FIGS, Inc.

Good afternoon and thank you for standing by. Welcome to the FIGS third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be question and answer session and instructions will follow at that time. Please be advised that reproduction of this call and who or in part is not permitted. without written authorization from FIX. And as a reminder, this call is also being recorded. I would now like to introduce your host for today's call, Ms. Carrie Gillard, Vice President of Investor Relations. Ms. Gillard, please go ahead.

Good afternoon, and thank you for joining today's call to discuss FIGS third quarter 2021 results, which were released this afternoon and can be found on the FIGS website at ir.wherefigs.com. Presenting on today's call will be Trina Speer, our co-chief executive officer, and Jeff Lawrence, our chief financial officer. Heather Hassan, our co-chief executive officer, will also be available to answer questions during the Q&A portion of the call. I want to remind everyone that management's remarks on this call that do not relate to past events should be considered forward-looking statements within the meaning of the federal securities law. These may include predictions, expectations, or estimates, including about our anticipated financial performance, market opportunity, business strategy and plans, and our operational capacity. And actual results could differ materially from those mentioned. These forward-looking statements also involve substantial risks and uncertainties, some of which may be outside of our control, that could cause actual results to differ materially. These risks, among others, are discussed in our filings with the SEC. We encourage you to review these filings for a discussion of these factors, including our quarterly report on Form 10-Q filed today and our shareholder letter furnished today. You should not place undue reliance on these forward-looking statements, which speak only as of today, and we undertake no obligation to update or revise them for new information. Additionally, information discussed on this call concerning our industry, competitive position, and our markets are based on information from third-party sources and management estimates. These assumptions are also subject to risk, which could cause results to differ materially from those expressed in the estimates. Finally, this call will also contain certain non-GAAP metrics, which we believe are useful supplemental measures as well as certain key performance indicators, which we also believe are useful for understanding our business and performance. Reconciliations of these non-GAAP measures to their most comparable GAAP measures and definitions of these indicators are included in our shareholder letter, which can be found on the investor relations portion of our website at ir.warefix.com. Now, I would like to turn the call over to Trina Spear, Co-Chief Executive Officer of FIX.

