FIGS, Inc.

Good afternoon. Thank you for attending today's FIGS third quarter fiscal 2023 earnings conference call. My name is Cole, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Jean Fontana. Please go ahead.

Thank you. Good afternoon, and thank you for joining today's call to discuss FIGS third quarter 2023 results, which we released this afternoon and can be found in our earnings press release and in the stockholder presentation posted to our investor relations website at ir.warefigs.com. Presenting on today's call are Trina Spear, our co-founder and chief executive officer, and Daniela Ternschein, our chief financial officer. As a reminder, remarks on this call that do not concern past events are forward-looking statements. These may include predictions, expectations, or estimates, including about future financial performance, market opportunity, or business plans. Forward-looking statements involve risks and uncertainties, and actual results could differ materially. These and other risks are discussed in our SEC filings, including in the 10 key we filed today, which we encourage you to review. Do not place undue reliance on forward-looking statements, which speak only as of today, and which we undertake no obligation to update. Finally, we will discuss certain non-GAAP metrics and key performance indicators, which we believe are useful supplemental measures for understanding our business. Definitions and reconciliations of these non-GAAP measures to their most comparable GAAP measures are included in the stockholder presentation we issued today. Now, I'd like to turn the call over to Trina Spear, who's Executive Officer of VIX.

Thanks, Jean. Good afternoon, everyone. Thank you for joining us for our third quarter 2023 conference call. We are very pleased to have delivered better than expected net revenues and adjusted EBITDA margin for the third quarter. I would like to thank our entire fixed team for their hard work as well as their devotion to our healthcare community. Touching on some highlights from the quarter, net revenues grew 11% compared to the prior year period, driven primarily by nearly 20% growth in active customers with another record number of new customers added in the third quarter. Beyond the market share gains we are driving the United States We are building demand internationally with record growth of 81%. We are replicating the powerful word-of-mouth dynamics that we fueled in the U.S. over the last decade. Within teams or B2B business, we saw strong performance with a growing number of institutions coming to FIGS to professionalize their organizations. We also continue to make meaningful progress in normalizing inventory levels, which declined 15% compared to the third quarter of last year. Looking at profitability, we delivered an adjusted EBITDA margin of 17.2% ahead of our expectations and generated free cash flow of $46 million for the third quarter. Our third quarter performance underscores our ability to deliver on our objectives, and as a result, we are raising our full-year net revenue and adjusted EBITDA margin guidance, which Daniela will speak to shortly. Turning to our business highlights, as we execute our strategic priorities, we remain committed to our mission of serving those who serve others. Everything we do is centered around the healthcare community, from the product innovation we bring to bear, to our compelling marketing campaigns, to the inspiring ambassadors we partner with, to our work around advocacy. Product innovation for FIGS is above all about solving real-world problems for the healthcare community with premium products that offer supreme functionality, comfort, and style. Our customer-first approach to product attracts new healthcare professionals to our brand and drives loyalty amongst our existing customers, demonstrated by the fact that repeat customers continue to generate roughly 70% of our net revenues. Our merchandising strategy is to build a product assortment that not only stands alone, but can be matched back to our core scrubs offering to create a complete layering system. We leverage customer insights to bring new product across our categories, These are limited-edition styles that create a flywheel effect that drives both excitement and traffic, whereby customers buy these new styles in addition to replenishing their core. During the third quarter, for example, we introduced our Natal Scrub Tops and Lesage Scrub Jogger with a feminine twist while maintaining maximum movement and utility. We also launched our first wide-leg pant, the high-waisted Yendi Card Go Scrub Pants. The success of these limited edition style drops match back with our core scrub styles and reflect our ability to deliver a consistent stream of newness that our customers want. Another area of strength is in collaboration. We seek partnerships with brands that are leaders in their industries, have similar values to FIGS, and complement our own core capabilities. We have talked in the past about our New Balance partnership, where we continue to see tremendous growth in footwear intentionally designed for healthcare professionals. Most recently, we collaborated with Echo, a leading digital health company that is advancing how healthcare professionals detect and monitor heart and lung disease. We launched the co-branded Core 500 digital stethoscope that was supported by our campaign, Innovation You Can Hear, which exemplified how we create powerful storytelling that captures the attention of our community. Turning to building and deepening engagement with our community. Our marketing strategy reflects a combination of engaging campaigns with creative storytelling, segmentation strategies that align our content to our channels, to our audience, and personalized messaging based on our deep understanding of our customers. The efficiency of our marketing engine enables us to reinvest dollars into top-of-funnel strategies, which help to drive another record number of new customers in the third quarter. As part of our new customer acquisition efforts, we are engaging students who have long purchase cycles as they are just entering their 30-plus year career. We are creating local on-campus experiences with customized products for each school with colors and embroidery. We are also leveraging the Teams platform in order to become the exclusive provider to universities and associations. These efforts led to a new partnership with Veterinary Business Management Association, a student organization spanning 38 universities. We also maintain a strong connection with our community by delivering campaigns that highlight awesome humans, new technical innovation, and cultural moments that drive heightened excitement and a call to action. For Breast Cancer Awareness Month we teamed up with F Cancer on a mission to prevent, detect, and unite. We donated $50,000 to this organization to advance health equity through education, community clinics, and screening. Some of our greatest moments with the healthcare community come through our advocacy. Beyond the products we deliver, the way we utilize our platform to stand up for their rights and their well-being, without hesitation, is what generates such intense loyalty to our brand. This quarter, during the largest strike of healthcare workers in U.S. history, we spoke out in support of higher pay, safe working conditions, and sustainable patient loads, all core tenets of our Austin Humans Bill. Our Instagram posts generated some of our highest engagement over the past year, and letters to Congress sent through our advocacy hub spiked. To date, our community has sent almost 3,000 letters to Congress through our advocacy hub. Looking at our performance outside the U.S., we are thrilled to see the growing affinity for the FIGS brand across continents. International delivered record net revenue growth of 81%, reflective of strong performance across countries, including our longest-standing markets, Canada, UK, and Australia. We added seven new countries, including Poland, Kuwait, and Singapore during the quarter. And similar to Mexico and the Philippines, our entrance into these new regions arose from strong grassroots demand signaling the growing recognition of FIGS worldwide. Turning to our B2B business, teams delivered exceptional net revenue growth year over year with orders from best-in-class healthcare organizations such as the American Student Dental Association, AYA Healthcare, and Veterinary Emergency Group, VEG. a fast-growing emergency care organization with over 60 locations. Inbound demand is growing as more institutions are looking to FIGS to help them professionalize their staff with premium uniforms. FIGS is best positioned to support these institutions with a best-in-class technology platform and products that help their professionals look good, feel good, and perform at their best. Turning to retail, I am super excited to share that we will officially be opening our first permanent retail store which we refer to as a community hub, on November 3rd, which is tomorrow, in Century City Mall. We are incredibly proud of this achievement, not only because this is our first branded permanent retail location, it's really the first of its kind, a space that was created and is purely dedicated to healthcare professionals. In addition to enabling healthcare professionals to feel, try on, and become educated about our products, our community hubs will serve healthcare professionals through purposeful programming and events, on topics that they really care about. In closing, while we are proud of what we have accomplished to date, we have so much untapped potential, which I will speak to following Daniela's review of our financial results.