On November 7, 2024, FIGS Inc (FIGS, Financial) released its 8-K filing detailing the financial results for the third quarter of 2024. FIGS Inc, a healthcare apparel company known for its innovative scrubwear and related products, reported a slight decline in net revenues and faced several operational challenges during the quarter.
Performance Overview
FIGS Inc reported net revenues of $140.2 million for Q3 2024, a 1.5% decrease compared to the same period last year, missing the analyst estimate of $143.14 million. This decline was primarily attributed to a decrease in average order value (AOV), despite an increase in orders from existing customers. The company's gross margin also fell to 67.1%, down from 68.4% in the previous year, due to higher discounted sales and a shift in product mix.
Operational Challenges and Strategic Investments
Operating expenses surged by 17.4% year over year to $102.7 million, driven by increased marketing and selling expenses, including costs associated with the 2024 Olympics campaign and the transition to a new fulfillment center. These expenses accounted for 73.2% of net revenues, up from 61.5% in the previous year.
Net income for the quarter was a loss of $1.7 million, or $(0.01) per diluted share, aligning with analyst expectations. This represents a significant decline from the $6.1 million profit reported in the same quarter last year. Adjusted EBITDA also saw a substantial decrease, falling to $4.8 million from $24.4 million in Q3 2023.
Financial Achievements and Industry Context
Despite the challenges, FIGS Inc made notable strategic moves, including a $25 million minority investment in OOG, Inc., an AI-powered platform for healthcare professionals. This investment is expected to enhance FIGS' marketing, community engagement, and data capabilities, aligning with the company's mission to innovate within the healthcare apparel industry.
Key Financial Statements and Metrics
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Revenues | $140.2 million | $142.4 million |
| Gross Margin | 67.1% | 68.4% |
| Operating Expenses | $102.7 million | $87.4 million |
| Net Income (Loss) | $(1.7) million | $6.1 million |
| Adjusted EBITDA | $4.8 million | $24.4 million |
Analysis and Outlook
FIGS Inc's performance in Q3 2024 reflects the challenges of balancing growth initiatives with operational efficiency. The decrease in AOV and increased operating expenses highlight the need for strategic cost management. However, the company's investment in OOG, Inc. and the transition to a state-of-the-art fulfillment center demonstrate a commitment to long-term growth and innovation.
Looking ahead, FIGS Inc has updated its full-year 2024 outlook, expecting net revenues to be flat or down 1% compared to 2023, with an adjusted EBITDA margin of approximately 8%. These projections underscore the company's focus on stabilizing its financial performance while continuing to invest in strategic initiatives.
"The third quarter included several key investments to support and scale FIGS, highlighted by our incredible Olympics campaign with the Team USA Medical Team and the completed transition of our fulfillment center to a state-of-the-art, highly-automated facility," said Trina Spear, Chief Executive Officer and Co-Founder.
Explore the complete 8-K earnings release (here) from FIGS Inc for further details.
