2021 Facility bears interest at a variable rate, we will be exposed to market risks relating to changes in interest rates if we have a meaningful outstanding balance. At December 31, 2024, there were no outstanding borrowings under the 2021 Facility.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign exchange rates. Interest Rate Risk At December 31, 2023, we had cash and cash equivalents of $144.2 million. Interest-earning instruments carry a degree of interest rate risk.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign exchange rates. Interest Rate Risk At December 31, 2024, we had cash and cash equivalents of $85.6 million. Interest-earning instruments carry a degree of interest rate risk.
A hypothetical 10% change in interest rates would not result in a material impact on our financial statements. 69 Table of Contents The 2021 Facility provides us with available borrowings in an amount up to $100.0 million.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. A hypothetical 10% change in interest rates would not result in a material impact on our consolidated financial statements. The 2021 Facility provides us with available borrowings in an amount up to $100.0 million.
Inflation Risk Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our results of operations.
Inflation Risk Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our results of operations. For example higher freight costs have from time to time impacted our gross margin, which we believe is a result of inflation due, in part, to global supply chain disruptions.
Removed
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Removed
For example, during the year ended December 31, 2022, our gross margin was impacted by higher freight costs compared to the same periods in 2021, which we believe was as a result of inflation due, in part, to global supply chain disruptions.

Other FIGS 10-K year-over-year comparisons