Thanks, Gary. Good afternoon, everyone. And we appreciate you joining us today to discuss our financial results and an update on the exciting things happening at FIGS. First, I will discuss a few business updates on today's call and then hand it over to Jeff to discuss our financial results and outlook. Our third quarter performance reflects the strong demand for our brand by healthcare professionals, the power of our unique and durable business model, and the strength of our team. We are transforming and expanding the $79 billion global healthcare apparel industry through an obsession with creating innovative products that celebrate, empower, and serve our community of awesome humans. From a financial perspective, we are generating revenue growth and profitability metrics that are exceptional for a direct-to-consumer brand. Our net revenues for the third quarter were $103 million, which represents growth of 34% compared to the third quarter of 2020. Excluding the $4.2 million non-recurring related party sale from Q3 2020, net revenues grew 41%. Our growth was driven by the continued expansion of our customer base and higher average order value for new and existing customers. Our total active customer base is now more than 1.7 million intensely loyal awesome humans, which keeps growing bigger and bigger every single day. We paired our revenue growth with a high level of profitability. We generated net income of $7 million and diluted earnings per share of 3 cents in the quarter or 5 cents on an adjusted basis. We also achieved an adjusted EBITDA margin of 21.6%, showing how we've unlocked the powerful combination of top-line growth and bottom-line profitability. Given our strong results and the momentum we see in our business, we are raising our 2021 full-year net revenue outlook to $410 million compared to our previous outlook of $395 million. The most exciting thing is that even with the results we've seen, we still have so many opportunities right in front of us. We're still under-penetrated in the United States. Our non-Scrubs lifestyle offerings continue to gain traction, and the international opportunity is largely untapped. Everything from a product standpoint starts with creating high quality, comfortable, and functional products that healthcare professionals love to wear every day. As a reminder, we are a uniform company focusing on outfitting the healthcare community to work, at work, from work, on shift, off shift, head to toe. To us, that means a complete layering system of innovative products that fit seamlessly into their lives to help them do their jobs better. Today, more than 80% of our net revenues come from 13 core styles, seven on the women's side and six on the men's side. Our strategy with these core styles is to have a steady supply of products that healthcare professionals come back all year round to replenish and that enable them to be at their best. Through the direct connection we have with healthcare professionals, we're able to use their feedback in our data-driven design process to make products that are technical, comfortable, and supremely functional by solving the real problems they face. We also create franchises around these core styles, like what we did in the third quarter where we added our yoga-inspired waistband to our best-selling YOLO pants to ensure that these core styles are always growing and improving. Alongside our core styles in core colors, we release limited edition styles and colors just about weekly to keep things fresh and exciting, driving even more engagement and traffic to our digital platforms. In fact, over 80% of our sales come from repeat customers on our first day of a color drop as they come back to bolster their favorite styles with new colors like surgical green and dusk. This strategy enables us to drive even greater loyalty over time, while also growing our net revenue per active customer every year. These launches allow us to deepen our connection with our healthcare professionals who come back to FIGS again and again. While Scrubs are the foundation of FIGS, the opportunity for our brand extends much further. Healthcare professionals change environments frequently, and they need and deserve comfortable, high-quality products that help them do their jobs in every situation they face. That's why we approach our products as a complete layering system. What are they wearing under their scrubs, like our underscrubs, our sports bras, our leggings? To their scrubs, to what are they wearing over their scrubs? Our vests, our jackets, our fleeces, and more. With our non-scrub lifestyle business accounting for 13% of our net revenues in the quarter, we are excited to continue to unlock this key growth driver for years to come. From a digital experience perspective, we use our data segmentation strategies to bring the most dynamic, fun, and personalized shopping experience possible through innovative new features and content that we're creating every day. One great example has been the launch of our kit. By bundling multiple items together to curate different looks, we made it simpler and more convenient for customers to purchase everything they need with one click. Of course, it's still early on, but in just the six months since we debuted them, we have seen that about one in six customers has purchased a kit. This strategy helps us drive a higher AOV in units per transaction, and it also leads to an even greater uptake of our lifestyle offering. With a strong retention rate of around 50%, our data tells us that over time, our customers not only begin to add more of our lifestyle products, but also continue to buy them more frequently. All of this expands our total addressable market far beyond the $79 billion healthcare apparel market that already exists today. Our marketing strategy is centered on building brand loyalty and engagement at every touchpoint along the customer journey. A big reason why we've been efficient with our spend is because so much of our customer acquisition happens organically. There's no doubt that the most authentic way for new healthcare professionals to learn about FIGS is through other healthcare professionals who already wear and love our brand. This organic customer acquisition, which is over 60% of our traffic, combined with our strong retention, is how we've been able to maintain such an efficient marketing spend, even as we've scaled so rapidly. In the third quarter, we were particularly pleased with our ability to attract more healthcare professionals to our brand. Because we were so efficient from a performance marketing standpoint, we were able to invest those gains into top of the funnel brand initiatives aimed at growing awareness and brand love. This included the launch of a comprehensive out-of-home strategy where our purpose is to celebrate the current generation of healthcare professionals and inspire the next generation to become them. Beyond marketing, our brand building comes from the impact initiatives that we're so passionate about. From our $500,000 Future Icons grant program, which helps students pay off their tuition, to the $1.2 million of scrubs and masks and other products that we donated around the world in the quarter, we show up in authentic and meaningful ways that impact our community. This devotion to our mission and our community is what makes FIG so special and is a big part of why healthcare professionals feel so connected to our brand. From an operation standpoint, we know that in order to achieve our long-term growth ambitions, we must balance our long-term vision with an incredibly sharp focus on day-to-day execution. We are not a discretionary spend. Healthcare professionals need our products to do their jobs, and it's our responsibility to get those products to them as quickly and efficiently as possible. We continue to monitor the dynamic supply chain challenges being experienced by any company manufacturing products because of the ongoing COVID-19 pandemic, particularly those with supply chains around the world. At FIGS, we are proud to say that we've been able to continue to produce our products at the highest quality possible and without significant disruptions, with all of our manufacturing facilities currently operating at near or full productivity. as a company that has grown 68% through the first three quarters of 2021, and that grew 138% in 2020. We have always leveraged the strength of our business model to navigate through the impact of COVID-19. Some of our biggest differentiators include the fact that over 90% of our product is made from the same fabrication, and more than 50% of our revenue is generated by our core styles in core colors. This steadier volume enables our manufacturing partners to produce our raw materials and finished goods farther in advance and holds greater inventory without the risk of obsolescence. Additionally, the consistency of being a uniform company significantly reduces our exposure to seasonality because our customers require the same product year-round. While these differentiators have enabled us to continue to meet our demand expectations quarter after quarter, including bringing in more inventory early in Q4, we are not immune to the increasing transit times that nearly all companies are experiencing. For the fourth quarter, that meant making a proactive strategic decision to increase our spend on air freight, primarily to ensure we get our limited edition styles and colors in time to meet forecasted customer demand. While this creates a near-term impact on our margin, this is the right thing to do to support our growth and the demand we are seeing from our healthcare professionals. We currently anticipate COVID-19 related supply chain pressures to begin to ease as we move into 2022. Looking ahead, we remain incredibly confident in our ability to harness our strength to drive towards $1 billion plus in net revenue by 2025, while delivering against annual targets of 70% plus gross margin and 20% plus adjusted EBITDA margin over each of the next three years. We are building the brand for healthcare professionals, the fastest growing job segment in the United States. Our business, like the healthcare community, is amazing. The scale we have built across supply chain, digital, and community gives us sustainable competitive advantages that we will continue to optimize to put us in the best position to serve healthcare professionals. The opportunity in front of us is massive, and we are confident in our ability to continue to meet and exceed the high expectations of our community of awesome humans and shareholders. With that, I will hand the call over to Jeff.