Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FIGS Inc (FIGS, Financial) reported solid second quarter results with revenue growth at the high end of their expected range and adjusted EBITDA margin above expectations.
- The company's US growth returned to positive territory, driven by improved repeat frequency trends.
- International growth accelerated, with a record quarter showing year-on-year revenue growth of 32%.
- FIGS Inc (FIGS) launched a successful Olympics marketing campaign, which has been their most significant to date, driving engagement and brand visibility.
- The company maintains a strong balance sheet with over $268 million in cash and no debt, providing financial flexibility for future growth.
Negative Points
- Gross margin for the second quarter decreased to 67.4% from 69.5% in the same period last year, primarily due to product category mix shifts.
- Average order value decreased by 1.7% to $113, and net revenues per active customer decreased by 2.3%, impacted by accounting reclassifications related to duty subsidies for international customers.
- The company anticipates full-year gross margin to be 150 to 200 basis points lower than the previous year due to a shift in product mix.
- Selling expenses increased as a percentage of net revenues due to transitional costs associated with the new fulfillment center.
- Despite positive trends, there is still uncertainty in the macroeconomic environment, affecting consumer purchasing behavior.
Q & A Highlights
Q: Can you elaborate on the consumer engagement metrics and trends observed in the second quarter and into the third quarter? What is your assessment of the health of the FIGS consumer in the United States?
A: We continue to see positive trends in repeat frequency, driven by product innovation and top-of-funnel marketing. Our Olympics campaign is driving engagement and repeat frequency. However, there is still uncertainty in the macro environment, and our customers are buying below pre-COVID levels. Despite this, healthcare professionals remain a stable consumer base with stable wages.
Q: Can you discuss the current margin levels between your core business and new innovations? How do you plan to narrow the gap between these product lines?
A: Our pinnacle products and non-scrubwear have slightly lower margins than core scrubwear. As we gain scale, we expect margins to improve. We are seeing positive trends with pinnacle products driving core sales, which will help offset the margin impact. We are also exploring opportunities in costing and pricing to enhance margins.
Q: What are the early learnings from the Olympic marketing campaign, and how will it shape your future marketing strategy?
A: The Olympic campaign has been our biggest and best, driving significant engagement and repeat frequency. We've achieved impressive impressions across various media. This campaign reinforces the importance of top-of-funnel marketing and building an authentic brand presence across multiple platforms.
Q: How do you see the price points of new innovation products versus core essentials? What is the consumer's acceptance level?
A: Our new products are outperforming, and we are being strategic with pricing. While maintaining affordability and accessibility is crucial, there is opportunity for strategic pricing as demand for new innovations grows. Our Olympics collection, for example, sold out quickly, indicating strong consumer acceptance.
Q: Can you provide insights into international market growth and the contribution of newer markets?
A: International growth was 44% for the quarter, with strong performance in Canada, UK, and Australia. Newer markets like Mexico and the Philippines are also performing well. We see significant potential in Asia and the EU, and we are strategically investing in high-potential markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
